Geoscience Reference
In-Depth Information
This discussion suggests that the major motivation for countries to
join the carbon treaty would come from the stigma and messiness
of being outside the carbon-compliant region. But would it work? The
main cost of noncompliance would be an array of proceedings that
would be visible, costly, contentious, and undesirable for noncomply-
ing countries. In effect, there would be a free-trade zone of complying
countries and a tangle of regulations and penalties for noncomplying
countries.
While harnessing the world trading system to a climate agreement
is the most promising route to overcoming the tendency of countries to
ride free on the efforts of others, it must be used with great caution. The
current free and open trading system is the result of hard-fought efforts
to combat protectionism. It has produced large gains to living standards
around the world. It should be tied to a climate-change agreement only
if the benefi ts to the climate regime are clear and the dangers to the
trading system are worth the benefi ts.
Let's summarize the lessons on devising incentives to participate.
To begin with, past approaches such as the Kyoto Protocol contained
completely inadequate enforcement mechanisms, with the result that
countries could stay out without any adverse consequences. Trade mea-
sures that impose duties on imports from nonparticipating countries
are likely to be the most useful instrument for overcoming free riding
and inducing participation. However, trade measures are only indirectly
related to emissions, and the need to calibrate and apply them effectively
is uncharted territory in environmental and trade policy.
Establishing effective policies to slow global warming will require
four important steps. First, it will require focusing on raising the price
of CO
2
and other GHG emissions in the marketplace. Second, because
free markets will not do the job, it will require nations to use either a
cap-and-trade or carbon tax system to raise CO
2
prices. Third, it will
require most nations to agree to the fi rst two steps and to coordinate
their policies at a global level. And fi nally, an international climate-
change agreement must contain an effective mechanism to combat free
riding.
