BARRIERS

The discussion so far has made it seem easy. It is in our collective interest to reduce emissions, drastically, starting now. But it hasn’t happened. If it is such a good idea, then we need some explanation for the current state of affairs.

We seem to be hitting ourselves in the head with a hammer. How is that possible?

One explanation is that we are simply being foolish. There is a lot of truth to this. Our foolishness might be explained by disruptions that a serious climate policy could cause. Given that the harms are not immediate, it is always easy to push the pain of emissions reductions back another year. And vested interests can readily take advantage of this. The United States, with its unique political system that creates numerous veto points before action can be taken, is particularly subject to delay and capture by vested interests. Given the vast US emissions, it is difficult for the world to act without the United States.

But even if we overcame US resistance, and the nations of the world were determined to act, the problem would be difficult. It would take another book to explore the problems with reaching an agreement on climate change, but consider some of the problems.

The primary problem is what is known as the “free rider problem.” Suppose that the nations of the world are about to agree to reduce emissions, and consider the position of any one nation that is part of the negotiations. If everyone else agrees but that nation pulls out, almost all of the benefits will be reached—all but the one nation will be reducing emissions—but that nation would not have to bear any of the costs. It would free ride on the emissions reductions in the rest of the world. But if each nation has an incentive to pull out of an agreement, it is hard to reach an agreement in the first place. As Benjamin Franklin famously said about the thirteen colonies fighting England, “either we hang together or we hang separately.” There is an incentive to let everyone else do the hard work but that might mean disaster.

The incentive to free ride is made even worse because of what is called carbon leakage. A nation that does not join a treaty not only avoids paying for emissions reductions. It can attract high emitting industries relocating from nations that do join the treaty. For example, if the United States were to commit to substantial emissions reductions and China did not, companies might move from the United States to China to avoid the additional costs they would face in the United States. China therefore would obtain two benefits: it would avoid paying for emissions cuts and it would attract industry that might otherwise not locate there. And the same holds for every nation thinking about joining a global climate treaty.

A second, related problem is that nations will bluff to obtain an agreement that is better for them. Reducing emissions will be costly and nations naturally want to bear as little of those costs as possible. Moreover, given that nations are better off free riding than joining a treaty, bluffs are credible. A nation saying “we won’t join a treaty unless we get a special deal” might be telling the truth. Bluffs that are not credible are easily ignored but credible bluffs must be taken seriously, making negotiations difficult.

Nations also have very different costs and benefits. Some nations will be hurt badly because of climate change and others not as much. Some nations will bear very high costs of reducing emissions and others not as much. Moreover, nations will value the future differently. A nation that is growing very fast may not want to reduce current growth to obtain future benefits.

Differing costs and benefits normally creates room for bargaining rather than preventing bargaining. If I am going to sell you a widget, you have to value it more than I do for us to agree on a price. But in the context where free riding is a problem, different costs and benefits make free riding easier because it makes it easier to bluff. A nation that just wants to free ride can credibly claim that because of its particular costs and benefits, the treaty does not make it better off.

Finally, all of these incentives play out not just when negotiating a treaty but also when nations have to comply with a treaty. There is an incentive to cheat, free riding on emissions reductions elsewhere without bearing the costs after a treaty is signed—that is, an alternative strategy to refusing to join a treaty is to join and cheat. Monitoring emissions and sanctioning violators is difficult. And nations knowing that enforcement is difficult and that everyone has an incentive to cheat might be even more reluctant to enter into a treaty in the first place.

In sum, just because we know what we need to do does not mean that it will be easy to get nations to agree to do it. Solving the free rider problem in light of the incentives to bluff and to cheat, and given the different costs and benefits each nation faces, will take significant effort, if it is possible at all.

Given these problems, it is especially important, I believe, to pay attention to feasibility constraints. Reaching an agreement that makes each nation better off will be difficult but might be possible. A treaty driven by a theory of ethics that makes major polluters worse off has no chance. They would not be bluffing. They would not even be free riding. They would simply be refusing to take actions that make their citizens worse off.

 
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