Beyond Environmental Taxation: Ronald Coase and the Architecture of the Carbon Market
By Lucas Ribeiro (CFC-GS/UFPA) In the previous blog, we explored how Arthur Pigou pioneered the economic understanding of environmental externalities by demonstrating that productive activities can generate social costs that are not internalized by economic agents. Based on this finding, Pigou advocated state intervention through corrective taxes and fiscal incentives as a way to restore social welfare. However, throughout the 20th century, this view began to be questioned. It is in this context that the thinking of Ronald Coase emerges, whose theoretical contribution shifts the focus from state taxation to the institutional structure of markets, providing the conceptual basis that would allow the emergence of the Carbon Market as a regulatory instrument. In The Problem of Social Cost (1960), Coase proposes a reinterpretation of the problem of externalities. Unlike the Pigouvian approach, which is based on the need for state correction of the negative effects of economic activity, Coase argues that the problem is essentially reciprocal. This means that, while an economic activity can cause damage to third parties—as in the case of environmental pollution—its restriction or interruption can also impose costs on the producing agent. Thus, it is not just a matter of avoiding damage, but of assessing which institutional arrangement generates the lowest total social cost. The central axis of Coasean theory lies in the clear definition of property rights. For Coase, economic rights—including the right to pollute—can be understood as factors of production that are subject to negotiation. In this vein, when rights are well defined and transaction costs are low, economic agents themselves can negotiate among themselves, reaching efficient solutions for the allocation of resources, regardless of who originally holds the right. Therefore, the role of the state is not to intervene directly in the behavior of agents, but to structure the market by establishing clear rules and legal certainty mechanisms. The most obvious practical application of Coase’s theory in the environmental field is the carbon market. By transforming the right to emit greenhouse gases into a tradable asset, the market creates a system in which externalities are internalized through private transactions. In this model, the state legally recognizes carbon credits, but the pricing and efficient allocation of these rights occur based on the logic of supply and demand. The result is a mechanism that seeks to reconcile economic efficiency and environmental protection without resorting exclusively to taxation. In the Brazilian context, Law No. 15,042/2024, by establishing the Brazilian Greenhouse Gas Emissions Trading System (SBCE), explicitly consolidates the influence of Ronald Coase’s thinking, reinforcing Coasean logic by assigning economic value to emission rights and encouraging private agreements between regulated agents. However, although often presented as antagonistic authors, Pigou and Coase are not mutually exclusive. On the contrary, the contemporary carbon market model demonstrates that their theories are complementary. While Pigou provides the normative basis for the internalization of externalities and legitimizes state action in the name of collective welfare, Coase, in turn, offers the institutional architecture that allows this objective to be transformed into a functional market system based on the trading of rights. Law No. 15,042/2024 reflects this synthesis by combining tax incentives, administrative sanctions, and market mechanisms, resulting in a hybrid model of climate regulation. Thus, Ronald Coase not only criticized the Pigouvian model, but also provided the theoretical basis that made it possible to construct the Carbon Market as a climate policy instrument. By shifting the debate from taxation to the definition of property rights and private negotiation, his theory allowed pollution to be treated as a regulatable economic variable. Thus, while Pigou revealed the need to internalize environmental externalities, it was Coase who offered the institutional path for the carbon market to emerge as a mechanism capable of aligning economic efficiency and environmental sustainability. REFERENCES BRASIL. Lei nº 15.042, de 11 de dezembro de 2024. Institui o Sistema Brasileiro de Comércio de Emissões de Gases de Efeito Estufa (SBCE); e altera as Leis nºs 12.187, de 29 de dezembro de 2009, 12.651, de 25 de maio de 2012 (Código Florestal), 6.385, de 7 de dezembro de 1976 (Lei da Comissão de Valores Mobiliários), e 6.015, de 31 de dezembro de 1973 (Lei de Registros Públicos). Disponível em: https://www.planalto.gov.br/ccivil_03/_ato2023-2026/2024/lei/L15042.htm. Acesso em: 04 jan. 2026. COASE, Ronald Harry. The problem of social cost. Journal of Law and Economics, v. 3, p. 1-44, 1960. DUARTE, Beatriz Bergamim; TUPIASSU, Lise; CRUZ, Simone Nobre. O Mercado de Carbono na Política de Mitigação das Mudanças Climáticas. Revista de Direito Ambiental e Socioambientalismo, v. 6, n. 2, p. 93-108, 2020. GODOY, Sara Gurfinkel Marques de; SAES, Maria Sylvia Macchione. Cap-and-trade e projetos de redução de emissões. Ambiente e Sociedade, v. XVIII, n. 1, p. 141-160, 2015. PIGOU, Arthur Cecil. The Economics of Welfare. London: Macmillan, 1920. REATO, Talissa Truccolo; CABEDA, Taísa. A relação entre o imposto de Pigou e o Teorema de Coase. Revista Eletrônica Direito e Política, v. 12, n. 1, 2017.
