In the aftermath of the train wreck in Copenhagen, it is very difficult to predict what a post-Kyoto treaty would look like or even if there will be an international treaty that succeeds Kyoto in 2012. However, this also means that thinking through key elements needed in a post-Kyoto treaty is important and timely. This chapter briefly presents the case for five concrete changes that would make a post-Kyoto cap-and-trade climate treaty more effective, efficient, and equitable. A brief discussion of whether or not these changes can garner political support and how the climate justice movement can play a positive role follows.
For a number of reasons, we should insist that scientists who study the climate, not economists, are the experts best suited to advise us about how much reduction in global net emissions is necessary. (1) Climate scientists are more likely to be right about the dangers of climate change than economists, much less the business community, whose interests do not coincide with the social interest. (2) The scientific community is miraculously speaking with a single voice once we discount a handful of scientists who are clearly in the employ of fossil fuel industries, whereas other communities are a cacophony of wildly contradictory advice. (3) Most importantly, the scientific community uses the logic of insurance, which, as explained in Chapter 2, is better suited to treating climate change, where uncertainties are great and the downside risk is literally unthinkable, than the alternative logic of cost-benefit analysis favored by mainstream environmental economists. In the case of climate change, people quite reasonably want to know what reductions are required to make us safe. Weighing costs and benefits is something sensible people do only when they already feel safe. In other words, climate scientists have instinctively used the appropriate methodology, whereas economists and politicians have become bogged down in a cost-benefit framework that is inappropriate in the case of climate change.
Climate scientists have also proved the best negotiators for an aggressive response to the danger of climate change. The power of their testimony has now moved reductions of 80 percent or more by 2050 or sooner smack into the middle of the bargaining table and fixed discussion on the necessity of stabilizing atmospheric concentrations of greenhouse gases (GHG) at 350 parts per million or less. As discussed in Chapter 2, for decades mainstream economists recommended a minimalist response to climate change based on an inappropriate methodology and large-scale models driven by unrealistic and indefensible assumptions.1 “Expert” testimony from these mainstream environmental economists bolstered resistance to dealing with climate change that was orchestrated by denialists, the fossil fuel industry, and the U.S. Chamber of Commerce. Since putting a dollar figure on the damage from cataclysmic climate change is quite difficult, if not impossible, mainstream models traditionally limited their estimate of damages to the case of moderate climate change. In effect, mainstream economic climate models simply left the central issue out of their calculations. Fortunately, climate scientists have recently succeeded in refocusing attention on what has always been the key issue—what is necessary to avoid cataclysmic climate change and keep us reasonably safe. In truth, economists have no expertise relevant to deciding how much we need to reduce carbon emissions to be safe from cataclysmic climate change, whereas climate scientists do have expertise relevant to this decision. Economists can only make useful suggestions about how to minimize the overall costs of achieving necessary reductions, and, more importantly, progressive economists can make helpful recommendations about how to distribute those costs in ways that reduce rather than further aggravate global inequities.
As explained in Chapter 8, trading certified emission reduction (CERs) credits that are completely bogus between Annex-1 governments or private parties within Annex-1 countries cannot undermine global reductions as long as national, annual emissions are monitored accurately and governments are held to their treaty commitments. Trading of bogus carbon credits can puncture holes in the global emissions cap only when projects in non-Annex-1 countries where national emissions are not capped sell bogus CERs to governments or sources in Annex-1 countries with caps. The obvious solution to this problem is to cap emissions in all countries—that is, eliminate the distinction between Annex-1 and non-Annex-1 countries altogether. Our motto should be “No cap, no trade.”
As discussed in Chapters 8 and 9, some activists in the climate justice movement fail to understand that capping national emissions in all countries would plug all holes in the global emission cap created by trading bogus carbon credits. But others who do understand this idea still worry that capping emissions in all countries would not be fair. They argue it is not fair to cap emissions of poor countries who are least responsible for causing climate change and least able to bear the costs of curtailing climate change. Climate justice activists, as well as governments in poor countries, argue that capping emissions in poor countries effectively prevents them from developing and catching up with the developed economies.
These arguments that capping emissions in every country would be unfair are correct if the caps are wrong. However, none of these arguments against capping emissions everywhere holds true if caps are set equitably. Setting equally restrictive caps for all would be grossly unfair. But sensible people, and even sensible governments, understand this. As discussed in Chapter 8, for equity reasons not all Annex-1 countries were given the same caps under Kyoto. Moreover, in its plan to meet its commitments under Kyoto, the European Union (EU) assigned much lower caps to more developed countries (MDCs) such as Germany and France, and higher caps to less developed countries (LDCs), including caps that allowed emissions to increase for Portugal and Ireland. Once it is understood that capping everyone does not mean the same cap for everyone, it becomes apparent that we can achieve equity and, at the same time, prevent erosion of global emission reductions resulting from failure to cap emissions in all countries. Moreover, there is no reason we cannot allow very poor countries to increase emissions for some time, as long as the increase is capped.
