Environmental and economic benefits resulting from citizens' participation in CO2 emissions trading: An efficient alternative solution to the voluntary compensation of CO2 emissions

Over the last few months in the emerging and lucrative carbon project market, a growing number of organizations have proposed to offset citizens' greenhouse gas emissions. The target of these carbon-offset initiatives is to satisfy the increasing demand of individuals wishing to take part in the fight against climate change. In this paper, we review and criticize these carbon-offsetting programs in general terms. We then propose an alternative that, in our opinion, should prove to be a better solution for citizens who are willing to pay for protecting the environment. This alternative is to organize citizens' participation in carbon emissions trading on a large scale in order to purchase and retire (destroy) CO2 permits. To do so, a benevolent Regulator or non-governmental organization must correct certain CO2 emissions market failures; this particularly concerns the high transaction costs, which represent an entry barrier and prevent citizens from purchasing and withholding permits. Based on theoretical findings, we demonstrate that implementing citizens' participation in emissions trading is an economically efficient and a morally preferable option. (C) 2007 Elsevier Ltd. All rights reserved.