Suchergebnisse

This paper argues that a uniform global tax‐like price on carbon emissions, whose revenues each country retains, can provide a focal point for a reciprocal common climate commitment, whereas quantity targets, which do not nearly so readily present such a single focal point, tend to rely ultimately on individual quantity commitments. The paper postulates the conceptually useful allegory of a futuristic 'World Climate Assembly' (WCA) that votes for a single worldwide price on carbon emissions via the basic democratic principle of one person, one vote majority rule. A WCA‐like uniform price‐tax counters self‐interest by incentivizing countries or agents to internalize the externality because each WCA agent's higher abatement cost from a higher emissions price is counterbalanced by that agent's extra benefit from inducing all other WCA agents to simultaneously lower their emissions in response to the higher price. The paper derives fresh insights and new simple formulae that relate each emitter's most‐preferred world price of carbon to the world 'social cost of carbon' (SCC), and further relates the WCA‐voted world price of carbon to the world SCC. Some implications are discussed. The overall methodology of the paper is a mixture of mostly classical with some behavioural economics.

There is an increasing interest in the economics of climate change, and the marginal damage costs of emissions, known as the Social Cost of Carbon (SCC). In 2002, the UK Government recommended an SCC for policy appraisal. A recent review of this SCC was commissioned and summarised in this paper. The authors conclude that SCC estimates span at least three orders of magnitude, reflecting uncertainties in climate change and choices of key parameters/variables (discount rate, equity weighting and risk aversion). Estimates also vary due to their coverage, and a risk matrix was developed to compare climate change effects (predictable to major events) against impacts (market, non-market and socially contingent). From several lines of evidence, the current lower SCC value is considered a reasonable lower benchmark for a global decision committed to reducing the threat of dangerous climate change. An upper benchmark was more difficult to deduce, though the risk of high values was considered significant. It is currently impossible to provide a central value with confidence. The study also reviewed the use of the SCC in policy, from project appraisal to long-term climate policy, and used stakeholder interviews to elicit views. A wide diversity of responses was found: whilst most considered some values are needed for policy appraisal, nearly all had reservations for long-term policy. From this, the authors propose a two tier approach. The economic benefits of climate change should be considered when setting long-term policy, but a wider framework is needed (i.e. than cost-benefit analysis). This should include a disaggregated analysis of economic winners and losers by region and sector, and key impact indicators such as health and ecosystems. It should also consider the full risk matrix (i.e. non-marginal/irreversible effects). Once long-term policy is set, shadow prices for appraisal across Government are useful, provided they are consistent with the long-term goal, and are applied consistently.