An international carbon-price commitment promotes cooperation
License
Cadmus Permanent Link
Full-text via DOI
ISBN
ISSN
2160-5882; 2160-5890
Issue Date
Type of Publication
Keyword(s)
LC Subject Heading
Other Topic(s)
EUI Research Cluster(s)
Initial version
Published version
Succeeding version
Preceding version
Published version part
Earlier different version
Initial format
Author(s)
Citation
Economics of energy & environmental policy, 2015, Vol. 4, No. 2, pp. 51-64
Cite
CRAMTON, Peter, OCKENFELS, Axel, STOFT, Steven, An international carbon-price commitment promotes cooperation, Economics of energy & environmental policy, 2015, Vol. 4, No. 2, pp. 51-64 - https://hdl.handle.net/1814/38365
Abstract
To promote cooperation in international climate negotiations, negotiators should focus on a common commitment. Such commitments have the advantage of facilitating reciprocal "I will if you will" agreements in a group. Reciprocity is the basis for cooperation in repeated public goods games, and a uniform price would provide a natural focal point for a common international commitment. Such a price is also essential for efficient abatement. Countries would retain flexibility in how to implement the price - with cap-and-trade, a carbon tax, or a hybrid approach. Country risk is reduced relative to risk under international cap-and-trade since carbon revenues stay within the country. Price commitments also tend to equalize effort intensity and can facilitate enforcement. To encourage participation by less-developed countries, a green fund is needed to transfer money from richer to poorer countries. Transfers are smaller and more predictable with a uniform price commitment than with international cap and trade.