Toward a Post-Kyoto Climate Change Architecture: A Political Analysis

Abstract

Any international agreement to address climate change must rest on broad public support in developed nations for mitigation actions. We propose an international climate architecture that builds on such public support — which we hope will be forthcoming — and uses multilateral international institutions to extend its effects to countries without such "green" publics. First, we suggest that politicians' desire for public recognition could be manipulated through an "economy of esteem" in which incentives, such as prizes for climate leadership, are used to encourage additional climate-related actions. Second, we argue that an international cap-and-trade system in which buyers are liable for the validity of their emissions permits is the only international architecture that is likely to solve the three problems of (1) participation by many nations, (2) effectiveness at reducing global greenhouse gas emissions, and (3) compliance by all participants (Barrett, 2003). Cap-and-trade systems have the enormous advantage that permits can be set to give valuable "hot air" — permits in excess of likely future emissions — to those nations reluctant to join the system. Even though international agreements cannot be credibly enforced against sovereign nations, compliance with emissions caps can be secured through a system in which domestic political will enforces caps in net-purchaser countries, and profit-seeking behavior enforces caps in net-seller countries. Under our proposed system, trading would take place among firms, but the eventual value of permits would be determined by international evaluations and would be the same for all permits from a given political jurisdiction. Such a provision would simplify monitoring and evaluation and generate internal pressures on uncommitted states to construct viable domestic enforcement systems. The value of our proposed approach is that it uses domestic political support in countries that are willing to address climate change to provide incentives for participation by less-motivated countries. Although some non-compliance is inevitable, the system that we outline provides a political foundation for a working system not doomed by enforcement problems. It could therefore lead to effective regulation of greenhouse gas emissions and, more importantly, help to generate the technological innovation that is widely agreed to be essential if climate change is to be brought under control.