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Greenhouse gas emissions: a theoretical framework and global solution

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In Brief

The Kyoto Protocol, as 'the first game in town', represents significant progress towards reducing global emissions. Its cap-and-trade mechanism and flexible market-based implementation have been valued highly.

Meanwhile, its flaws have also been widely criticised. Particularly its small coverage and ineffectiveness, and the lack of incentive for countries (especially developing countries) to participate. To effectively fight against global warming, we need a more effective post-Kyoto architecture.

The DRC team has proposed an architecture that attempts to improve on these shortcomings.

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All countries, including developing countries are covered, and the unclear ‘common but differentiated responsibilities’ of each country are clearly represented by the balances of their National Emission Accounts (NEAs). An open-and-compatible solution on both international collaborative mechanisms and domestic approaches is also established.

While climate change may be a diabolical problem, the essence of any solution can be stated simply: how to equitably allocate the right to emit green house gasses (GHG).

This problem is best dealt with by nations in cooperation. No matter how much an individual country emits, the harm from those emissions is borne by everyone on earth. Equity requires that no country has the right to harm (through emissions) to others without compensation. We offer the following proposition:

A country does not impose extra external emission harm to any others, if and only if each country’s per capita emissions are equal.

Accordingly, equal per capita emissions determine a country’s emission entitlements. If a country’s actual emissions is greater than its entitlements, it should compensate the others for its extra emissions, and vice versa.

Time is an essential element of our proposal. Equal per capita emissions should apply both across countries and over time. We consider both past and future. According to each country’s initial emission rights, actual emissions, and traded emissions, we can establish a NEA for each country. The current balance on a countries NEA exactly represents its country’s differentiated responsibilities’ to reduce emissions.

By the target year (say 2050), each country’s balance on its NEA is the past emission balance plus the quota allocated between now and the target date. Countries must stay below their cap, unless they purchase permits from other countries through the international emission trade scheme (IETS) or any other channel.

Under the DRC’s scheme, three steps are proposed towards a global agreement:

Step 1: Define each country’s emission rights from a starting point to the present, according to a per capita principle. We can then establish an NEA for each country, and turn the unclear ‘historic responsibilities’ of the over-emitted countries into clear NEA deficits, and into surpluses for others. The balance of each country exactly represents its ‘historic responsibilities’ or rights.

Step 2: Based on advice from science, allocate a global emission budget for the years to the target date. The global emissions budget then needs to be allocated according to the per capita principle. The balance of past NEAs plus the future allocated budget determines each country’s new emission quotas to the target date.

Step 3: Establish an open and compatible solution for both the international collaborative mechanism and domestic emission reduction approach which incorporates the various existing proposals. The various solutions can then co-exist and compete with each other.

A numerical example may help to explain. Consider a hypothetical world consisting of two countries: a developed country and a developing country.

The developed country has a population of 200 million and currently emits 2 tons of GHG per capita. Until now, it has emitted a sum of 28 billion tons of GHGs (140 tons per capita).

The developing country has a population of 400 million and currently emits 1 ton of GHG per capita. Until now, it has emitted a sum of 14 billion tons of GHGs (35 tons per capita).

This equates to a total of 42 billion tons of GHG emitted to date (28 plus 14), or 70 tons per capita (42 billion shared by 600 million people). On an equal per capita basis, the developed country has over-emitted by 70 tons per capita, while the developing country has a surplus entitlement of 35 tons per capita. This represents the respective NEA balances over the past.

Based on scientific estimates, the hypothetical world can sustain a further 30 billion tons of emissions to the target date (50 tons per capita). This entitles the developed country, with 200 million people, to 10 billion tons, and the developing country with 400 million people to 20 billion tons.

Combining the current balance with future entitlements, the developed country target is 14 billion tons less than zero, while the developing country target is 14 billion tons above zero. If these targets are met (allowing for trading and other mechanisms) both countries will have equal per capita emissions over the entire period: an equitable outcome. Note that the developed country does not have to significantly reduce its real emissions – it only needs to balance its NEA through various channels, such as international emission trading system (IETS), international emissions reduction funds, technology transfer, clean development mechanism (CDM).

Our proposal is based on the fair, simple and consistent principle of equal per capita emissions. It encompases all countries and eliminates the need to classify countries into developed and developing categories. It would also be effective, since the global reduction target is built into the proposal.

Replacing the vague ‘common but differentiated responsibilities’ with clearly defined responsibilities derived from historic action would be a major step forward and is a significant advantage of our proposal. Each country’s emission balance exactly represents its responsibility for emissions reduction.

Further, both developed and developing countries will have sufficient incentive to reduce their emissions, since the more a country reduces, the more it can sell (or the less it is required to buy) in the IETS market. Emissions reduction then becomes a self-interested behavior.

It also solves a problem of history. For the countries not being covered by the Kyoto Protocol or that have failed to meet their commitments, their contribution and responsibilities on emission reduction are clearly measured by their NEAs.

This article is drawn from the paper ‘Greenhouse Gas Emissions: A Theoretical Framework and Global Solution’ in Ross Garnaut, Ligang Song and Wing The Wood (eds) ‘China’s New Place in A World in Crisis

One response to “Greenhouse gas emissions: a theoretical framework and global solution”

  1. While the equal per capita rights of emissions are a good approach, to mingle the present task with historical emissions makes the proposal difficult to realise and accept by industrialised countries. Many people in industrialised countries who enjoyed the benefits of high emissions in the past have died. Do you want who to pay for their “over the equal per capita emissions?”

    So it would be better to have two parts, first the present and future and the other part for the past. Focus on the present and future and reach an agreement.

    For the past, it is up to those rich countries to “voluntarily” make some financial, technological and other assistance to developing countries.

    Only this is a practical way to reach a fair and simple deal. Attempting too much may mean achieving little.

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