Opinion (John Hassler, Professor of Economics and Per Krusell, Professor of Economics, Stockholm University): “There now is widespread consensus that the key driver of climate change is the emission of carbon dioxide from burning fossil fuels. Since climate change affects the global economy, this is a textbook example of what economists label a ‘pure externality.’ There is substantial uncertainty about how large this externality is. Yet, available knowledge can be used to provide an estimate of the externality that is surprisingly robust. In this note we argue that this provides a strong case for using a carbon tax rather than emission caps.
“Given the fact that there is now around an extra 200 gigatons in the atmosphere, the total flow loss is around 0.5% of global GDP.
“We see a more promising future in striving to agree on a uniform global carbon tax. We have argued that its optimal value can be robustly computed and its main subjective element – the intergenerational discount rate – should not be a cause of significant disagreement across countries.
“Our formula can calculate the discounted value of damages that will occur in the future due to all the fossil carbon emitted so far. To us it appears reasonable that the countries responsible for past emissions – largely the developed world – should acknowledge this debt. It also appears reasonable that mortgages on the debt be paid to a fund aimed at helping poor countries deal with adaptation.
“The practical implementation of a global tax may be challenging, especially in countries that rely less on markets than does the developed world. But using the tax as an explicit extra cost, or price tag, in any decisions to use fossil fuel represents a practical mind-set. Similarly, any investments in carbon capture and storage that, per unit, cost more than the tax should not be undertaken. In short, the plan to introduce a global carbon tax seems to have a chance of succeeding, while the current attempts to agree on a two-degree warming cap have, for understandable reasons, proven rather futile.”
My Comment: No fair agreements between countries and especially agreements that try to compensate for the “destruction of the planet” can be accepted and implemented—egoism will not allow to do it. The crisis will inevitably lead to the need to change our nature from hate to love because otherwise we will continue to destroy the planet and ourselves along with it.