Proposal for an international carbon fee

A fee on greenhouse gas (GHG) emissions, applicable equally to all nations and based on the quantity of fossil fuels used in each country, is proposed. Fees would be paid into a UNFCCC-administered fund. Fees would be distributed to nations, according to population, for use in climate change mitigation or adaptation. Advantages and disadvantages of the fee scheme and its effects on various groups of nations are discussed. About 40% of the fees would be net transfers from developed nations to developing nations; 60% of fees would return to their country of origin. Concessions to major fuel exporters may be appropriate. Historical emissions could be included in the fee scheme. A fee provides disincentives to inefficient industrial operations, regardless of location, and avoids trade inequities inherent in unequal national emission caps. Project-based emission reductions of the Clean Development Mechanism could be continued by using fees to buy CERs. A fee scheme would be simpler than alternative climate change treaty proposals but presents problems regarding the appropriate fee level, efficient and fair management of funds, perverse incentives to increase GHG emissions through biofuels production, and political acceptability in nations having greater than average per capita GHG emissions.