North-South Convergence and the Allocation of CO2 Emissions

Humberto Llavador, John Roemer and Joaquim Silvestre
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Joaquim Silvestre: University of California, Davis

No 2172, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

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.

Keywords: Unanimity equilibrium; Climate change; Carbon pricing; Integrated assessment models (search for similar items in EconPapers)
JEL-codes: D5 D6 H0 Q5 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2019-03
New Economics Papers: this item is included in nep-ene, nep-env and nep-sea
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Related works:
Working Paper: North-South Convergence and the Allocation of CO2 Emissions (2015)
Working Paper: North-South Convergence and the Allocation of CO2 Emissions (2013)
Working Paper: North-South convergence and the allocation of CO2 emissions (2010)
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