We print a government bond called a Global Warming Bond. These have stamped on
them: "I pay out 1000 indexed pounds in every year – beginning in the year 2050
and going on forever". Bonds would be given out, as a subsidy, to those
people and organizations who reduce emissions today.
The bonds would have immediate value. A market in them would spring up. I shall
assume that their status as government bonds would make risk of default
negligible. One might object to this, but I shall leave it at that.
The attractive thing about these bonds is that (leaving aside technical issues
about general equilibrium reallocations across asset classes) they would be
funded essentially by future taxpaying citizens. Those earning and paying taxes
in 2050 onwards would fund them. Our citizens, in 2007, would gain.
In this way, the unborn would subsidize us to cut carbon emissions.
Ha! There is general case for subsidizing virtuous behavior, but don’t think the future people are paying; they inherit both the tax liability and the bonds. Our great-grandchildren pay only to the extent that the existence of the bonds causes us to feel wealthier, spend more, and leave smaller bequests. Even Ph.d. economists miss that point with astonishing regularity. That link is via Mark Thoma, who also links to commentary from Larry Summers and other luminaries.
Here is Mark’s new blog experiment.