An Early Action Proposal with Known Costs: A Sensible and Realistic Option for Emissions Trading in Australia

In a number of papers, McKibbin and Wilcoxen (1997a,1997b,1999) have proposed to tackle rising greenhouse emissions by using an internationally coordinated system of domestic permit trading schemes with a fixed price rather than a fixed cap on greenhouse emissions. This paper argues that early action by Australia alone is difficult to justify. However, if early action on the Kyoto Protocol is deemed to be warranted then the McKibbin- Wilcoxen Proposal for a permit trading system with a low fixed permit price is a sensible early action policy for Australia, especially if many countries implement it at the same time and particularly if by implementing this proposal as an early action policy, it ultimately replaces the Kyoto Protocol. The paper sets out some important lessons from model research that are crucial for designing an early action policy for Australia. The paper also sets out the original McKibbin-Wilcoxen proposal as a more realistic approach to climate change than the Kyoto Protocol, as well as explaining how this proposal could work as an early action policy.