October 24, 2010

Sharing the Cost of Global Warming

by Justin Leroux and Étienne de Villemeur

- Due to meteorological factors, the distribution of the environmental damage due to climate change bears no relationship to that of global emissions. We argue in favor of offsetting this discrepancy, and propose a "global insurance scheme" to be financed according to countries responsibility for climate change. Because GHG decay very slowly, we argue that the actual burden of global warming should be shared on the basis of cumulated emissions, raher than sharing the expected costs of actual emissions as in a Pigovian taxation scheme. We characterize new versions of two well-known cost-sharing schemes by adapting the responsibility theory of Bossert and Fleurbaey (1996) to a context with externalities.

Leroux, J. and É. de Villemeur (2010). "Sharing the Cost of Global Warming." IDEI Working Paper No. 629, Jul 2010.