POL 4410Global 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

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

• 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• 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.