The Copenhagen Accord

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The ultimate aim of science is to predict, preferably something that can be falsified. In 1994, using tools that were much older, Scott Barrett predicted that an international treaty on the provision of a global environmental good (say, greenhouse gas emission reduction) would be either narrow (that is, ratified by a few countries only) or shallow (that is, have lenient targets). That prediction was not entirely correct. The Kyoto Protocol was both narrow and shallow: Western Europe signed up to targets that will be met by virtue of lacklustre economic growth.

Since 1994, game theorists have shown that while meaningful global treaties are unlikely, regional treaties may well be feasible and effective. That prediction seems to be accurate. In Copenhagen, five nations (Brazil, China, India, South Africa, USA) came together in something of a deal. (The other 188 agreed to take note.)

The EU had put all of its cards on the table well before the meeting, and was thus sidelined from the negotiations.

As an academic, one should be happy if predictions stand up to observations. As a taxpaying citizen, one may have a different opinion. Why did 45,000 people travel to Copenhagen for a meeting that was widely predicted to fail, and indeed did?

The short answer is: bad policy advice. The debate on climate policy is not open. Group think dominates, and people who have a slightly different opinion are ignored or smeared. Policy advise is often manipulated, and decisions are regularly made in complete ignorance of the consequences. The Intergovernmental Panel on Climate Change, which is supposed to synthesize the academic literature to inform decision makers, has deliberately ignored or downplayed politically inconvenient parts of the literature such the large body of game theory.

The literature on the provision of global public goods has two straigthforward recommendations:

1. Forget about legally binding targets. Use pledge and review instead. International law is weak, and countries are reluctant to sign away part of their sovereignty.  Treaties with legally binding targets tend to codify what signatories plan to do anyway. Discussion about binding targets and sanctions tend to be acrimonious, as some countries feel threatened and “binding” has different meanings in different jurisdictions. So, countries should meet every so often to discuss their domestic plans.

Such an information exchange is important because climate policy inevitably raises the price of energy. Dearer energy implies a loss in competitiveness. A country would therefore be more inclined to unilaterally raises its energy prices if it knew its trade and investment partners would do the same.

2. Focus on policy instruments. Emission reduction is much cheaper in some places than in others. So there needs to be a mechanism through which a country can purchase emission reduction in another country. The simplest way to do this is by linking up domestic markets for emission permits. (Permits are licences, rather than commodities, so international trade is not automatic.) An international treaty should regulate international trade only. (Current attempts seek to micro-regulate both international and domestic policies.)

One could hope that the failure in Copenhagen will lead to a fundamental re-think of international climate policy. I’ve hoped that for over 15 years now, and I’m not holding my breath this time.

42 Responses to “The Copenhagen Accord”

  1. Brian J Goggin Says:

    The predictions of a mathematician may not be irrelevant, even if in a context different from that he had in mind:

    http://www.casualhacker.net/tom.lehrer/evening.html#go

    bjg

  2. Holbrook Fields Says:

    Very interesting post (certainly to me as a climate change novice). I must learn more about how emission permits would work.

  3. B P Woods Says:

    ‘It’ was a successful failure ’cause the Joule finally dropped that a decrease in your fossil-fuel emissions means your GDP goes into the toilet. No fuel, no ‘growth’, no credit, no debt, no obscene incomes … no nuthin’ – just back to the farm – and it better be 30m above current sea levels. ‘Cept of course you enjoy fishing.

    B Peter

  4. garrett wyse Says:

    Having studied Global Public Goods for the past number of years I am inclined to agree with the argument about not pushing for legally binding targets. GPG theory relies heavily on appropriate incentive structures and the interaction between local, national, regional and global, public private and civil society actors.
    While this makes matters complex it also allows for a focus on public goods in the local and national setting, and as is mentioned when one nation gets a signal from another (e.g. energy pricing) they can act react accordingly, and so the public goods increase in production levels, even if relatively uncoordinated.
    This I think you will see more and more in the coming years as groups tentatively move more into public goods production, relatively unilaterally, but when combined and signalled then a more cohesive public goods production process emerges.

