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Global unanimity agreement on the carbon budget

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Abstract

Carbon budgets are a useful way to frame the climate mitigation challenge and much easier to agree upon than the allocation of emissions. We propose a mechanism with countries agreeing on the global carbon budget, while the decision to emit is decentralized at the country level. The revenue is collected in a global fund and allocated according to endogenously defined weights proportional to the marginal cost of climate change. The proposal features a unanimous agreement of the national citizenries of the world and global Pareto efficiency. We run a simulation in the spirit of the Paris Agreement, with zero emissions after 2055. At the Global Unanimity Equilibrium, permits are priced at 90$/tC, yielding 1.3 trillion dollars annually. Africa, India and the less developed countries in Asia are the only net recipients, while the US and China are the largest net contributors.

Suggested Citation

  • Humberto Llavador & John E. Roemer, 2019. "Global unanimity agreement on the carbon budget," Economics Working Papers 1646, Department of Economics and Business, Universitat Pompeu Fabra.
  • Handle: RePEc:upf:upfgen:1646
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    1. William Nordhaus, 2018. "Evolution of modeling of the economics of global warming: changes in the DICE model, 1992–2017," Climatic Change, Springer, vol. 148(4), pages 623-640, June.
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    More about this item

    Keywords

    carbon budget; emissions; international agreement; permits; climate change;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
    • F64 - International Economics - - Economic Impacts of Globalization - - - Environment

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