Abstract
I use a multi-regional computable general equilibrium model (GTAP-EG) to assess the economic consequences of initial carbon dioxide permit allocations. I compare ad hoc approaches, like "Ability to pay", "Sovereignty" and "Egalitarian", with those resulting from specifying a social welfare function. My main conclusion from these simulations is that the choice of social welfare function is of importance. Contrary to earlier literature, I find that the initial distribution not only gives second-order effects but affects equilibrium prices and therefore income.