ABSTRACT
Carbon dioxide (CO2) was discovered by the Scottish chemist Joseph Black in 1754. A few years later, in 1769, James Watt introduced an improved version of the steam engine and coal became the primary source of energy for a wide range of industrial processes and for transport. At that time carbon dioxide was not considered a pollutant. It does not smell and it is not toxic. Today it is an established fact that CO2 is the most important greenhouse gas with the potential to change the global climatic system. As a response the international community established the United Nations Framework Convention on Climate Change (UNFCCC) in 1992. With the ratification of the Kyoto Protocol in February 2005 international policies have been adopted aiming at a reduction of greenhouse gas emissions. A potentially efficient tool to implement reductions of greenhouse gases are tradable emission permits. In 2005 the European Union launched a system of tradable emission permits and thereby created new property rights. This system of property rights, however, does not cover emissions from all sectors of the economy and, more importantly, it is confined to European countries. The fundamental problem of implementing emission restrictions with limited global emission rights remains unresolved. Of the many reasons why a global agreement has proven to be difficult to obtain, one seems to be the most prominent: the unsettled question of who should receive the CO2 emission permits.2 While in practical political terms this may be a bargaining problem, it is certainly a problem of justice. The emergence of property rights, and particularly the introduction of CO2 emission permits, raises three different questions:
• The process of the emergence of property rights as a reaction to increasing scarcity. Increasing scarcity is a driver of institutional reform, including the regulation of access to resources (see e.g. Libecap 1989)
• The efficiency of a private property rights regime as compared to joint management of common pool resources is a debated issue; cf. e.g. Demsetz (1967) and Ostrom (1990) and Stevenson (1991); and
• The distributional aspects of an initial allocation of property rights.
