Efficiency and Distribution in Computable
Models of Carbon Emission Abatement
Joaquim Oliveira Martins
Although much uncertainty surrounds the precise links between carbon emissions and their effect on climate, the risks involved are by now considered sufficiently large for the global community to have started discussing active policy measures. In this context special attention is being paid to the reduction of carbon emissions from the use of fossil fuels. The need for abatement action being generally recognized, the search is on for “efficient” policy instruments, that is, instruments that achieve a given abatement objective at minimum cost. In this context uniform global emission taxes and tradable emission quotas have been suggested as policy instruments of choice.
The initial consensus relating to the efficiency characteristics of a uniform global carbon tax and/or a system of tradable emission quotas has been challenged by Chichilnisky  and Chichilnisky and Heal , in which the authors (hereafter CH) claim that given the public goods character of emission abatement, a uniform emission tax or tradable emission quotas do not necessarily (in fact not usually) lead to Pareto-efficient outcomes, and that in the context of emission abatement policy efficiency and income distribution issues are intertwined; that is, the fundamental proposition of welfare economics that equity and efficiency are “orthogonal” (i.e., independent of each other) does not
The opinions expressed here are those of the authors and cannot be held to represent the views of the OECD or the IMF.