Can Negotiating a Uniform Carbon Price Help to Internalize the Global Warming Externality?

It is diffi cult to resolve the global warming free-rider externality problem by negotiating n different quantity targets. By contrast, negotiating a single internationallybinding minimum carbon price (the proceeds from which are domestically retained) counters self interest by incentivizing agents to internalize the externality. The model of this paper indicates an exact sense in which each agent’s extra cost from a higher emissions price is counter-balanced by that agent’s extra benefit from inducing all other agents to simultaneously lower their emissions in response to the higher price. Some implications are discussed. While the paper is centered on a formal model, the tone of the policy discussion resembles more an exploratory think piece.