The enhanced greenhouse effect, which causes global warming, requires an international treaty to address the international nature of the problem. Unilateral action, or action by a group of countries, would be insufficient to solve the problem; the United States, as the world superpower and the world's primary greenhouse gas producer, is in a unique position to lead the negotiations towards a treaty, but must gain widespread participation in order to succeed. The developed countries, the former Soviet bloc, the debtor nations, and the less developed countries, all bring conflicting demands to the negotiations. Despite the uncertainty of the extent and effects of global warming, and despite the conflicting demands, a compromise treaty must be implemented to avoid a potentially catastrophic climate change.
A Climate Change Treaty was signed at the UNCED conference in Rio in June 1992. That treaty provides a framework within which future treaties (called "protocols") can be written to commit signatories to emissions reductions. The "framework / protocol" approach was used successfully to negotiate CFC emissions reductions -- the Montreal Protocol is a treaty within the framework treaty of the Vienna Convention. This paper addresses the issues involved with a "greenhouse protocol," a treaty which would commit to actual emissions reductions, as the next step to follow the Rio Climate Change Treaty.
A primary need for a workable treaty is that it be affordable to the participants, or at least, that it be achieved at a minimum cost. A primary goal of a successful treaty is that it reduce greenhouse gas emissions sufficiently to allow ecological and social adaptation to the inevitable atmospheric temperature increase. The traditional "command and control" approach could achieve the goal of reducing emissions, but such an approach would certainly not be cost-effective and would likely be prohibitively expensive. The more innovative "carbon tax" approach could fill the need for cost-effectiveness, but does not directly control emissions and hence could fail in its goal of reducing emissions. A carbon tax also implies setting up an agency to collect the tax, redistribute it, and enforce it; because of the enormous sums of money involved, such an agency is, at best, politically unpalatable. An "emissions trading" approach, which establishes a market for carbon emission reductions, could fulfill the goal of reducing emissions as well as the need for minimizing cost.
The primary experience with markets for emission reductions has been in the United States, via the Environmental Protection Agency's emissions trading program for alleviating air pollution. The EPA program has been in effect since the Clean Air Act was implemented in the early 1970s. The "offset policy" allows new emissions sources only if the best technology were applied to the source, and if the additional emissions were offset by reducing excess emissions at other sources. The "bubble policy" allows transfer of emission credits between existing sources, as long as the total emissions do not increase. The "banking policy" allows sources which are below their allocated limit to retain credits for future use. The concept underlying the program is that control decisions are made by those who are best prepared to choose optimal solutions, and hence the overall cost of emissions reduction is minimized because the marginal costs of each source are equalized, since any source with a higher reduction cost will buy permits from a source with lower costs. Congressional legislation has recently been proposed to extend the trading policy to greenhouse gas emissions within the US.
This paper examines how an international greenhouse gas emissions trading program could be implemented, by drawing on the experience of the US programs. Greenhouse gases are "uniformly mixed accumulative pollutants," in the EPA parlance, and as such are amenable to emissions control (quantitative) rather than ambient control (qualitative). The international supervising agency, or its domestic representatives, must monitor quantity of emissions from each source; the purpose of the agency is only to monitor emissions and to use that information to allocate credits. Market forces will create the incentive for each source to determine its least-cost strategy, and in the longer term, will encourage technological advancements with worldwide benefits. The initial allocation scheme for distributing permits is a point of conflicting interest. It will figure prominently in any treaty negotiations: the developed countries have an interest in basing allocations on currently existing emissions, since they are the large emitters now; less developed countries have an interest in a per-capita allocation basis, since they are below the world average of per capita emissions. This paper suggests a compromise of a sliding scale, beginning with country allocations based on emissions in an historical base year, and progressing over 10 years to an allocation based on adult population in the same historical base year. The compromise plan includes: technology transfer and capital transfer from the developed countries to the less developed countries; debt forgiveness to foster efficient development; and accounting for tropical forest preservation, a "carbon sink," as a capital asset and source of emission reduction credits. Special emphasis is given to the United States' implementation plan, since the US is the world's largest source of carbon emissions. The US can reduce its emissions by 25% within a "no regrets" policy, that has a net cost savings due to increased efficiency.
The increase in greenhouse gas concentrations is well-documented, but the results of the enhanced greenhouse effect are less certain. The most optimistic observers claim that the earth will compensate for the increases in GHGs by unforeseen natural mechanisms, and hence no action is necessary to maintain the current global climate. The most pessimistic observers claim that the temperature rise is already well under way, and sometime next century will result in unpredictable and catastrophic climate change throughout the world. The realistically expectable effects of global warming are somewhere between those two extremes. Prudence dictates that we begin measures to deal with our ever-increasing emissions of greenhouse gases, as "insurance" against the potential worst case. Even for those who believe in the best case, the measures we take now can be worthwhile anyway, if they are inexpensive, can have positive effects other than alleviating global warming, and can leave open the possibilities for more stringent measures when warranted. This paper will discuss a potential international "Greenhouse Gas Emission Reduction Protocol" (GHG treaty) from that perspective: that the treaty should outline a least-cost, no-regrets, flexible policy of reducing greenhouse gas emissions.
The primary greenhouse gases are carbon dioxide (CO2), methane (CH4), various chlorofluorocarbons and halons (CFCs), nitrous oxide (N2O), and tropospheric ozone (O3). Each of these gases has a different "greenhouse warming potential" (GWP), so that their effects on atmospheric temperature are not in direct proportion to their quantity of emissions. One ton of N2O has the same warming effect as 14 tons of CH4, which has the same effect as 290 tons of CO2; the most potent GHGs are the CFCs, some of which achieve that same effect with only 54 kilograms of emissions.[2] Although CO2 is weakest in terms of relative warming effect, it is emitted in the largest quantity by far, so it accounts for 61% of the total GWP.[3] N2O and CH4 are not as readily monitored as CO2, and their sources are not known quantitatively.[4] The CFCs are already controlled under the Montreal Protocol (the Ozone Treaty), and their emissions are being phased out now. Hence, any GHG treaty will likely initially attempt to control only CO2 emissions. This paper will discuss only CO2 emission reductions; where applicable, the other GHGs will be included as "CO2 equivalents," which method the GHG treaty will likely use as well.
Humans emit CO2 at a current rate of 21.8 billion metric tons per year,[5] some of which is re-absorbed into the oceans, biomass, and soil; the rest accumulates in the atmosphere. That emission rate causes a current atmospheric CO2 concentration of 353 ppm (parts per million), compared to a pre-industrial level of 280 ppm.[6] The atmospheric concentration is increasing at a rate of 1.6 ppm per year,[7] and because energy usage is increasing, the rate of increase of atmospheric CO2 concentration is increasing as well. That rate of increase, 0.5% per year, represents a doubling of CO2 concentration in 140 years, which translates into a temperature increase of between 1.9°C and 5.2°C.[8] The resulting prediction of average temperature increase, in the absence of any emissions reductions, is estimated between 0.15°C and 0.35°C per decade; the "ecologically tolerable rate," or maximum that the environment can withstand without damage, is about 0.1°C per decade.[9] To limit the temperature increase to the tolerable rate, we must decrease CO2 emissions by 20% from their projected levels for the year 2005.[10] This 20% reduction level by 2005 will be the basis for discussion in this paper, representing a minimum goal and starting point for treaty negotiations.
To estimate the economic damage resulting from unmitigated global warming (discussed in section 5 below), we must rely on "general circulation models" (GCMs), which predict the earth's climate patterns based on the specified temperature increase. All of the numbers above are "zero dimensional," that is, they describe only a global average. The GCMs are super-computer simulations of the earth's climate; they model climate three dimensionally, predicting climate effects for each area of each country. The GCMs predict that climate change will not be uniform throughout the earth: specifically, high latitudes will warm more than low latitudes; high latitudes will receive more precipitation and low latitudes will receive less; warming will be greater in the winter than in the summer.[11] In addition, the average global sea level is predicted to rise by 6 cm per decade as a result of thermal expansion of the ocean itself plus land-based ice-cap melting.[12] The more developed countries (MDCs) will be able to cope with the economic damage by implementing technological fixes (building dikes) or social fixes (moving people north); the less developed countries (LDCs) will be less able to cope without economic assistance. The inherent difference between MDCs and LDCs in ability to cope with the consequences of global warming (which, ironically, is created primarily by the MDCs) form the basis for the technological and financial transfers required by any GHG treaty; these transfers are discussed in detail in section 13 below.
Perhaps more significantly, the GCMs fail to account for catastrophic climate change, which is the basis of most pessimistic scenarios. In our discussion above, temperature increases ranged from 1.9°C and 5.2°C; that temperature increase would be the largest experienced in the last 18,000 years.[13] For comparison, during the "Altithermal Period," 4,000 to 8,000 years ago, global temperature was 1°C to 3°C warmer then today; the associated precipitation changes made the Sahara Desert a prairie.[14] The most recent Ice Age, 18,000 years ago, had an average temperature only 5°C cooler than today's average.[15] The GCMs also do not attempt to predict major events such as the breakup of the Antarctic ice shelves, which would cause a sea level rise of five to eight meters,[16] nor any "runaway greenhouse" positive feedback effects, such as methane released from melting Arctic tundra.[17] On the other hand, the GCMs cannot account accurately for the known re-absorption of CO2 which is emitted today -- according to the models, the atmospheric CO2 concentration should be higher than the observed values, and the atmospheric temperature rise should be easily recordable by now. Because the current CO2 levels are unprecedented in earth's history,[18] the GCMs cannot properly account for the carbon balance; presumably there is some unknown oceanic "carbon sink" or biomass uptake.[19] In other words, there is great uncertainty in predicting global warming. Political decisions must be made despite that uncertainty. Even if global warming turns out to be overestimated, reducing carbon emissions is a wise decision just for "insurance." The remainder of this paper is based on that premise, and explores how to make the emission reductions in the most cost-effective and most politically acceptable manner.
