On a World Climate Assembly and the Social Cost of Carbon

This paper argues that a uniform global tax-like price on carbon emissions, whose revenues each country retains, can provide a focal point for a reciprocal common climate commitment, whereas quantity targets, which do not nearly so readily present such a single focal point, tend to rely ultimately on individual quantity commitments. The paper postulates the conceptually useful allegory of a futuristic "World Climate Assembly" (WCA) that votes for a single worldwide price on carbon emissions via the basic democratic principle of one-person one-vote majority rule. A WCA-like uniform tax-price (whose proceeds are domestically retained) counters self-interest by incentivizing countries or agents to internalize the externality because each WCA-agent's higher abatement cost from a higher emissions price is counter-balanced by that agent's extra benefit from inducing all other WCA-agents to simultaneously lower their emissions in response to the higher price. The paper derives fresh insights and new simple formulas that relate each emitter's most-preferred world price of carbon to the world "Social Cost of Carbon" (SCC), and further relates the WCA-voted world price of carbon to the world SCC. I argue that the WCA-voted price and the SCC are unlikely to differ sharply. Some implications are discussed. The overall methodology of the paper is a mixture of mostly classical with some behavioral economics