A PAY-FOR-CUTS CARBON TREATY

Abstract

This paper describes and analyzes a proposal for a pay-for-cuts carbon treaty and illustrates how it would work with numerical simulations for 186 countries. A treaty board would pay each country’s government an amount P for each CO2 ton the country cuts by any method. Each government would decide how to get its firms and households to cut CO2 emissions; the board would encourage a carbon tax or cap-and-trade but not require it. [Formula: see text] is the number of tons that country i reduces its CO2 emissions. [Formula: see text] equals country i’s base emissions minus its actual emissions which are publicly available data. Country i’s government would receive [Formula: see text] from the board. The board’s [Formula: see text] payments would be financed by country government contributions to the board. A formula would give each country’s government the amount it must contribute each year. The formula would aim to make government contributions equal to the board’s [Formula: see text] payments and equitably distribute the burdens from cutting world emissions. Representatives of the countries would have to approve the board’s most important decisions.