In forming policy responses to the uncertain consequences of global warming, before the effects are fully realized, we can choose to mitigate the problem or ignore it; after the warming has occurred, we can choose to adapt to the new climate or to attempt to adjust the climate to suit us. This paper assumes that before the warming effects are realized, we will not choose to ignore the problem, and instead we will negotiate a treaty despite the uncertainty. This paper also assumes that regardless of our actions to mitigate global warming, that it will occur to some degree anyway. That is not an assumption of insufficient political will, but rather one of scientific necessity: even if all GHG emissions were to stop immediately, considerable warming would still occur because of the existing high atmospheric concentrations of GHGs, which have not yet fully realized their global warming potential.[20] This paper further assumes that after the warming effects are fully realized, we will not choose to adjust global climate by technological means. While there are many suggestions for technological solutions,[21] any global climate adjustments will likely cause greater environmental damage than would be solved. This paper will not address adaptation policy -- it will take place far in the future under different technological circumstances -- but assumes that the institutions set up by the GHG treaty will expand to deal with adaptation as the need arises.
Every one of the countries in the above categories requires special considerations, which will translate into exceptions in a GHG treaty, as was done in the Ozone Treaty. Each country represents a special interest or bloc of other countries -- discussion of these countries is therefore meant to include all countries as member of one "bloc" or another. The basis of a GHG treaty will be some method of apportioning shares of carbon usage to each country -- each special consideration will add some factor to the apportionment formula. The US will require consideration for existing emissions, since its per capita emission rate is so much higher than any other country's. Since US leadership is a necessity for the success of the GHG treaty (the role of the hegemon is discussed further in section 4 below), the US cannot be required to pay a proportional share of the GHG control costs, which means that the GHG treaty must allow for "grandfathering" of existing emissions (discussed with other initial allocation methods in section 13 below).
The former USSR is counted as one entity for comparison with other countries. The former Soviet republics would presumably sign independently, and not under any form of commonwealth, so emissions limits should apply individually rather than collectively. The former USSR and its former East Bloc allies must consider the gross inefficiencies of their economies, which consist of MDC emission levels without MDC per capita income with which to pay a proportional share. The former Soviet bloc should, "for at least a generation, concentrate on immediate threats to health and child development. Carbon dioxide will appear benign by comparison."[22] Special concessions will certainly be necessary to allow financial participation of Russia and the rest of the former Soviet bloc.
1992 Percent Emissions Percent
Country population of world (million of world Tons CO2
(millions) pop. tons CO2) emissions per capita
_______ __________ ________ ________ _________ _________
USA 252.5 4.9% 4,210 19.3% 16.7
Former USSR 297.2 5.7% 4,210 19.3% 14.2
United Germany 77.1 1.5% 976 4.5% 12.7
United Kingdom 56.0 1.1% 639 2.9% 11.4
Japan 125.2 2.4% 943 4.3% 7.6
Total MDCs 808.0 15.5% 10,975 50.3% avg. 13.6
China 1,149.4 22.1% 2,780 12.8% 2.5
Brazil 156.3 3.0% 213 1.0% 1.4
India 854.3 16.4% 804 3.7% 1.0
Nigeria 120.2 2.3% 85 0.4% 0.8
Indonesia 187.6 3.6% 140 0.6% 0.8
Bangladesh 120.7 2.3% 19 0.1% 0.2
Total LDCs 2,588.5 49.8% 4,038 18.5% avg. 1.6
Total Selected 3,396.6 65.3% 15,012 68.9% avg. 4.5
Total World 5,200.0 21,800 avg. 4.2
Table 1: Population and emissions of major GHG Treaty players at the time of the treaty negotiations. Source of table information: (Gupta & Epstein, 1990, p.21), adapted from World Resources Institute and International Institute for Environment and Development, "World Resources 1988-89". Carbon tonnage converted to carbon dioxide with ratio 12:44; percentages and per capita tonnage calculated by author; total carbon dioxide tonnage from (PIGW, 1991, p.6); 1992 total world population from World Population Data Sheet, © 1990 Population Reference Bureau
United Germany has incorporated the world's former highest per capita CO2 emitter, East Germany, and will require consideration for its cleanup of the former East. A possible concession is to allow counting pollution cleanup not directly related to GHGs as if they were GHGs -- this would apply to the rest of the former Soviet bloc as well. The United Kingdom must consider its restrictions imposed by the European Community, as must Germany and the rest of the EC. The EC itself will likely be a separate signatory to any GHG treaty, along with its members; the "EC bloc" will presumably coordinate their GHG treaty negotiations. Germany and the UK have relatively strong domestic Green Parties, which should make their large balance of payments more politically feasible at home.
Japan will require consideration for its current high efficiency -- it has invested heavily in low carbon emissions and will demand accounting for it (France falls into the same category, due to its extensive nuclear program). Using a strict "grandfather" basis for initial allocations will penalize any countries who have previously reduced their GHG emissions; the "efficiency bloc" will demand equity for their past investments. But using a strict "per capita" basis will be grossly favorable to China and India at the expense of the rest of the world, because of their enormous populations. Some sort of compromise formula between the two extremes must be negotiated.
China has invested heavily in limiting its population, and has achieved a growth rate approaching that of MDCs (1.4% annual growth rate, vs. 0.8% for US and 2.1% for India).[23] China has 22% of the world's population -- the best thing it could do to alleviate global warming is to maintain its population policies, and the GHG treaty should consider that (China's birth control policy is as abusive of human rights as any of Beijing's policies, but the discussion here only concerns GHGs). China has large reserves of low-grade coal, which, if burned during China's development, would greatly increase atmospheric CO2 content. The same result applies when China builds refrigerators for all of its citizens: its choices of efficiency have a significant impact on the rest of the world's atmosphere. Enormous monetary transfers to China are concomitant with any GHG treaty based on population, but the enormous savings in emissions match the enormous expenditures.
Brazil contains the Amazon, the world's largest tropical forest. Tropical deforestation causes 20% of atmospheric CO2 increase,[24] and clearly should be considered in a GHG treaty. Brazil also has an external debt of $109 billion, the highest of any LDC.[25] The debt burden encourages Brazil and other debtor nations to exploit its natural resources to repay the debt, but "by an accident of history and geography, half of the Third World external debt and over two-thirds of global deforestation occur in the same fourteen developing countries."[26] Indeed, 30% of all external debt in 1985 was owed by just four countries: Argentina, Brazil, Mexico, and Venezuela,[27] which along with other debtor nations with abundant natural resources, will constitute the "debt-for-nature bloc" at GHG negotiations. The treaty must account for maintaining forests in exchange for repaying debt; "Stimulating conservation while ameliorating debt would encourage progress on both fronts."[28] Preserving the extraordinary biodiversity which is unique to tropical rainforests is a significant side-benefit to ending the strip-cutting of the Amazon and other rainforests. More importantly for the GHG treaty, carbon stays in the trees instead of in the atmosphere, and debtor nations have a large financial incentive to participate in the treaty.
India has 16% of the world's population, but unlike China, has not successfully implemented a birth rate reduction plan. Many LDCs are in an equivalent situation, and will constitute the "over-population bloc" at GHG treaty negotiations. Any per-capita based carbon allocation scheme inherently favors countries with high birth rates, since their allocations would progressively gain on the other participants as their populations increased. Many writers suggest that the allocation scheme should be per adult, not per person, which would discount high birth rate countries since they have a relatively higher child population. But their contribution to GHG reduction would be best accomplished, like China, if they implemented a birthrate reduction plan, and an adult population scheme discourages that. A better solution would be to allocate carbon shares on one base year, with no change in the per capita allocation with time, so that if the population continues to increase, the per capita carbon share decreases, hence creating a strong incentive to limit population growth.
Nigeria is certainly a member of the "over-population bloc", but it is a member of the "poverty bloc" as well. They will require considerations for addressing poverty issues before they address emissions issues at all. But alleviating extreme poverty will cause a decrease in GHG emissions in the long run, because poverty implies energy inefficiency:
"It is in the poor countries, however, where the most progress is left to be made toward efficiency. For instance, a person who cooks in an earthen pot over an open fire uses perhaps eight times more energy than an affluent neighbor with a gas stove and aluminum pans. The poor who light their homes with a wick dipped in a jar of kerosene get one-fiftieth of the illumination of a 100-watt electric bulb, but use just as much energy."[29]
Indonesia represents the "development bloc;" they have natural resources but relatively little debt, so some other encouragement must be provided to get them to participate. They will require considerations for encouraging efficient industry and sustainable development patterns. It seems incongruous to discuss a transfer of payments to encourage development in the context of a greenhouse gas treaty (and indeed, many of the topics in this section seem out of place in a GHG discussion), but the environmental issues are intertwined:
"If the developed high-income nations are now prepared to make substantial investments of their own resources in the standard of living and quality of life fifty to seventy-five years from now in the now-developing countries, there will be two competing routes to pursue. One is to invest in greenhouse gas abatement; the other is to invest directly in economic growth and improvement ... the preference in developing countries would be for the immediate direct investment."[30]
Bangladesh represents the "catastrophe bloc." Bangladesh is an extremely poor country, but more importantly, it is an extremely low-lying country. If the enhanced greenhouse effect progresses far enough to cause a significant rise in sea-level, Bangladesh will experience flooding over most of its land area. Unlike prosperous MDC low-lying countries such as the Netherlands, Bangladesh will not be able to build dikes or use some other infrastructure solution. In reference to changing climate, "a representative from the Maldive Islands, a small group of about 1,200 tiny islands off the coast of India, complained that even a 1-meter rise in sea level would doom most of his 200,000 people to migration or death...."[31] Many island nations, small in population but large in General Assembly votes at the UN, have a vital national interest in preventing sea-level rise. Their participation in a GHG treaty is based on a need to avoid global warming and nothing else.
The multitude of issues related to a GHG treaty indicates that a comprehensive "Law of the Atmosphere," modelled on the Law of the Sea Treaty, could be more appropriate than a framework/protocol approach. Single-issue treaties, like the Montreal Protocol (Ozone Treaty), limit the possibilities for linkage of issues: "A package deal may offer the possibility of 'trading' across issues for joint gain -- thus breaking impasses resulting from treating issues separately."[32] But the temptation to link essentially social issues, such as poverty alleviation and birthrate reduction, to an epistemic regime, is bound to become unworkably complex. The Rio Climate Change framework has decided this issue, in favor of a framework/protocol model and against a "Law of the Atmosphere" model. What, then, should be the outline of a Greenhouse Gas Emissions Reduction Protocol?
