Working Paper: CEPR ID: DP8685
Authors: Hans Gersbach; Noemi Hummel
Abstract: We suggest a development-compatible refunding system designed to mitigate climate change. Industrial countries pay an initial fee into a global fund. Each country chooses its national carbon tax. Part of the global fund is refunded to developing and industrial countries, in proportion to the relative emission reductions they achieve. Countries receive refunds net of tax revenues. We show that such a scheme can simultaneously achieve efficient emission reductions and equity objectives, as developing countries abate voluntarily, do not have to pay an initial fee, are net receivers of funds, and are net beneficiaries. Moreover, we explore the potential of simple refunding schemes that do not claim tax revenues and only rely on initial fees paid by industrial countries.
Keywords: climate change mitigation; developing countries; international agreements; refunding scheme
JEL Codes: H23; H41; O10; O13; Q54
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| initial fee paid by industrial country (F18) | increased refunds based on relative emission reductions (H23) |
| increased refunds based on relative emission reductions (H23) | encourages both countries to abate emissions optimally (F64) |
| initial fee paid by industrial country (F18) | encourages both countries to abate emissions optimally (F64) |
| DCR allows industrial countries to pay an initial fee (F18) | motivates both industrial and developing countries to set socially optimal emission taxes (H23) |