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Price is a Better Climate Commitment

Peter Cramton () and Steven Stoft ()

Papers of Peter Cramton from University of Maryland, Department of Economics - Peter Cramton

Abstract: Developing countries justifiably reject meaningful emission targets. This prevents the Kyoto Protocol from establishing a global price for greenhouse gas emissions, and leaves almost all new emissions unpriced. This paper proposes a new pair of commitments—a commitment to a binding carbon-price target and to a Green Fund financed by a form of carbon pricing. The result is global carbon pricing that neither requires developing countries to accept emission caps nor requires industrial countries to accept carbon taxes. The cost of complying with these commitments is subject to far less risk than the cost of an emissions cap, and the combined cost of a $30/ton price target and the Green Fund is only 23 cents per person per day for the United States and is negative for India. The combined advantages should significantly increase the chance that developing countries will commit to a substantial carbon price, and this should increase the chance of cap and trade passing the U.S. Senate.

Keywords: Climate change; carbon pricing; cap and trade; carbon auctions (search for similar items in EconPapers)
JEL-codes: Q54 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-agr, nep-cwa, nep-ene and nep-env
Date: 2010, Revised 2010
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Published in The Economists' Voice, 7:1, www.bepress.com/ev/vol7/iss1/art3, February 2010

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