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Initial Ph. D. proposal
Economic assessment of Kyoto Protocol
Name:不羁的二
Introduction
One of the most encouraging historical events of the current century might be the
increasing awareness of the environmental issue, notably the climate change. The
GDP growth of developing countries such as India and China is intensively driven by
unsustainable consumption of nature resources. Solving poverty, at least in the short
run, seems to be met by more coal-fire power plants, which are rapidly turning these
countries into major green house gas (GHG) emitters. Cutting the emissions of GHGs
is highly costly in terms of GDP growth. Apart from that, developing countries argue
it is unfair for them, as emerging markets to pay the bills left by developed countries
who “contributed” to the damage of the ecosystem for 150 years of industrial activity.
It is agreed that the solution of environmental issue cannot rely on the restriction of
morality. Unless developed countries at least partially subside the potential cost of
GHGs emission reduction in developing countries, there is no incentive for poor
countries to commit to environmental agreements. However, developed countries
refuse to do so. From the game theory point of view, individual’s reluctance to
contribute to environmental protection is the tragedy of public goods. Kyoto Protocol,
helping in building trust and credibility among nations, enables the whole system to
reach a more optimal outcome. The world is now attempting to establish
mechanisms to enable nations collectively to respond to the continuing
environmental crisis. Such mechanisms, known as international institutions or
regimes, performed various tasks to help nations overcome the obstacles which lay in
the path of cooperation.
Kyoto Protocol was adopted in Kyoto in 1997 and entered into force in 2005. It is an
international agreement linked to the United Nations Framework Convention on
Initial Ph. D. proposal
Economic assessment of Kyoto Protocol
Name:不羁的二
Climate Change. Recognizing that developed countries are principally responsible for
the current high level of GHGs emissions in the atmosphere, the Kyoto Protocol
burdens a heavier responsibility on industrialized countries according to the principle
of common but differentiated responsibilities. The major characteristic of the Kyoto
Protocol is that it establishes binding targets for 37 industrialized countries and EU-15
for reducing GHG emissions. These amounts are supposed to reduce to an average of
five percent against 1990 levels over the five-year period 2008-2012. The essential
purpose of the Kyoto Protocol is to establish a carbon market to serve as the market
mechanism to finally solve the problem of GHGs emission reduction as a public good.
From 7-18 December this year, negotiators from all over the world will meet in
Copenhagen to forge the post-Kyoto climate regime. The whole world is waiting for
the results. Kyoto Protocol is a long way to go, however, a way full of hope and
discovery, which makes the research of the Protocol a passionate one. Indeed, it is
the first time when the market mechanisms are being seriously considered to get
adopted to the environmental issues creating the great milestone and hope for
success.
Subject
In the following study we would like to assess the impact of Kyoto protocol over past
5-10 years using several groups of countries—countries committing to GHGs
emissions reduction, countries ratifying Kyoto Protocol but without commitment, and
the rest of the world. The question of long term effects of this policy on GHGs
emissions, international trade, GDP and poverty is still open. This research will
analyze the current situation regarding these indicators comparing different groups
of countries to assess the impact of Kyoto Protocol.
Initial Ph. D. proposal
Economic assessment of Kyoto Protocol
Name:不羁的二
Research Questions
Initially, the research will try to verify the following questions using comparative
study of the selected countries:

How large is the impact of Kyoto Protocol on GHGs emissions?

How large is the impact of Kyoto Protocol on macroeconomic performance
(pattern of trade, GDP, GDP per capital, etc)?

