THE POLLUTER PAYS PRINCIPLE AND COST-BENEFIT ANALYSIS OF CLIMATE CHANGE: AN APPLICATION OF FUND

No FNU-98, Working Papers from Research unit Sustainability and Global Change, Hamburg University

Abstract: I compare and contrast five climate scenarios: (1) no climate policy; (2) non-cooperative cost-benefit analysis (NC CBA); (3) NC CBA with international permit trade; (4) NC CBA with joint and several liability for climate change damages; and (5) NC CBA with liability proportional to a country’s share in cumulative emissions. As estimates of the marginal damage costs are low, standard NC CBA implies only limited emission abatement. With international permit trade, emission abatement is even less, as the carbon tax is reduced in countries with fast-growing emissions, and because a permit market ignores the positive, dynamic externalities of abatement. Proportional liability shifts abatement effort towards the richer countries, but away from the fast-growing economies; again, long-term, global emission abatement is reduced. Joint and several liability would lead to more stringent climate policy. These findings are qualitatively robust to the size and accounting of climate change impacts, to the definition of liability, and to the baseline scenario.

Keywords: Climate change; cost-benefit analysis; liability; permit trade (search for similar items in EconPapers)
JEL-codes: Q54 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2006-02, Revised 2006-02
New Economics Papers: this item is included in nep-ene and nep-env
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Working Paper: The Polluter Pays Principle and Cost-Benefit Analysis of Climate Change: An Application of Fund (2006)
Working Paper: The Polluter Pays Principle and Cost-Benefit Analysis of Climate Change: An Application of Fund (2006)
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