A Global Incentive Scheme to Reduce Carbon Emissions

Somik V. Lall, Raghuram Govind Rajan and Christian Schoder

No 10759, Policy Research Working Paper Series from The World Bank

Abstract: This paper proposes an objective way of estimating and allocating “differentiated” responsibilities for carbon emissions across countries. These responsibilities translate into specific obligations and incentives for future emission reductions and support for adaptation, mitigation, and development. The proposals in this paper should be seen as a starting point for an informed and productive debate. Under the Global Carbon Reduction Incentive, every country that emits more than the per capita global average pays into a global incentive fund. This annual payment will be calculated based on the “excess” emissions per capita, the country’s population, and a dollar amount called the Global Carbon Incentive. Countries below the global per capita average would receive a payout commensurate with their “under-emission.” The United States and China are the two biggest emitters and, assuming a Global Carbon Incentive of $10, they jointly would contribute more than $70 billion to the fund, from which nations such as India, Nigeria, Pakistan, Bangladesh, and Indonesia would be the major recipients. An important adjustment to the Global Carbon Reduction Incentive is to focus on consumption rather than production—a country should not avoid responsibility for the carbon it consumes by outsourcing production to another country. The proposal considers that countries that have used more of the collective carbon budget have benefited from the associated development and should pay for it. The proposal also considers methane emissions as well as crediting countries for their efforts toward preventing deforestation.

Date: 2024-04-25
New Economics Papers: this item is included in nep-ene, nep-int and nep-sea
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