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Many developing countries claim that it is now their turn to pollute if they want to develop economically. Developed countries are concerned that allowing this
- Many developing countries claim that it is now "their turn" to pollute if they want to develop economically. Developed countries are concerned that allowing this will seriously endanger the future of the planet. According to the Coase Theorem it does not matter who is assigned the pollution property rights as the global societal result will be the same provided that transactions costs are very low. This theorem is the basis of the so-called "cap and trade" system: "The cap on greenhouse gas emissions that drive global warming is a firm limit on pollution. The cap gets stricter over time.
- The trade part is a market for companies to buy and sell allowances that let them emit only a certain amount, as supply and demand set the price. Trading gives companies a strong incentive to save money by cutting emissions in the most cost-effective ways." Why do we need government agreements (such as the Paris Agreement) if assignment of rights is irrelevant.
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Answer The Coase Theorem suggests that the assignment of property rights should not matter for the final outcome as long as transaction costs are low ...Get Instant Access to Expert-Tailored Solutions
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