Environment & Climate Change

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

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.

In this policy brief, Harvard Project Director Robert Stavins focuses on how subnational policies will interact with a federal climate policy. It turns out that some of the interactions will be problematic, others will be benign, and still others could be positive. He also examines the role that could be played by subnational policies in the absence of a meaningful federal policy, with the conclusion that—like it or not—we may find that Sacramento, California comes to take the place of Washington as the center of national climate policy. This case study might provide insight for COP 17 delegates in designing the next steps toward a flexible international agreement.

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.

"...[B]ottom-up linkage of state and regional cap-and-trade systems could be an important part, or perhaps even the core, of future of U.S. climate policy, at least until there is meaningful action at the federal level. In the meantime, it is at least conceivable—and perhaps likely—that linkage of state-level cap-and-trade systems will become the (interim) de facto national climate policy architecture."

African agriculture is at a crossroads. Persistent food shortages are now being compounded by new threats arising from climate change. But Africa also has three major opportunities that can help transform its agriculture to be a force for economic growth. First, advances in science, technology, and engineering worldwide offer Africa new tools needed to promote sustainable agriculture. Second, efforts to create regional markets will provide new incentives for agricultural production and trade. Third, a new generation of African leaders is helping the continent focus on long-term economic transformation.

With regard to developing a new international framework, developed countries should acknowledge how grave the consequences would be to easily give in to a Kyoto extension. Merely extending the Kyoto Protocol would surely delay mitigation actions on the part of developing countries and discourage the U.S. from making serious efforts to reduce its large energy consumption. In other words, no country should end up being a "climate-killer" in its attempts to avoid being called a "Kyoto-killer."