One excellent proposal for determining equitable caps for developed and developing countries alike is the Greenhouse Development Rights Framework proposed by Paul Baer, Tom Athanasiou, and Sivan Kartha (2007). Their practical formula for assessing countries’ “responsibility” and “capability” addresses an important problem about international equity. Critics have pointed out that while more people in LDCs have failed to benefit from successful economic development than in MDCs, nonetheless there are some poor people living in MDCs who also should have a right to benefit from economic development and not have to bear the costs of preventing climate change. Likewise, while there are fewer wealthy people in LDCs than there are in MDCs, there are some wealthy people in LDCs who have enjoyed development and can afford to bear part of the cost of preventing climate change. The authors of the Greenhouse Development Rights Framework propose a practical way to divide those who have already enjoyed the benefits of economic development in any country—and therefore can reasonably be expected to bear the costs of preventing climate change now that we know what kind of problems fossil-fuel-based development creates—from those who have not yet enjoyed development—and therefore should not be expected to bear the costs of preventing climate change.2 The Greenhouse Development Rights Framework goes on to create a very practical formula to assign differential caps to all countries on a continuum that considers only a country’s residents who have enjoyed economic development, combining those residents’ “responsibility”— their per capita emissions since 1990—and those residents’ “capacity”—their per capita gross domestic product (GDP).
By treating countries differently on a continuous basis, instead of a dichotomous basis as the Kyoto Protocol does by designating countries as either Annex-1 or non-Annex-1, a post-Kyoto international treaty would become much fairer. Not all MDCs are equally responsible and capable. More importantly, not all LDCs are equally responsible and capable. As explained in Chapter 9, China should not be treated the same way as the United States, nor should the Republic of the Congo be treated the same way as China, as it is under Kyoto. The Greenhouse Development Rights formula would give the United States tighter (lower) caps than China and would give China tighter (lower) caps than the Republic of the Congo. Of course, the more we allow developing countries to increase emissions before reaching their caps, the lower the caps on industrialized countries must be in order to meet a given level of global reductions.
Nobody is suggesting that achieving agreement on different caps for all countries will be politically easy. But achieving agreement on different caps for Annex-1 countries was not easy, yet agreement was finally reached in Kyoto. Moreover, debating the merits of different formulae for assigning caps is a far more constructive way to organize the discussion on national caps than discussing different caps on an ad hoc basis. In any case, the answer is simple, no matter how difficult negotiations may prove: Capping all countries is the only way to guarantee that we will meet our global emissions reduction goal. Capping all countries is also the only way to reap the full efficiency gain possible from carbon trading without risking undermining the overall reduction target when trading of bogus credits punctures holes in the global cap. Finally, equity can be achieved by varying the caps for different countries sufficiently using a formula such as the one already developed by the authors of the Greenhouse Development Rights Framework, which permits emissions increases for some time in the poorer countries.
At the international conference on climate change in Rio de Janeiro in 1992, attendees wisely recognized that it was net emissions—carbon emitted minus carbon sequestered—that mattered. However, in the intervening years between Rio and Kyoto, what was hammered out were agreements about percentage reductions in emissions to be achieved by 2012 for different industrialized countries, not reductions in net emissions. As a result, problems have arisen with sequestration offsets.
For example, after percentage reductions were set in Kyoto, the United States argued that it deserved credit for sequestration from U.S. standing forests and from agricultural practices that sequester carbon in soils. In some estimations, this would have cut the amount the United States was required to reduce its carbon emissions by almost half of what had been agreed to in difficult international negotiations over required emission reductions for different industrialized countries. Canada and some other MDC countries presented similar petitions. If these petitions for sequestration credit had been granted, the reduction in global emissions envisioned at Kyoto would have been seriously eroded. Of course, if the shortfall in global emissions reductions had been matched by an equal increase in global sequestration, there would have been no problem, since it is net emissions that matter. But critics pointed out correctly that much of the credit being asked for was not for an increase in sequestration; instead, credits were being demanded for a great deal of sequestration that was taking place anyway. The problem was that percentage reductions were negotiated for emissions, not net emissions, and then petitions for sequestration credit in lieu of emission reductions came in after the fact.
Capping net emissions in the national territory of a country—rather than capping only emissions—would also solve an important problem arising from projects in non-Annex-1 countries selling offsets for sequestration increases. As already explained, under Kyoto’s Clean Development Mechanism (CDM), a project can receive CERs if it increases carbon sequestration. So creating a tree plantation can qualify for CERs because it is easy to demonstrate that new trees planted are sequestering carbon that would not have been sequestered had the trees not been planted. But the CDM executive board does not grant CERs for carbon stored and sequestered by existing forests that are conserved because it is difficult to know whether or not the forest would have been preserved in any case. As discussed in Chapter 9, this created a perverse incentive to replace existing forests with tree plantations in non-Annex-1 countries, which led to the Reducing Emissions from Deforestation and Degradation REDD proposal.3 At this point it is not clear if REDD will ever be approved. If REDD is not approved, there is no financial compensation for conserving existing forests under Kyoto and the perverse incentive to destroy existing forests and replace them with tree plantations will persist. But if REDD is finally approved, the executive board of the CDM will face the challenging task of establishing a hypothetical baseline in order to make sure that conservation is “additional” and creates no “leakage.” After all, it was because these measurement problems were deemed intractable that forest conservation was excluded from receiving credit under the CDM in the first place.
