| Abstract: | This paper proposes a global warming implementation regime which addresses the issues of equity, flexibility, cost minimization, and population growth. Previously proposed international policy instruments, such as country by country targets, carbon taxes, and tradable permits, face major difficulties as stand alone proposals. The key element of the regime proposed here is to combine annual tradable permits which are allocated based on population in a fixed year with a small carbon tax ($5–10/tonne) on emissions in excess of permits. Both permits and carbon taxes are applied to national level governments, which in turn would use whatever mix of policies desired to reduce national emissions. It is suggested that the initial number of permits correspond to total global emissions in the base year; over time, the number of permits could be reduced and the tax rate increased if improved scientific knowledge so dictates. By allocating permits based on population the equity concerns of developing countries are addressed, while taxing emissions in excess of permit holdings removes the rigidity of a quota system and limits resource transfers by effectively capping the permit trading price, which is a major concern of industrialized countries. To accommodate the difficulties of countries which have not yet achieved the demographic transition, the permit allocation scheme could be subject to a one-time adjustment after 10–15 years based on some weighting of the initial and then-current populations. The proposed scheme is based on the premise that there is a large potential for reducing emissions in developed countries or limiting emission increases in developing countries, and the intention is to create competition between national level governments in implementing cost-effective emission reduction. |
