The Copenhagen Accord
This post was written by Richard Tol
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.