If I were President of the World, I would set a limit of the quantity of fossil fuels that could be extracted, worldwide. The amount would be determined by an independent body of scientists and economists, that would auction a fixed number of tradable permits every year – let’s call it the World Carbon Authority (WCA).
The WCA would be responsible for conducting audits and enforcement, and would be informed by very well funded scientific and economic research divisions. The revenue from the auctions would go partly to the WCA to fund its activities, partly towards complementary measures like stopping deforestation and promoting better land use, with the remaining revenue distributed to all countries based on their population, to offset the higher energy prices. All countries would receive the same per-capita income, but the less energy intensive countries would be net winners. This money would also be a strong incentive for countries to recognise the authority of the WCA.
It would be up to each national government to decide how to spend this money, but the natural incentive is for rich countries to spend it on improving efficiency and investing in renewable energy, and for poor countries to improve the general well-being of the population. It would be a force both for environmental responsibility as well as social equality.
The extraction industry and the emissions intensive industry would face the same conditions worldwide, so they would be able to pass through their higher costs to consumers, and would have no incentive to move their operations to unregulated countries.
Compared to an emissions trading system, an extraction trading system would also be far simpler, because it would cover only the thousands of organisations that extract significant amounts of coal, oil and natural gas, rather than the many millions of organisations that burn them.
This kind of system is not entirely without precedent. At a much smaller scale, some fisheries are managed in this way. And at the international level, OPEC has been enforcing oil production quotas (although not always successfully) among its 12 member countries for many decades.
Of course, I’m realistic enough to know that I’ll never be President of the World (sigh…), and that this proposal will never be politically tenable. But its nice to dream.