The United States has considerable tax administration and cap-and-trade expertise that could highlight potentially successful carbon pricing approaches. Although this experience is not climate-related, the United States deploys an efficient and highly compliant excise tax system, and it could assist developing country efforts to build their own capacity to tax carbon. The United States also has long experience with cap-and-trade systems for criteria air pollutants, much of which is transferable to greenhouse-gas emissions trading.
The authors compare the targets and actions to which countries have committed under the Copenhagen Accord. The Accord allows participating countries to express their commitments to reduce greenhouse-gas (GHG) emissions in a variety of ways—most broadly, through economy-wide quantified emissions targets for developed countries and mitigation "actions" by developing countries. These are difficult to compare. However, even mitigation commitments that look similar can require very different levels of effort in different countries, and commitments that produce similar economic outcomes can look inequitable. These variations in effort and equity depend on historical patterns of energy use, marginal costs of greenhouse-gas abatement, choice of base year, methods for determining "business as usual" projections, and other factors.
December 18, 2009
Parties could break the stalemate around hard targets and ensure the comparability of efforts by supplementing commitments on emissions with commitments for price signals on carbon. Under our proposal, all major parties would need to show at least a minimum level of effort regardless of whether they achieve their emissions target, and they would be allowed to exceed their target if they were unable to achieve it in spite of undertaking a high level of effort.
"To estimate the emissions reductions and costs of a climate policy, analysts usually compare a policy scenario with a baseline scenario of future economic conditions without the policy. Both scenarios require assumptions about the future course of numerous factors such as population growth, technical change, and non-climate policies like taxes. The results are only reliable to the extent that the future turns out to be reasonably close to the assumptions that went into the model.
In this paper we examine the effects of unanticipated macroeconomic shocks to growth in developing countries or a global financial crisis on the performance of three climate policy regimes: a globally-harmonized carbon tax; a global cap and trade system; and the McKibbin-Wilcoxen hybrid...."
September 5, 2007
"McKibbin and Wilcoxen Proposal: A Credible Foundation for Long-Term International Cooperation on Climate Change"
Warwick McKibbin and Peter Wilcoxen propose a system of parallel national-level cap-and-trade programs. Each country would determine its own emissions path and give away long-term permits to regulated firms.
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