International Emission Permits: Equity and Efficiency

Chichilnisky, Graciela; Heal, Geoffrey M.; Starrett, David

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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Academic Units
Department of Economics, Columbia University
Department of Economics Discussion Papers, 686
Published Here
February 28, 2011


December 1993.