Introduction

Many people believe that the problem of climate change should be handled by an international cap-and-trade system. Under this approach, participating nations, and perhaps the entire world, would create a “cap” on greenhouse gas (GHG) emissions. Nations would be allocated specified emissions rights, which could be traded in return for cash. Other people have doubts about whether such a system is practical, and it is becoming increasingly likely that some other approach will be used—for example, a cap-and-trade system in the north along with technical and financial assistance and general targets for the south.

Both types of system raise broad questions of welfare and justice. Consider, for example, the cap-and-trade system. The proposal for such a system does not answer a crucial question: how should emissions rights be allocated? It is tempting to suggest that the status quo, across nations, provides the appropriate baseline. According to one view, emissions might be frozen at existing levels, so that every nation has the right to its current level of emissions. Taking a more aggressive view, all or most signatory nations should have to reduce their emissions levels by a specified percentage, again taking the status quo as the foundation for reductions. The status quo might seem to have intuitive appeal, but it is also somewhat arbitrary and raises serious questions from the standpoint of equity. Why should climate change policy take existing national emissions, and to that extent existing national patterns of energy use, as a given for policy purposes?