Tradable Cumulative C02 Permits and Global Warming Control*

Abstract

As an alternative to current global warming policy proposals to freeze greenhouse gas “emissions” at their 1990 levels by the year 2000, this study examines the implications of a long-run objective of stabilizing greenhouse gas “concentrations” at low to moderate risk levels by the year 2100. The current proposals to control emissions slow but do not end the build-up of concentrations, and they could imply costly short-term adjustments of the energy industries. Our objective is to explore an alternative policy that could (1) stabilize induced climate change, (2) provide for the creation of international “property rights” in the stratosphere by means of tradable emission permits, and (3) be more intertemporally cost-effective. Our method for analyzing this effort is a tested, dynamic, price sensitive, global economic model to which is linked a climate change submodel. Together these models enable us to project price and quantity time paths of energy, climate, and tradable permit variables under alternative policy actions.

Keywords

Tradable CO2 permits Climate control Energy policy Greenhouse gases

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