Monday, February 11, 2008

"Global Refunding Scheme" as a possible replacement for Kyoto

From Vox ("Research-based policy analysis and commentary from leading economists"), a plan by Hans Gerbach of the Center of Economic Research at ETH in Zurich. The idea is to replace the Kyoto Protocol with a more effective and flexible agreement. Would it work? Take a look: ...I propose an alternative international framework called the Global Refunding Scheme (referred to hereafter as GRS) that would enable countries to determine their climate policy at a national level while simultaneously creating powerful incentives for abatement by means of global refunding, which would work as follows:
  • Countries decide whether they want to join the GRS. A country can join the GRS if it accepts the rules and levies a minimal carbon emission tax. Industrial countries pay an initial fee.
  • In each period, every country belonging to the GRS independently determines its level of taxes on CO2 emissions. Emission taxes are the sole policy instrument a country is allowed to adopt.2 All tax revenues are collected in a global fund.
  • In each period, the GRS refunds a share of the accumulated wealth to the participating countries.3 Each participating country receives an annual refund in proportion to the share of total CO2 emission reductions it achieves in the period under consideration.4
  • Non-refunded wealth of the GRS is invested in order to maintain funds for future refunding activities.
  • In each period a country is allowed to exit. If a country leaves the GRS, it loses its right to refund.
  • Decisions within the GRS are governed by majority rule.
Photo of Hans Gerbach from Vox website

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