  5. Ronnie O'Toole Says:

    Peter Neary did a nice graph in predicting how long it would take the world to a agree the Doha trade round. He graphed the years it took for each WTO/GATT round against the number of countries participating. The more countries, the harder the negotiations.

    Like kyoto to copenhagen, the GATT started narrow, and then started to include pretty much everyone. Writing in 2003, he predicted that Doha would take 8.5 years (to conclude in May 2010). Turns out that his graph won’t quite be right, though his point was well made. Global warming needs 7 people around a table, not 45,000.

    For Neary’s paper:
    http://www.ucd.ie/economics/research/papers/2003/WP03.17.pdf

  6. Richard Tol Says:

    @Ronnie

    Point well taken.

    Trade liberalisation is a club good, while emission reduction is a public good.

  7. Edward Says:

    I really don’t see why people are so disappointed that Copenhagen is not legally binding, given that Kyoto was binding to no evident benefit.

  8. Pat Donnelly Says:

    Those who stood to lose the most naturally did not want to sign away their future prospects of economic expansion. As you say, predicted!

    There is a treaty that bans weather modification, but only as a weapon of war. It may still be used in civil wars and with the connivance of a government …..

    There are clearly priorities and using direct action to alter any perceived defect in weather, is obviously better than asking for developmental inequality to be enshrined in law.

    As the world cools perhaps some of the heat will leave this distraction?

  9. Richard Tol Says:

    @Edward
    Kyoto failed to deliver much emission reduction, but it did bring name recognition to Japan and the opportunity for Europe to declare its moral superiority, while it enshrined zero obligations for Africa.

    African negotiators would have been more effective if they had stuck to the principle of no obligations rather than to the emblem of Kyoto. But while European negotiators are badly advised, African ones are often unadvised.

    Note that the behaviour of the US was more rational. Obama pledged the US targets and went off to strike a deal with a few key countries.

  10. Cearbhall O' Dalaigh Says:

    @ Holbrook Fields

    You may find this interesting …
    http://www.jpmorgan.com/pages/jpmorgan/investbk/solutions/commodities/environmental

    Here We Go! Here We Go! Here We Go!

  11. Donal O'Brolchain Says:

    @Richard
    Great post.
    Just the kind of insight and argument that a site like this can diffuse to people like myself ie. those who want to be reasonably well informed on all aspects of the climate change issue (FYI – I bought and read Lomberg’s Sceptical Environmentalist – as soon as I first read about it).

    I cannot imagine this kind of article appearing in other media (eg. [printed or broadcast) nor in a peer-reviewed journ

    On the substance, can you comment (or at least point to sources of comments) on examples of the kinds of policy insturments that you think offer some kind of way of dealing with CO2 and other emissions eg.
    1) the Montreal protocols/accords on CFCs/HCFCs;
    2) the EU with its ETS;
    3) the RGGI with the 10 states in the North East of the US http://www.rggi.org/home

  12. Richard Tol Says:

    @Donal
    The Montreal Protocol etc is an outright ban on the production and use of the offending chemicals. This is possible because there substitutes which are only slightly more expensive to the end-users (you) and more profitable to the producers (DuPont etc). So, the pain is dispersed over a large, unorganised group, while the lobbyists gain.

    There is little wrong in principle with emission trading. The EU ETS does not deliver much emission reduction because there are too many permits. The EU total of permits is the sum of the permits granted by the Member States. The total amount of permits is a commons: Each Member States grants as many permits as it can, hoping that the other Member States will restrain themselves.

    The EU ETS also gives implicit subsidies to big business and creates opportunities for new kinds of fraud.

    These are all flaws in the fine print of the EU ETS — because the European Commission did not get the best advice and the European Council ignored recommendations — but this does not discredit emissions trading as a principle. It has been working fine in the US for SOx and NOx (after a decade to teething problems).

