Green Economics 9/12

[Over an extended period ZNet has been publishing excerpts of chapters from Robin Hahnel’s latest book, Green Economics: Confronting the Ecological Crisis, available from M.E. Sharpe. Excerpts published here are not the full chapters which are made available inside the book. More information about the book and links to purchase it are below. Or, if you want, first, go to previous excerpts: Introduction / Chapter 1 / 2 / 3 / 4 / 5 / 6 / 7 / 8 / 9]


The Earth Summit in Rio


International negotiations about how to respond to the threat of climate change only began in earnest at the “Earth Summit” in Rio de Janeiro in 1992. The Earth Summit is where the United Nations Framework Convention on Climate Change (UNFCCC) was signed by 154 nations (now more than 190 countries have signed). The document contains a number of important principles including a commitment to preserve the climate system for the benefit of present and future generations, recognition of the precautionary principle as the defining reason for global action to prevent climate change, and identification of “sustainable development”—defined as policies that satisfy the basic needs of the present without jeopardizing the rights of future generations to satisfy their needs—as our economic goal. But most importantly, Article 4 of the 1992 UNFCCC establishes the principle of common but differentiated responsibilities for mitigating climate change based on countries’ contribution to the buildup of greenhouse gases (GHGs) in the atmosphere and ability to afford reductions. However, after much discussion, country delegations in Rio were unable to agree on mandatory reduction targets for industrial countries.


The Kyoto Protocol


On December 11, 1997, 160 nations voted to approve a document known as the Kyoto Protocol. The agreement requires more developed countries (MDCs), classified as Annex-1 signatories, to cut their emissions of six major GHGs by an average of 5.2 percent below their 1990 emission levels by the period 2008–2012…. At the insistence of U.S. negotiators, European delegations in Kyoto agreed at the last moment to permit “carbon trading”—although key details remained to be worked out at subsequent meetings.


While the Kyoto Protocol called on Annex-1 countries to meet their commitments “predominantly” from domestic reductions, it sanctioned trading carbon credits between Annex-1 governments, trading offsets, credits, or allowances between individual sources in different Annex-1 countries, and finally, limited purchases of certified emission credits (CERs) by individual sources in Annex-1 countries from projects located in non-Annex-1 countries as monitored by the executive board of the Clean Development Mechanism (CDM)….


From Kyoto to Copenhagen


Even as the Kyoto Protocol was being approved by delegations from 160 countries in Kyoto, the U.S. Senate ominously passed a resolution 95 to 0 against any treaty that did not require developing countries to make “meaningful” cuts in emissions. In 2001 President George W. Bush officially renounced the protocol and the United States withdrew from participation. Nonetheless, the European Union ratified the treaty in 2002, and after Russia ratified in November 2004, the Kyoto Protocol became a legally binding treaty for its signatories on February 16, 2005. Australia ratified the treaty in 2007, leaving the United States as the sole country not to have done so….


The Free-Rider Problem


After watching emissions continue to climb despite nonbinding promises to the contrary made by delegations from the MDCs in Rio, a majority of delegations arriving at Kyoto in 1997 realized that they could no longer avoid hammering out an agreement that set binding caps on national emissions. When binding caps are mutually agreed to, this can change the calculus of national self-interest to better align with the global interest of achieving sufficient global reductions to avert cataclysmic climate change. When national reductions are mutually agreed to, the benefits each country achieves for its own citizens by agreeing to reduce its own emissions are expanded many fold because its commitment wins its citizens the additional benefits from all the reductions made by other countries as well. We might say this difference “makes all the difference in the world.” When negotiators sat down in Kyoto in 1997, they finally realized they had to bite the bullet and secure an agreement on binding caps for MDCs.


Reconciling Effectiveness, Equity, and Efficiency


After overcoming inevitable resistance to the loss of sovereign power implied by a treaty that imposes binding caps on national emissions, negotiators in Kyoto still faced three major problems: (1) how to make the treaty effective—that is, guarantee sufficient global reductions to reduce the risk of cataclysmic climate change to an acceptable level; (2) how to distribute the costs of averting climate change fairly, or equitably among countries; and (3) how to make the treaty efficient—that is, how to minimize the global cost of averting climate change.



Effectiveness: Most negotiators at Kyoto probably realized that a 5.2 percent reduction in emissions by 2012 by MDCs only was not likely to be enough to do what scientists were insisting even then was necessary…. A little over 5 percent is what delegations agreed to because no higher reduction target was deemed politically feasible since many of their governments faced domestic opposition to ratifying a treaty that required greater reductions. It was also invariably described as a first step, which some defended as a significant and worthy first step and others criticized as woefully inadequate.


Equity: Even if all countries could be expected to benefit to the same degree from averting climate change—which is not the case—is it reasonable and fair to expect all countries to shoulder the burden of doing so to the same extent—that is, to reduce their national emissions by the same percentage? Article 4 of the UNFCCC approved in Rio in 1992 established the principle of “common but differentiated responsibilities and capabilities.” Negotiators in Kyoto implemented this mandate and addressed the problem of equity by dividing countries into two groups, MDCs and LDCs, and assigning mandatory caps only to MDCs.


Efficiency: Once caps were agreed to for different Annex-1 countries, negotiators at Kyoto faced the dilemma of whether to require countries to meet their caps entirely through internal reductions or to allow some kind of trading of “emission rights.” Proponents of emissions trading—the U.S. delegation chief among them—presented a strong case that, absent opportunities to trade, the global pattern of emission reductions agreed to as (at least roughly) fair was likely to be very inefficient—that is, the global cost of achieving the reductions was likely to be much higher than necessary….


If LDCs without caps are also permitted to sell emission rights, as they are through the CDM of the Kyoto Protocol, trading will also generate a predictable flow of income from MDCs purchasing emission rights to sources in LDCs where abatement is cheaper. The 1997 Kyoto Protocol accepted trading in principle with some limitations, leaving details to be hammered out later during negotiations in Marrakesh and Bali.


Green Economics: Confronting the Ecological Crisis by Robin Hahnel is available from M.E. Sharpe.

To purchase the print edition please click here.

To order 180-day online access from the Sharpe E-text Center click here.

Coming soon from Google eBookstore and Barnesandnoble.com.


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