A Modified GHG Intensity Indicator: Toward a Sustainable Global Economy based on a Carbon Border Tax and Emissions Trading

Abstract: It will be difficult to gain the agreement of all the actors on any proposal for climate change management, if universality and fairness are not considered. In this work, a universal measure of emissions to be applied at the international level is proposed, based on a modification of the Greenhouse Gas Intensity (GHG-INT) measure. It is hoped that the generality and low administrative cost of this measure, which we call the Modified Greenhouse Gas Intensity measure (MGHG-INT), will eliminate any need to classify nations. The core of the MGHG-INT is what we call the IHDI-adjusted Gross Domestic Product (IDHIGDP), based on the Inequality-adjusted Human Development Index (IHDI). The IDHIGDP makes it possible to propose universal measures, such as MGHG-INT. We also propose a carbon border tax applicable at national borders, based on MGHG-INT and IDHIGDP. This carbon tax is supported by a proposed global Emissions Trading System (ETS). The proposed carbon tax is analyzed in a short-term scenario, where it is shown that it can result in significant reduction in global emissions while keeping the economy growing at a positive rate. In addition to annual GHG emissions, cumulative GHG emissions over two decades are considered with almost the same results.