Tradable climate liabilities: A thought experiment

Etienne Billette de Villemeur and Justin Leroux
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Justin Leroux: HEC Montréal - HEC Montréal

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Abstract: We envision the creation of a climate liability market to address climate change. Each period, countries are issued liability commensurate to their emissions of the period. Liability bearers are required to pay over time, as climate harm materializes. Revenues are used to compensate participating countries in proportion of climate harm. Because liabilities are traded like financial debt among participants, the mechanism achieves a unique carbon price through decentralization of the choice of a discount rate as well as beliefs about the severity of the climate problem. We discuss properties of such a mechanism along the dimensions of efficiency, fairness, exposure to risk, commitment, participation, as well as implementation challenges.

Keywords: Climate liability; Market instruments; Pigovian tax; Risk sharing (search for similar items in EconPapers)
Date: 2019-10
Note: View the original document on HAL open archive server: https://hal.science/hal-02504760v1
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Citations: View citations in EconPapers (2)

Published in Ecological Economics, 2019, 164, pp.106355. ⟨10.1016/j.ecolecon.2019.106355⟩

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Journal Article: Tradable climate liabilities: A thought experiment (2019)
Working Paper: Tradable Climate Liabilities: A Thought Experiment (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02504760

DOI: 10.1016/j.ecolecon.2019.106355

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