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Wednesday, January 06, 2010

Stiglitz: Overcoming the Copenhagen Failure

Is there a way forward after Copenhagen?:

Overcoming the Copenhagen Failure, by Joseph E. Stiglitz, Commentary, Project Syndicate: ...A month after the Copenhagen climate conference, it is clear that the world’s leaders were unable to translate rhetoric about global warming into action. ...
The failure of Copenhagen was not the absence of a legally binding agreement. The real failure was that there was no agreement about how to achieve the lofty goal of saving the planet, no agreement about reductions in carbon emissions, no agreement on how to share the burden, and no agreement on help for developing countries. Even the commitment ... to provide amounts approaching $30 billion for the period 2010-2012 for adaptation and mitigation appears paltry next to the hundreds of billions of dollars that have been doled out to the banks in the bailouts of 2008-2009. If we can afford that much to save banks, we can afford something more to save the planet. ...
Underlying the failure in Copenhagen are some deep problems. The Kyoto approach allocated emission rights, which are a valuable asset. If emissions were appropriately restricted, the value of emission rights would be a couple trillion dollars a year – no wonder that there is a squabble over who should get them.
Clearly, the idea that those who emitted more in the past should get more emission rights for the future is unacceptable. The “minimally” fair allocation to the developing countries requires equal emission rights per capita. Most ethical principles would suggest that, if one is distributing what amounts to “money” around the world, one should give more (per capita) to the poor.
So, too, most ethical principles would suggest that those that have polluted more in the past – especially after the problem was recognized in 1992 – should have less right to pollute in the future. But such an allocation would implicitly transfer hundreds of billions of dollars from rich to poor. Given the difficulty of coming up with even $10 billion a year – let alone the $200 billion a year that is needed for mitigation and adaptation – it is wishful thinking to expect an agreement along these lines.
Perhaps it is time to try another approach: a commitment by each country to raise the price of emissions (whether through a carbon tax or emissions caps) to an agreed level, say, $80 per ton. Countries could use the revenues as an alternative to other taxes – it makes much more sense to tax bad things than good things. ...
We have seen that goodwill alone can get us only so far. We must now conjoin self-interest with good intentions... A system of border taxes – imposed on imports from countries where firms do not have to pay appropriately for carbon emissions – would level the playing field and provide economic and political incentives for countries to adopt a carbon tax or emission caps. ...
Time is of the essence. While the world dawdles, greenhouse gases are building up..., and the likelihood that the world will meet even the agreed-upon target of limiting global warming to two degrees Celsius is diminishing. We have given the Kyoto approach, based on emission rights, more than a fair chance. Given the fundamental problems underlying it, Copenhagen’s failure should not be a surprise. At the very least, it is worth giving the alternative a chance.

There would be a temptation to use border taxes as a protectionist policy rather than as a means of leveling the playing field, and if each country is allowed to impose these taxes on their own, charges that the taxes are being manipulated in this way would likely undermine the system. Thus, it would probably require some sort of institution along the lines of the WTO that could independently approve or disapprove of such taxes. But agreeing on the structure of such an agency would likely be quite problematic, so it's not clear this approach necessarily opens the door to moving forward. However, it still might have a better chance of working than the current structure.

[See also Robert Stavins who wonders if the United Nations Framework Convention on Climate Change is the best way to proceed.]

    Posted by on Wednesday, January 6, 2010 at 10:17 AM in Economics, Environment | Permalink  TrackBack (0)  Comments (62)

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