Working Paper: NBER ID: w20925
Authors: Martin L. Weitzman
Abstract: This paper posits the conceptually useful allegory of a futuristic "World Climate Assembly" that votes on global carbon emissions via the basic principle of majority rule. Two variants are considered. One is to vote on a universal price (or tax) that is internationally harmonized, but the proceeds from which are domestically retained. The other is to vote on the overall quantity of total worldwide emissions, which are then distributed for free (via a pre-decided fractional subdivision formula) as individual allowance permits that are subsequently marketed in an international cap-and-trade system. The model of the paper suggests that the majority-voted price is likely to be less distortionary and easier to enact than the majority-voted total quantity of permits. While the study is centered on a formal model, the tone of the policy discussion resembles more an exploratory think piece.
Keywords: climate change; global warming; international public goods; prices versus quantities
JEL Codes: F51; H41; Q54
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| majority-voted universal price on carbon emissions (Q58) | less distortionary than majority-voted total quantity of emissions permits (H23) |
| majority-voted price internalizes the externality of carbon emissions (D62) | higher prices lead to lower emissions (Q52) |
| median voter theorem (D79) | majority-voted price approximates socially optimal price (D41) |
| median marginal benefit of emissions reduction close to mean marginal benefit (D61) | majority-voted price approximates socially optimal price (D41) |
| voting structure can lead to socially desirable outcomes (D72) | preferences are single-peaked (D11) |
| endowment effects in quantity-based system (D11) | achieving social optimality more challenging (D71) |