![]() ![]() ![]() Some scholars suggest that, in many cases, market corrections, such as pricing carbon, can address these (as suggested by Daly, 2007). Scholars of ecological economics have pushed this point further by arguing that markets are inherently deficient in many ways that further inequity. Their point is that, unless there is intervention in or oversight of markets, that the “haves” can take advantage of imperfections in the markets (such as monopolies, rentseeking, and asymmetric information) to increase their relative wealth over the “have nots.” This informs the present reflection, where we slightly modify the above point to include the increasing exposure of the “have nots” to adverse conditions compared to the “haves.” To be sure, the economics literature has been paying attention to inequitable outcomes of market processes (more recently, by Piketty, 2014 and Stiglitz, 2012). Most revolve around imperfections in the market, while invariably validating the general notion of the market-based solution. In such an arrangement, both parties are better off, financially, than the command-and-control solution of each party reducing its carbon a pre-determined amount.Īrguments against the trading solution often involve the non-trivial nature of transaction costs and thinness or markets – in these cases, trading would not lead to the Pareto optimal solution. So long as the costs of inter-party transactions are low and there are numerous sellers and buyers, then this arrangement should lead to negotations between parties that results in a reduction in total carbon emissions in the most efficient manner possible.įor example, if it costs party A twice what it costs party B to reduce a unit of carbon, then A could pay B an amount in between A’s and B’s unit cost, so that B would reduce additional carbon on behalf of A, who would then not need to reduce its own emissions. ![]() For the case at hand, this would be a carbon emission permit, allowing the bearer the right to emit a certain tonnage of carbon each year, that could be bought and sold between parties. Rather than have government dictate each party’s actions through direct (command-and-control) regulation, a market would be created wherein parties could bargain for the right to determine their actions. The solution to this problem in governance, as Ronald Coase proposed, was to create a tradeable instrument ( Coase, 1960). Should the government try to allocate carbon reduction requirements (or, what amounts to the same, carbon emission permits) in some way that accounts for these? But this introduces the complex problem of having to figure out how much each emitter should emit, which is a daunting task for a government agency. This disadvantages each emitter to differing degrees, since the opportunity cost of giving up a unit of carbon is higher for some than others. Suppose a central government were to simply require each carbon emitter to reduce its emissions by a set amount (e.g., 30%). How should the global community govern in the area of climate change mitigation? One way is through command-and-control regulation. Contrary to the idea of alienable rights, the transfer of carbon affects people and place in ways not internalized by these market instruments. These considerations are a concern for the larger question of carbon mitigation as the global community strives to identify feasible, yet just, approaches to reducing greenhouse gas emissions. We illustrate the argument by examining emissions from refineries participating in California’s cap-and-trade program. One of these may be the creation of toxic hotspots as the trade of carbon may bring with it a transfer of air toxics, as well. In this article, we explore some hitherto unrecognized disequities. However, the trading of carbon credits may have socially unjust consequences. So long as transaction costs are low, the creation of a tradeable permit to emit carbon should allow bargaining for emission rights among buyers and sellers, resulting in an efficient allocation of carbon emission rights. 2Felizberta Lo Padilla Tong School of Social Science, Caritas Institute of Higher Education, Tseung Kwan O, Hong Kong.1School of Culture, Education, and Human Development, New York University, New York, NY, United States.Lejano 1* Wing Shan Kan 2 Ching Chit Chau 3 ![]()
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