This article was originally published in French at
where, as nearly always at the French edition of their blog, no-one comments except me. Since the Conversation very decently allows free use of its articles, and since the author is a Nobel Prizewinner for Economics, it seemed only reasonable to translate his thoughts and make them available to a wider audience.
Unlike the Conversation, we don’t receive funding from universities and charitable foundations set up by dead billionaires. Nor do we censor comments because they quote “unreliable” sources. But we do have an intelligent, though sceptical, readership who I hope will provide Professor Tirole with the conversation he didn’t get at the Conversation.
The Paris Agreement: Still a Long Way to Go
The COP21 was meant to result in an effective, fair and credible agreement. Mission accomplished? The agreement is ambitious. The goal is now “well below 2°C” and the world should not produce net emissions of greenhouse gases after 2050. The funds for developing countries after 2020 will exceed the100 billion dollars a year that had been decided at Copenhagen in 2009. Unfortunately, in practice, the compromise agreement falls far short of the aims.
From the point of view of effectiveness in the fight against global warming, carbon pricing, recommended by the vast majority of economists and many decision-makers, but a red rag for Venezuela and Saudi Arabia, was quietly dropped by negotiators, seriously jeopardizing the achievement of the climate goal, as noted by the Nicolas Hulot Foundation.
However, we need a universal carbon price consistent with the objective of a 1.5–2°C temperature rise. Proposals for differential pricing according to the country open up a Pandora’s Box, (who pays what?) and, furthermore, are not environmentally friendly for the most part. Emissions growth will come from poor developing countries, and under-pricing the carbon emitted by these countries will not achieve the objective, especially as a high carbon price in developed countries will encourage the location of GHG emitting production in countries with a low carbon price, thus canceling out the efforts of rich countries.
From the point of view of justice, developed countries have not detailed their contributions to developing countries, leaving the latter dependent on the generosity of the former. It’s notorious that collective promises are never kept. It’s essential that these transfers are specified and are in addition to existing promises, and not existing aid redirected to green projects, or vague promises of loans or transfers which may never materialise.
And what about credibility? The agreement pushes back a concrete commitment of countries to reduce their emissions to a later date. The strategy of “wait and see’ and voluntary commitments to reduce emissions (INDC) won the day. The undertakings are not comparable, they are insufficient, would be costly to implement, and it’s a safe bet that, since they are not binding, they will not be implemented anyway (A promise is only binding on he who believes it).
The negotiation on the subject of transparency was also a failure. It is difficult to understand why countries of the southern hemisphere should not be subject to the same monitoring, reporting and verification as others. Northern, developed countries should be generous, but not close their eyes.
Finally, the idea that we will adopt a more virtuous path through revising targets every five years ignores what economists call the ratchet effect: can we be sure that a country will improve its future negotiating position by faithfully respecting its promises rather than “dragging its feet”? We always expect more from the best behaved student.
Three failures? In fact they come down to one and the same. It is futile to seek ambitious commitments on green funds from developed countries, without also establishing a mechanism for achieving climate goals. And we can’t expect developing countries to make the necessary efforts without a credible compensation. It takes two to tango.
This bleak picture should not obscure the reasons for optimism. First, public concern has been growing in recent years. Secondly, all the countries present at the COP21presented predictions for their pollution trajectories, contrary to what happened at Kyoto in 1997. It’s a symbolic progress.
Finally, more than 40 countries, including theUnited States, China and Europe, have markets for trading emission rights, albeit with ceilings which are too generous, resulting in very low carbon price. But at least they show willing to use a rational policy against global warming. These carbon markets will one day be connected together to form a more coherent and effective global market although the question of the correct exchange rate* will remain thorny. We have to build on this dynamic.
While it is important to maintain a dialogue at a global level, the UN process has shown its very predictable limits. Negotiating among 195 nations is incredibly complex. We have to create a “climate coalition” including major polluters both current and future. I do not know if this should be the G20 or a smaller group (for example, the five biggest polluters: Europe, the United States, China, Russia and India, representing 65% of global emissions). The coalition members would put pressure on the World Trade Organization, which, in the case of “environmental dumping,” could authorize a border tax on countries refusing to impose a carbon price in line with climate targets.
Finally, it should simplify the negotiation arranging subjects in order from the simplest, which should be officially recorded, to the more complex, which should be the real subject of negotiation. The fight against global warming is not an economic problem (we know how to do it), but a geopolitical one. The difficult but unavoidable, questions involve respect for agreements and, even more, of financial transfers between countries. Let’s stop beating around the bush.
* It has to be established whether a right to emit one tonne in a particular system is equivalent to the same right in another system. The most “virtuous” countries – those having issued fewer rights – might then feel disadvantaged.