Abstract:

Economists generally agree that the best way to achieve optimal control of carbon gasses is by globally uniform emission charges equal to the best available estimates of the global marginal social costs of emissions. Prices equal to global marginal social costs motivate efficient economizing, and global marginal social costs of emissions are globally uniform. Less attention has been paid to the question of how the proceeds of carbon gas taxes should be allocated. The simple answer would be that there is never any shortage of ways to use tax revenue. One can always reduce other taxes or pay for the most urgent unmet public needs. But it may be worth thinking about a system of global sharing of the revenue from carbon gasses. There are three reasons for this. 1) Some nations, such as low-lying island nations, are particularly hard-hit by global warming. They deserve compensation for the harm they experience from global warming. 2) It has been notably difficult to persuade less developed nations to participate to the extent that would be efficient in the global effort to slow global warming. It is possible that a system of sharing revenue, after compensation for special harms, would make full participation in the interest of less developed nations. 3) It may be possible to achieve a global resonance with the idea that all persons have equal rights to the atmosphere, so that if some persons wish to use it in ways that must be limited, we deserve to share equally in the revenue that results, after compensation for special harms. This paper traces the relationships across countries among population, carbon gas emissions, and per capita income, so that the consequences of global sharing of the proceeds of carbon gasses can be estimated and the prospect of achieving something close to global agreement can be assessed.