Equity effects of alternative assignments of global environmental rights

Through a thought experiment in which members of different generations trade with each other in a virtual market, we examine the effects of alternative assignments of global environmental rights on prices, interest rates, and the global distribution of income. The model is “semi-calibrated” to current and projected levels of the output of produced goods and to present and future quantities of global environmental goods. Income classes in each country are disaggregated to the quintile level. Multiple equilibria are possible for some rights assignments, with implications for intergenerational equity. The model projects bounds on the degree of future economic inequality depending on how the environmental rights are assigned. A policy that assigns the environmental rights in such a way as to leave the present-day distribution of income unchanged while moving in the direction of equal per capita endowments of environmental rights can result in future inequality comparable to today's average within-country inequality.