One auction for all the ‘safe’ greenhouse gas pollution?


in Economics, Politics, The environment

If a way could be found to make firms and governments take it seriously, it seems like a single auction of all the planet’s ‘safe’ remaining carbon emissions could be an alternative form of carbon pricing with some virtues.

Starting with the goal of keeping warming to under 2˚C, we could estimate the total quantity of greenhouse gas (GHG) emissions that humanity can still produce. In order to make the auction at all fair, it would need to take into account national populations and levels of wealth. Probably, it should be set up so that everyone is positioned to acquire equal per-capita shares in the world’s remaining emissions.

If confidence is created that no more credits will ever be auctioned, we can expect the price of those from the initial auction to rise across time as people use them up and trade them. People in countries with excessively high per-capita emissions (like Canada, Australia, and the United States) will find themselves burning through their reserves at a frightening pace, and face a strong incentive to cut emissions quickly.

Of course, there would be many challenges with such an approach. Governments would need to agree to participate. Global monitoring of GHG emissions would be necessary. Rogue governments, individuals, and firms could simply disregard the system. Splitting up the emission allowance between present and future generations is also a major problem (especially since the smartest course of action is probably to save a big chunk of the remaining total for the activities that are hardest to decarbonize, like air travel and space launches). All that being said, an auction of the whole resource would strongly reinforce the idea that humanity has a finite amount of atmospheric space for GHG pollution and that we need to move aggressively to stay within the limit.

{ 2 comments… read them below or add one }

oleh November 5, 2014 at 11:20 am

I would be concerned that such an auction would not result in no further carbon emissions being burned after those sold in the auction are sold unless we completely end carbon emitting technologies. The fossil fuels would still be in the earth. There would be considerable pressure after those fossil fuels are burned for more to be burned.

Milan November 5, 2014 at 3:58 pm

That’s the central challenge. There is no way to reconcile burning all the planet’s fossil fuels (or even a large fraction of what remains) without causing very substantial and dangerous amounts of climate change.

The world needs to develop some sort of governance mechanism that can achieve and sustain this outcome.

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