There are three current US stances which are inconsistent with this principle of ‘whoever benefits, pays’.
Firstly, it is inconsistent with this principle simply to compare the aggregate emissions of different countries. A characteristic of greenhouse gas emission is that no matter how much an individual country emits, the harm that emission does is borne by everyone on earth. To prevent externalities from emissions among different countries, the emissions quota of a country should equal to the average harm it does. If country A and country B both emit 2,000 units of greenhouse gas each and country A has 100 people, then its per capita emission is 20 units while if country B has 200 people, its per capita emission is 10 units. The overall per capita emission of the global (or the average harm of greenhouse gas emission) is about 13 units. Although the aggregate emission of both countries are the same, the harm (13) on the people in country B is higher than its own contribution to the problem, or its average emissions (10 ), while the harm (13) imposed on people in country A is much lower than the damage it does (20). People in country B are actually covering the costs for people in country A. These are the externalities involved. All other things equal, country A ought to reduce its per capita emission from 20 to 13, while country B has right to increase its per capita emission from 10 to 13 to eliminate the externalities. Alternatively, country B could transfer rights to emit (quota) to country A. This has nothing to do with whether a country is wealthy or poor. If country A is the US and country B is India or China, which of them has the right to ask the other to reduce emissions or to be compensated for emissions?
Secondly, it is inconsistent simply to compare emissions in production rather than to compare emissions embedded in the industrial goods each country consumes. An important reason why the unit GDP energy consumption and emission in the industrial countries is relatively low compared with developing countries is because their economies are service-based, and most of their high energy-consuming manufacturing industries have been transferred to the developing countries. As a ‘world factory’, about half of China’s emissions result from producing manufactured goods for industrial countries including the US. The developing countries benefit from the FDI and trade with the industrial countries but so do the developed countries. The embedded emissions in traded goods need to be re-considered when defining emission rights among countries.
Thirdly, it is inconsistent simply to compare the ‘current emissions’ without taking into account the ‘accumulated emissions’ of different countries. Greenhouse gas emissions are a result of industrialization. Since the industrial revolution in 18th century, industrial countries have been emitting without limitations and have benefited from the emissions. Accumulated emissions are overwhelming a product of industrial countries. This is a kind of externality between developed and developing countries. It is extremely difficult to estimate the accumulated emissions of the industrial countries. A simpler solution is to use the ‘benchmark’ approach to compensate developing countries, removing them of the obligation to cut their emissions by international treaty until their per capita GDP has increased to the level of industrial countries (the minimum level defined by the World Bank).
A fairer system for allocating emissions permits would use the concept of ‘per capita emissions’ to replace the ‘aggregate emissions’; use the concept of ‘embedded emissions in consumption’ to replace ‘ emissions in production’ and use ‘accumulated emissions’ to replace ‘current emissions’.
Most people accept the ‘right of developing countries to develop’ and special treatment for developing countries in cutting emissions. Accepting ‘development rights’ might lead to the same result as that suggested here but the rationale of ‘whoever benefits, pays’ is different and has nothing to do with if a country is developed or not.
Nonetheless, this argument is not to suggest that developing countries should not reduce their emissions. Rather, since climate change is a common challenge confronting all mankind, developing countries should also try their best to reduce greenhouse gas emissions, together with their developed counterparts.
To achieve this goal, we need a more constructive international mechanism. World emissions cuts can be classified into two different categories. One is an obligated cut to emissions imposed on the industrial countries. Another is a voluntary cut to emissions applicable to the developing countries. Though China is not required by the Kyoto Protocol to reduce its emission, the Chinese government has voluntarily set a target to reduce its unit GDP energy consumption and emissions by 20 per cent during the period of ‘11th-five year plan’ (2006-2010). Yet, effective collaboration on emissions reduction between the industrial and developing countries needs to be enhanced and expanded. Industrial countries need to provide technology and funding to assist the developing countries to reduce emissions.
The existing clean development mechanism (CDM) suggested in the Kyoto Protocol is indeed a good mechanism for the collaboration between developed and developing countries, and provides strong incentive for the two groups of countries to reduce the emissions. Nonetheless, CDM is far from sufficient and more channels need to be provided for all firms especially the SMEs in the developing countries to collaborate with their developed counterparts. An international emission trading system (IETS) between the developed countries and developing countries should also be established. At this stage, IETS only exists within the developed countries. If developing countries can establish their own domestic emission trading systems for voluntary emissions reduction, and these systems can be connected with the ETS in the developed countries such as EU ETS, this would significantly facilitate emissions reduction in developing countries and in the world as a whole.