    I don’t know much about RGGI. I think it is mainly a programme for putting political pressure on the Federal government while learning how to create a market.

  13. Donal O'Brolchain Says:

    Thanks, Richard

    From what you say, I take it that the EU ETS is OK , but implemented very badly. But it could could be made to work, by a better design of the market.

    A stray thought arising from your comment on the relative power of lobbyists over dispersed groups. When slightly more expensive (to end users) options are know to be workable, how many are rejected by policy-makers/decision takers because they fear that the “dispersed group” would not accept the slightly more expensive option?
    The normal economic model says people will not pay more. Do behavioural economists study – in the real world (as opposed to gaames being played by students/volunteers) – the extent to which people are prepared to pay more (or lose some existing way of doing things) for some reason. This reason may have to be explained and campaigned for.

    The example I use is that in some French cities, the introduction of on-street LRT transport was voted on eg. Grenoble, Strasbourg. Options had to discussed in public.

    I gather that in some German-speaking parts of Europe, surveys showed that citizens and decision makers both responded positively to proposals for on-street LRT – when polled separately. But the decision-makers were inclined to decide against the on-street LRT option, on the grounds the people would not put up with the inconvenience during the construction phase and the reduction in the amount of street-space (for car drivers) during the operational phase. I gather something like this tookplace when the citizens of Zurich voted on whether the LR should be mainly on-street or mainly underground. It is mainly on-street.

    Once the loop is closed, outcomes that the mental models of the policy-making/decision-taking classes would not opt for, become possible.

    In summary, if a better designed EU ETS resulted in slightly higher energy charges to end users, would people pay more once the reasons were subject to wider public debate and even decision by voting?

    Or the Carlow motorway is opened on time, because the word got out that it was being delayed, for a few weeks, by pussillanimous politicians or by people who decided that even delay would be least painful for those the Minister listens to.

  14. The Digest – Dec 20 2009 – The Story Says:

    [...] Tol on The Copenhagen Accord. David Roberts with another [...]

  15. Brian O' Hanlon Says:

    I have to say, I enjoyed reading Tom McGurk’s appraisal of Copenhagen in the Sunday Business Post today.

    http://www.sbpost.ie/commentandanalysis/climate-of-chaos-reigns-supreme-in-copenhagen-46344.html

    It is another perspective on the whole affair at least. It will be difficult to know where to strike the balance right for Ireland in this debate over different technologies and means of sourcing power.

    The advantage of renewables over nuclear being that we can source our fuel right at home, and manage, own and run the equipment to a large degree also. Nuclear wouldn’t seem to offer us those opportunities.

    Just from my superficial observation of things. A book I once read part of was Isaiah Berlin’s ‘The Crooked Timber of Humanity’. Quite an interesting book, to explore how choices made by one human culture at one particular age, may not be ‘compatible’ in any real sense with human culture in another age.

    I suppose this idea applies to energy technology also. What we are experiencing in Ireland is two very different human outlooks or even cultures at the same time in the same place. The energy technology debate has merely uncovered its existence.

  16. Paddy Orwell Says:

    Despite the spin to the contrary, Copenhagen was a triumph having an immediate impact: Obama greeted by snow in Copenhagen; Obama returns to snow in Washington (where snow ploughs had to clear the runway), rugby in Brussels postponed, Eurostar cancelled, and the worst of the english snow in……..yes, you guessed it: East Anglia! Definitely worth modelling!!

  17. Pat Donnelly Says:

    Paddy Orwell

    Thanks! I needed that! I see a SC judgement where Obama can now strip anyone he wishes of all civil rights in the USA! Gives the measure of the man, I think?

  18. Veronica Says:

    In the wake of Copenhagen, those who have orchestrated how climate policy is played out will have to regroup. It’s too early to say if they can successfully manage to do that, or if Copenhagen represents a major defeat from which they cannot recover. One of the main problems, especially amongst the leading NGOs is that they don’t necessarily have the flexibility to contemplate any alternative to the legally binding targets formula to achieve the goals they profess to desire.

