Title: Pricing carbon: an ecological economics perspective on the McKibbin–Wilcoxen proposal for Australia

Authors: J.M. McNeill, J.B. Williams

Addresses: Institute for Rural Futures, University of New England, Armidale, NSW 2351, Australia. ' School of Business, Universitas 21 Global, 5 Shenton Way, Singapore 068808, Singapore

Abstract: Many countries are contemplating the design of institutions to address |the greatest market failure the world has ever seen| (Stern, N. (2007) The Economics of Climate Change. Cambridge, UK: Cambridge University Press, p.xviii). Australia is currently considering introducing a carbon trading scheme and prominent amongst the proposals being discussed is the |McKibbin–Wilcoxen hybrid scheme| (McKibbin and Wilcoxen, 2002, 2006, 2007). We examine the literature on this proposal. We conclude that provided long-term goals are not sacrificed, there is much to admire in the institutional arrangements suggested. Short-term permits can address concerns about employment impacts, whilst long-term permits facilitate business planning. Nevertheless, we do seriously question the theoretical framework advanced to justify the hybrid structure – a framework that is also used in some sections of Stern (Stern, N. (2007) The Economics of Climate Change. Cambridge, UK: Cambridge University Press) and elsewhere. Short- and long-run optimal abatement theories are neither credible nor necessary. In an Australian context, we also argue that there is a strong case for supplementing credits with carbon sinks created in the agricultural sector.

Keywords: cap and trade; carbon offsets; carbon tax; carbon trading; Australia; ecological economics; climate change; market-based instruments; optimal abatement models; social cost of carbon; Stern report; carbon sinks; agriculture.

DOI: 10.1504/IJEWE.2007.015291

International Journal of Environment, Workplace and Employment, 2007 Vol.3 No.1, pp.50 - 66

Available online: 01 Oct 2007 *

Full-text access for editors Access for subscribers Purchase this article Comment on this article