2024-03-06 00:34:44
Economists have been led by the mistake that to reduce emissions the most efficient way is to put a price on them.
An impartial observer of the recent United Nations Climate Change Conference (COP28) in Dubai could be forgiven for attaching too much importance to the event. During the sessions, UN Secretary General António Guterres warned: “We are on the brink of a climate disaster, and this conference has to be a turning point.” Later, when a final agreement was reached, Canadian Environment Minister Steven Guilbeault celebrated the achievement of “groundbreaking commitments to renewable energy, energy efficiency and the transition away from fossil fuels.”
But the truth is that neither the content of the Dubai agreement nor what was left out of it will have much impact on climate change. We have already seen this film many times, starting with the 1992 treaty that created the UN Framework Convention on Climate Change. At that time, all countries committed to preventing “dangerous” climate change, which would have required a drastic reduction in annual greenhouse gas (GHG) emissions. But emissions have not stopped growing, although at a slower pace than they would have been if the agreement had not been signed. Voluntary commitments have largely been in vain.
Let’s be clear: We are not implying that all these warnings about climate risks and the need for action are misguided. We are economists who have spent decades studying climate change, and we know that those who oppose a meaningful response have often used some of the economic literature to their advantage. As we noted in a recent report for the Institute of Global Politics, economic models intended to identify “optimal” climate policies often systematically underestimate the benefits of emissions reductions and exaggerate the costs.
Furthermore, economists have been fascinated by a single solution (carbon taxes) and this has led to the mistake of claiming that the most efficient way to reduce emissions is to put a price on them, and that that is enough. But in reality, the numerous market failures that prevent a rapid and equitable transition to carbon neutrality highlight the need to appeal to a variety of policies (including emissions pricing).
Today, the world is full of urgent challenges that compete with climate change for the attention of politicians and economists. Therefore, instead of placing so much importance on international conferences that demand unanimous support, impose no accountability and ultimately have little effect on emissions, we should direct our energies toward negotiating agreements that can achieve transformations in a few crucial economic sectors.
It is already known that this type of selective measures works. Just think of the Montreal Protocol, which protects the stratospheric ozone layer, or the International Convention for the Prevention of Pollution from Ships (MARPOL). Unlike the voluntary commitments of the COPs, these two treaties created binding obligations that can be enforced through international trade. The Montreal Protocol prohibits participating countries from trading chlorofluorocarbons (ozone-depleting chemicals) with non-participating countries; and Marpol stipulates that ships that do not meet certain technical criteria will not be able to use ports.
The two treaties work because they create a positive feedback loop: the more countries join, the more pressure increases on others to sign them. The result is that in a few decades the ozone layer will return to the pre-1980 situation; and more than 99% of maritime oil shipping now meets MARPOL standards, effectively eliminating a major source of marine pollution.
This same idea has already been used in climate agreements and it worked. The Kigali Amendment to the Montreal Protocol stipulates the phase-out of hydrofluorocarbons, a potent greenhouse gas. Like the previous examples, the amendment includes a trade measure designed to create a positive feedback effect once a critical threshold has been reached; The structure means that ratification is convenient for each country separately. Even in the polarized United States, he won strong bipartisan support in the Senate last year.
Now we have to do the same with other large sources of emissions. For example, aluminum production is responsible for around 2% of annual global GHG emissions. But this sector can greatly reduce its emissions by using inert anodes instead of the current carbon anodes. An aluminum treaty could be created that requires signatories to adopt the use of inert anodes and not import aluminum from countries that have not signed it.
Unlike unilateral threats to impose trade measures, this approach to international climate agreements is fundamentally cooperative and multilateral. It is not like unilaterally imposing local regulations on foreign production, as the European Union does, or charging carbon-based tariffs on certain imported products without corresponding local regulations, as some in the United States have proposed. These methods will only encourage retaliation.
To be successful, international climate agreements have to be compatible with the economic strategies of various countries, particularly lower-income ones such as India, where most of the future emissions will come from. That is why the Montreal Protocol and the Kigali Amendment include clauses for rich countries to help poor countries pay the cost of complying with the agreements.
The international community learned the lesson of the Kyoto Protocol poorly. It should be evident by now that voluntary commitments and aspirational goals do not work. The problem with Kyoto was not designing the incentives well.
To bring the world closer to achieving the goals of the Dubai agreement – a rapid and equitable transition to carbon neutrality – climate agreements need to target specific individual sectors; Compliance with obligations must be made a condition for accessing markets; and not forget the principle that, in international negotiations, rich and poor countries have a “shared but differentiated” role.
Future COPs can then focus on resolving other important issues, rather than searching for the exact combination of empty words to get everyone to agree.
Authors: Scott Barrett is the Lenfest-Earth Institute Chair in Natural Resource Economics at Columbia University’s Climate School. Noah Kaufman is a senior fellow at the Center on Global Energy Policy at Columbia University’s School of Public and International Affairs. Joseph E. Stiglitz, former chief economist at the World Bank and former chairman of the US Presidential Council of Economic Advisers, is a distinguished professor at Columbia University and a Nobel Laureate in Economics. © Project Syndicate 1995–2024.
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