Economy – Quantitative Finance – General Finance
Scientific paper
2011-10-06
Economy
Quantitative Finance
General Finance
To be submitted to an Elsevier journal
Scientific paper
In a global economy, fair and universal management of worldwide markets with a guarantee of sustainability of life on this planet is a key element. 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, and provide a uniform approach to penalizing emissions. The core of the MGHG-INT is what we call the Modified Gross Domestic Product (MGDP), based on the Inequality-adjusted Human Development Index (IHDI). The MGDP enables us to normalize the status of all nations on a common scale, making it possible for us to propose universal measures, such as MGHG-INT. We also propose a carbon border tax, either as a direct tax or a tax adjustment, applicable at national borders, based on MGHG-INT and MGDP. This carbon tax is supported by a proposed global Emissions Trading System (ETS) applied at the international level. It is assumed that each country will implement its own equivalent carbon tax system to preserve the competitiveness of the marketplace; however, consideration of this aspect of our concept is beyond the scope of our work here. The proposed carbon tax is analyzed in a short-term scenario with interesting outcomes, such as the simultaneous lowering of emissions levels and the maintenance of reasonable growth in MGDP. The proposed carbon tax and ETS can also be implemented at the national level in a country, in provincial or corporate slices. In addition to annual GHG emissions, cumulative GHG emissions over a decade are considered for the big players in the world economy with almost the same results.
Cheriet Mohamed
Moghaddam Fereydoun Farrahi
Moghaddam Reza Farrahi
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