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POL 4410
Global environmental policy
Structure
1. Global Warming: the evidence
2. Global Warming: the political economy
3. Potential policies
4. From Kyoto to the Stern Review
The Evidence
• Increasing scientific consensus of
global warming by over 2 degrees C by
end of century
• Likely upper bound now over 6 degrees
• Evidence supports man-made effect
Gore...
• Earth in the Balance
• An Inconvenient Truth
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vs. Inhofe
Senator for OK (R)
Chair of Senate
Environment and Public
Works Committee
Global warming is
‘greatest hoax ever
perpetrated’
Compares
environmentalists to
Nazis.
Temperature
Increase
In the long run
Carbon and
temperature
Where is hotter?
Where are we
heading?
Globally by 2100
CGIAR Prediction
2001 IPCC Report
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Intergovernmental Panel on Climate Change
Led by government scientists but includes
several hundred academics.
Reports are based on peer-reviewed articles.
2001 estimates are 1.4 to 5.8C surface temp
rise and 0.1 to 0.9m sea level rise.
Not a single published article between 1993
and 2000 denied global warming
Opponents
• Heat island argument
• Consensus not enough
• Climate models unreliable
• Economic tradeoffs
The Political
Economy
• Externalities
• Intergenerational Tradeoffs
• Current inequality and development
• Discounting and time inconsistency
Advocates of Kyoto
• Western Europe
• Service sector workers
• Environmentalists
• Developing states
• Fans of Emissions trading
Enemies of Kyoto
• Energy companies
• Russia
• United States of America
• Manufacturers
• Nationalists
• Bjorn Lomborg!
Potential Policies
1. Emissions Caps plus Trading
2. Carbon Taxation
3. Value at Risk
Emissions Trading
• Agreed at Kyoto to reduce levels of
emissions to 1990 level and introduce
system of trading.
• Each state would be given a quota. If
they exceed quota they can buy from
other states. If they do not meet quota
they can sell.
• One way of gauging ‘price’ of pollution.
Carbon Tax
• Alternative to quota is to set a flat tax
on carbon emissions.
• Must be globally uniform though
collected nationally.
• Massive debate over level of tax.
Nordhaus wants $10 per ton rising to
$60 by 2100. Cline advocates $150
rising to $600.
Value at Risk
• Minimax strategy
• Consider reducing damages at 95% of
cumulative probability distribution.
• Could be up to 9.3C rise.
• Risk averse strategy. One percent
doctrine?
• Precautionary principle.
What Else?
• Adaptation: will price signals create
incentives to produce emissions
reductions?
• Adapting to global warming itself
• Lowering global rate of growth
Rio Summit
• 1993 Earth Summit held in Rio de
Janeiro
• Produced Framework Convention on
Climate Change
• Legally non-binding but established
possibility of ‘protocols’ that could set
emissions levels.
Kyoto Protocol
• Negotiated in 1997
• Annex I countries should reduce
emissions to 95% of 1990 levels by
2012.
• Can meet requirements through
emissions trading (EU Emissions
Trading Scheme)
• Non Annex I countries do not have to
do so.
Kyoto
Who Pollutes?
Bush and Kyoto
• Clinton signed but never ratified treaty political consensus that developing
countries would have to be brought in.
• Bush opposes Kyoto because of
China’s exception, ‘debate’ over climate
change, and economic costs.
• Blocking of reports by NOAA on effects
on hurricanes.
• California legislature agrred to reduce
emissions by 25% by 2020.
Stern Review: A New
Consensus?
• British report headed by Sir Nicholas
Stern
• Makes economic case for action
• Predicts GDP will be reduced by
between 1% and 10% under Business
as Usual
• Recommends carbon pricing,
government investment in R&D, carbon
finance flows, and ETS.
Criticisms of Stern
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The usual suspects
Also DasGupta (Cambridge economist)
criticized use of discount rates - Stern gets his
answer because he over-values welfare of
future inhabitants such that we should save
97.5% income now.
DeLong notes that DasGupta excluded
technological growth from estimate - in fact we
should save 22.5% now.
Parameter choice matters hugely.
Political Economy of
Agreement
• Intergenerational Tradeoffs
• Growth for poor now vs. growth for
everyone later.
• Inclusion of developing states
• What are the likely effects on trade of
carbon taxation?
Next Class(es)
• Crime: Moises Naim
• Terrorism: Pape and Sandler
• Tuesday: finish up and discuss exam.