Greenhouse Gas Emission Reductions and Poverty: A Joint Solution

This paper describes the design of a new emissions trading scheme which is based on the principle of equity. The scheme is based on the principle that the atmosphere is common property to all humankind, and as such, all people have an unalienable right over air. As such there is little justification for setting emission caps on societies which distribute the right to emit Greenhouse Gasses (GHG) unequally. Accordingly, I propose a global Equitable Allocation of Global Emissions (EAGE) trading scheme as an alternative to current mechanisms. The EAGE scheme relies on a global cap on GHG emissions which would be reduced over time in order to keep atmospheric GHG levels within reasonable limits. The emissions cap is allocated on a globally per person basis, generating EAGE permits and allocating them directly to individuals. People sell their EAGE permits (their right to emit GHGs) directly to organizations via an International EAGE Permit Exchange (IEPE). The EAGE permits are purchased by organizations to offset their GHG emissions, causing prices for high GHG-intensive products to increase. As such, the EAGE scheme penalizes (rewards) individuals and organizations which contribute the most (least) to GHG pollution by increasing the cost of consuming high GHG emission intensive products. The costs of EAGE permits are passed onto the consumers of goods and services, creating a user-pays system of allocating GHG emission rights. As people in poverty are being compensated for giving up their ‘right to emit’, the cash flows to them are based on the principle of exchange. The estimates presented indicate that the EAGE scheme has the potential to reduce poverty for more than two billion people.