Rich countries should pay people in developing countries for the climate damage their emissions cause , on condition that those countries put a price on carbon. That is the central proposal of a forthcoming book, Just Economics , by University of Chicago economist Michael Greenstone, with Nobel-Prize winning economists Abhijit Banerjee and Esther Duflo.
Much of Mr. Greenstone’s work is around designing market-based solutions to address pollution. From those bids, we were able to infer how expensive it was to achieve different levels of total emissions. Enforcement mattered. When firms fell short of permits, the regulator levied a fine of ten times the permit value. Similar conversations are on with Rajasthan, Uttar Pradesh, Madhya Pradesh, Bihar and Haryana. Gujarat’s Pollution Control Board has itself asked for help designing a water market and a Statewide sulphur dioxide market. The challenge that enforcement agencies faced is the inability to track a plant’s emissions second by second. Industries, for competitive advantage, frequently resorted to turning off pollution monitoring equipment. “ This is the Achilles heel of environmental regulation around the world. Finding the upper limit to the pollutants that industries could be permitted to emit is the other big challenge.
Because researchers could see what firms bid to buy and sell pollution permits: “The price I want for that has got to be at least what it cost me to do it, this happened. Because the guys had all the equipment and just had to start operating it or maintaining it,” he explained, cutting emissions proved cheap,. Most prominent is the Surat Emissions Trading Scheme for controlling particulate matter, first mooted with the Gujarat Pollution Control Board in 2010. In a randomised trial, 150 textile plants were assigned to a market and 150 stayed under conventional regulation.
Compliance in the market was “99%”, against about a third of industries out of compliance at any time under the status quo. “Once the industry saw that the rules were going to be enforced then everything changed,” he said. If States get their own markets working, he said, “one could imagine linking those markets”. “It is a judgement about the right trade-off between economic costs and environmental quality.”
Next month countries are expected to convene in Turkey for the annual climate meet.
He pointed to “the more or less complete failure of climate finance to the Global South” and said “it’s time to think about a new approach.
