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For International Cap-and-Trade in Carbon Permits, Price Stabilization Introduces Secondary Free-Rider-Type Problems

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  • Martin L. Weitzman

    (Harvard University)

Abstract

In this brief note (Without holding them responsible for errors, omissions, or interpretations, I am grateful for constructive comments on an earlier version of this note by Joseph Aldy, Severin Borenstein, Maureen Cropper, Carolyn Fischer, Meredith Fowlie, Lawrence Goulder, Geoffrey Heal, N. Gregory Mankiw, Michael Mehling, Gilbert Metcalf, Adele Morris, Ian Parry, William Pizer, Simon Quemin, Andrew Schein, Richard Schmalensee, E. Somanathan, Robert Stavins, David Victor, and Gernot Wagner.), I take the initial allocation of carbon emissions as a prototype international public goods problem. Overcoming the free-rider problem in carbon emissions is central to a successful comprehensive international climate-change agreement. Volunteerism alone may go part way, but is unlikely to fully adequately overcome this free-rider problem. (The numerical values of the pledged “Nationally Determined Contributions” under the Paris Agreement are voluntary, although the Paris Agreement itself may help constructively by laying a legal foundation for participation, reporting, verification, transparency, and trust.)

Suggested Citation

  • Martin L. Weitzman, 2019. "For International Cap-and-Trade in Carbon Permits, Price Stabilization Introduces Secondary Free-Rider-Type Problems," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 74(2), pages 939-942, October.
    • Handle: RePEc:kap:enreec:v:74:y:2019:i:2:d:10.1007_s10640-019-00354-7
    DOI: 10.1007/s10640-019-00354-7
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    References listed on IDEAS

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    1. Lawrence H. Goulder & Andrew Schein, 2013. "Carbon Taxes vs. Cap and Trade: A Critical Review," NBER Working Papers 19338, National Bureau of Economic Research, Inc.
    2. William Nordhaus, 2015. "Climate Clubs: Overcoming Free-Riding in International Climate Policy," American Economic Review, American Economic Association, vol. 105(4), pages 1339-1370, April.
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    Cited by:

    1. Yunting Feng & Yong Geng & Ge Zhao & Mengya Li, 2022. "Carbon Emission Constraint Policy in an OEM and Outsourcing Remanufacturer Supply Chain with Consumer Preferences," IJERPH, MDPI, vol. 19(8), pages 1-16, April.
    2. Woerman, Matt, 2023. "Linking carbon markets with different initial conditions," Journal of Environmental Economics and Management, Elsevier, vol. 119(C).
    3. Ayman Hassan Bazhair & Saleh F. A. Khatib & Hamzeh Al Amosh, 2022. "Taking Stock of Carbon Disclosure Research While Looking to the Future: A Systematic Literature Review," Sustainability, MDPI, vol. 14(20), pages 1-24, October.
    4. Xiqiang Xia & Mengya Li & Biao Li & Hao Wang, 2021. "The Impact of Carbon Trade on Outsourcing Remanufacturing," IJERPH, MDPI, vol. 18(20), pages 1-18, October.

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