A Modified GHG Intensity Indicator: Toward a Sustainable Global Economy based on a Carbon Border Tax and Emissions Trading

TL;DR

This paper proposes a universal, low-cost measure of GHG emissions called MGHG-INT, based on IHDI-adjusted GDP, and suggests a global carbon border tax and emissions trading system to reduce emissions sustainably.

Contribution

It introduces the MGHG-INT measure using IHDI-adjusted GDP and designs a global carbon border tax supported by an emissions trading system.

Findings

Significant potential for global emissions reduction

Economic growth can be maintained with the proposed measures

Effective over both annual and cumulative emissions

Abstract

It will be difficult to gain the agreement of all the actors on any proposal for climate change management, if universality and fairness are not considered. In this work, a universal measure of emissions to be applied at the international level is proposed, based on a modification of the Greenhouse Gas Intensity (GHG-INT) measure. It is hoped that the generality and low administrative cost of this measure, which we call the Modified Greenhouse Gas Intensity measure (MGHG-INT), will eliminate any need to classify nations. The core of the MGHG-INT is what we call the IHDI-adjusted Gross Domestic Product (IDHIGDP), based on the Inequality-adjusted Human Development Index (IHDI). The IDHIGDP makes it possible to propose universal measures, such as MGHG-INT. We also propose a carbon border tax applicable at national borders, based on MGHG-INT and IDHIGDP. This carbon tax is supported by a proposed global Emissions Trading System (ETS). The proposed carbon tax is analyzed in a short-term scenario, where it is shown that it can result in significant reduction in global emissions while keeping the economy growing at a positive rate. In addition to annual GHG emissions, cumulative GHG emissions over two decades are considered with almost the same results.