The Complex Climate Change Incentives of China and the United States

Abstract:     
It is increasingly clear that the world would be better off with an international agreement to control greenhouse gas emissions. What remains poorly understood is that the likely costs and benefits of emissions controls are highly variable across nations. Most important, prominent projection suggest that the world's leading emitters - the United States and China - have weak incentives to participate in an agreement that would be optimal from the standpoint of the world. The first problem is that any significant emissions effort would probably be exceedingly expensive for both nations. The second problem is that on prominent projections, the United States and China are unlikely to be the most serious losers from climate change. There are two ways to eliminate the resulting obstacle to an international agreement. The first is through altering the perceived cost-benefit analysis for both countries. The second is through an understanding that both nations, and the United States in particular, are under a moral obligation not to inflict serious harm on the highly vulnerable citizens of Africa, India, and elsewhere. Existing proposals for unilateral action on the part of the United States seem to stem from an unruly mixture of confusion, hope, and a sense of moral obligation. There are also interesting differences between the situations of the two leading emitters: Because China is much poorer and has much lower per capita emissions, it is especially difficult to interest China in taking aggressive steps to reduce its emissions.

Keywords: climate change, greenhouse gasses, cost benefit analysis, Kyoto Protocol

Working Paper Series