The McKibbin-Wilcoxen proposal for global greenhouse abatement

[Conclusion]: The Kyoto Protocol complicates the process of achieving a realistic approach to greenhouse gas abatement. It has created a great deal of uncertainty about how and whether countries are going to achieve the strict quantity targets that have been set by 2008 to 2012. The international community had an opportunity to put in place a credible instruments based approach that would begin to reduce emissions at low cost wherever possible, in addition to giving flexibility to the time frame and burden sharing arrangements. Policy makers now have to turn to economic instruments within a target regime that has many potential risks. For the world economy it has presented many crucial challenges. Our goal from here should be to make the system that develops as de-centralized as possible and to ensure that Australia doesn’t commit to a significant loss in economic well-being while we wait for the United States to ratify the treaty. The best way forward for Australia would be a domestic version of the McKibbin-Wilcoxen proposal with allowance for sinks (where possible) in which the permit price is fixed (and modest) and the market is used to determine the extent of abatement at a known cost.