It is extremely important to solve this problem. As explained in Chapter 9, carbon emissions from deforestation and degradation exceed total emissions from the transportation sector worldwide, according to recent estimates. Even if we do not take other environmental benefits from forest conservation into account, destroying existing forests is very counterproductive simply from the perspective of net carbon emissions. If the original forest is preserved intact, it continues to store large quantities of carbon and also sequester more carbon each year. On the other hand, if the existing forest is logged off and young trees are planted in its place, net emissions will be higher and occur sooner. The young trees may grow faster and therefore sequester more carbon than the original forest, but any increase in annual sequestration pales in comparison to the release of carbon that immediately accompanies deforestation. From a net carbon emission perspective, it is better to conserve existing forests than destroy forests, even when deforestation is followed by replanting.4
But what if net emissions were capped in the country in question? In this case, since the treaty would hold the government responsible for national net emissions, the government would have an incentive to discourage activities that increase net emissions and encourage activities that decrease net emissions within its borders. The international treaty need not dictate to governments how they go about doing this. Since conservation almost always yields fewer net emissions than deforestation followed by replanting, national governments would be foolish not to enact domestic policies that make sure that conservation is also financially more attractive. Capping national net emissions provides the proper incentive for governments to find ways to discourage deforestation, eliminates the perverse incentive to destroy and replant that currently exists under Kyoto in countries without caps who can sell sequestration offsets, and does not burden the CDM with the headache of judging additionality and leakage with regard to conservation projects. The only thing the treaty must measure is annual, national, net emissions, which, as explained in Chapter 9, is straightforward and relatively noncontroversial. Again, the solution is simple: Cap national net emissions rather than emissions.
Besides capping national emissions in every country rather than only emissions in Annex-1 countries, besides capping national emissions according to differential responsibility and capability using something like the Greenhouse Development Rights formula, which gives poor countries caps above their current emissions to allow them to develop, and besides capping national net emissions rather than emissions, what else needs to be done to address valid criticisms of the Kyoto Protocol?
As long as emissions from non-Annex-1 countries are not capped, there is no choice but to give an international agency the authority to review applications for CERs from sources in those countries. Applicants have every incentive to cheat and pretend they are reducing emissions even if they are not—that is, even if reductions are not “additional” or produce “leakage.” More importantly, there is no incentive for non-Annex-1 country governments to blow the whistle on bogus proposals for CERs by home country applicants. Even if a proposal is bogus, there are no negative ramifications for anyone else in the home country since non-Annex-1 country emissions are not capped. So why should a non-Annex-1 government agency disapprove bogus applications that will give a home country applicant a profit, even if the government agency does not collect part of the bogus profit in bribes? For this reason, Kyoto had no choice but to create an international professional bureaucracy to play the role of sheriff for the international carbon market.
However, as hardworking, honest, and professionally competent as the CDM executive board and its staff may be, the CDM is an international bureaucracy subject to the pressures all international bureaucracies respond to. In the end, its officers have nothing at stake but their salaries and reputations. Meanwhile, they are subject to predictable political pressures from different sides. On the one hand, international environmental organizations concerned with preserving the integrity of global reductions apply political pressure on the CDM to tighten standards and deny certification to questionable projects. On the other hand, those who wish to sell or buy CERs, governments that lobby for business interests operating in their territory, and those who favor the income flows from MDCs to LDCs that CER sales generate all apply political pressure on the CDM to approve more projects and increase the volume of CER trading.
As discussed in Chapter 9, the result has been suboptimal in two ways. While many projects approved have been legitimate, a troubling number of bogus projects have also been approved, undermining planned global emissions reductions and generating inefficiencies and inequities. Meanwhile, those worried about the negative effects of bogus projects have succeeded in limiting application of the CDM mechanism by continuing to press Annex-1 countries to meet their reduction quotas “predominantly” from internal reductions and by excluding certain categories of projects deemed too difficult to monitor. These limits on trading have led to a failure to minimize the global cost of achieving reductions and have also limited the transfer of income from MCDs to LDCs.
If an international bureaucracy were the only sheriff we could find to monitor the legitimacy of international carbon trades, we would have no recourse but to accept whatever outcome results from this predictable tug-of-war or abandon carbon trading among private parties and forgo the considerable cost reductions and desirable income transfers legitimate trading provides. But fortunately there is a better sheriff available once net emissions are capped in all countries. Once such caps were established, planned global reductions would be secured even if bogus CERs were traded—including bogus CERs for sequestration offsets. Furthermore, the governments of all countries would have a powerful incentive to prevent private parties within their borders from selling bogus CERs in the international carbon market. It is in the interest of country governments whose national net emissions are capped to keep private parties operating within their territories from selling more CERs in the international carbon market than the amount by which a project actually reduces emissions or increases sequestration above and beyond what would have occurred had the project not been undertaken. As already explained, if country governments whose net emissions are capped failed to prevent bogus sales, either those governments or their citizens would suffer the adverse consequences of having to cover the shortfall by reducing net emissions or buying more CERs than they would have had to otherwise.
