International Emission Permits: Equity and Efficiency
Graciela Chichilnisky; Geoffrey M. Heal; David Starrett
- International Emission Permits: Equity and Efficiency
Heal, Geoffrey M.
- Working papers
- Permanent URL:
- Department of Economics Discussion Papers
- Part Number:
- Department of Economics, Columbia University
- Publisher Location:
- New York
- Not all possible distributions of a given total of emission permits are compatible with the attainment of first-best Pareto efficiency. In fact, of the infinitely many ways of distributing a given total of permits between a fixed number of parties, only a finite number can lead to efficiency. We can therefore evaluate permit allocations not only in terms of their equity, but also in terms of their efficiency. If there are no other redistributive instruments in the policy environment, the traditional orthogonality of equity and efficiency does not hold here. This has important implications for arguments about the initial international distribution of entitlements to produce carbon dioxide.
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