Formulas for Quantitative Emission Targets

Abstract

Start from three premises: (1) Global Climate Change is a genuine problem; (2) the Kyoto Protocol constitutes the only multilateral framework we have to address it; and (3) the Protocol is inadequate, particularly with regard to incomplete coverage across countries (no participation of US or developing countries) and across time (nothing agreed after 2012). This paper argues that - given the combination of political, economic and scientific realities as they are - Kyoto is a good foundation, a good first stepping stone on the most practical path if we are to address Climate Change seriously. A constructive approach asks what are the requirements for the design of a second step in the process, a successor to the Kyoto regime of 2008-2012, one that would build on what is good about it and fix what is most lacking. This paper offers a proposal that seeks realistically to bring in all countries and to look far into the future. It argues that the path of emission targets for the 21st century must be selected sequentially, perhaps one decade at a time, all within a common framework. An analogy for the framework would be the post-war General Agreement on Tariffs and Trade (GATT), which gave us 50 years of successful rounds negotiating trade liberalization, even though the original signers did know what specifics would emerge. The paper proposes allocating relative targets across countries by means of a formula that is fairly general at first but that becomes increasingly specific as the decade in question approaches. New joiners would be obligated to adopt emissions targets, but these paths need not immediately fall below their "business as usual" growth path. Allowing new joiners to sell permits in the initial budget period would then provide them with an economic incentive to join, or at least would not penalize them. It would carry economic benefits for both rich and poor countries, while also bringing environmental benefits to all. Countries would be required in subsequent budget periods of their participation to adopt steeper reductions in their emissions targets relative to their "business as usual" paths. The extent of relative cuts across countries would depend on such factors in the formulas as the per capita income and past emission levels of the country in question. The extent of cuts in aggregate global emissions would depend - as is inevitable - on how strong is the international political consensus for aggressive action at that point in history. Such a scheme provides the necessary flexibility and incentives to appeal to both industrialized and developing countries.

Keywords: Economics - Economic and Econometric Theory, Environment and Natural Resources, International Affairs/Globalization, Science¸ Technology and Public Policy