Under an international treaty that enforces caps on net emissions in all countries, national governments and the citizens they represent are the ones who lose when residents are certified to sell more CERs than they should. No doubt national governments will appreciate all the assistance they can get from the professional staff of an agency of the international climate treaty with expertise in establishing baselines to measure additionality and detect leakage. But it is national governments that should be put in charge of final approval for projects within their own borders seeking to sell CERs in international carbon markets.
Very little would be required to make this change. At present, designated national authorities (DNAs) in non-Annex-1 countries must approve project design documents (PDDs) before they are submitted to the CDM executive board for evaluation and final certification. The problem is that in countries without caps there is no incentive for DNAs to disapprove projects even if they are illegitimate, and DNAs routinely rubber-stamp proposals. However, once net emissions are capped in all countries, governments would be foolish to allow their DNAs to rubber-stamp bogus projects. Once net emissions are capped in all countries, after PDDs are evaluated by the MDC executive board and awarded CERs on a provisional basis, DNAs should then be allowed to approve or nix the deal.
It is very important to protect the integrity of a climate treaty from difficult problems that arise in monitoring the integrity of carbon trading. Problems inherent in measuring and monitoring the integrity of sales of carbon credits are much greater than in measuring annual national net carbon emissions. Measuring annual national net emissions involves none of the dilemmas associated with establishing a hypothetical baseline necessary to measure additionality and detect leakage or judging the permanence or timing of emission reductions or sequestration increases. Since all these problems intrude when making judgments about equivalences for individual trades, it is advantageous to protect the integrity of the climate treaty from problems associated with monitoring carbon trading between private parties. For all these reasons, we should cap annual national net emissions for all countries, make monitoring and enforcing national caps the top priority of the international treaty organization, and shift responsibility for certifying emission reduction credits for individual projects to the governments where projects are located.
Having protected the global interest and prevented damage to the global cap by any bogus carbon trading that does occur, what remains is to be sure that those who have the most to lose from illegitimate carbon credits are in charge of accreditation. Once a country’s annual net emissions are capped, its own government should have final approval over proposals by any of its residents who wish to sell credits in the international carbon market because those who seek to sell bogus credits are seeking to exploit their fellow citizens.
In sum, to fix Kyoto we need to take the following five steps: (1) Embrace the advice of climate scientists and lower the global cap on emissions sufficiently to stabilize atmospheric concentrations of GHGs at 350 parts per million and keep the average increase in global temperature below 2 degrees Celsius. (2) Cap emissions in all countries. Once we do these two things, we will be assured that the treaty is effective—that is, it really will reduce the risk of cataclysmic climate change to an acceptable level—and that, even if bogus carbon credits are traded, they will not puncture holes in the global emission cap. (3) Set national caps using a formula along the lines of the Greenhouse Development Rights Framework, which accounts for differential responsibility and capability on a continuous basis and awards LDCs much higher caps than MDCs, including caps for LDCs that allow increases in emissions sufficient for them to develop. Once we have done this, we will have distributed the costs of averting climate change fairly and not denied anyone, living anywhere, the right to benefit from economic development; furthermore, carbon trading will generate a massive annual flow of income from richer to poorer countries without resort to acrimonious and unprofitable debates over climate reparation payments. (4) Cap national net emissions rather than emissions. This will eliminate existing perverse incentives and provide effective incentives for conservation and sequestration without burdening the international treaty organization with difficult measurement problems, as REDD would do. Finally, (5) appoint national governments as the new sheriff to oversee accreditation for carbon trading between private parties. While this does not make the job of judging additionality and leakage any less difficult, it puts the decision in the hands of a sheriff with a great deal to lose if sellers receive more credits for a project than the amount by which the project actually decreases net emissions, above and beyond what would have taken place otherwise.
The train wreck in Copenhagen raised the question whether it might not be better to scrap the Kyoto framework altogether and try to get countries to agree on an international carbon tax instead. Even though many criticisms of Kyoto are unfounded, other criticisms are valid, and nobody denies there are problems with Kyoto. In early negotiations there was support, particularly from Europe, for an international carbon tax. Moreover, the cap-and-trade framework hammered out in Kyoto was championed principally by A1 Gore and the delegation from the United States, which remains the only country not to sign the agreement. Finally, as we saw in Chapter 7, progressive economists traditionally favor taxes over cap-and-trade programs for a number of good reasons. So why should progressives not abandon the Kyoto cap-and-trade framework as a failed experiment and push for an international carbon tax in its place? There are three compelling reasons why this would be a fatal mistake.
First, the international community has invested twelve years negotiating a cap-and-trade format, and given the urgency of the problem as compared to the speed of international diplomacy we should not want to start all over again. While some people propose now switching from cap-and-trade to an international carbon tax in good faith, those who have long opposed doing anything significant to avert climate change are now dangling a carbon tax in front of our noses as a cynical ploy to delay negotiations further. Those who want a serious and timely response to climate change should be very careful not to witlessly aid and abet those maneuvering for further delays.