    Climate policy was defined during an era of never-ending economic growth. The costs of a ‘zero carbon economy’ or massive subsidisation of renewable energy systems or shifting industry and jobs to the developing countires via Kyoto’s CDM policy, just to pick out a few obvious examples, didn’t matter all that much when everyone in the developed world was getting richer anyway, there was near to full employment and enivronmentalists were universally acknowledged as singularly pure of heart. To paraphrase Colm McCarthy (in an entirely different context), the developed world hasn’t run out of compassion, it has run out of money. Arguably, the entire UN framework on climate change belongs to an era that is now past and what happened at Copenhagen is, at least in part, a reflection of that.

    That the EU’s climate strategy now lies in tatters hasn’t received much attention in the media, but should become subject to more rigorous analysis in the months ahead.

    In the short term , media coverage of climate change issues and consequences may become more polarised than it is already. But there should also be an opening for ‘the middle ground’(including those recently referred to by Ed Milliband as ‘saboteurs’) who regard the current structural approach to climate change as flawed. More space too for critiques of the costs of policy changes and where funding should be directed.

    As to how the results of Copenhagen should influence the contents of the proposed Climate Change Bill, promised for early next year, also bears thinking about.

  19. George Says:

    The fact that a treaty would not be signed at Copenhagen was certainly quite obvious by the end of Bangkok. The Danes allowed vanity to get in the way of reality and much of the conference was ruined by wrangling over a document that was being discussed 12 months too early. Mexico now have the poison chalice but hopefully they can rebuild trust. Connie will have a difficult transition to her new role in Brussels. I think Richard’s two point plan makes sense but I wonder how effective market solutions can be given the kind of uncertainty that will exist given point one.

  20. Richard Tol Says:

    @Veronica
    The international strategy of the EU indeed failed in Copenhagen, but it had failed before in Bali, Marrakesh, Kyoto, Bonn, Rio … Chances are, the EU will try the same again in Mexico City and Johannesburg. One of the more interesting aspects of Copenhagen was that the EU was excluded from the final sort-of-deal.

    The New York Times had an interesting piece on this:
    http://www.nytimes.com/2009/12/21/world/europe/21scene.html?pagewanted=1&_r=1

    A google news on “Ireland carbon tax” reveals that our newest tax was not effectively used in international diplomacy, if at all.

  21. Richard Tol Says:

    @Georg

    The EU, US, and China now each have domestic emission targets in the medium term. It’s time to play hardball. China has a large export potential for emission permits. The EU and the US should simply refuse to buy Chinese permits unless they are backed up by Chinese law and internationally verifiable monitoring.

    The EU has a functioning permit market. Markets grow, because it is in everyone’s interest to trade. But just as we put minimum standards on goods and services on the market, we should put minimum standards on emission permits. Unilaterally. Anyone who is willing to abide by the rules is welcome to the market.

  22. toby Says:

    Here’s a view of Copenhagen as a “modest success”. Given what has come out since about the Chinese approach, this is probably the best that could be achieved. Like a lot of other “agreements”, everything depends on what happens afterwards.

    http://climateprogress.org/

    Here is also an overview of the leading climate change sceptics.

    http://www.guardian.co.uk/environment/2009/dec/04/climate-sceptics-public-opinion

    Richard, your GWPF is mentioned favourably, though it should release its list of donors to avoid being suspect as denialism in sheeps’ clothing, especially as it still boasts a chart of cherry-picked data on its website. Cherry-picking (using only data that supports your case) is an old denialist scam (learned from the Creationists, the tobacco lobbyists & Holocaust denialists).

  23. George Says:

    @Richard
    It certainly seems that when the EU tried to play their only remaining card (20 -30%) that no other parties were interested in going with them.
    US and EU don’t only want to buy permits from China, but also to see China’s own emissions stabilising and ultimately beginning to fall. They don’t seem to want to make an objectively measurable commitment in this regard. Perhaps the most efficient outcome to the battle over property rights arises when the two largest emitters can agree between them the cost effective solution, rather than a regulator (UNFCCC) tries to impose a solution which is agreeable to all of its 192 parties. Is there a Coase based solution to this problem?