Creating an international executive agency with the authority to implement CO2 emissions reductions is clearly impossible, because the bureaucracy involved would be beyond the scope of anything other than a world government. Creating an international financial agency, which would monitor the array of issue areas and convert their long-term GHG reduction effect into a monetary value, and then redistribute the funds to address the other issues above, would be more workable. But such an agency, which would be responsible for the transfer of hundreds of billions of dollars, would be too powerful to be supported by sovereign states. Creating an international monitoring agency, which would be charged with evaluating the issue areas, but which would have no financial power, is the central idea of this paper. The monitoring agency would have strictly epistemic duties: to collect information, to act as a clearinghouse, and to verify and evaluate the wide array of options discussed above. The actual monetary transfers would be accomplished by a permit system, with the value of greenhouse gas reduction credits determined by the monitoring agency. The treaty would be a framework to set up a market, not a comprehensive deal to manage its implementation. Linkage of the array of issues would occur not by fiat, but by the economic self-interest of the participants:
"A system of transferrable emission permits would be particularly desirable because : (1) it would handle distribution problems (i.e., LDC participation) explicitly while allowing for efficient allocations to emerge; and (2) it would provide incentives for efficient GHG management, including the use of forests as "carbon reservoirs" to generate valuable credits and offset the growth of atmospheric concentrations of GHGs. The latter factor creates the possibility of linking another global commons problem, tropical deforestation, to the problem of climate change with positive net benefits."[33]
"(1) The United States has 5 percent of the world's population and yet consumes more than 20 percent of the world's fossil fuels and emits more than 20 percent of the world's CO2 derived from the combustion of fossil fuels; (2) The United states consumes fossil fuels on a per capita basis at four times the worldwide average and more than twice the per capita average in many other highly industrialized countries."[35]
The Congressional bill establishes a unilateral US greenhouse gas reduction policy, although the intention is to establish a policy which others can use as a model, and presumably to provide supporting evidence when considering a permit market for a multilateral GHG offset market. Acting unilaterally risks putting the US at a competitive disadvantage if we spend money on GHG emissions reduction and our competitors do not. But that risk is necessary in order to begin the international process:
"No nation acting alone can substantially reduce the rate of buildup of greenhouse gases. Yet if each nation waits for another to act, all will continue to wait and the rate of buildup will be uncomfortably rapid. Such a "tragedy of the commons" can only be avoided by international agreements, in which some nations take the lead to set the moral (and economic) tone for the rest of the world with the full expectation that others will -- by agreement, it is hoped -- follow suit."[36 ]
Morality aside, for many years to come, our emissions reductions will make us more competitive due to increased efficiency (see the discussion on "No Regrets" in section 14). "The US spends 11% of its GNP on energy supplies; Japan only 6%. If we were at their level of efficiency, we would be spending $190 billion a year less on energy bills than we do now, without any reduction in our total output of goods and services."[37] The $190 billion sum is slightly more than the total balance of payments from the US to LDCs required over 10 years in the worst case of a GHG treaty (as suggested in section 13 below, see Table 2). The US has improved its energy efficiency by 24% since the oil crisis of 1973.[38] During the 1970s, US efficiency improvements were for the purpose of energy security; during the 1980s, for purposes of competitiveness; and during the 1990s, if the Congressional bill becomes official policy, for purposes of greenhouse gas mitigation. As Americans, we evidently need a pretext to do what's a good idea anyway; the government is providing a guideline without undue coercion. "Some governments, notably the government of the United States, are in no strong position simply to make things happen where carbon emissions are concerned,"[39] since we don't have a command economy. Providing guidelines that allow citizens to achieve emissions reductions while they save themselves money is a successful means of implementing policy. Congress in 1990 enacted the "National Energy Strategy" in order to:
"4(5) identify the actions necessary to mitigate or adapt to adverse consequences of global climate change; 4(6) identify and evaluate the domestic policies required to mitigate or adapt to the possible adverse social and economic consequences of a reduction or stabilization in the generation of greenhouse gases; 5(b)(1) implement standards for more efficient use of fossil fuels; 5(b)(2) increase the energy efficiency of existing technologies."[40]
The Bush administration was lax in implementing that Strategy, and the Clinton administration has been reluctant to pick up on a Bush legacy, so this paper will discuss one aspect of what could be done. President Clinton attempted to institute a BTU tax, but he lacked the political will to see it through, except as a weakened, and environmentally meaningless, gasoline tax. "Most important is a large, phased-in increase in the federal tax on gasoline and the adoption of a carbon dioxide emissions fee applicable to users of fossil fuel,"[41] says the 77th American Assembly on adopting new policies on global warming and energy. A US gas tax would be a powerful international symbol that we are willing to participate with the rest of the world in solving a common problem. It also has direct effects above its symbolic value: urban passenger travel in the US consumes 15% of the world's oil production,[42] and emits about 200 million tons of CO2 per year, which corresponds to 1% of total worldwide CO2 emissions.
Germany charges a gas tax of about $1.30 per gallon; the UK about $1.80; Japan about $1.70; and the US charges about 21¢ per gallon.[43] President Clinton's plan would raise the tax by a few cents per gallon, still well below the rest of the industrialized world. Cheap gas has resulted in a net cost of mass transit estimated at 45¢ per passenger mile, while automobile travel costs 24¢ per passenger mile, and 32¢ per passenger mile in urban commuting.[44] Automobiles cost 13¢ to 21¢ per mile less than mass transit -- the power of economic incentives such as that can be seen by observing US spending on highway construction and lack of commitment to rail service. "Using gasoline taxes in the industrialized nations to fund roads perpetuates an excessive reliance on the automobile."[45]
The US Office of Technology Assessment estimates that raising the gas tax by 10% would result in a decrease of gasoline usage of from 1% to 6%; raising the tax 50% would result in a 5% to 20% usage decrease. Raising it 100% or 200% (as would have Clinton's original BTU tax plan) would cause an immediate decrease in usage of 13% to 20% and a long term decrease of 35% to 40%,[46] as more fuel-efficient cars replace older ones. More importantly, it would decrease our dependency on foreign oil, would reduce our penchant for gas-guzzler cars, and would decrease our CO2 emissions as well as reducing other urban pollutants; an example of a "no regrets" policy. Clinton intended the tax as a means both to reduce the budget deficit and to become more fuel-efficient -- it would do both.
Most importantly, it would do both in a non-distortionary manner. Cinton must now replace the revenue that would have been generated by a gasoline tax with an income tax increase or some other distortionary means. Such taxes "distort" the economy by inducing taxpayers to behave inefficiently (such as creating an incentive to avoid claimable income, in the case of income taxes). A gasoline tax is a "corrective tax," which internalizes the external cost of maintaining national security in an oil-dependent and oil-importing economy (among other externalities).
The "Polluter Pays Principle" (PPP) implies implementing full social cost pricing. The PPP requires polluters to install emissions control devices at the source of the emission -- the polluter bears the initial cost of installation, but the consumer bears the ultimate cost, and hence receives information about the social cost of product which has caused emissions during its production. In the context of greenhouse gases, the PPP means implementing energy taxes or carbon emission taxes, since there is no technology to remove CO2 from emissions. The current "external cost" of CO2 emissions is zero; there is no economic incentive for consumers to reduce their carbon-emitting behavior.
The economist's phrase for setting prices to reflect their full external cost is "Pareto-optimal pricing." Pareto-optimality implies that society is best off at that point; reducing prices or raising prices makes society worse off (when externalities are included). Accounting for "depletable externalities," which in GHG context means CO2 emissions, requires charging an appropriate fee for depleting the external resource (here, the atmosphere).[48] Setting a fee for the generation of negative externalities is called a "Pigovian tax."[49] The US EPA emissions trading program imposes a Pigovian tax on pollution emission sources to achieve Pareto-optimal pricing. In non-economist parlance, that's the same thing as invoking the Polluter Pays Principle to achieve full social cost pricing.
The MDCs will object during GHG treaty negotiations because they will be required to pay for their excessive carbon emissions. Charging for carbon emissions in order to alleviate global warming is an attempt at Pareto-optimal pricing -- if there is no carbon fee now, there will be larger costs later due to unmitigated global warming. The GHG treaty will likely not require participating states to pass on the costs to their taxpayers in any particular form. However, to avoid economic distortions, and to abide by the PPP, the costs should be passed on in such a way that the activities which cause carbon emissions are those which pay for its effects.
What is the cost of doing nothing about global warming (which means, what is the full social cost of GHG emissions)? The 1980 US heat wave cost $20 billion; the 1988 US drought cost $39 billion; the 1989 US East Coast hurricane cost $5 billion;[50] events such as these are predicted to become much more likely due to global warming, and these only scratch the surface of the "full social cost" of CO2 emissions. This paper's proposal is for the US to spend an average of $16 billion per year on preventing events such as those (see section 13).
The fundamental problem with a C&C approach is that there is a mismatch between capability and responsibility.[51] The regulators, who have the responsibility for assigning controls, do not have sufficient information to assign the most appropriate control at each regulated emission source. The regulated industry, who have the capability to determine the best control at their sources, do not have the responsibility to do so, and have no incentive to implement cost-effective choices other than those which are imposed by the regulators. Not only is there no incentive to develop cost-effective alternatives to the specified control technology, but there is a strong disincentive to research and development, because if a new technology is developed that is appropriate for one source, the regulatory agency may impose its use at every source, regardless of appropriateness. Hence, C&C fails at "technology forcing,"[52] since innovation is not encouraged. Alternatively, when industry makes its own decisions about control technology, there is a strong incentive towards innovation, in order to minimize the cost of compliance, and technology is progressively improved.
A more insidious problem with C&C approaches is that, since industry has no responsibility other than that which is imposed by the regulatory agency, they have no incentive to ensure that the assigned technology achieves its objective at all.[53] If it fails, the industry can claim that it fulfilled its obligations by installing the required control devices. If the choice of the control technology were up to industry, their responsibility is to ensure that the technology achieves its objective, and to replace it if it does not. Indeed, during early implementation of the EPA ETP program, industry was accustomed to C&C so much that they were reluctant to take the additional responsibility themselves, fearing that along with responsibility would come the cost of risk.