Second, as explained above, the scientific community has positioned us to win global caps that are, even if not a “solution,” a decent deal in present circumstances. Caps that stabilize GHG concentrations in the atmosphere at 350 parts per million and keep the average global temperature from rising by more than 2 degrees Celsius would be a tremendous step forward to prevent climate change before it is too late. This is quite a change from a few years ago and is largely due to the powerful testimony coming from climate scientists. On the other hand, nobody believes we have any chance of winning political support for an international carbon tax high enough to reduce emissions by nearly this much. In other words, strictly from an emission reduction perspective we are poised to get a much better deal than we could ever hope to get with an international carbon tax.
Nor is this surprising. When tax levels are debated it is economists who are the experts. How high should a tax be? Ask an economist. On the other hand, when we ask how low does a cap on emissions need to be to keep us safe, people sensibly ask climate scientists. Those who want an aggressive response to climate change should want the political debate to play out the second way, with climate scientists telling us what caps make us safe—not the first way, with economists telling us how high to set a carbon tax based on their estimates of how costly the tax will be to the economy. It is important to remember that mainstream environmental economists have not testified in favor of an aggressive response to climate change and are unlikely to recommend a tax that is high enough. If we change the subject from caps to taxes, we witlessly take the microphone out of the hands of climate scientists and hand it back to economists.
But neither of these is the most important reason that progressives should prefer a cap-and-trade treaty to an international carbon tax. The most compelling reason is that there is no practical way to make an international carbon tax nearly as fair as we can make a cap-and-trade policy. One issue is how effective the treaty will be at averting climate change. That concerns how much and how fast global emissions are reduced, and as explained above, cap-and-trade is a better bet to get the job done than an international tax. The second important issue is how the costs of achieving those reductions will be distributed among countries, some of which bear much greater responsibility for current GHG concentrations in the atmosphere than others, and some of which have much greater capacity to bear the costs of solving international problems than others. A uniform global carbon tax places a more or less equal burden on all countries, principally in the form of higher energy costs in the short and medium run. If the international treaty organization collected this tax from every country, then in theory the treaty organization could redistribute the tax revenue in a way that was fair to poorer countries—for example, compensate China more for imposing as high a carbon tax as the United States, and compensate the Republic of the Congo even more. But it is highly improbable that countries would let the United Nations collect an international carbon tax. It is far more likely that any international carbon tax treaty would instead require participating governments to impose a uniform carbon tax and then collect the tax from its own citizens. Having done so, does anyone imagine that the U.S. Senate would agree to send tens, if not hundreds of billions of dollars per year collected from U.S. citizens to the government of China?
So the overwhelming problem with an international carbon tax is that the tax revenues would not be distributed back to countries as “reparation payments” in a way that fairly compensates poor countries. On the other hand, under a cap-and-trade treaty, redistribution is done by giving wealthier countries tighter (lower) caps than poorer countries and then allowing sources in richer countries to “buy” cap space from projects in poorer countries through carbon trading. To secure international economic justice under an international carbon tax system, MDC governments would have to collect tax revenues from their own citizens in order to make reparation payments to LDC governments. Under the cap-and-trade treaty proposed above, sources emitting GHG in MDCs would make even larger payments to projects located in LDCs in order to lower their own compliance costs and boost their own bottom lines. At present, achieving agreement to do the latter seems far more likely than the former.
It is increasingly apparent that lumping countries into two groups—Annex-1 MDCs, all given more or less the same mandatory cap, and non-Annex-1 LDCs, all given no caps—is not the best way to set caps for both efficiency and equity reasons. But, as explained, it would be easy to fix this problem in the tradition of the Kyoto Protocol. Assigning caps for all countries according to the Greenhouse Development Rights Framework formula would perfect the Kyoto system of distributing the costs of averting climate change according to “differential responsibilities and capabilities” by assigning very different caps to different countries on a continuum based on the per capita cumulative emissions since 1990 and the per capita GDP only of citizens who have already benefited from economic development. By capping emissions in all countries, we prevent any trading of bogus credits in international carbon markets from puncturing holes in the cap on global emissions; and by treating countries differently on a continuous instead of a dichotomous basis the treaty would also be more fair.
In sum, there is still a chance of winning a decent deal for poor countries through an improved cap-and-trade post-Kyoto treaty, whereas there is little chance of moving the climate justice agenda forward if we go back to the idea of an international carbon tax. With caps higher than current emissions for LDCs, and caps way below current emissions for MDCs, carbon trading could generate the biggest transfer of resources from rich countries to poor countries that the world has ever seen.
Can the kind of modifications proposed gather enough political support to be incorporated into a post-Kyoto treaty? Even if these changes would make an international treaty more effective, efficient, and fair—which they would—they are of limited interest if they are politically impossible.
