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Climate Policy: Now What?
John Reilly
MIT Joint Program on the Science and
Policy of Global Change
Fourth Annual Conference on Global
Analysis, June 27-29, 2001, Purdue
University, West Lafayette, Indiana
Kyoto: 10-Year Path to Deadlock
• Rio (1992): the Framework Convention
– Deal with climate in the UN context
– Concept of quantity targets, and a timetable
• Berlin (1995): the Berlin Mandate
– “Common but diff.”   Annex I/Non-Annex I split
– Seek (by 1997) national targets for 2005, 2010, 2020
• Kyoto (1997): the Kyoto Protocol
– Agreed 2008-2012 targets . . . but NOT key definitions!
– Entry into force if get 55% of 1990 Annex I emissions
• The Hague (2000..and counting):
– Resolve remaining definitions.
Where Are We Headed?
Into force: YES
EU + USA?
Kyoto as
written
NO
The
Hague
YES
Agree
COP-6
Details?
NO
Into force: YES
w/o USA?
NO
Euro “Club”
Return to
Kyoto?
Into force?
Separate
Paths?
Renew
Negotiations
Return
to Rio?
?
The Hague (2000) : The Devil Is In
the “Details”
On the agenda:
Issues
Trading
Limits on purchase
Sinks
Credit for pre-existing forests,
inclusion of agricultural soils
Penalties for non-compliance?
Compliance
LDC Transfers
Not on agenda:
Adaptation aid, tech. transfer,
compensation to oil exporters
LDC accession
A US View of Flaws in Kyoto
• Fixed, legally binding, short-term targets
– Unknown and unbounded cost?
– Unequal burdens, feasibility?
• Trading/sinks: an artifact of premature targets?
– Imply large international financial flows
– Stimulate damaging fight over carbon sinks
• Handling of developing countries
– Not even discussion of how they might participate
• Seek domestic policy details ahead of Congress
Where Are We Now?
• Bush statements marks the end of pretense
regarding US ratification
– Senate: 95-0 against, pre-Kyoto
– Clinton: Warm words, but no action
– Bush: Said he was opposed in campaign
• Fundamental problem is lack of meaningful
domestic political support
• But US seeking a way to proceed
– Non-Speech of June 11—An Administration
divided?
What Will the US Do?
• Will not denounce or abstain from COP processes
• Cabinet-level review. . .
– No concrete proposal for COP 6.5
(inappropriate and presumptuous?)
– Expression of concern and general approach
– The Bush (Clinton-Gore) Action Plan
– Is a price on carbon still a possibility?
• Where to restart?
– Problems of UN structure for resolving key problems
– Unlikely to return to Pronk text
What will Europe Do?
• Desire/success in putting Kyoto into force?
• Can’t consider alternative to Kyoto, or amend,
until EU and member state positions become
clear
• How much stronger support in Europe than US?
– Quiet abandonment of European eco-tax reform
since the September price/tax protests
– Differing forms of government explain differing
rhetoric in Europe and US
• Willingness to engage?
Top Down or Bottom-Up Policy
• Top-down approach~ Kyoto Protocol or
something like it: I.e. permits, coordinated tax,
global technology standard.
–
–
–
–
negotiation 
uniform policy instrument 
adopted in many countries 
expanded to all countries & tightened over time.
• Bottom-up approach: countries act domestically ~
–
–
–
–
Some countries start, instrument choice varies 
Intn’l negotiations jawbone to limit free-riding 
Broaden and deepen involvement 
Knit together a more coordinated trading system later,
if needed, a la 50 years of GATT-WTO
Economic Modeling Influence--Hobbled?
• Economists, the “lemon suckers.”
– “Siren song” of no-cost abatement.
– “Cross your fingers and hope” for new
technology.
– “Join hands” for voluntary reductions.
– Climate policy, it’s “good for what ails
you.”
Economic Modeling Influence--Hobbled?
• Which costs? What’s big?
– $300 per ton C; .05 percentage point
reduction in growth; $4.5 trillion 10-year
tax increase.
– Economists preferred measure, welfare as
equivalent variation is ~.7% reduction—Is
this an HHS budget proposal?
– Is climate change a catastrophe, a change of
clothes, or a false alarm?
Economic Modeling Influence--Hobbled?
• Economics—Precisely irrelevant.
– Triangles versus rectangles--$950 or
$4500/household; $20B/year to Russia.
– Tradeable permits vs Pigouvian taxes vs
political reality.
– “Action” or the appearance of “Action.”
– Leading, following, trust—the commons
problem.
– A “first best” or “fourth best” world?
Where to for Economic Modelers?
• Directions for policy not clear BUT as
policy moves closer to happening the
proposals on the table will be a lot messier
than a uniform tax or cap and trade system.
• Economic Modeling—Keep plugging away.
Need serious analysis of even silly ideas
and attention to communicate simply and
clearly—vitae plumping or affecting
policy?