The "information burden" should be transferred as much as possible to the sources themselves, in order to implement a control policy cost-effectively.[54] The more information burden is decentralized to industry, the better a regulatory approach works: for example, when implementing the Corporate Average Fuel Economy (CAFE) standard, Congress set the goal and let industry develop and implement the technology. In a strict economic incentive approach, the regulatory agency will set guidelines, monitor compliance, and enforce against non-compliance -- but industry itself will make all the decisions involving methods of implementation:
"One potential difficulty with the approach is that it will require regulators to change the way they think about their jobs. No longer will regulators be in the business of evaluating different pollution control technologies and strategies. Firms will do that for themselves."[55]
The reason for the popularity of C&C systems, despite their shortcomings, is that it's easy to create a law, but more difficult to create an economic incentive system. "The first recourse of governments when electorates demand that they 'do something' about a problem is nearly always to pass laws and issue regulations about it."[56]
The inherent inefficiency of C&C systems, according to economists, is that they do not attempt to equalize marginal costs.[57] An imposed regulatory control system typically requires that each source install the same equipment, even if it costs twice as much at one source than at another. If an industry had one expensive source and one inexpensive source in one location, they could more cost-effectively install more control equipment on the inexpensive source, and less control equipment on the expensive source. The amount of equipment on each source would be determined by the marginal cost: whichever source has the less expensive means to control the next unit of emissions, would receive the next unit of control. Hence, the two sources would have equal marginal control costs, and the same degree of emission control would be achieved at a net lower cost, than if equal controls were installed on both sources.
Market-oriented policies and C&C policies work well in different circumstances. Where emissions have a local effect (pollution is not evenly dispersed after emission), and when the emissions have a threshold effect (where there is no effect until a certain concentration of pollutants is reached), then C&C policies work best by imposing a uniform emission standard.[58] In the case of GHGs, only "aggregate control" matters, since there is no local effect of GHG emissions. There is also no threshold effect, since there are no short-term health detriments of CO2 emissions. Incentive-based approaches work best in aggregate control,[59] since the common benefit is to reduce emissions regardless of the details of the reductions (pollution types are discussed in more detail in section 11 below).
The purpose of a GHG treaty is not just to reduce greenhouse gas emissions; it should do so in a cost-effective manner. The traditional C&C approach would reduce emissions, but would not do so cost-effectively. Rephrasing that, using an economic incentive approach can achieve greater emissions reductions for the same cost.
Effluent fees are used extensively in Europe and Japan, but are not in significant use in the US (see discussion on the gas tax, a consumer-based effluent fee, in section 4 above). In terms of GHGs, effluent fees means carbon taxes, and are often called "emission charges" to distinguish them from "emission permits." Existing emission charges in Europe tax at the rate of $0.40/ton CO2 in the Netherlands, about $2/ton CO2 in Finland, and about $12/ton CO2 in Sweden.[60] Emission charges offer a possibility for cost-effectiveness, since they allow for an equalization of marginal costs (see discussion in section 6 above). Sources which could reduce emissions at a marginal cost higher than the tax rate will do so to avoid paying the tax, and sources which have a high control cost would just pay the tax. Emission charges also allow for "technology forcing," since development costs are offset directly by paying less tax. Contrasting with a C&C approach, emission charges "can stimulate the reduction of waste, not merely the control of waste."[61]
How much tax is necessary to reduce emissions by the desired amount? The Congressional Budget Office indicates that a tax of $27 per ton of CO2 would reduce US CO2 emissions by 8% to 36% of what emissions would otherwise be in the year 2000.[62] To reduce emissions from their current levels by 20% (to limit global warming to its ecologically tolerable rate, per section 2 above), would require an initial rate of $54 to $108 per ton, in order to reduce current excess emissions, and a rate of $67 per ton CO2 to maintain the lower emission rate.[63] These rates are considerable higher than the existing emissions charges instituted in Europe (see above). Referring to table 1, a 20% reduction in per capita CO2 emissions, at $67 per ton of CO2, yields an average cost of $880 per US citizen, who would pay the fee on the remaining 80% of emissions. That would create an income to the taxing agency of $225 billion, in the US alone, in 1992 dollars. Ideally the tax revenue would be spent on further carbon reduction; in any case, an emissions tax always implies a large redistribution system.
Emissions charges are a "regressive tax," since it is distributed equally to all people, regardless of income level, so that people with lower income pay must use a larger share of their income to pay the tax. But C&C approaches end up with a regressive distribution plan as well; further, emission tax revenue could be redistributed to alleviate the burden on the poor; and ultimately, an emissions tax costs less than a C&C approach for the same level of environmental benefit.[64]
The benefit of a carbon emissions charge is that it would encourage a switch to more efficient fuels. The tax would be scaled according to the carbon content of the fuel, so that coal, which has a high carbon content, would have a higher tax rate per unit of energy produced than would oil, and both would have a higher rate than natural gas, which produces energy with a minimum of emissions.[65] The initial fee discussed above, $27/ton of CO2, would increase the price of oil by about 67%, and would reduce oil usage by about 50%.[66]
The problem of a carbon emissions charge is that it would set no emissions targets. Instead of explicitly reducing the emissions of CO2, it would set a tax to attempt to achieve a desired reduction, and then would adjust the tax later if the target were not met. That, however, is a minor problem in GHG terms, since the time frame is large and minor aberrations in expected emissions are acceptable. The major problem in GHG emissions charges is how to establish the taxing agency and how to redistribute the immense income. While "earmarked" taxation (where the tax funds are dedicated to developing new emissions technology, for example) is not a new idea, it is considerably more difficult to manage at an international level than at a national level. Especially, sovereign nations would be paying taxes to some international agency outside of their sovereign control:
"I utterly dismiss the possibility that the United States would contribute in any fashion, let alone through taxation, upwards of $100 billion per year, or that the Senate would ratify any treaty including such financial commitments."[67 ]
A marginal emission tax is a more workable international concept: nations are assigned a quota for emissions, and must pay a tax on the tonnage emitted over the quota, not on the total emitted overall. The problems with initial allocation of quotas are the same for emission charges as for emission permits, and are discussed in section 13 below. A marginal tax is close in concept to a permit scheme: with permits, each source must pay for their emissions beyond their quota by purchasing permits on the free market, and with taxes, each source must pay for their excess emissions by paying the regulating agency directly.
In a GHG treaty, the international method of implementation need not match the domestic method. For example, in the Montreal Protocol, the international method is quota allocation, while the US domestic implementation is to assign effluent permits. A tax at one level could be implemented as a permit system at the other level. However, the important characteristic of a GHG treaty is that emission reductions be achieved worldwide at minimal cost; to achieve an international equalization of marginal costs (and hence achieve cost efficiency), reductions must be tradable internationally. International taxation does not achieve the goal of interrelating carbon reduction issues (as discussed in section 3 above), but a international permit trading system does allow for "issues trading." How does permit trading work in detail?
The EPA Emissions Trading Program (ETP) concerns itself not only with quantity of emissions, but with quality of the local environment as well. Quality is not an issue in GHG emissions, so many EPA concepts such as "Non-Attainment Areas" and "Prevention of Significant Deterioration" do not apply directly to a GHG discussion. This paper mentions those concepts only to clarify the EPA policy, but does not discuss them in detail. The quality versus quantity issue is discussed in section 11 below.
The basis of the EPA enforcement of the Clean Air Act (CAA) is in State Implementation Plans (SIPs), which define the detailed methods for achieving the air quality goals of the CAA. The CAA was initiated in 1969, and it soon became clear that many states could not meet their SIP deadlines. Under then-existing rules, no new industry could emit any pollutants in areas which were not in compliance with SIP standards -- this is the typical dilemma in environmental regulation between maintaining quality and allowing growth. In 1976, the EPA promulgated the offset policy, which allows for new sources and old source modification in any area, if the additional emissions are offset by reductions elsewhere (generally within the same plant or in another plant owned by the same company). In addition, new or modified sources are required to include control technologies which attain the Lowest Achievable Emission Rate (LAER). The offset policy allows for economic development to continue, while having a net effect of no additional emissions. The offset itself is regulated by Emission Reduction Credits (ERCs): the EPA approves a reduction at an existing source, and then issues an ERC for the amount of reduction; the new additional emission source is measured, and the source must be offset by the ERCs.
The bubble policy was first implemented successfully in 1979. Here, the plant may define an imaginary "bubble" over multiple emissions sources, and may install whatever control technology it deems appropriate as long as the total emissions from the entire bubble do not exceed EPA standards. The bubble policy was slow in getting started because there was a large administrative burden associated with it: the plant proposing a bubble had to get state approval and EPA approval for each bubble transaction. In 1981, the EPA approved the first state "generic bubble," which defined the rules for allowing bubble transfers and hence made EPA involvement in each bubble transaction unnecessary.
The netting policy began in 1980. It is similar to the bubble policy as applied to new or additional emission sources. Plants could avoid an EPA review of their existing sources and imposition of more stringent new-source emissions requirements, which would normally occur whenever an emission source was altered, if the new emission source had no net effect on emissions. The net gain of zero would presumably occur by a reduction in other sources in the same plant in which the new source was being installed.
The banking policy initiated successfully in 1986. It allows for banking of ERCs for future use. Prior to the banking policy, ERCs had to be used or allocated when they became available (i.e., a plant had to have a particular use in mind when it received the ERC). The banking policy allows ERCs to be treated as a bankable currency, to be used in later offset trades, netting trades, or bubble trades, or to be sold to other plants in a free market.
The offset policy, the most widely used component of the program, is currently interpreted as requiring a net decrease in emissions, not just an equal offset. The difference, or offset ratio, is defined by the states, and differs from area to area. In Los Angeles, for example, the basic offset ratio is 20% (i.e., an ERC is discounted by 20% of emissions quantity when being used to offset other emissions increases), and then an additional small percentage is added based on the distance between the two sources.[68]
In terms of initial allocation, the ETP is a strict "grandfather" program: unless a plant changes emissions at a source, it is subject only to the EPA standards which would otherwise apply without the ETP. That is, participation is not required for existing plants, but only for new emissions sources or old sources which add a significant amount of emissions. Any plant may continue to emit pollutants at the rate at which it had historically done, subject to EPA guidelines. The alternative to a grandfathering allocation scheme would be to set a baseline of zero for all emissions, and then require permits for any emissions at all. The EPA chose not to use that method in order to maintain continuity with the EPA approach in use before the ETP was implemented.