Particularly in light of the setback in Copenhagen and the failure of the United States Senate to pass any climate legislation whatsoever, it is easy to be skeptical about the prospects for an effective and fair climate treaty. Nor does the present alignment of political power particularly favor progressive forces, although that could change quickly if ruling elites continue to fail to respond effectively to the current economic crisis; the very process of winning an effective, fair international climate treaty could catalyze other progressive changes as well. But perhaps the best way to pose the question is this: Do these demands give us our best chance of winning something worthwhile?
The EU: The EU has a better track record of being willing to support an effective and fair climate treaty than either the United States or China, so let us begin in Brussels. Since the EU is the strongest supporter of Kyoto, the five-point program outlined above should play well in Brussels because it affirms support for the essential features of Kyoto—the necessity of binding caps on national emissions agreed to jointly and enforced by an international treaty, and sharing the costs of averting climate change according to differential responsibilities and capabilities. Placing caps on national emissions in all countries should also please Brussels since it gives the EU more global emission reductions in exchange for its own reductions. Since the program allows for full carbon trading, it also allows the EU to lower the cost of meeting its commitments while ensuring that bogus trading by others cannot puncture holes in the global cap. If the EU’s historical resistance to full carbon trading was based on fears about holes, this program should assuage those fears. However, this program would require the EU to agree to a lower cap for itself. As everywhere, there are different political forces at work in the EU. The Great Recession has caused some governments to become less willing to undertake more burdens. On the other hand, the recession has temporarily lowered emissions, and European delegations in Copenhagen were the only ones who arrived ready to commit to more aggressive reductions if other countries proved willing to do likewise. This program essentially reinforces the must-do, progressive impulse that is stronger in Europe than elsewhere.
China: How might China react? China has argued forcefully that its underdeveloped status should exempt it from any mandatory cap. Moreover, unlike some smaller and weaker LDCs that can be subjected to outside pressure, China has made it perfectly clear that it will not be bullied into submission on this or any other subject. So it might appear there is no chance of selling this program in Beijing since it replaces China’s non-Annex-1 exemption from any mandatory cap with a mandatory cap, no matter how lenient. Moreover, the science is very clear on this: Because China is so large, unless China does reduce emissions at some point there is no way to prevent climate change, period. So does this mean “game over”?
The question we need to ask is how China might be induced to do something it is not willing to do at this point—accept a mandatory cap. The program outlined above offers some important inducements. While China would not get nearly the free ride the Republic of the Congo would get under the Greenhouse Development Rights Framework, it would certainly be treated fairly given its low per capita cumulative emissions and low per capita GDP relative to the United States, Europe, and Japan. For some years Chinese caps would be set above its current emissions under the Greenhouse Development Rights formula, so the caps would not impinge on its economic growth for now. Moreover, the five-point proposal would also permit China to sell more credits since MDC purchases would no longer be limited, as is the case under Kyoto. If China’s main concern is economic competitiveness vis-à-vis the United States, the EU, and Japan, this program would guarantee China a permanent competitive advantage compared to any country whose GDP per capita remained higher than China’s. China might also risk the anger of poorer countries and lose leadership status among LDCs if it blocks a treaty that would provide countries that are considerably poorer than China with more preferential treatment. Finally, if China continues to reject any mandatory cap, no matter how favorable, and insists instead on cutting emissions voluntarily, it will discover that the price for this kind of sovereignty is quite high. Voluntary reductions buy no quid pro quo reductions on the part of others in exchange, and as the most populous country in the world China benefits more when others reduce their emissions than any other country.
The United States: Of course the U.S. Senate—even when the Democratic Party had a sixty-seat majority—would not have ratified the treaty outlined above. The recommended changes do address the most common reason senators voiced for rejecting Kyoto, namely that emissions were not capped in China. Moreover, the proposed changes increase the scope for carbon trading, which the United States has long demanded. But those were never reasons—they were merely excuses—for not ratifying Kyoto.
The reason the U.S. Senate will not ratify a treaty like the one outlined above is simple. The antiquated U.S. Constitution not only gives a senator from Wyoming who represents only 544,270 constituents the same vote as a senator from California who represents 36,961,664 constituents, but also requires the U.S. Senate to ratify any treaty by a two-thirds majority vote. This means that if thirty-four senators, many of whom represent remarkably few people and are easy targets for industry to bully or buy, oppose a treaty, it cannot be ratified. In almost all other countries, international treaties can be ratified by a simple majority vote of their democratically elected parliament or legislature. But because there are thirty-four U.S. senators who are largely immune from the popular will, who hold a stranglehold on the treaty ratification process in the United States, and who prefer for the United States to ride for free on whatever sacrifices the rest of the world makes to avert climate change, the world’s richest country and largest emitter of GHGs will not join the civilized world to solve arguably the greatest problem humanity has ever faced. Does this mean “game over”?
The United States has long been a bigger obstacle to an effective and fair international climate treaty than any other country. The performance of the Obama administration in Copenhagen demonstrated that this continues to be the case even though a different political party controls the White House and both Houses of Congress. In the case of the United States there are two questions worth asking: (1) Do the proposed changes provide the best opportunity for eventually winning U.S. support for an international climate treaty that is effective and fair? If not, (2) do the proposed changes best equip the rest of the world to proceed without U.S. ratification for the time being and to increase the pressure on the United States to join the civilized world in the long run?
