The Cause of the War over Caps and How to End It

Abstract

Industrialized countries are demanding that developing countries accept binding emission targets, but developing countries refuse these caps. Developing countries, in turn demand that Industrialized countries accept much tighter caps than any have considered. Industrialized countries refuse such caps.

Developing countries sell carbon offset credits at a profit, but that profit would be reduced if they accepted any cap on emissions. This increases their resistance to accepting such caps. But stricter caps on industrialized countries would cause those countries to buy more offsets from developing countries. The increased profits from increased offset sales is one reason developing countries demand such strict caps.

If industrialize countries accepted extremely strict caps and met them by buying enough offsets from developing countries, this could limit emissions enough to meet a reasonable global target. But the high cost to industrialized countries makes this approach politically infeasible. If however, developed countries are allowed to commit to a binding carbon-price target instead of an emission target, this would eliminate their major objections—it would not cap them below developing countries, and it would not prevent them from reaching the same level of development. Industrialized countries could then commit to caps that were guaranteed to be equally effective.

Keywords: Kyoto Protocol, International Offset Credits, CDM, CER, cap and trade, carbon tax, Climate Change Conference Copenhagen 2009, Clean Development Mechanism