Buy Coal! A Case for Supply-Side Environmental Policy, Journal of Political Economy
Free-riding is at the core of environmental problems. If a climate coalition reduces its emissions, world prices change and nonparticipants typically emit more; they may also extract the dirtiest type of fossil fuel and invest too little in green technology. The coalition ís second-best policy distorts trade and it is not time-consistent. However, suppose the countries can trade the rights to exploit fossil fuel deposits: As soon as the market clears, the above-mentioned problems vanish and the first-best is implemented. In short, the coalition ís best climate policy is to simply buy foreign deposits and conserve them.
Harstad, Bard. 2012. Buy Coal! A Case for Supply-Side Environmental Policy, Journal of Political Economy. Journal of Political Economy. 120(1): 77-115.