We could easily make a strong case that the proposed changes are the best deal the United States should hope to get. While the United States has a mandatory cap, so does every other country. While the U.S. cap is tight, it is no tighter than that of any other country with the same responsibility and capability. In other words, this treaty would not ask the United States to pull greater than its fair share. It also guarantees that its sacrifices would not go in vain because they would be accompanied by reductions elsewhere in the world sufficient to achieve the result of averting cataclysmic climate change, certainly a result that everyone in the United States would benefit from. The treaty would also provide the unlimited access to international carbon markets that the United States government has long asked for as a means of minimizing the costs of living up to its responsibilities.
Most importantly, the proposed modifications permit the rest of the world to proceed as they should without U.S. ratification for the time being. It keeps U.S. intransigence from derailing the only process that has any chance of preventing climate change equitably. It also gives the rest of the world the best opportunity to put more and more pressure on the United States to come around.
Just as it was possible to implement Kyoto without U.S. participation, it is also possible to implement the kind of treaty outlined above beginning in 2012 without U.S. participation. When the United States refuses to ratify and participate in a post-Kyoto treaty, the rest of the world can argue even more powerfully and irrefutably that this is a clear case of free riding by the country most responsible for causing the problem it refuses to help solve and most capable of shouldering burdens necessary to solve it. At that point the only kinds of pressure the world can ever bring to bear on the world’s greatest military power and largest economy can be considered: travel restrictions for U.S. citizens; expelling the United States from the Olympic Games and the World Cup; recalling foreign ambassadors to Washington; expelling U.S. ambassadors abroad; United Nations resolutions condemning U.S. behavior. The World Trade Organization has already signaled its willingness to authorize retaliatory tariffs against countries that unfairly award themselves competitive advantages by refusal to curb carbon emissions. Besides levying fines, these are the same kinds of measures an international climate treaty must resort to when a signatory nation fails to live up to its treaty obligations. While none of these measures will sway a U.S. government that persists in remaining obdurate, they do impose real costs that a rational calculation by U.S. policymakers should weigh in the balance.
Exemplary mass actions: Only climate change denialists, special interests tied to the fossil fuel industries, or people who have been hypnotized by demagogues or are paying no attention fail to understand that both domestic and international political responses to the danger of climate change have been woefully inadequate to this point. Climate change is an urgent problem and delay is deadly. Anyone who cares about averting climate change should be thankful that the criminally negligent performance of official government delegations and a number of heads of state in Copenhagen in December 2009 did not go without a massive and powerful protest. There is a crucial role for climate justice activists and the street heat they bring. Protests in the galleries of national congresses and parliaments where elected representatives serve special interests and refuse to approve effective, fair domestic policies ; protests at international meetings where government delegations free ride and obstruct, where too little is accomplished, and where justice is sacrificed, are all productive and desperately needed. The larger the demonstrations and the greater the anger over the failure of authorities to do what is required, the better. “Keep the Oil in the Soil and the Coal in the Hole” campaigns, which mobilize citizens to engage in mass protests and civil disobedience at mine sites, at wellheads, and, better yet, at company headquarters and CEOs’ residences, can also be an important and positive catalyst. When governing elites are playing Nero’s fiddle while our world burns, outrage is the only sane response.
However, dogged determination, heroic protest, and civil disobedience can be only one part of an effective strategy to reduce carbon emissions sufficiently to avert climate change. Unless an effective cap-and-trade international treaty is approved and enforced, unless governments are forced to implement effective domestic policies, demonstrators engaging in civil disobedience will be rounded up and arrested by armed police and military personnel to no avail. So just as it is counterproductive for mainstream environmental nongovernmental organizations and progressive politicians to denounce the tactics of demonstrators who are playing an important, positive role in averting climate change equitably, it is also counterproductive for radicals who put their lives on the line to accuse those working tirelessly for a more effective and fair international treaty and better domestic policies of misleading the public and selling “pretend solutions.” We will need much more of both kinds of efforts to succeed, and the sooner climate change radicals and reformers recognize this, the more successful we all will be.
Expose bogus carbon trading: As explained above, we will not avert climate change without ratifying and enforcing an international climate treaty that caps national emissions in all countries and allows for carbon trading. Therefore ill-informed attacks on all forms of carbon trading, in all circumstances, are extremely counterproductive. Trashing carbon trading only weakens efforts to avert climate change fairly and undermines the credibility of the climate justice movement.
