Background on CDM and Carbon Trading
DOI link for Background on CDM and Carbon Trading
Background on CDM and Carbon Trading book
The intellectual origins of carbon trading can be traced back to a small publication in 1968 titled, ‘Pollution, Property, and Prices’ by the Canadian economist John Dales. Like Garrett Hardin who penned his famous essay, ‘The Tragedy of the Common‘ in the same year, Dale believed that natural resources in their unrestricted common property form would face tragic overexploitation by people acting in their rational self-interest.1 Yet Dales went much further than Hardin in his solution to this problem. Dales proposed to control water pollution by setting a total quota of allowable waste for each waterway and then set up a ‘market’ in equivalent ‘pollution rights’ to firms to discharge pollutants up to this level.2 These rights, referred to as “transferable property rights…for the disposal of wastes” would be sold to firms and then they could trade them amongst themselves.3 The more efficient firms would make the largest pollution reductions and sell their credits to less efficient firms, thereby guaranteeing a reduction of pollution at the lowest social cost.