Environment & Climate Change

Recent research in economics shows how not to design climate treaties—and suggests how to get it right.

This paper analyses a set of new scenarios for energy markets in Europe to evaluate the consistency of economic incentives and climate objectives. It focuses in particular on the role of natural gas across a range of climate policy scenarios (including the Copenhagen Pledges and the EU Roadmap) to identify whether current trend and policies are leading to an economically efficient and, at the same time, climate friendly, energy mix.

Robert Stavins argues for an economic approach to solving environmental problems and explains why "environmental economics" is not an oxymoron.

The United States has considerable tax administration and cap-and-trade expertise that could highlight potentially successful carbon pricing approaches. Although this experience is not climate-related, the United States deploys an efficient and highly compliant excise tax system, and it could assist developing country efforts to build their own capacity to tax carbon. The United States also has long experience with cap-and-trade systems for criteria air pollutants, much of which is transferable to greenhouse-gas emissions trading.

The Kyoto Protocol establishes a very complex and ambitious regime, in architecture if not stringency. The problem is that relatively few states, representing only about a quarter of the world's emissions, have been willing to assume emission targets under Kyoto....The future of the Protocol thus seems doubtful at best. Even in the most optimistic scenario, a new round of emissions targets couldn't be agreed in time to prevent a legal gap between the first and second commitment periods. A possible middle ground would be to establish a transitional regime that would be political in nature, but that could evolve over time into a legally-binding regime.

Dramatic growth in nuclear energy would be required for nuclear power to provide a significant part of the carbon-free energy the world is likely to need in the 21st century, or a major part in meeting other energy challenges. This would require increased support from governments, utilities, and publics around the world. Achieving that support is likely to require improved economics and major progress toward resolving issues of nuclear safety, proliferation-resistance, and nuclear waste management. This is likely to require both research, development, and demonstration (RD&D) of improved technologies and new policy approaches.