Coase to the rescue!

As my friend and colleague Alex Tabarrok (@ATabarrok), an economics professor at George Mason University, recently pointed out (see chart below), CO2 emissions in the USA are actually falling, but alas they are rising in the rest of the world, especially in fast-growing countries like China and India. Professor Tabarrok thus proposes a novel (?) Coasean solution to climate change: instead of Pigovian carbon taxes, what if rich countries (and rich men like Bill Gates, I would add) were to buy out or lease the legal rights to coal fields in China and India and then shut those fields down or convert them into parks? Here is an excerpt from Tabarrok’s ingenious proposal:

Coal use in China is very high and increasing. India has been canceling coal plants as solar becomes cheaper but coal is still by far the largest source of power in India. Thus, there is plenty of opportunity to buy out, high-cost coal mines in China and India. It might seem odd to buy Chinese and Indian coal mines but we buy Chinese and Indian labor, why not a coal mine? Moreover, it’s important to understand that the policy is to buy only up to the point that it benefits both parties. Buying coal isn’t foreign aid, it’s a pollution reduction plan just like a carbon tax or R&D investment and because we can buy barely-profitable coal mines and avoid the problem of leakage this is a low-cost method to reduce CO2 emissions.

About F. E. Guerra-Pujol

When I’m not blogging, I am a business law professor at the University of Central Florida.
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2 Responses to Coase to the rescue!

  1. Kathy H says:

    This proposal sounds like asking rich people to contribute to a charity. They will not make money by buying the coal. Although they would benefit from clean air and less climate change. Also, would they then build other sources of energy for the people in these countries to use? Bill Gates thinks that cow fats are a major contributor to green house gasses. Bill Gates is putting his money into looking for solutions to climate change. I wonder what he would think of this proposal?

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