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The idea of taxing carbon emissions uniformly throughout the world offers some very interesting possibilities, especially for a major economy like the EU or the USA.  

Please allow me a few comments about how such a tax might be ideally structured.  In principle, the following outline could be applied to any form of air pollution, but will be limited here to carbon.

  1. There could be periodic tax on all carbon emissions proportional to number of carbon atoms emitted by each citizen of the world.  The tax would go into a fund and every citizen of the world would have an equal claim on the fund as compensation for damages.  

  2. An additional local tax might be charged that would vary by population density with the charge being very high in large cities and smaller in rural areas.  The citizens of a city would each have an equal claim on the carbon fund for itself, which would be funded by whoever polluted within the city regardless of where they lived.  (A country, or region, could start with these sorts of internal charges as an example to the internaional community of how to administer the charge).

At present no one is doing anything like this so how could the transition work?  If as a pleasant fantasy the USA or the EU accepted such thinking and moved to the mechanics of implementing such a policy lots of possibilities emerge.  Just speaking of the USA, we  might well "owe" China and India a payment because we emit more carbon than they do.  But they are still increasing their pollution rates and might not readily go along with charging their polluters immediatly anyway.  We could:

  1. Withhold what we "owe" while charging their carbon tax on their imports (proportioned to carbon used in production and transport with best approximations) with the offer that the tax goes away if they want to agree to the same uniform rules.

  2. We might offer to pay the citizens of the "other country" directly if they sign up for the program and express their support for it, while the offer would have a termination date if the other nation didn't adopt compatible policies within a reasonable period of time.  The sign up policies could be carried out through trusted institutions within the "other country" or in the case of really troubled countries new institutions might be created, but that might be a strong move too (Think community banks, or appropriate interest groups).  

A few other observations are in order and are quite important.  If, for the sake of argument, the USA, EU, and Japan all adopted stiff carbon taxes we would collectively greatly alter demand for carbon.  some of this tax would probably be "shifted back" onto the rent of oil bearing lands causing oil to be priced at the well head for less than it might otherwise be priced (although the total cost to use oil might still increase).  Therefore the net increase in production costs within the consuming nations due to the carbon tax would probably not increase at 1:1 with the tax.  In essence the carbon consumers could shift some of the cost back onto the oil producers.  Of course, the cost structures within the consuming countries would be greatly altered with many winners and loser.

Just a few quick thoughts.....

by Geonomist on Mon Mar 19th, 2007 at 12:37:55 AM EST

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