  24. Paddy Orwell Says:

    Season’s Greetings from the White House to all you Warmers out their: Wishing you all a white christmas and an irony-free New Year!

    http://www.telegraph.co.uk/news/picturegalleries/worldnews/6858095/Heavy-snow-blankets-the-north-eastern-states-of-the-US.html?image=1

  25. Richard Tol Says:

    @George
    Back in the 19th century, the West could tell China what to do. Now we can only try to convince them that it is in their interest to cut emissions.

    On Coase: Sure. If China adopts a cap-and-trade system with very lenient targets / a very low carbon price, and this cap-and-trade system is linked to the EU ETS, then both China and the EU are better off.

    This is Dave Bradford’s No Cap But Trade proposal. (Bradford was a world-leading authority on the provision of public goods.) Katrin Rehdanz and I quantify this: http://ideas.repec.org/p/sgc/wpaper/68.html (paper has since appeared in Climate Policy). China and India can cut emissions by 10% (from baseline) at no net cost.

  26. Cearbhall O' Dalaigh Says:

    TOTAL AND ABSOLUTE UNMITIGATED DISASTER

    Sorry to have to disagree with the general consensus, but Copenhagen was a disaster.
    This was caused by the Chinese and here is an accurate account of what happened and how they did it:
    http://www.guardian.co.uk/environment/2009/dec/22/copenhagen-climate-change-mark-lynas

    I now believe, that technology alone will save the planet.
    Amongst other things, a replacement must be found for the internal combustion engine and in the near term we must now look more seriously at nuclear power (carbon free) as a bridging technology.

    We cannot afford to waste any more time on trying to secure
    ‘International Agreements.’
    First George Bush wrecks Kyoto and now the Chinese have wrecked Copenhagen.
    These deals which rely on a wide diversity of peoples with an even wider diversity of hidden agendas are always destined to end in failure.
    Lets accept that fact now and move ahead.

    The mountain can still be climbed, but a new path must be discovered.
    CO2 abatement is the key and nuclear will help us buy time, but we need to face facts and get on with it.

    While the Greens are in government they should, as a matter of urgency, organise a NATIONAL DEBATE and lets see if there is any will for this solution. Because it is a solution and some of you ageing hippies out there who are trenchantly opposed have some stark choices facing you with the collapse of Copenhagen.

    Patrick Moore faced reality and so must we all …
    http://en.wikinews.org/wiki/Greenpeace_founder_supports_nuclear_energy

  27. Richard Tol Says:

    @Cearbhall
    You may note that a success in Copenhagen was the last hope for Labour facing an election in Spring.

    Milliband’s swipe at China was silly. They will not have forgotten if and when he returns to power.

  28. Cearbhall O' Dalaigh Says:

    @ Richard

    If Lynas ‘s account is accurate, and I believe it is, Milliband’s frustration was understandable.
    The next election is far from being a done deal, one way or the other
    http://www.guardian.co.uk/politics/2009/dec/20/polls-conservatives

    Regarding the Chinese; Wen Jinbao’s discourtsey towards the President of the US is indicative of how the Chinese intend to play ball, so I wouldn’t be too surprised at how they react to any situation in the near future.
    The main thing is THERE IS NO DEAL.

    What are your own views on the desireability of a national debate on the nuclear issue?

  29. Richard Tol Says:

    @Cearbhall
    A debate on nuclear is pointless. MoneyPoint will go offline no later than 2025. If we want a nuclear power plant to take over the provision of baseload as of 2025, then we should put in the orders in 2010, apply for planning in 2005, start the debate in 2000.

