How a Minimum Carbon Price Commitment Might Help to Internalize the Global Warming Externality

Martin Weitzman

No 22197, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: It is difficult to resolve the global warming free-rider externality problem by negotiating many different quantity targets. By contrast, negotiating a single internationally-binding minimum carbon price (the proceeds from which are domestically retained) counters self-interest by incentivizing countries to internalize the externality. In this contribution I attempt to sketch out, mostly with verbal arguments, the sense in which each country's extra cost from a higher emissions price is counter-balanced by that country's extra benefit from inducing all other countries to simultaneously lower their emissions in response to the higher price. Some implications are discussed. While the paper could be centered on a more formal model, here the tone of the discussion resembles more that of an exploratory think piece directed to policymakers and the general public.

JEL-codes: F51 H41 Q54 (search for similar items in EconPapers)
Date: 2016-04
New Economics Papers: this item is included in nep-ene, nep-env, nep-pke and nep-res
Note: EEE
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Citations: View citations in EconPapers (1)

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