The next step for climate change policy after COP5

Abstract

Introduction: The Kyoto Protocol to the United Nations Framework Convention on Climate Change (UNFCCC), which was negotiated in Kyoto in December 1997, is yet to be ratified. There are still many unresolved problems with implementing this convention--not least is the problem that the Kyoto Protocol is fundamentally unsustainable.1 Little progress in implementation of the Kyoto Protocol was achieved at previous meetings in Buenos Aires and Bonn. The next major negotiations will be held in The Hague in November 2000, although there will be intense activity leading up to this meeting, which will be the last serious chance for countries to implement the Kyoto Protocol. Rhetoric will not achieve the tight targets of the Kyoto Protocol and at some stage either actual policies must be implemented or the Kyoto Protocol must be jettisoned. The irony of the current state of climate change policy is that the Kyoto Protocol is actually raising greenhouse emissions because some corporations are postponing taking low-cost actions until it is clear what actions will be given credit in future abatement systems. Before taking the next step, it is worth reflecting on what a sustainable and realistic climate change policy should look like. First, the policy should slow down carbon dioxide emissions where it is cost-effective to do so, but only as an insurance policy until further information on climate change is accumulated. Second, the policy should involve some mechanism for compensating those countries who will be hurt economically without requiring massive transfers of wealth that could undermine economic stability. Third, since climate change is potentially a global problem, any solution will require a high degree of consensus both domestically and internationally. Few countries want to relinquish sovereignty, especially when the policies in question can have large economic effects. A system that does not ultimately include developing countries will do little to achieve the goals of the UNFCCC because these countries are large future emitters of carbon and because the cheapest reductions will be found where carbon-intensive capital investments have not yet been made. Fourth, the regime must allow new countries to enter with minimum disruption and also allow a core group of countries to continue to participate even if other countries exit the system at certain times. A system involving many countries that doesn’t survive changing composition over time is destined to fail since the reality is that a country’s commitment to the regime is a function of the commitment of political incumbents at any point of time. Given these criteria, the next step in climate change policy should not be in the direction taken by the negotiators at Kyoto. We propose here a different approach: one that sets the price of emission permits in the short run, but over the longer run, allows the market to determine the price of emission allowances. Show more