A Global Emissions Trading Scheme? Fantasy and Reality

Xie Laihui (谢来辉)
National Institute of International Strategy, Chinese Academy of Social Sciences, Beijing, China

 
Abstract: Many have argued that the international community should establish a globalemissions trading scheme (ETS) to reduce emissions and streamline efforts to mitigate climate change. This paper argues against establishing such global ETS for the following reasons: (1) a global ETS may assist developed countries in cutting emissions abatement cost, but it may also result in deterioration in the welfare of developing countries; (2) each nation participating in providing global public goods shall be dedicated to forming “Lindahl equilibrium” under the principle of common but differentiated responsibility, rather than the “Walrasian equilibrium”, which is represented in a global ETS; (3) the establishment of a global ETS has its driving forces as it is seen as a preferred regulatory form for industrial special interest groups in developed economies, since its benefits is biased rather than promoting global economic and environmental efficiency; and (4) the developing countries should be more cautious when designing tools of climate policies and need to avoid to be locked in emission trading systems.
Keywords: global emissions trading, carbon tax, developing countries, political economy

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