February 24, 2008

Climate Change and Redistribution

A fascinating proposal for creating a global climate change policy:
  • Countries decide whether they want to join the GRS. A country can join the GRS if it accepts the rules and levies a minimal carbon emission tax. Industrial countries pay an initial fee.
  • In each period, every country belonging to the GRS independently determines its level of taxes on CO2 emissions. Emission taxes are the sole policy instrument a country is allowed to adopt. All tax revenues are collected in a global fund.
  • In each period, the GRS refunds a share of the accumulated wealth to the participating countries. Each participating country receives an annual refund in proportion to the share of total CO2 emission reductions it achieves in the period under consideration.
  • Non-refunded wealth of the GRS is invested in order to maintain funds for future refunding activities.
  • In each period a country is allowed to exit. If a country leaves the GRS, it loses its right to refund.
  • Decisions within the GRS are governed by majority rule.
Based on a first glance, the thing that jumps out at me is the proposal to distribute carbon tax revenue based on emissions reductions, rather than a per capita or historic emissions basis. This goes to one of the hardest questions in the climate change debate: Who is more deserving of consideration when it comes to providing assistance to adapt to climate change and (most likely) a carbon-constrained economy? Is it the developing world, whose people will likely be most harmed by climate change? Or is it the developed world, which is heavily dependent on fossil fuels and therefore will find it hardest to make a transition away from that particular energy regime? Viewed from a global (transnational?) perspective, the per capita argument (or the emissions reductions argument, which could be heavily weighted in favor of developing countries) seems quite compelling, but the case against what would be, in effect, a massive transfer of wealth from the developed to the developing world has a lot of force as well.

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