Climate payments: A Coase theorem

Prajit K. Dutta and Roy Radner

Journal of Economic Theory, 2025, vol. 228, issue C

Abstract: Climate-related payments have emerged as a contentious and complex issue in climate negotiations. Major questions remain on how this will be done and how effective payments will be. The paper studies transfers under a variety of timing possibilities. It is shown that outcome-contingent payments always lead to efficiency and a particular alignment of transfer and emission timings implies that the efficient equilibrium is the only equilibrium even when the horizon is infinite. The theoretical novelty is a multi-lateral Coase Theorem in a dynamic model. The policy prescription is for an enhanced role for transfers to solve the climate problem.

Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:228:y:2025:i:c:s002205312500078x

DOI: 10.1016/j.jet.2025.106032

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