Abstract
By adopting the Paris Agreement on climate change, the world community has agreed on global goals for climate policy. However, by relying on voluntary contributions and respecting “national circumstances”, it does not ensure efficient and equitable country policies. To derive guidelines for a fair burden sharing between countries, the paper applies welfare theory and combines it with the general equity principles. The procedure selects those “national circumstances” which are suitable for internationally acceptable policies. The concept is then compared to policies formulated by purely selfish countries. A convergence process closing the gap between country contributions and the optimum international climate policy is developed. It is argued that equity-based signals can be a forceful means supporting this process.
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Notes
While it is widely believed that energy taxes have a regressive impact and mostly hurt the poor, the contributions in Sterner (2011) show that fuel taxation is a progressive policy particularly in low income countries.
Bretschger and Valente (2011) derive the macreconomic impact of climate change in a dynamic setting.
See also Pierce (1988) for a general evaluation of equity in the sustainability debate.
The Kyoto protocol was not able to solve the coordination problem, major emittors were even not included in the agreement at all.
See the preamble paragraph 3, saying: “In pursuit of the objective of the Convention, and being guided by its principles, including the principle of equity and common but differentiated responsibilities and respective capabilities, in the light of different national circumstances”, and in Article 4, paragraph 1 stating: “To achieve the long-term temperature goal set out in Article 2, parties aim to reach global peaking of greenhouse gas emissions as soon as possible, recognizing that peaking will take longer for developing country Parties, and to undertake rapid reductions, thereafter, in accordance with the best available science, so as to achieve a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases in the second half of this century, on the basis of equity, and in the context of sustainable development and efforts to eradicate poverty” (UNFCCC 2015).
Concrete numbers can, e.g., be taken from Meinshausen et al. (2009). It is known that Cramton et al. (2015), Stiglitz (2015), and Weitzman (2014) have argued, it would be easier to negotiate a uniform carbon prices, but negotiating countries will always consider how each instrument affects their carbon emission potential for the future; Gollier and Tirole (2015) state that either a carbon tax or a global cap would constitute a formidable achievement.
When a global carbon market is established or taken as a reference point, carbon has a uniform price, so that the value of a country carbon budget can be assessed like with any other asset. Then, the country carbon budget can be analyzed like any other component of household wealth.
See BASIC (2011).
As an example, it has been calculated that the realisation of all the intrended contributions of the countries to global climate policy will cause a major downward shift of prices of green technologies which will benefit the whole world economy.
It might sound paradox to reward a carbon efficient country with a higher carbon budget, but the budget is the only means for compensation available in this approach. On the permit market, the budget can be sold, if unused, so that it becomes equal to any form of compensation.
See Bretschger (2013).
In the case of unequal weights of the parameters equity status and carbon budgets can still be calculated, see the ETH climate calculator at http://www.ccalc.ethz.ch.
Fossil fuels are subsidized in many oil-rich economies, while political resistance against raising fuel prices in the other countries is proof of high consumer rents of fossil use at the expense of the environment.
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Valuable comments of Andreas Schäfer and Max Meulemann are gratefully acknowledged.
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Bretschger, L. Equity and the convergence of nationally determined climate policies. Environ Econ Policy Stud 19, 1–14 (2017). https://doi.org/10.1007/s10018-016-0161-6
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DOI: https://doi.org/10.1007/s10018-016-0161-6