Carbon Pricing and Intergenerational Fairness

John Broome and Duncan Foley have proposed an ingenious way to transfer benefits backwards in time, from people who are not here yet to people who will not be here in the future. Present people can crowd out conventional, and often brown, investments by issuing global climate bonds (GCBs). The debate about GCBs has focused on whether it is justified to use this financial instrument to allow future people to buy off present people for climate mitigation. In this article, I ask whether it is fair to use GCBs to share the cost of a global carbon price between present and future people. My answer is that it depends on the approach used to calculate the carbon price and, of course, on the normative claims underlying the different approaches. Specifically, I argue that the internalisation principle underlying the cost-benefit approach does not justify intergenerational cost-shifting if, as in most cases, the social cost of carbon is determined using, inter alia, a social discount rate. Instead, the conservative justifications underlying a cost-effective carbon price consistent with the Paris mitigation target allow for intergenerational cost-shifting, but only to the extent of the difference (if any) between the Paris-consistent and the Pareto-efficient carbon price.