The name is absent

equitable. Third, it should be revenue productive as long as international air travel exists, even
though its occurrence would be reduced, beneficially from the viewpoint of global welfare.
Fourth, it should be an administratively feasible tax. If it turns out to be difficult to
administer by a global body, the tax could be collected by national authorities and the revenue
handed over to a global regulatory body. Of course, there will be a need for an international
convention or treaty, selected related matters of which are addressed in Section VI.

A similar tax could be levied on international shipping based on a similar argument
i.e. that of their use of the open seas which are global commons, and to the extent that the
use leads to pollution and congestion.

If such a global tax takes hold, it is perhaps not too far fetched to imagine that it
might even be possible to introduce differential taxation to reflect congestion costs at airports
or ports. For example, the rates could be related to arrivals and departures during heavy or
light traffic periods, introducing an element of peak-off-peak differentials such as usually
experienced where competition exists, for example, in the telephone, movie or hotel industries.
A well crafted design would include two parts: (1) a fixed component for the entitlement to
enter; and (2) a differential component reflecting the marginal cost of abatement.(see
Congressional Budget Office, 1992).

2. International tradeable permits?

Tradeable permits have the merit of exerting direct control over the quantity of
emissions. In the case of a Pigouvian tax or charge, if it is calculated to be too low, pollution
may exceed optimal levels, necessitating reiterations to set the right tax. Tradable permits do
not suffer from this shortcoming. ¹³

If a permit is required for each unit of pollution, then the optimal number of permits
is Q* in Diagram 5, where MAC (marginal abatement cost) and MEC (marginal external cost)

However, it should be kept in mind, that, a tradeable permit, like a Pigouvian tax,
necessitates differential assessment to reflect differences in marginal damage caused
in different areas, for example, with different population densities, by the same
pollutant.

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