Common Tragedies

Thoughts on Environmental Economics

World of warm-craft

Posted by Daniel Hall on October 11, 2007

I attended an event last week at Resources for the Future on crafting the next (i.e., post-Kyoto, post-2012) international framework for addressing global climate change. The event website now has video up, as does E&ETV, so you can watch for yourself if you’d like.

The event was focused around a new book, Architectures for Agreement, edited by Joe Aldy and Rob Stavins, that discusses what a post-Kyoto agreement could look like. The book is composed of 6 proposals from different authors on possible climate policy frameworks. Each proposal was discussed briefly at the event, and they fell broadly into 3 categories:

1. Targets and timetables, i.e., global international agreements that are similar to Kyoto.

2. Harmonized domestic policies, i.e., countries or regions implement their own policies (e.g., cap-and-trade programs) but attempt to roughly harmonize them, perhaps by trying to make emissions prices similar.

3. Coordinated and unilateral policies, i.e., countries choose their own climate change policies, but have some coordination, perhaps on technology transfer, or on R&D, etc.

Moving down the list you go from more centralized, top-down approaches towards more national and bottom-up approaches.

I’m going to hold most of my specific comments on the various proposals until I’ve actually read the book, but I do want to offer my impressions from the presentation and the Q&A session with the panel:

— Centralized, top-down approaches sound pretty to economists (“Ooh, everyone faces the same marginal abatement price!”) but are probably not realistic. I basically agree with the realpolitik view that countries will for the most part do only what is in their own interest, and once we get down to an emissions price that China and India are willing to face, the price is much too low to get many emissions reductions.

— Almost all proposals remain focused on mitigation of greenhouse gas emissions. A few acknowledge the need for adaptation policy, albeit briefly. This seems like the 3 ton elephant sitting in the room: we are committed to some degree of warming, and given how long it is likely to take to slow and reverse emissions growth there will be more to come. We should start thinking more about adaptation, particularly given the equity implications if the poor world is doing a lot more adapting to adverse consequences than the rich world.

— Geo-engineering: this is the 6 ton elephant sitting in the room that people really don’t want to talk about. Scott Barrett discusses it in his proposal in the book, and Joe Aldy reiterated the point during the panel discussion — if we arrive in 2030 and find that the consequences of climate change are far, far worse than the median projections currently suggest, it would be invaluable to have a deployable technology that could delay or reverse big temperature changes. Geo-engineering has been criticized for its inherent moral hazard characteristics. Further, it could very possibly have unintended consequences. So it’s not the first option on the table. Still, it could prove incredibly valuable to have it, and this means thinking about it now: once it becomes clear it is needed, it may be too late to engage in a serious R&D effort.

— The silver lining in these last 2 points is that both adaptation and geo-engineering are public goods that are likely easier to provide than emissions mitigation. Adaptation should be easier because its spatial scale tends to be local or regional, rather than global, reducing the scope of the collective action problem. Geo-engineering should be easier because — if it is being deployed to prevent a truly disastrous scenario — the costs it is potentially avoiding are extremely high, and thus the ‘private’ incentives of one wealthy nation might provide sufficient impetus to develop and deploy geo-engineering technology. (Think of the analogy of a potential existence-threatening meteor strike and the private incentives of the U.S. — or China, or the EU — to prevent such a strike.) The problem for geo-engineering might even be the opposite of a free rider problem — so many nations have an incentive to employ such technologies that the unintended consequences of the cure(s) are worse than the disease.

Once I read the book I’ll return to discuss specific proposals.

2 Responses to “World of warm-craft”

  1. Nick said

    I’ve only made it throught the first 100 pages…thanks for spoiling the ending.

    I recentlly attended a conference on North American vs. EU approaches to climate policy. Everyone focused on mitigation. At the end, someone mentioned adaptation, which seemed to be followed by a collective, “Oh, right, adapatation!…almost forgot aboput that one!”

    With a lot of bright people trying to solve the mitgiation challenge, have economists let the adaptiation question slip aside a bit?

  2. Don’t worry Nick, I don’t think I’m spoiling much in the book, unless there’s loads more discussion of adaptation and geo-engineering than I gathered from the presentations and discussion at the event. Think of my impressions as jazz riffs off a couple of (side) themes from the event.

    I think economists have paid less attention to adaptation because it’s so variable, as it is intrinsically spatial, ecological, and institutional. It doesn’t reduce to equations very easily, and economists can’t create or gather datasets on it without relying on experts in these other fields.

    Well, all that and the money. I really do suspect there’s less funding out there for adaptation research than mitigation research, particularly economic/social science (as opposed to hard science) funding.

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