NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Can Negotiating a Uniform Carbon Price Help to Internalize the Global Warming Externality?

Martin Weitzman

NBER Working Paper No. 19644
Issued in November 2013
NBER Program(s):   EEE

Thus far, most approaches to resolving the global warming externality have been quantity based. With n different national entities, a meaningful comprehensive treaty involves negotiating n different binding emissions quotas (whether tradeable or not). In post-Kyoto practice this n-dimensional coordination problem has proven intractable and has essentially devolved into sporadic regional volunteerism. By contrast, on the price side there is a natural one-dimensional focus on negotiating a single binding carbon price, the proceeds from which are domestically retained. Significantly (and unlike negotiated quantities) the negotiated uniform price on carbon emissions embodies an automatic "countervailing force" against free-riding self interest by incentivizing agents to internalize the externality. The model of this paper indicates an exact sense in which each agent's extra cost from a higher emissions price is counter-balanced by that agent's extra benefit from inducing (via the higher emissions price) all other agents to simultaneously lower their emissions. With some further restrictions, the theoretical model shows that population-weighted majority rule for a uniform price on carbon emissions can come as close to global efficiency as the median marginal benefit (per capita) is close to the mean marginal benefit (per capita).

download in pdf format
   (208 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w19644

Published: Martin L. Weitzman, 2014. "Can Negotiating a Uniform Carbon Price Help to Internalize the Global Warming Externality?," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 1(1), pages 29 - 49. citation courtesy of

Users who downloaded this paper also downloaded these:
Goulder and Schein w19338 Carbon Taxes vs. Cap and Trade: A Critical Review
Byrne, Kovak, and Michaels w19637 Price and Quality Dispersion in an Offshoring Market: Evidence from Semiconductor Production Services
Holland, Hughes, Knittel, and Parker w19636 Unintended Consequences of Transportation Carbon Policies: Land-Use, Emissions, and Innovation
Metcalf w19729 The Economics of Energy Security
Cheng and Xiong w19642 The Financialization of Commodity Markets
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us