"1) The ETP has generally resulted in better air quality.
2) There have been significant cost savings.
3) The offset policy has allowed growth in areas which would have otherwise suffered economically.
4) Administrative costs have been high.
5) Abatement technology introduction has been stimulated by the program."[69]
The offset policy has been a widely used component of the program, since it was the earliest initiated and the easiest for plants to use:
"... several estimates suggest that some 2000 to 2500 offset transactions have taken place. With this policy the confrontation between economic growth and environmental protection was diffused. New firms were not only allowed to move into polluted cities, but they became one of the main vehicles for improving the quality of the air. Economic growth facilitated, rather than blocked, air quality improvement."[70]
The offset policy has resulted in about 2,000 transactions, 1,800 of which have been internal transactions within one plant or one owner. The netting policy has resulted in 5,000 to 12,000 transactions, saving industry $25 - $300 million in permitting fees and $500 - $12,000 million in emission control costs. The bubble policy has resulted in 42 federally approved trades and 89 state approved trades, saving industry $435 million in control costs. The banking policy has resulted in only about 100 transactions, and only a small cost savings, due to its limited application.[71]
Another problem with the ETP is that it addresses only new sources of emissions. Existing sources are subject only to EPA pollution standards and are not included in permit trading unless additional emissions are added. The new sources must meet more stringent standards than existing sources -- hence, industry is reluctant to change over from existing sources to new sources unless absolutely necessary. The disincentive to change-over results in the maintenance of old sources, using older technology that meets the EPA existing-source minimum standard, but could produce less emissions if a change-over were encouraged. In order for a permit system to be optimally cost-effective, it must include old sources as well, since those often have the lowest marginal cost of reduction.
In addition, the ETP, despite its progressive liberalization, limits its scope by excessive state intervention. In the L.A. program mentioned in section 8, the distance component of the offset ratio precludes trades from occurring across any great distance. There is no economic nor environmental reason to limit trades to any zone; it is merely an administrative convenience. Another example is how SIPs handle banked credits. In many cases, there is a time limit to the use of banked credits, after which the state confiscates the ERCs. This creates a disincentive to using the banking policy at all, since state confiscation is always a possibility. Such restrictions should be eliminated in order to fully implement the program.
Despite the limited utilization and modest success of the ETP, it has achieved its goal of providing a means to resolve the conflict between growth and protection: "Without question, the principal purpose which the offset policy was designed to serve has been satisfied: to provide a 'safety valve' permitting legal continuation of economic growth in non-attainment areas."[72] More importantly, it has done so with no additional pollution emissions, and often has saved money for industry while simultaneously reducing emissions. Indeed, the ETP has become progressively more cost-effective, as barriers to its full implementation have been progressively removed.[73] One writer notes that, as the federal authority for the bubble policy is progressively transferred to state authority, that "a marked increase in bubble activity is associated with a decrease in federal oversight."[74 ]
Compliance with EPA standards is made easier with a marketable permit system. In a C&C system, tightening standards would cause many industries to request special exemptions, pleading that they cannot afford to implement the new standard. C&C policy becomes more difficult to enforce as the standards get progressively tighter; permits, on the other hand, become more cost-effective under those conditions:
"Because marketable permit approaches have been shown to have a demonstrable effect on cost savings without sacrificing environmental quality, this instrument can be expected to receive more widespread use. One factor which will stimulate the application of this mechanism is the higher marginal costs of abatement that will be faced as environmental standards are tightened. "[75]
The ETP has faced numerous legal stumbling blocks, and have been often only partially implemented, yet "it is important to recognize that [marketable permit systems'] performance is broadly consistent with economic theory."[76] Basic economic theory states that when barriers to trading are low, more trading is likely to occur; the ETP program has many barriers to trade, and its strength is that despite the barriers, trades have successfully been made. Recent estimates of cost savings place the total control cost savings at $4 billion, with no adverse effect on air quality.[77] The ETP program's purpose is to promote cost savings in implementing emissions controls by letting the decisions of control costs to be made at the source itself; the ETP has achieved that purpose; it is up to the EPA to require more emissions controls if the ETP is to more fully implemented.
The "CO2 Offsets Policy Efficiency Act of 1991" (COPE),[79] proposes that any new major greenhouse gas emitters be required to offset their emissions with other GHG emission reductions, or pay a fine of $250 per ton of CO2 emitted. This proposal matches the initial ETP offset policy: it applies only to new sources and major additions to old sources, and hence would provide continuity from the situation prior to the legislation. The COPE also proposes formally the ERCs suggested in the CAA amendment above; this establishes a banking policy to be administered by a "National CO2 Offset Bank."
Since there are no standards for GHG emissions, a netting and bubble policy do not apply, because those are designed for meeting standards and not just generating credits. The new legislation, by providing statutory authority from the onset of the program, bypasses the early problems with the ETP. It also is directly amenable to inclusion in an international GHG treaty, since it accounts for international trading. In addressing the complaint that the ETP has high administrative costs, the sponsor of the legislation says:
"The only Government role in all this is to keep the trading honest. The Federal Government should set guidelines for the States so that they can tell how much new CO2 is really going to be emitted from the new plant and, therefore, how much of an offset is required."[80]
Assimilative pollutants are amenable to permits which have a time period associated with them, so that a pollution source might have a permit valid for one ton per year. The regulatory agency would issue new permits yearly, the number of which is determined by how much pollution reduction is desired that year. Accumulative pollutants should use "cumulative emission permits," which are issued once, and are retired once they are used. A pollution source is issued a permit allowing for 10 tons of emissions -- they may then schedule their emissions in any time frame they prefer, but after their 10 tons are emitted, they must purchase new permits to emit at all. Cumulative emission permits have no expiration date, since many in the permit market would purchase them as "futures," assuming that the price will go up as the permits become scarcer.
CO2 is both assimilative and accumulative. Earth's ecosystem can absorb a large quantity of CO2, and given sufficient time with no further emissions, even today's elevated levels would return to their pre-industrial values by natural processes. However, the rate of assimilation is slow (and the destination of the assimilated carbon is unclear also, as discussed in the context of GCMs in section 2 above), and for practical purposes CO2 is accumulative. The progressively increasing CO2 concentration in the atmosphere indicates that we are well above the earth's assimilative limit. Obviously, cumulative emission permits are not practicable for CO2 because its emissions are too prevalent in every industrial activity. But the economically correct method of permit issuance would be to determine the assimilation rate of CO2, and issue annual permits for that quantity, and then issue cumulative permits for emissions above that level. The annually issued permits would be issued for a number of tons of CO2 that can be assimilated that year (allowing for an 0.1°C rise per decade as ecological tolerance, perhaps, as discussed in section 2 above). The cumulative permits would account for historical emission levels and create a smooth transition to the permit scheme. Nations (or industries) could then be assured a certain minimum number of permits on an ongoing basis, and would have a bank of cumulative permits to use at their discretion, as their emissions are reduced to a sustainable level.
The EPA also distinguishes between "Criteria Pollutants" and "Hazardous Pollutants." Criteria pollutants, such as ozone, are dangerous only in high concentrations, which the EPA determines in "Criteria Documents" (hence the name). Hazardous pollutants, such as mercury, are dangerous in any quantity and are much more stringently controlled. All GHGs are criteria pollutants; the significance to this discussion is that the equivalent of Criteria Documents must be created. The level at which GHGs become "dangerous" is when they accumulate faster than their assimilative threshold -- the criteria document would establish that threshold and use it to allocate the number of annual emission permits.
The EPA also classifies pollutants by their degree of mixing. "Uniformly mixed pollutants" spread quickly throughout the atmosphere. Their damage to the local environment is no different than their damage further away. An example is CFC emissions, again; CFCs are "uniformly mixed accumulative pollutants," in EPA parlance. Non-uniformly mixed pollutants don't migrate quickly; their damage is concentrated in the local area in which they are emitted. An example is sulfur dioxide, a component of urban smog.[82]
Uniformly mixed pollutants are amenable to an "emission based system," because only the quantity of emissions matters, not the rate of emissions. Emissions permits allow a certain quantity (usually per year, but only for administrative convenience), but the rate at which the emission occurs doesn't matter (except that unequal rates are more difficult to monitor). Non-uniformly mixed pollutants should use an "ambient based system," which measures the rate of emissions and not just the total quantity.[83] The EPA rules for ambient based permits include detailed monitoring systems on an hourly basis, daily basis, and yearly basis. Ambient based systems are concerned with the quality of air near the emission source; emission based systems have no such quality concerns.
In full EPA terminology, GHGs are "uniformly mixed assimilative criteria pollutants." As uniformly mixed pollutants, there is no difference in the greenhouse effect nearer to a point of emission than further away. All of the GHGs follow that same logic; therefore, GHG permits should be emission-based, and measure only the total quantity of output. The EPA program sets different emissions standards for each pollutant under their authority, and permits cannot interchange between pollutants, because there are ambient based criteria for most of the pollutants in question. In the GHG permit system, there is no reason to maintain a distinction between different emissions (such as carbon dioxide versus methane), since all contribute in a quantifiable manner to the same problem. This paper has simplified the discussion by including only CO2, but the other GHGs could be included readily in a permit system by counting them as CO2 equivalents. The proposed US GHG legislation (see section 10 above) does exactly that: the legislation is written only concerning CO2, but allows for future consideration of other GHGs emissions, fully tradable with CO2 emissions, as CO2 equivalents.
