Abstract
No country can capture the full benefit of its efforts to provide global public goods such as protecting the climate or providing new medicines or technologies to a growing world. As a result, there is persistent under-investment in combating climate change and promoting innovation. This Article proposes a new solution to this well-studied social dilemma: matching commitments. It explains how matching commitments could be used in countries that adopt climate regulation to encourage action by other countries around the world. And it shows why this solution is better than other commonly-proposed solutions for encouraging action in recalcitrant countries.
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Notes
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Brewster (2010), pp. 245, 268, 304 (“The planet’s atmosphere is a public good, and climate change constitutes a public bad.”).
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European Commission (2014).
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Relying on unilateral mechanisms is important because persistent distributional disagreements have deadlocked climate negotiations. Coleman (2014), pp. 88, 105.
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Boadway et al. (2009).
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See also Wood (2011), (surveying other game theoretic solutions to climate change).
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Brewster (2010), pp. 245, 268, 278, (“The conventional wisdom among interest groups, policymakers, popular commentators, and academics is that national climate change legislation is useful not because of its direct environmental effects but because it puts the nation on a path to achieving a comprehensive climate change solution.”).
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Hunter (2010), pp. 4, 5, (outlining the Bali Action Plan created to provide a framework for the UNFCCC’s Copenhagen Summit).
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United Nations Framework Convention on Climate Change (2009).
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Hongju Koh (2017), pp. 338, 352.
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Hongju Koh (2017), pp. 338, 352.
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New Zealand uses such a system, Government of New Zealand, Ministry for the Environment (2011), p. 6, [hereinafter Emissions Trading Scheme], as do several U.S. states, Martella, supra note, at 19:30. New Zealand, however, currently allows covered entities to purchase unlimited allowances at a price of $12.50 NZ, Emissions Trading Scheme, supra at 29, which means that it does not absolutely cap emissions—indeed if there were widespread purchase of allowances at this price, the scheme would be closer to a carbon tax. See also Stavins (2008), pp. 367–371, (describing cap-and-trade systems of EU and U.S. states).
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European Commission (2008), p. 9, A cap-and-trade system limits emissions by capping the number of available permits, and keeps cost low by allowing emitters to purchase more permits from other polluters that can reduce their emissions cheaply. See, e.g., Stavins (1997), supra note [__] at pp. 305–307. The administrator of such a regime may distribute allowances to emitters based on their past emissions, simply auction them to the highest bidder, or adopt a more complex distribution system. Stavins (1997), pp. 305–307 (describing each system and noting that auctioning these permits makes a cap-and-trade system more like a carbon tax).
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Carbon taxes have been adopted in Costa Rica, Switzerland, and the Canadian province of British Columbia. Meyer (2010), p. 6; Schürch (2011), pp. 15–20; Bauman and Hsu (2012), (describing British Columbia’s tax). Although Australia adopted a carbon tax in 2011, Clean Energy Act 2011, Act No. 131, available at http://www.comlaw.gov.au/Details/C2011A00131, it is likely to be repealed by the incoming Liberal/National government, Taylor (2013).
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Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards, 75 Fed. Reg. 25,324, 25,330 (May 7, 2010).
- 18.
Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule, 75 Fed. Reg. 31514 (June 3, 2010) (requiring new sources to keep greenhouse gas emissions below a level set by local permitting authorities). The Environmental Protection Agency (“EPA”) also proposed new standards for greenhouse gas emissions from fossil-fired utilities. Standards of Performance for Greenhouse Gas Emissions from New Stationary Sources: Electric Utility Generating Units, 79 Fed. Reg. 1430 (Jan. 8, 2014). Finally, EPA is due to release greenhouse gas standards for existing fossil fuel plants, Presidential Memorandum, Power Sector Carbon Pollution Standards (Jun. 25, 2013), http://www.whitehouse.gov/the-press-office/2013/06/25/presidential-memorandum-power-sector-carbon-pollution-standards, and new and modified refineries in the near future, Proposed Settlement Agreement, 75 Fed. Reg. 82,390 (Dec. 30, 2010) (announcing proposed settlement agreement, addressing greenhouse gas emissions standards for certain refineries).
- 19.
These regulations commit China to increase its energy efficiency by 20% between 2005 and 2010, and mandate that 16% of its energy come from renewable sources like wind, biomass, solar, and hydropower by the year 2020. Leggett et al. (2008), pp. 19–21; China has also committed to improving the efficiency of the power sector by shutting down old, inefficient coal plants and building efficient new plants. Leggett et al. (2008), p. 21; Most recently, China has announced plans to launch pilot greenhouse gas emissions trading programs in six provinces before 2013, with a possible national scheme by 2015. Reuters (2011); Finally, China is also pursuing miscellaneous measures such as promoting nuclear power. Leggett et al. (2008), supra at p. 21.
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- 22.
That is, 0.02 + 0.5 × 0.02 + 1.2 × 0.02 + 0.75 × 0.02 = 0.020 + 0.010 + 0.024 + 0.015 = 0.069.
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- 24.
Specifically, each country would act as though it was covered in a bubble that trapped all greenhouse gas emissions, limiting their warming effect to the emitting country. As a result, countries like Russia that may have less to fear from climate change, might still emit more than is globally optimal, but they would at least act as though they were harmed by their own emissions. Boadway et al. (2009) and Wood (2011).
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Coleman, J.W. (2021). Matching Commitments: A New Approach to Regulation of the Commons. In: Mathis, K., Tor, A. (eds) Law and Economics of Regulation. Economic Analysis of Law in European Legal Scholarship, vol 11. Springer, Cham. https://doi.org/10.1007/978-3-030-70530-5_14
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