However, as explained earlier, there will be powerful incentives for individual parties to sell bogus carbon credits, allowances, and offsets. Buyers cannot be relied on to prevent this because buyers have no reason to care if an allowance is bogus or not as long as it is accredited; and judging how much credit a project legitimately deserves is often quite difficult. While an international treaty that successfully enforces caps on net national emissions will prevent bogus trading from puncturing holes in the global cap and thereby undermining global reductions in net emissions, bogus trading is nonetheless terribly unfair. When a source in one country gets away with selling a bogus credit to a source in another country, it cheats everyone else in the country where the sale originated. A cap on national emissions in the country of origin prevents the bogus sale from puncturing a hole in the global cap, but it does so by forcing others in the country where the sale originated to plug up the hole the bogus sale created. In other words, sale of an illegitimate carbon credit unfairly forces someone else in the country to bear the cost of reducing its emissions, increasing its own sequestration, or purchasing a credit in the international carbon market when it should not have had to.
Sales of bogus credits by sources located in poor countries are particularly unfair because those who are unfairly forced to bear the cost of plugging the hole are residents of poor countries who, in general, can least afford to do so. This is an area where international climate justice activists who prioritize protecting the interests of poor residents in poor countries can be of great help. Monitoring accreditation for fraud and exposing sales of bogus credits can be very useful. But to be useful those performing this valuable service must not be confused about what is at stake. As long as the sale is from a country whose national emissions are capped, it cannot puncture a hole in global reductions. So that should not be the basis for the criticism. Instead, a bogus carbon credit is an act of environmental injustice inflicted by the sellers on their fellow citizens. Just as prosecutors who want to win convictions must accuse defendants of the crime they committed rather than some other crime, climate justice activists need to accuse the sellers of bogus carbon credits of the crime they actually commit. The crime is exploitation of one’s fellow citizens. The crime is not undermining global emission reductions when the country of origin for the sale has its national emissions capped.
Question the economic system: In Part II we reviewed important theories from both mainstream and heterodox schools of economics and discovered a number of ways in which the private enterprise market system puts the environment at risk. Like Pogo, we have found the enemy, and he is us! Not “us” the people. Nor is the enemy population growth or advanced technologies per se. But “us” meaning the defining institutions of “our” economic system bear primary responsibility for putting more and more strain on the natural environment, strain that has now reached crisis proportions in the form of climate change. Who will raise these important issues and resist the temptation to sugarcoat painful truths about our present economic system?
Who will point out that markets predictably overproduce goods whose production or consumption generates negative external effects and consequently leads us to pollute too much? Who will point out that markets predictably undersupply public goods since all can free ride on what others provide, so markets consequently provide insufficient incentives to protect the environment? Who will point out that it would be irrational for private owners not to extract natural resources—including coal, oil, and natural gas—faster than is socially desirable whenever rates of profit are higher than a socially responsible rate of time discount? Who will explain how markets for labor and consumer goods create perverse incentives that lure people to take too much of their productivity gains as individual consumption and too little as more environmentally friendly collective consumption and leisure time? Who will criticize the culture of consumerism that business interests promote because it profits them, and the perverse environmentally destructive effects of market biases on preference development? And who will point out that markets fail to generate information necessary to know how high corrective environmental taxes and subsidies should be, while spawning powerful political lobbies with interests in underestimating the size of necessary correctives?
Climate justice activists and spokespersons are among the most reliable voices pointing out how and why giant corporations and market forces are the most powerful enemies of the natural environment today. Climate justice activists are among the best at explaining how those fighting to protect the environment must invariably swim against the current in our private enterprise market system, which often rewards environmentally destructive behavior and punishes environmentally responsible behavior. Last, but not least, climate justice activists are willing to explore possibilities of system change in order to replace perverse incentives with incentives for economic decision-makers to respect and protect the environment instead.
Prospects for the human and other species may ultimately hinge on whether our current economic system is replaced by a qualitatively different economic system, a system unencumbered by a dysfunctional growth imperative and with no elites to prey on their fellow humans and the natural environment. Climate justice activists have played an increasingly important role in exploring the kinds of changes discussed briefly in the conclusion.
1. In addition to the studies criticizing key assumptions responsible for misleading conclusions in mainstream economic models cited in note 9 in Chapter 2, interested readers should also consult Stanton, Ackerman, and Kartha (2009), Laitner et al. (2003), Hall and Behl (2006), Kahouli-Brahmi (2008), and Edenhofer et al. (2006).
2. Unfortunately, there is no way to compel national governments to use the leeway afforded them by higher caps to benefit poor citizens rather than wealthy elites without interfering in the internal affairs of sovereign states. But at least a treaty whose caps were determined according to the Greenhouse Development Rights formula could not be accused of denying any people the right to enjoy the benefits of economic development no matter where they lived.
3. It is unlikely that the CDM executive board would approve CERs for a project proposal to clear-cut an existing forest and replace it with a tree plantation. However, if the project proposal were to create a tree plantation on land that had already been clear-cut, it might well be approved. A change in ownership might prove necessary to secure approval, but that is hardly an insurmountable hurdle in today’s business world.
4. Besides serving as carbon sinks, standing forests also provide other important environmental services. As habitats for endangered species they are crucial in efforts to protect biodiversity. They are also water purifiers and soil protectors. Any policy that fails to provide effective incentives for forest conservation is seriously flawed. Any policy that creates perverse incentives to destroy forests is criminally incompetent.