It is time to stop quivering in our boots in pointless fear of the future and just roll up our sleeves and build it.
- Ray Pierrehumbert

Sunday, August 24, 2008

An Idea for Breaking the Carbon Logjam

Hans Gerbach has an article in Economists' Voice suggesting a viable way to entice global participation in a carbon reduction regime. It's an interesting example of economic thinking in some ways. While I fear it does a better job explaining why the outcome is likely to be self-destructive if not suicidal, than identifying a practical way to get around it, at this point I am for considering anything.

Here's the teaser:
The problems with the Kyoto accord are clear
to all. The developing world and the United
States did not agree to join in CO2 emissions
reductions and as to the signatories, what will
make them achieve their reduction targets?
It is easier either not to join or not to comply
and let others do all the work of emissions
reduction. That is the fundamental free-rider
problem. Greenhouse gases disperse around
the globe and burden everyone. One country’s
reductions burden it alone but benefit everyone.
That makes it quite a trick to get largely selfish
states to reduce emissions.

The long-term nature of addressing climate
change compounds the free-rider problem. Even
if a long-term reduction path is chosen at the
get-go, each year presents a new opportunity
for each nation to renounce its responsibilities
and free-ride on the reductions of others. It is
as if the monumental act of coordination (which
could not be fully achieved even once at Kyoto)
really needs to be reenacted each and every year
when countries come to actually implement
reductions. Without a way around this problem,
any agreement, even if entered with the best of
intentions, will soon become a hollow shell.
Alas, that makes the kind of sense that the modern world makes.

Here's the link. Gersbach proposes a kind of workaround that is interesting. You may have to jump through some hoops on the website. It wants you to identify a university with which you are affiliated but it doesn't really enforce it. Try your alma mater.

In short he proposes a global fund to collect carbon taxes and reward carbon reductions.In a way it reminds me of the McKitrick solution. It essentially requires an objective measurement mechanism of carbon emissions per nation that will not be easy to implement in practice. There are also some ethically dubious grandfathering effects here that won't fool the less developed countries for a second.


bernie said...

Perhaps you can get Ross McKitrick to comment?
I am not sure I saw any specific mechanism for measuring the effects of CO2 versus the use of carbon - did I miss something?

Michael Tobis said...

I'll have more to say about the McKitrick idea. I alluded briefly to its basic problem in a comment thread recently. The hangup is one of time scales.

I think there is a significant core of utility in the idea but making it work in the end is not especially easier than making anything else work.

bernie said...

I think most fiscal policies are pretty blunt instruments and are useless unless they significantly mold investors' expectations as to where sizable returns are possible - then watch out for the stampede.

One key possibility occurs if the solution has significant economies of scale and you simply want to generate suffient demand to get you to a better point on the cost curve. That is part of the promise of new solar technologies -- but it really does have to be viable and not simply wishful thinking.