‘The problem of carbon emmission rights allocation among all countries is a problem …’
Agreed Horatio, but only because the economically responsible solution only exists outside that framework. The problem is how to map or transpose emmission rights in a way that accomodates the transient nature not only of populations, but also comparative advantage due to natural resource distribution which is not only non-equitable but also discovered and then depleted.
[…] The challenges of international climate equity are well taken up by Yongsheng Zhang in this post. He suggests that emissions rights may be allocated on an equal per capita basis. Indeed equal per […]
Arguable equitable but comparative advantage is not accomodated e.g. if country A has bauxite and strong emission controls while country B has none of either; then the world will end up paying more in cash as well as CO2 to process bauxite in country B instead of country A.
nb – a CO2 tax on embedded emmissions doesn’t alleviate the problem: it probably wouldn’t recognise whether non-polluting manufacturing technologies were being used, and would increase the transport of bulky goods for no utility or economic benefit.
Hamlet appears to be mistaken in assuming that a Treaty of the Atmospheric Commons founded on Contraction & Convergence will support continued Business-As-Usual.
It will not. In fact, BAU is already over.
The very dynamic of converging the allocations of (tradable) GHG emission-entitlements toward per capita parity transforms the calculus firstly of just what is to be produced, and only secondarily of where the product will be processed.
Thus in the example Hamlet posed as problematic, firstly, under C&C all countries have a detectable value on their emission entitlement which they can trade at will; i.e there are no countries without de facto emissions constraints. This means that where the relevant volume of emission-entitlements is transferred, the recipient industrial processing will not be relocated,
Notably any such relocation would still use up those emission entitlements and thus nullify their value to country B.
Secondly, the function of county A having to purchase emission entitlement of course acts to raise the price of their product, thus making non-polluting alternative products and behaviours more competitive.
As examples, I look forward to the worldwide restoration of re-used glass bottles for drinks displacing the wasteful and disreputable provision, trashing & re-smelting of aluminium drink cans,
and, similarly, to the provision of extensive new rail transport displacing a further fraction of aluminium demand for the aircraft industries.
In this manner C&C does accommodate competitive advantage in the dynamic sense of encouraging its shift to those countries not merely with abundant sustainable resources (e.g. forestry, farmland, natural energy flux etc.) but particularly to those with the innovative drive and adaptability to rapidly reform both their industries and their social behaviours.
I wish Lewis.
Unless GHG allocations are made, the dynamic of convergence remains intangible. If a Treaty of AC exists and has signatory emmitters or States, I could find neither, so I can not address this ‘solution’ directly (links anyone?).
I respect the ideal that polluting goods and services should be taxed for externalities, and in principle the theory that they (or their customers)) could end up paying fairly for it in that way.
But the problem remains the allocation.
My earlier example (25 July) describes the situation, I believe, when equitable economic activities of individuals are going to be squeezed out, because they’re collocated nationally with others that (through international sponsorship) drive up the local cost of carbon.
If you are familiar with the resource ‘curse’ you shall recognise the parallel issue I raise.
Finally I think it is economically responsible to sympathise with innovative and industrious individuals, striving to maximise the utility of resource allocations, wherever and in whatever circumstances they find themselves.
[…] an ETS but we also need to demonstrate leadership in the management of global warming. There are good reasons why developed countries carry this responsibility. Gans’ starting-point is that wealthy countries […]
While there can be many different arguments, as Zhang and others may have done so, the most realistic and practical way in the most simplest manner, in concept, could be characterised as to apply a global carbon tax so to achieve whatever the target would need to be, then distribute this global revenue to the world population (maybe based on a certain time) equally, that is equal per capita. This will address many problems except the historical causes. But that point could be regarded as “bygone as bygone” (we won’t hold those dead people to be responsible for solving our future climate problems), if and when the current allocation can be done on an equal per capita basis.
Based on this principle, other scheme broadly consistent with this can be designed and implemented.