The EPA program is concerned with air quality; the GHG program would be concerned only with emission quantity, simplifying the administrative load considerably. Nevertheless, a large agency must be set up, the international equivalent of the EPA, perhaps under the UN agency created at UNCED, the Sustainable Development Programme (UNSDP). The EPA operates through SIPs, the state implementation plan. The UNSDP would operate through national plans of each participating nation. The internal methods used by each SIP are of concern to the EPA because they are charged with maintaining national environmental standards. The UNSDP would not have authority within countries to set methods or standards; it's unnecessary to do so because the only concern is quantity, not quality. In fact, the internal means by which countries can achieve their emissions reductions is of no consequence to the success of the system, for the same reason that the EPA is not concerned with the particular technology that a factory uses to limit its emissions. A nation's internal means of compliance can include a separate national permit system, a carbon tax, or traditional C&C methods. Nations could allow their large source emitters to participate in the international system directly -- those emitters would then be responsible for trading their own permits after their government had decided their initial allocation.
The EPA and the states have joint authority to monitor compliance in general and to monitor emissions at particular sources as well. This monitoring function would have to be done by the UNSDP as well, in order to accurately determine the quantity of GHGs emitted; this would be the largest administrative overhead of the program. The EPA limits itself to large emissions sources, of which there are 27,000 in the US.[86] The UNSDP would deal with large emissions sources directly (for example, power generation plants which would trade permits), as well as national governments (which would trade permits for all other sources within their country, such as individual automobile emissions). The EPA is solely responsible for maintaining records on ERC banking as well as for issuing and distributing permits; the UNSDP would do the same. The task for the UNSDP would include estimating national CO2 emissions as well as monitoring point source emissions from large sources. The implementation of a permit system would proceed as follows:
"First, a target level of environmental quality is established. Next, this level of environmental quality is defined in terms of the total allowable emissions. Permits are then allocated to firms, with each permit enabling the owner to emit a specified amount of pollution. Firms are allowed to trade these permits among themselves. Assuming firms minimize their total production costs, and the market for these permits is competitive, it can be shown that the overall cost of achieving the environmental standard will be minimized."[87]
The target level would be defined in the GHG treaty itself, presumably on some sort of annual basis (the Montreal Protocol set targets as percentage reductions by specific years; the 1992 Copenhagen Amendments set the targets as zero for most CFCs by 1996). The total allowable emissions would be determined in CO2 equivalents for whichever GHGs are to be monitored. Permits are allocated to national governments as well as to large sources within nations, if the national government in question allows so (if not, then the national government itself would be responsible for the entire emissions of the country). The allocation method could be by historical emissions, by population, or by negotiated amounts from the GHG treaty (the allocation method is discussed in more detail in section 13). Nations and large sources would then trade permits, on a free market basis. The UNSDP could maintain a clearinghouse for information about available permits, prices, etc. The EPA enforces its program by disallowing new industry into non-attainment areas, and by fining emissions sources who emit in excess of their standard plus permits. In the arena of international law, such an enforcement scheme is less workable, but the UNSDP could at least assess fines on emitters over their limits, and then declare the country in question to be in non-compliance of the GHG treaty. The new US GHG legislation proposes a fine of $250 per ton of CO2, which places an upper limit on the price of permits (the estimated price for permits, however, is closer to $11 per ton; see section 13).
The practical reality would be that MDC governments (or their large emitters, if allowed to act independently) would have a large incentive to make more efficient their energy usage. For the large industrial nations, the cost effective means of achieving their quota would be to purchase permits from LDCs, which, if the allocation system is based on population, will have plenty to sell. In the US, for example, after the least cost alternatives are exhausted (the 25% reductions which the US can achieve at net negative cost or zero cost), rather than install costly control technology on US power plants, the US could build efficient cookstoves for Nigeria and trade them for permits. Building cookstoves presumably costs less than installing control technology, in terms of cost per ton of emissions, so by that means, the marginal cost is equalized and the system is cost-efficient.
The US could also simply pay Nigeria for permits, although providing cookstoves would net Nigeria more money in the long run, since they would have more permits the next year due to their increased efficiency and hence decreased emissions. It is tempting to suggest that transactions be required to have a net emission reduction in order to be allowed, so that a list of allowed methods of payments would be established (such as using the permit funds for reforestation, debt payment, population control, ad.inf.). However, any such limitation on transactions would immediately entail a large administrative cost (UNSDP would have to monitor every trade), and would ultimately decrease from the cost-effectiveness of the system because the least marginal cost sale might be disallowed. In addition, the theoretical basis of the permit system is disrupted if the market in permits is not a free market. If the Nigerians wish to sell their permits and buy powerboats with the proceeds, so be it; we must trust market forces to make that unlikely.
The regulatory agency with the responsibility for allocations (the UNSDP, for example again) could hold an auction to sell the permits. The auction could be from a zero basis (countries are initially allocated no permits, and would have to buy as many as needed at the auction), or could be after an initial allocation has occurred on some other basis (in that case, the rest of this discussion applies to how the pre-auction permits are distributed). If it's from a zero basis, the auction would raise about $150 billion.[89] That's a lot of money for a UN agency to control, and therefore this scheme seems unlikely for the same reason that carbon taxation seemed unlikely in section 7: countries will not pay that much money to the UN.
A successful allocation formula must meet the following criteria: (1) The US should not be forced to pay an exorbitant amount of money. If the US amount is within reason, every other MDC will also be within reason. Furthermore, if the amount is too large, the US will reject the treaty. The US initially declined to participate in the Ozone treaty because, it was reported, the transfer of $20 million was assumed to be setting a precedent for the much larger amount in the GHG treaty.[90] (2) The formula should include some "grandfathering," or basing the early years on historical emissions, in order to make a smooth transition into the program. If the grandfathered amount is 100%, and the base year is the present year, and the reduction target is 0%, then every country gets just enough permits to cover their emissions, and pays nothing unless their emissions increase. (3) The formula should include adult population, since that accounts for demographic imbalances in LDCs, and encourages the LDCs to maintain a population control program. Basing the formula on a fixed base year for adult population further encourages LDCs to decrease their birth rate, since then their allocation is fixed at the previous population and does not slide upward as their population increases. (4) The formula should provide LDCs with sufficient funds to encourage development.
Allocation Deficit Worst Per capita
1992 Adult in 2002 in 2002 Case Cost
Country population (million (million Cost ($ in
(millions) tons CO2) tons CO2) (million $) 2002)
_______ __________ ________ ________ __________ _________
USA 197 1,211 2,999 $164,944 $168
Former USSR 217 1,334 2,876 $158,183 $146
United Germany 67 412 564 $31,022 $93
United Kingdom 46 283 356 $19,567 $86
Japan 100 615 328 $18,051 $37
Total MDCs 627 2,854 7,121 $391,656 $125
China 823 5,059 -2,279 -$125,328 -$30
Brazil 96 590 -377 -$20,729 -$43
India 525 3,227 -2,423 -$133,286 -$50
Nigeria 66 406 -321 -$17,645 -$53
Indonesia 117 719 -579 -$31,861 -$54
Bangladesh 66 406 -387 -$21,275 -$64
Total LDCs 1,693 10,406 -6,638 -$350,264 -$41
Total Selected 2,320 14,260
Total World 3,547 21,800
Table 2: Estimated costs of permit purchases for GHG Treaty players for 10 years following treaty negotiations.
Column 3 is allocation in 2002. The allocation for 1992 appears in Table 1, column 4; the 1992 allocation is 100% grandfathered, and hence matches the 1992 usage. Column 4 is 2002 allocation minus 1992 allocation; negative value means the country has permits to sell. Column 5 is "worst case" cost; sum of 10 years of purchasing permits assuming that no emissions reductions were made (emissions stayed constant at 1992 levels). Sliding scale of allocations changes from fully grandfathered in 1992 to fully population-based in 2002. Negative means net income. Column 6 is per adult capita cost of 2002 permit purchases, assuming no population growth.
Table 2 proposes the following formula: Allocations in the first year of the treaty are set at the level of the previous year's emissions (100% grandfathered), so that the cost of permits in the first year is zero. Allocations in the tenth year are proportional to adult population, with the same total carbon emissions allowed (i.e., carbon emissions are frozen at 1992 levels). The allocation for the years in between are a sliding scale between 100% grandfathered and 100% adult population basis. The column labelled "2002 allocation" is based on the 1992 emissions divided by the 1992 adult population. The column labelled "2002 deficit" is the 2002 allocation minus the 1992 allocation, which is the 1992 emissions column from Table 1. The column labelled "Worst Case Cost" is the amount a country would pay over the ten year period if they did not reduce their carbon emissions to below their 1992 levels (if their carbon emissions continued to grow, the cost would be more, but then presumably every other country would not be reducing either). In the case of a negative deficit (permits to spare), the worst case column is the minimum income level if the country does not reduce emissions. The column labelled "per capita cost" is the amount that the country would pay in the worst case in 2002, divided by the adult population. It represents the cost to each taxpayer in the country, assuming that the population does not increase and that carbon emissions are not reduced. A negative value in the rightmost three columns indicates that the country would have a net income from selling permits, and a positive value indicates that a country must buy permits.
An emissions permit trading scheme lends itself well to a gradualist approach, because it is unnecessary to design the specific details of its implementation. A permit plan works identically for no emissions reductions or for 60% emissions reductions, and in both cases allows for cost efficiency. In order to convert from an emissions stabilization plan (no emissions reduction) to a plan which stabilizes atmospheric concentrations (60% emissions reduction), the regulatory agency need only distribute fewer permits. The market will then determine which emissions sources to control, which to shut down, and which to maintain. Such flexibility is necessary when faced with the large degree of uncertainty in a problem as complex as global warming.
A stabilization of emissions at current levels represents a decrease of 20% of what emissions would have been in 2002 with no stabilization, since current emissions are increasing at a rate of approximately 0.4 billion tons CO2 per year.[92] The necessary reductions to achieve emissions stabilization can be gained by efficiency alone. In the United States, implementing the least cost options can achieve an emissions reduction of 3.6 billion tons CO2 per year, at a cost of less than $9 per ton,[93] which is under the expected permit price of $11 per ton (as estimated in section 13 above). Fully implementing the least-cost options would more than account for the US deficit of 3.0 billion tons CO2 which would be created by the per adult capita allocation scheme discussed above (see Table 2). In other words, the US could avoid all transfer payments to other countries in a cost-efficient manner by implementing energy efficiency options within the US.
