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Monday, May 28, 2007

Larry Summers: Practical Steps to Climate Control

Since the participation of developing countries is an essential component of any greenhouse gas reduction policy, how do we get developing countries to participate? Larry Summers has some "Practical steps to climate control":

Practical steps to climate control, by Lawrence Summers, Commentary, Financial Times [free]: ..[T]he most important ...[factor in] global warming policy ... is what happens in the developing world. These countries will deliver three-quarters of the increase in global greenhouse gas emissions over the next generation, on current forecasts. ...[T]here is the additional reality that ... policies that restrict emissions in some places but not everywhere may just relocate emissions not reduce them.

Developing countries recognise that today’s greenhouse gas problem was made mostly by industrial countries, that their own energy usage per capita represents about 20 per cent of ... industrial country usage and that their citizens have pressing material needs. They are also keenly aware of the uncertainty surrounding projections of economic growth, patterns of production and future energy technologies. It is easy to sympathise with their extreme reluctance to commit to levels of emissions decades from now that are lower than what industrial countries are emitting today.

For these and other reasons, ... the Kyoto approach to climate change – through the setting of targets – could prove to be ... impractical, ultimately ineffective and perhaps even counterproductive because of the valuable political capital it consumes. ... I fear that commitments to vast reductions in emissions decades hence are no more real than commitments to end aggressions or war.

What then should be done...? The place to start is with the recognition that it is much easier for governments to make and keep commitments to policies they can control than to outcomes they cannot assure. ...[E]mphasis should also be placed on concrete measures that will have meaningful impact.

First, the US must engage in an energy efficiency programme ... without delay... As long as developing countries can point to the US as a free rider there will not be serious dialogue about what they are willing to do. I prefer carbon and/or gasoline tax measures to permit systems or heavy regulatory approaches because the latter are more likely to be economically inefficient and to be regressive. The key point is that after Kyoto, where there was US vision ... but no ... action, there must be real policy commitments.

Second, the major industrial countries should commit to a very large increase in funding for research in technologies that offer the prospect of reducing ... greenhouse gases.. They should also ... commit to making intellectual property relating to clean energy available to developing countries on preferential terms. ...

Third, the World Bank, and probably the regional development banks, should ... take on as a major mission the provision of subsidised capital for projects that have environmental benefits that go beyond national borders. There is much that can be done ... within developing countries, yet national governments have inadequate incentives to take account of global impacts. ...

Fourth, a goal should be set of eliminating by 2025 the more than $200bn the world spends each year on energy subsidies...

There is a final critical ... element... Given that ... developing ... countries are unlikely to make [significant changes] unless they see their own interests as at stake, it is essential that they be full participants in setting the global direction. ...

Is all of this a sufficiently ambitious agenda? Perhaps not; and perhaps political efforts to generate commitments to ambitious if remote targets can be worthwhile as powerful forces for change, as with human rights in eastern Europe. But they must be married to more immediate if less dramatic steps that have real and practical effect.

    Posted by on Monday, May 28, 2007 at 03:42 PM in Economics, Environment, Policy, Regulation | Permalink  TrackBack (0)  Comments (20)

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