  30. Paul Hunt Says:

    I too have read Lynas’s account, but I think it’s far too easy to scapegoat the Chinese. At a much, much lower level I have encountered this negotiating ploy employed by the Chinese – send in a lower-ranking official while the decision-maker remains discretely in the background. The former G7 leaders displayed considerable naivete. They could have held their ground and demanded the presence of Wen Jiabao. Yes, the Chinese might have refused, but it would have tested the value they put on being part of the club.

    The Chinese Communist Party has a Faustian pact with the Chinese people: “You can stay in power while you deliver continuing (and more widely dispersed) prosperity; fail and you’re history.” The Party cannot deliver without increasing coal consumption. Over time the growing Chinese middle class will demand the climate change policies that many of their developed economy counterparts are now swinging behind.

  31. Richard Tol Says:

    @Paul/Cearbhall

    The Chinese got out of Copenhagen what they wanted. The Europeans did not get out of Copenhagen what they wanted.

    So who did something wrong again? Hat off to the China delegation. They again talked us into giving them money for nothing.

  32. Agrippa Hadrian Says:

    Science is agreed that current temperature levels must be kept at 2 above pre industrial levels to forestall massive and significant change at 3.All are agreed that this can be done with current intellectual ,economic and other capacities.The problem is the problem is global as is the atmosphere and goverments are nationalistic.

  33. Richard Tol Says:

    @Yann Auer

    Any target is a value judgement. The two degrees target is, therefore, a political statement rather than a scientific recommendation.

  34. Paul Hunt Says:

    @Richard,

    I agree that the EU is totally – and almost irredeemably – naive in its dealings with China on energy and climate change issues. I’ve seen this at first hand. And the US President is weakened by a weakened economy, a foreign war that damages, rather than advances, US interests and Houses of Congress that are behaving more like a polarised parliament than the legislature that the Founding Fathers intended. It is still, however, unwise to allow a rising superpower, that enjoys a measure of democratic legitimacy only by default, to behave in this matter with relative impunity as it may encourage more damaging behaviour in other areas.

    The perils of appeasement should not be associated solely with the failure of political will that accompanied, and assisted, the rise of Hitler.

  35. Richard Tol Says:

    @Paul

    I think you’re going overboard there. China will not be truly scare until the Communist Party loses grip.

  36. Paul Hunt Says:

    @Richard,

    With great power comes great responsibility. China is projecting some of its great power – primarily economic – in a growing number of developing countries (mainly because it is “not the West”), but constantly seeks to evade any accompanying responsibility – and may not even be aware of these responsibilities. This strengthened its negotiating position in Copenhagen.

    And I would be surprised if you thought that China would be worse off if the Chinese people’s consent to be governed were given in the accepted democratic manner.

  37. Richard Tol Says:

    @Paul

    I’d welcome a peaceful transition of reasonably benign autocracy to democracy in China. History suggests that such a transition is not guaranteed.

  38. Paul Hunt Says:

    @Richard,

    We have to believe the prize is worth the pain. In many established democracies it seems the pain has been forgotten and the prize is undervalued. And I would query your “reasonably benign”, but I realise I’m dragging you off-piste here.

    Returning to your initial post, my instinct is to favour a comprehensive multi-national agreement. I happen to believe that the sovereignty of countries is devalued when their governments exercise power without the freely given consent of their people.

  39. Pat Donnelly Says:

    http://www.globalresearch.ca/index.php?context=theme&themeId=4

  40. toby Says:

    Why on earth should a body focussed on the climate science bother with an unrelated field (game theory)? The Copenhagen negotiators should have been the ones using the game theorists results (much like nuclear weapons negotiators do), not the climate scientists.

  41. Richard Tol Says:

    @Toby
    The IPCC has three working groups. One is on the natural sciences, another one on impacts, and a third one on emission reduction. The working groups on impacts and mitigation also cover the social sciences, including (at least in principle) the large literature what works and what does not for international environmental agreements.

  42. The Irish Economy » Blog Archive » More trouble in climate land Says:

    [...] this to the failed negotations at Copenhagen, I doubt that Europe will strenghten its emissions targets. As the Netherlands has [...]

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