What’s at stake: As world leaders meet in Copenhagen this week to debate climate change policy, economists have shared their thoughts on what they would consider a successful agreement.
Jean Tirole sketches what would be, from an economist’s viewpoint, a successful agreement in Copenhagen. Delivering an outcome in conformity with GIEC’s recommendations depends on three conditions: a global system of tradable quotas, ensuring the uniqueness of the carbon price; an incentives-based credibility of commitments made by states; a compensation mechanism through quota allocations and the application of the subsidiary principle. An alternative would consist in agreeing on a set of precocious abatement actions for the near future, together with the principle of an agreement on a framework specifying: a) a global emission trading system; b) a governance mechanism (using the IMF and WTO among other features, and treating commitments as sovereign debt), c) an international investment in the near future in a satellite system monitoring country-level emissions, and d) an international time path for the negotiation of the allocation of permits.
Robert Stavins says the best goal for the Copenhagen climate talks is to make real progress on a sound foundation for meaningful, long-term global action, not some notion of immediate triumph. First, the focus should be on stabilising concentrations at acceptable levels by 2050 and beyond, because it is the accumulated stock of greenhouse gas emissions — not the flow of emissions in any year — that are linked with climate consequences. Second, the cost-effective path for stabilizing concentrations involves a gradual ramp-up in target severity, to avoid rendering large parts of the capital stock prematurely obsolete. Third, long-term technological change is the key to the needed transition from reliance on carbon-intensive fossil fuels to more climate-friendly energy sources. Fourth, the creation of long-lasting international institutions is central to addressing this global challenge.
Isabel Galiana and Christopher Green from McGill University argue in a Nature article that rather than horse-trading over emissions targets, governments should make long-term commitments to invest in energy R&D — financed by a slowly-rising ‘carbon tax’ to promote low-carbon technologies over the next century. We need an energy technology revolution, say Galiana and Green, and it has not yet started. Nancy Birdsall and Arvind Subramanian make a similar point in an FT column and argue that the climate change debate needs to shift from focusing on emissions to achieving energy equality so that developing countries can meet their energy needs in the greenest way possible.
Roger Guesnerie and Thomas Sterner argue for anchoring any short-term agreement on a shared vision of the long term. Bringing to the foreground a shared vision of the future, even if its realisation is not assured, would facilitate a short-term agreement. And if the negotiations fail to set up a credible policy, the agreement, even vague for the day after tomorrow, would be invaluable money for tomorrow. Countries should envisage a global volume of emissions compatible with the preservation of an atmospheric balance, meaning at least a division by two of the current global level of emissions by 2050. The quotas should be distributed amongst countries in proportion to their population. The objective is incomplete as it concerns only the target and ignores the trajectory. But it is voluntarily incomplete, making the hypothesis that a preliminary agreement on a global target will facilitate negotiations on the trajectory.
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