How does Kyoto Protocol influence differently among developed countries
and developing countries? (Do developing countries undergo more cost than
industrialized ones by committing to GHGs emissions reduction?)
By clarifying above questions, the research will seek the long term true relationship
between the state of the ecosystem and macroeconomic performance—
1. How much is the health cost of pollution and how that can be translated into
productivity loss?
2. To which extent can environmental agreements correct the loss?
3. To which extent can global environmental governance solve the tragedy of
environmental protection as a public good.
The above three questions will be the objectives of the research at the later stage.
The first question reflects the role economists play in translating the damage of
environment in terms of economic indicator, thus building the bridge between
nature scientists and politicians. Based on the first question, the second question
provides the final answer to the assessment of environmental agreements. The third
question, viewing from a height, touches the core of environmental issue—the role
of global environmental governance.
Initial Ph. D. proposal
Economic assessment of Kyoto Protocol
Name:不羁的二
Methodological framework and scope
The general reflections on the impact of the green policies on the economy are our
first basis of inspiration. It is followed by the environmental economics and technical
econometric papers related to the subject.
Although so far, Kyoto Protocol has not succeeded in the sense of establishing the
market mechanism of carbon trade, one can try to assess the impact of Kyoto
Protocol over the past 10 years. The evaluation of Kyoto Protocol contains various
aspects. On the one hand, it sets the difficulties one faces in evaluating the Protocol.
On the other hand, it brings diversity into the research. Kyoto Protocol is unique
among international treaties in that its legitimacy is based on a chain of scientific and
socio-economic hypothesis. These hypotheses and interconnectedness are the true
beauty of the quantitative research of the Protocol.
As for the estimation methods, they generally include simple OLS estimation, panel
data estimations with fixed and random effects, Tobit estimation, or semi-parametric
estimation. As the development of the research, a suitable and concrete
methodology regarding the topic will be formed.
Theoretical framework
The initial findings of World Bank (1992) and Grossman (1995) have dominated the
research regarding the empirical relationship between economic growth and
environmental pollution over the decade. A common methodology adopted is the
environmental Kuznets curve (EKC). The basic idea of EKC is the inverted U-shaped
relationship between levels of pollution and GDP per capita. The foundation of EKC is
Initial Ph. D. proposal
Economic assessment of Kyoto Protocol
Name:不羁的二
the dynamic or static optimal growth model with environmental variables such as
flow pollution and abatement taken into account. By adopting empirical methods,
research such as World Bank (1992), Grossman and Krueger (1993, 1995) and Selden
and Song (1994) verify the existence of U-shaped curve between pollutants and
economic growth—positive relationship (emissions increase as GDP increases) before
the turning point and negative (emissions decline as GDP increases) afterwards. After
this finding, the trend goes to two directions—theoretical explanation of EKC and
empirical analysis.
As for the relationship between environmental regulations, Jorgenson and Wilcoxen
(1990, 1993) confirms a negative relationship between GDP growth and
environmental regulations, by simulating the U.S. economy with and without
environmental regulations using an intertemporal general equilibrium model.
However, the empirical studies about Kyoto Protocol are relatively immature, lacking
the theoretical support and empirical analysis. Yet that is what makes associated
studies very meaningful. Moreover, we believe that the subject of adoption of Kyoto
protocol and environmental economics in general, cannot be seen without particular
attention paid to the social consequences of the described issues. A deeper insight
into the issue with multi disciplines taken into account is extremely important for the
research.
Bibliography:
Grossman, G.M., Krueger, A.B. (1995). “Economic growth and the environment”. The
Quarterly Journal of Economics 110, 353-377
IPCC (1996), Climate Change 1995: Economic and Social Dimensions of Climate
Change, Contribution of Working Group III to the Second Assessment Report of the
Intergovernmental Panel on Climate Change (IPCC), Cambridge.
Initial Ph. D. proposal
Economic assessment of Kyoto Protocol
Name:不羁的二
Jorgenson, D.W., Wilcoxen, P.J. (1990). “Environmental regulation and the U.S.
economic growth”, Rand Journal of Economics 21, 314-340.
Romer, D. (1996). Advanced Macroeconomics. McGraw-Hill, New York.
Solow, R.M. (1956). “A contribution to the theory of economic growth”. Quarterly
Journal of Economics 70,65–94.
Solow, R. (1974a). “Intergenerational equity and exhaustible resources”. In: Review
of Economic Studies, Symposium on the Economics of Exhaustible Resources, pp.
29–45.
Solow, R. (1974b). “The economics of resources or the resources of economics”.
American Economic Review 64, 1–14.
UNFCCC (1997), Kyoto Protocol to the United Nations Framework Convention on
Climate Change (UNFCCC), FCCC/CP/1997/L.7/Add.1, Bonn.
UNFCCC (1998), Review of the Implementation of Commitments and of other
Provisions of the Convention. Activities Implemented Jointly: Review of Progress
under the Pilot Phase (Decision 5/CP.1), Second Synthesis Report on Activities
Implemented, United Nations Framework Convention on Climate Change (UNFCCC),
FCCC/CP/1998/2,Bonn.
US Administration (1998), The Kyoto Protocol and the President’s Policies to Address
Climate Change: Administration Economic Analysis, Washington, DC.
World Bank (1992). World Development Report 1992: Development and the
Environment. Oxford University Press, New York.