Download The Polluter Pays Principle and Cost-Benefit Analysis of Climate Change: An Application of Fund

Abstarct : Richard Tol
We compare and contrast four climate scenarios: (1) non-cooperative
cost-benefit analysis (NC CBA); (2) NC CBA with international permit
trade;
(3) NC CBA with full liability for climate change damages; and (4) NC
CBA with liability proportional to a country’s share in cumulative
emissions. As estimates of the marginal damage costs are low, standard
NC CBA implies only limited emission abatement. With international
permit trade, emission abatement is even less, as the carbon tax is
reduced in countries with fast-growing emissions, and because a permit
market ignores the dynamic externalities of abatement. Partial
liability shifts abatement effort towards the richer countries, but
away from the fast-growing economies; again, long-term, global emission
abatement is reduced. Full liability would lead to more stringent
climate policy. These findings are qualitatively robust to the size and
accounting of climate change impacts, to the definition of liability,
and to the baseline scenario.