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Unpublished Paper
Global Carbon Pricing: Essential, Inexpensive, and Feasible
Research Paper, Global Energy Policy Center (2009)
  • Peter Cramton, University of Maryland
  • Steven Stoft

The failure of the international emission-capping agenda need not and should not block the path to Kyoto’s goal of global carbon pricing. Unpriced emissions will remain the root cause of the climate change problem until carbon is priced. This paper follows the suggestions of Joseph Stiglitz, William Nordhaus and James Hansen for a global carbon tax, while expanding the flexibility of the system to allow cap-and-trade to be fully integrated. A global carbon price of $30 per ton together with a Green Fund for equity with developing countries is remarkably inexpensive. The cost per person per day in the United States would be just 23 cents. For a country, like China, with average per-person emissions the cost is 4 cents; for India the cost would be negative—the Green Fund would doubly cover India’s abatement costs. The strength and distributional effects of the entire policy are controlled by just two values, the target carbon price and the Clean Development Incentive rate. These replace all national caps and all individual Green-Fund obligations and entitlements. Such a policy would reduce the world oil price and effectively transfer revenue from oil exporters to oil importers. For China and the United States, this savings would likely cover the full cost of the proposed initial climate agreement.

  • carbon pricing,
  • carbon auction,
  • emission market
Publication Date
November, 2009
Citation Information
Peter Cramton and Steven Stoft. "Global Carbon Pricing: Essential, Inexpensive, and Feasible" Research Paper, Global Energy Policy Center (2009)
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