Common Tragedies

Thoughts on Environmental Economics

Heterogeneity and emission reductions

Posted by Evan Herrnstadt on April 14, 2008

The Independent today notes that four nations — Iceland, New Zealand, Norway, and Costa Rica — have formally signed up to go carbon neutral, thus kick-starting a race to become the first such nation in the world.  The most interesting aspect of the article is that it really emphasizes how each nation faces different obstacles to reducing emissions.  The aforementioned countries are, of course, already getting much of their energy from (mostly endowed) renewable sources.  However, each nation faces a specific challenge.  Iceland has the world’s largest automobile fleet in per capita terms (and Icelanders like their cars big), Norway has an enormous oil and gas industry, half of New Zealand’s emissions come from agriculture, and Costa Rica (more than the others) has to balance emissions reductions with economic development.  Costa Rica, in particular, faces a difficult challenge common amongst many developing nations:

Last year [Costa Rica] planted five million [trees], a world record, and the banana industry – the country’s largest exporter – has promised to go carbon neutral.  However, its number of cars has increased more than five-fold in the past 20 years and its air traffic more than seven-fold in just six, making its task far harder.

This group of four establishes a lower bound of the degree of heterogeneity in technology and change needed to reduce carbon emissions.  Keep in mind that these four nations hardly run the full gamut of national per capital income level, are starting from a very high degree of renewable energy, and are already willing to establish strong, relevant legislation.

It really looks like a mess, but to me it underscores why we need a flexible, market-based solution like a carbon price coupled with appropriate R&D support.  As we’ve been told again and again, there is probably not a silver bullet.  Hopefully policymakers will remember that as they look forward.

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