Half of the least-cost options in the US could be achieved at no cost or at a net benefit;[94] these "no regret" options would save money, due to increased efficiency, even if greenhouse gas emission reduction were not a factor in their implementation. The newly introduced US GHG reduction bill calls for emissions reductions via energy efficiency, so that "the United States can improve its economic productivity, enhance its international competitiveness, reduce its trade deficit, and reduce its dependence on foreign oil."[95] Implementing "no regrets" policies provides positive benefits even if the threat of greenhouse warming does not become a reality -- it is cheap insurance in the face of uncertainty. A tradable permit system complements "no regrets" policies because the market automatically seeks the lowest-cost solutions first.
A number of design details of any tradable permit scheme are not discussed here but must be negotiated in any GHG treaty: Should permits be issued for multi-year emissions? (Doing so would allow industry to depreciate the costs on a predictable basis; the EPA has no such program).[96] Should enforcement be handled by the international regulatory agency or left to national governments? (Cost effectiveness of a permit system assumes an effective enforcement system, because otherwise non-compliance is cheaper than purchasing permits).[97] Should emission source shutdowns be bankable as emission reduction credits? (Counting shutdowns as ERCs would encourage shutdown of inefficient plants, but perhaps the banked credits should be discounted by a percentage).[98] Should there be a time limit for the use of banked credits? (The EPA program is currently debating this issue, since some SIPs call for state confiscation of ERCs after a certain time limit).[99] Should non-emitters be allowed to purchase permits? (Doing so would allow environmental groups to buy up carbon emission rights and hence directly reduce emissions, engaging industry in a "war with dollars").[100] Should there be a discount on emissions transfers, so that every transfer ensures an emissions reduction and not just emissions parity? (Environmentalists recommend such a discount to close the "polluter's loophole" with which industry can postpone compliance, but such adjustments detract from the cost efficiency of a permit system).[101]
The US Green Party says, "We strongly oppose the idea of air pollution or emission 'rights,' which we see as an unjustifiable commodification of this public natural resource and a recognition of a fallacious 'right to pollute.' [102] However, the current unregulated system defines unlimited emissions rights, and any dictated reduction scheme would similarly define a right to pollute because CO2 emissions cannot be entirely eliminated. Environmental regulation can contribute to economic difficulties if the costs are ignored,[103] creating a choice between environmental protection and economic development. Economic incentives for emission reductions make the relationship between environment and economics complementary rather than conflicting. In the context of a greenhouse gas treaty, environmental protection and economic development are intimately connected; an emissions trading program makes the connection cost-effective.
1 (IPCC, 1989, page xi). Footnotes in this format refer to complete citation in bibliography at end of paper.
2 (PIGW, 1991, p.104, converted numbers; all units in this paper are metric), adapted from The Economics of Long-Term Global Climate Change, U.S. Department of Energy, 1990.
3 (IPCC, 1989, p.xxi), table 4.
4 (IPCC, 1989, p.xxi), adapted from table 5.
5 (PIGW, 1991, p.104), 1985 estimate from US DOE.
6 (PIGW, 1991, p.1), current estimates are 1990, pre-industrial estimate is for 1750, and is ±10 ppm.
7 (OTA, 1991, p.56), tangential extrapolation from Mauna Loa Observatory data, cited from GMCC, 1990.
8 (PIGW, 1991, p.18), average of GCM data for temp. range. Other figures calculated by author. Compare figures to temp. rise of 2.8°C due to CO2 doubling assumed by Goddard Inst.. (EPA, 1983, p. 2-15), and to the estimate of 3°C ±1.5°C assumed by the Council on Environmental Quality (CEQ, 1981, p.8).
9 (Pearce, 1991, p.57), citing Nordwijk Declaration of 1990, conference of Environmental Ministers.
10 (Mathews, 1991, p.322, Final Report), citing IPCC recommendations, which also assume that CFCs are eliminated entirely by 2005, per the Montreal Protocol.
11 (Pearce & Turner, 1990, p.203), consensus of multiple GCM sources.
12 (IPCC, 1989, p.xi), uncertainty range 3 - 10 cm per decade.
13 (Stavins, 1988, p.10, Project 88).
14 (CEQ, 1981, p.17).
15 (Schneider, 1989, p.89).
16 (CEQ, 1981, p.57).
17 (Mathews, 1991, p.331, Final Report).
18 (IPCC, 1989, p.xv), CO2 maximum of approximately 300 ppm over the past 160,000 years.
19 (PIGW, 1991, p.88).
20 (Pearce & Turner, 1990, p.203).
21 (EPA, 1983, pp.6-13), for example, the EPA explores depositing 35 million tons of SO2 into the stratosphere annually, by daily airplane flights, in order to decrease solar radiance reaching the surface.
22 (Dornbusch & Poterba, 1991, p.203).
23 World Population Data Sheet, © 1990 Population Reference Bureau.
24 (Stavins, Project 88, p.12). Compare to estimate of 7% - 30% (OTA, 1991, p.32).
25 The World Factbook, Central Intelligence Agency, Washington DC, 1990.
26 (Mathews, 1991, p.202, Tietenberg article), quoting from Gus Speth of the WRI.
27 (OCF, 1987, p.73).
28 (Conservation International, 1989, p.12), citing Dr. Thomas Lovejoy, the originator of the idea, in "Aid Debtor Nations' Ecology," New York Times, 10/4/84, p.A31.
29 (OCF Guide, 1987, chapter 6).
30 (Dornbusch & Poterba, 1991, p.205), Schelling article, "Cooperative Approaches to Global Warming."
31 (Schneider, 1989, p.280), statement in the plenary session of the Toronto Conference on "Changing Atmosphere: Implications for Global Security."
32 (Sebenius, 1991, p.124).
33 (Stavins, Project 88, p.18).
34 (Mathews, 1991, p.336).
35 (HR 2663, 1991, pp.1-2).
36 (Schneider, 1989, p.279).
37 (Stavins, Project 88, p.43).
38 (Gibbons & Blair, 1990, p.45).
39 (Dornbusch & Poterba, 1991, p.213).
40 (HR 5521, 1990, pp.6-7).
41 (Mathews, 1991, p.337, Final Report).
42 (OTA, 1991, pp.20-21), other fiigures adapted by author from p.149.
43 (OTA, 1991, p.165), from Business Week magazine, 1/30/89, p.20.
44 (OTA, 1991, p.324).
45 (Tietenberg, 1990a, mimeo).
46 (OTA, 1991, p.21).
47 (PIGW, 1991, p.73).
48 (Baumol & Oates, 1975, pp.23-25).
49 (Sandmo, 1976, p.337).
50 (PIGW, 1991, p.100), Table A.3.
51 (Tietenberg, 1985, pp.15).
52 (Stavins, Project 88, p.25).
53 (Tietenberg, 1985, pp.11-12).
54 (Tietenberg, 1985, p.30).
55 (Stavins, Project 88, p.28).
56 (Dales, 1968, p.86).
57 (Gupta & Epstein, 1990, pp.3-4).
58 (Stavins, 1990, p.11, mimeo).
59 (Stavins, 1990, p.10, mimeo).
60 (Pearce, ed.,1991, p.32), figures converted from carbon to CO2 .
61 (Mathews, 1991, p,206, Tietenberg article).
62 (Stavins, Round II, 1991, p.27), all figures are converted from carbon to CO2 ; $27/ton-CO2 = $100/ton-C.
63 (Stavins, Round II, 1991, p.27), all figures cite the Congressional Budget Office.
64 (Pearce, ed., 1991, p.35).
65 (Pearce, et.al., 1989, p.163).
66 (Pearce, ed., 1991, p.38), consensus average of multiple estimates.
67 (Dornbusch & Poterba, 1991, p.215).
68 (Tietenberg, 1985, entire), is the basic source of this section. (Pearce & Turner, 1990, pp.118-199) and (OECD, 1989, pp.88-90) provided a more recent update.
69 (Pearce & Turner, 1990, pp.118-119), paraphrased.
70 (Tietenberg, 1990, mimeo).
71 (Hahn, 1989, p.100, J.Econ.Pers.), data as of 1986.
72 (OECD, 1990, p.92), quoting J.J.Boland, Env.Eco.86.14.
73 (Tietenberg, 1985, p.190).
74 (Hahn, 1989, p.112, J.Econ.Pers.), citing Hahn & Hester, 1986.
75 (Hahn, 1989, p.112, J.Econ.Pers.).
76 (Hahn, 1989, p.108, J.Econ.Pers.).
77 (Stavins, Project 88, p.26).
78 Title XI, Sec.1101-1106, Clean Air Act amend. of 1990, pp.370-385. All following text is paraphrased.
79 H.R.2663, 102d Congress, 1st Session, June 18, 1991.
80 Congressional Record, Vol.137, No. 95, 6/18/91, Hon. Jim Cooper of Tennessee.
81 (Tietenberg, 1985, pp.14-28), chapter 2 cited throughout this section.
82 (Tietenberg, 1985, p.42, Table 4).
83 (Krupnick, Oates, & Van de Berg, 1982, pp.236-237).
84 (OECD, 1989, p.88).
85 (OECD, 1989, p.99).
86 (Tietenberg, 1985, p.15), citing Council of Environmental Quality, 1980.
87 (Hahn, 1989, p.96), citing W.D.Montgomery, J.Econ.Theory 5, 1972.
88 (Gupta & Epstein, 1990, p.21), from Table 2, converted from carbon to CO2, & using price of $11/ton CO2.
89 (Pearce, ed., 1991, p.57), using a price of £20 - £30 per ton C x 1.6 £/$ x 12/44 = $9 - $13 per ton CO2 . Permit price is per M.Grubb, "The greenhouse Effect: Negotiating Targets", London, Royal Inst., 1990. The price of $11 per ton CO2 is used in table 2.
90 (Dornbusch & Poterba, 1991, p.218).
91 (Dornbusch & Poterba, 1991, p.194), Moe article.
92 (OTA, 1991, p.57), estimation from figure 2-7, final slope of emissions increase of 0.2B tons carbon per year, converted to 0.7B tons CO2 equivalent, of which 60% is CO2; 0.42B tons per year = 4.2B tons over a ten year period = 20% of 21.8B tons as estimated in Table 1.
93 (PIGW, 1991, p.59), table 6.2, "Comparison of selected mitigation options in the US."
