GLOBAL TRADEABLE CARBON PERMITS, PARTICIPATION INCENTIVES, AND TRANSFERS

This paper evaluates alternative global tradeable permit allocations t o stabilize world carbon emissions at 1987 levels by 2000. An importan t group of countries would have little incentive to participate in a t reaty based on widely discussed permit allocation principles. Each non -OECD country should be allocated permits equivalent to its projected baseline emissions, and OECD countries should be allocated the remaini ng permits given the world emissions target. Under the proposed regime we find that OECD costs would be about 50% lower than unilateral redu ction; non-OECD countries will enjoy substantial gains; and world cost s will be about 68% lower.