Energy

The effort to address climate change stumbled with the failure to pass cap-and-trade. What should happen now? Five experts, including the Harvard Project's Joe Aldy, discuss the future of U.S. climate and energy policy.

"Implementing such a linkage is possible. The Montreal Protocol, successfully protecting the ozone layer, is already restricting trade with non-participants and non-compliers, although only in the substances controlled by the treaty. To repeat this success and overcome the obstacles for a climate agreement, signatories should become favoured trading partners while non-compliance should trigger a temporary denial of this status. Disputes can be solved by expanding the mandate of the WTO's dispute settlement body or another mediator."

A "deal" is proposed in this paper, whereby all major-emitting countries, including the United States and China, agree to reduce emissions through implementation of significant, mutually agreeable, domestic emission-reduction policies. To resolve the competitiveness and equity concerns, a proposed Carbon Mitigation Fund would be created. This proposed fund is contrasted with other existing and proposed mitigation funds and finance mechanisms. 

The finance of climate mitigation and adaptation in developing countries represents a key challenge in the negotiations on a post-2012 international climate agreement. Finance mechanisms are important because stabilizing the climate will require significant emissions reductions in both the developed and the developing worlds, and therefore large-scale investments in energy infrastructure. The current state of climate finance has been criticized for its insufficient scale, relatively low share of private-sector investment, and insufficient institutional framework. This policy brief presents options for improving and expanding climate finance.

Our proposal for a post-2012 international global climate policy agreement contains three essential elements: meaningful involvement by key industrialized and developing nations; an emphasis on an extended time path of targets; and inclusion of market-based policy instruments. This architecture is consistent with fundamental aspects of the science, economics, and politics of global climate change.

Robert Stavins, Albert Pratt Professor of Business and Government at Harvard Kennedy School and a member of the Board of Directors at the school's Belfer Center, has been appointed to a new position in the Energy and Environmental Markets Advisory Committee at the U.S. Commodity Futures Trading Commission.

Both the nature of international climate policy architectures and the development and diffusion of new energy technologies could dramatically influence future costs of reducing global emissions of greenhouse gases. This paper explores the implications of interactions between technology availability and performance and international policy architectures for technology choice and the social cost of limiting atmospheric CO2 concentrations to 500 ppm by the year 2095. Key issues explored in the paper include the role of bioenergy production with CO2 capture and storage (CCS), overshoot concentration pathways, and the sensitivity of mitigation costs to policy and technology.