94 (PIGW, 1991, p.59), table 6.2 indicates a potential reduction of 1.8 billion tons CO2 at "net benefit" or "net benefit to low cost."
95 (HR2663, 1991, p.2, clause 6).
96 (Harrison & Krupnick, 1981, p.117).
97 (Tietenberg, 1985, p.189).
98 (OECD, 1989, p.91).
99 (Tietenberg, 1985, p.141).
100 (Dale, 1968, p.96).
101 (Hahn, 1989, p.110).
102 The Program of the Greens, ratified at the 4th National Green Congress, July 1991, p.31.
103 (Harrington & Krupnick, 1981, p.1).
(Atkinson & Tietenberg 1981) On economics of "bubble" and "offset" policies.
Atkinson, S.E., and Tietenberg, T.H., 1981. "The Empirical Properties of Two Classes of Designs for Transferable Discharge Permit Markets," in Journal of Environmental Economics and Management, N¡.9, pp.101-121.
(Baumol & Oates 1988) The basic theoretical text on pollution economics.
Baumol, William, and Oates, William, 1988. The Theory of Environmental Policy: Externalities, Public Outlays, and the Quality of Life. (Englewood Cliffs NJ, Prentice Hall Inc.)
(Baxter 1974) Chapter "Interregional Problems in Implementing an Effluent Tax System," for international carbon tax analysis.
Baxter, William F., 1974. People or Penguins: the Case for Optimal Pollution. (New York and London, Columbia University Press)
(Dales 1968) The first formulation of the idea of marketable permits.
Dales, J.H., 1968. Pollution Property, and Prices: An Essay in Policy-making and Economics. (Toronto Ontario, University of Toronto Press)
(Dornbusch & Poterba 1991) On carbon taxes and economic responses to global warming.
Dornbusch, R., and Poterba, J.M., eds., 1991. Global Warming: Economic Policy Responses. (Cambridge MA, MIT Press)
(Friedman 1967) On theoretical justification for free-market solutions over regulation.
Friedman, Milton, 1967. "The Role of Government in a Free Society," in M.I.Goldman, ed., Controlling Pollution: The Economics of a Cleaner America. (Englewood Cliffs NJ, Prentice-Hall, Inc.)
(Gupta & Epstein 1990) On economics of carbon taxes and marketable permits.
Epstein, J.M., and Gupta, R., 1990. "Controlling the Greenhouse Effect: Five Global Regimes Compared," in Brookings Occasional Papers. (Washington DC, The Brookings Institution)
(Hahn 1989) Intra-corporation trading in U.S. 'bubble' policy, administators versus environmentalists.
Hahn, R., 1989. "Economic Presriptions for Environmental Problems: How the Patient Followed the Doctor's Orders," in Journal of Economic Perspectives, vol.3, N¡.2, pp.95-114.
(Harrington & Krupnick 1981) U.S. federal regulation definitions.
Harrington, W., and Krupnick, A.J., 1981. "Stationary Source Pollution Policy and Choices for Reform," in H.M.Peskin, P.R.Portney, & A.V.Kneese, eds., Environmental Regulation and the U.S. Economy. (Baltimore MD, Johns Hopkins University Press)
(HR2663, 1991) U.S. greenhouse gas reduction plan, via marketable permits.
U.S. Government, 1991. "CO2 Offsets Policy Efficiency Act of 1991 ", proposed bill before the House of Representatives, June 18, 1991 (Washington DC, U.S. Government Printing Office)
(HR5521, 1991) U.S. energy plan addressing global warming.
U.S. Government, 1991. "Global Environment: A National Energy Strategy", Hearing before the Subcommittee on Energy and Power of the Committee on Energy and Commerce, House of Representatives, H.R.5521, Sept. 13, 1990 (Washington DC, U.S. Government Printing Office)
(IPCC 1989) Background and statistics on global warming.
World Meteorological Organization and United Nations Environmental Programme, "Intergovernmental Panel on Climate Change: Scientific Assessment of Climate Change", Summary and Report, (WMO & UNEP, Cambridge MA, Cambridge University Press, 1990)
(Krupnick, Oates, & Van de Verg 1982) On ambient-based system versus emmission-based system.
Krupnick, A.J., Oates, W.E., and Van de Verg, E., 1982. "On Marketable Air-Pollution Permits: The Case for a System of Pollution Offsets," in Journal of Environmental Economics and Management, N¡.10, pp.233.247
(Legget 1990) Essays on "Policy Responses to Global Warming" by JosŽ Goldemberg, "The Costs of Cutting - or not Cutting - Greenhouse gas Emissions" by Stephen Schneider, and "Third World Countries in the Policy Response to Global Climate Change" by Kilaparti Ramakrishna.
Legget, Jeremy, ed., 1990. Global Warming: The Greenpeace Report. (New York NY, and Oxford UK, Oxford University Press)
(Leonard 1984) On industrial responses to environmental regulation.
Leonard, H.Jeffrey, 1994. Are Environmental Regulations Driving U.S. Industry Overseas? (Washington DC, The Conservation Foundation)
(Mathews 1991) Essays on "The Potential Role for Economic Policies" by T.H.Tietenberg, and "The Implications for U.S.Policy" byJ.T.Mathews.
Mathews, Jessica Tuchman, 1991. Preserving the Global Environment: The Challenge of Shared Leadership. (Washington DC, World Resources Institute).
(McGartland & Oates 1985) On cost comparison of marketable permits versus CAC outcome.
McGartland, A.M., and Oates, W.E., 1985. "Marketable Permits for the Prevention of Environmental Deterioration," in Journal of Environmental Economics and Management, N¡.12, pp.207-228.
(OCF 1987) Basic text, especially chapter "Industry: Producing More with Less".
World Commission on Environment and Development, 1987. Our Common Future (Oxford England, Oxford University Press).
(OECD 1989) Chapter on "Economic Instruments: A Survey", and country-by-country analysis of applications.
Opschoor, J.B., and Vos, H.B., 1989. Economic Instruments for Environmental Protection. (Paris France, OECD)
(OTA 1991) The latest U.S.Government policy statement.
Office of Technology Assessment of the U.S.Congress, 1991. Changing by Degrees: Steps to Reduce Greenhouse Gases. (Washington DC, U.S.Government Printing Office).
(Pearce 1991) Chapters "Global Warming: The Economics of a Carbon Tax" and "Global Warming: The Economics of Tradable Permits".
Pearce, David, ed., 1991. Blueprint 2: Greening the World Economy. (London England, Earthscan Publications Limited)
(Pearce 1989) On price incentives & "Polluter Pays Principle," in a report for the UK Dept. of the Environment.
Pearce, David, ed., 1989. Blueprint for a Green Economy. (London England, Earthscan Publications Limited)
(Pearce & Turner 1990) Chapter "Marketable Pollution Permits," for theory of permits vs. optimal Pigovian tax.
Pearce, David W., and Turner, R. Kerry, 1990. Economics of Natural Resources and the Environment. (Baltimore MD, The Johns Hopkins University Press)
(PIGW 1991) On GHG statistics and "full social cost pricing".
Evans, Daniel J., chmn., 1991. Policy Implications of Greenhouse Warming. (Washington DC, National Academy Press)
(Portney 1990) Chapter "Air Pollution Policy," for basic history of Clean Air Act and definitions of EPA's emissions trading program.
Portney, Paul R., ed., 1990. Public Policy for Environmental Protection. (Washington D.C., Resources for the Future)
Roberts, M.J., and Spence, M., 1976. "Effluent Charges and Licenses Under Uncertainty," in Journal of Public Economics, N¡.5, pp.193-208.
(Sandmo 1976) On basics of Pigovian taxes.
Sandmo, Agnar, 1976. "Direct versus Indirect Pigovian Taxation," in European Economic Review, N¡. 7, pp.337-349.
(Schneider 1989) The basic factbook for global warming.
Schneider, Stephen H., 1989. Global Warming: Are We Entering the Greenhouse Century? (San Francisco CA, Sierra Club Books)
(Seidel 1983) Chapter on "The Effectiveness of Energy Policies for Controlling CO2".
Seidel, Stephen, 1983. Can We Delay a Greenhouse Warming? (Washington DC, U.S.Government Printing Office).
(Spulber 1985) On economics of failure to achieve social optimum via CAC effluent standards.
Spulber, Daniel F., 1985. "Effluent Regulation and Long-run Optimality," in Journal of Environmental Economics and Management, N¡.12, pp.103-116.
(Stavins 1991, Round II) Follow-up on Project 88 report.
Stavins, Robert N., dir., 1991. Project 88 -- Round II: Incentives for Action: Designing Market-Based Environmental Strategies (Washington DC, Public Policy Study)
(Stavins 1990) U.S. policy summary of EPA Emmissions Trading Program.
Stavins, Robert N., 1990. "Innovative Poicies for Sustainable Development in the 1990's: Economic Incentives for Environmental Protection," prepared for the United Nations Economic Commission for Europe and the US EPA (Washington DC, mimeo).
(Stavins 1989) Survey and summary of Project 88 (see Stavins 1988).
Stavins, Robert N., 1989. "Harnessing Market Forces to Protect the Environment," in Environment, vol.31, N¡.1, Jan/Feb.1989.
(Stavins 1988) Chapters on "Global Air Pollution Problems" and "Air Quality Issues," concerning international tradable permits and domestic permits respectively.
Stavins, Robert N., dir., 1988. Project 88: Harnessing Market Forces to Protect Our Environment: Initiatives for the New President (Washington DC, Public Policy Study)
(Tietenberg 1985) The basic work on marketable permits in the U.S.
Tietenberg, T.H., 1985. Emissions Trading: an Exercise in Reforming Pollution Policy. (Washington DC, Resources for the Future)
(Tietenberg 1990) On international economic incentive programs.
Tietenberg, T.H., 1990. "Remarks before Coolidge Center Workshop on Marketplace Incentives for Sustainable Development," (Boston MA, mimeo)
(Walter 1981) On international aspects of environmental management.
Walter, Ingo, 1981. "A Survey of International Economic Repercussions of Environmental Policy," in J.A.Butlin, ed., Economics of Environmental and Natural Resources Policy. (Boulder CO, Westview Press)
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