Problems of equity and efficiency in the design of international greenhouse gas cap-and-trade schemes

Harvard Environmental Law Review

Volumn 33, Issue 2, 2009, Pages 405-430

  Johnston, Jason Scott ^a  

^a Program on Law

Author keywords

[No Author keywords available]

Indexed keywords

CONFERENCE PROCEEDING; EMISSIONS TRADING; ENVIRONMENTAL ECONOMICS; EUROPEAN UNION; GREENHOUSE GAS; POLLUTION CONTROL; SULFUR DIOXIDE;

EID: 70249096681     PISSN: 01478257     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Conference Paper

References (103)

1. See, e.g., Richard B. Stewart & Jonathan B. Wiener, Reconstructing Climate Policy (2003).
2. For a representative statement of this conception of climate change equity or fairness, see teve Vanderheiden, Atmospheric Justice: A Political Theory of Climate Change 45-47 (2008).
3. See Stewart & Wiener, supra note 1.
4. Intergovernmental Panel on Climate Change, Climate Change 2007: The Physical Science Basis (Susan Solomon et al. eds., 2007) [hereinafter IPCC, The Physical Science Basis], available at http://www.ipcc.ch/ipccreports/ar4-wgl. htm;
5. Intergovernmental Panel on Climate Change, Climate Change 2007: Impacts, Adaptation and Vulnerability (Martin Parry, et al. eds., 2007) [hereinafter IPCC, Impacts, Adaptation and Vulnerability], available at http://www.ipcc.ch/ ipccreports/ar4-wg2.htm.
6. On North America, see IPCC, The Physical Science Basis, supra note 4, at 859, 890 fig. 11.12;
7. on Russia, see V. P. Meleshko et al., Anthropogenic Climate Change in Russia in the 21st Century: An Ensemble of Climate Model Projections, 29 Russ. Meteorology & Hydrology 38, 40 (2004), available at http://www.ifaran. ru/-mokhov/MeleshkoEtA12004-MiG4.eng.pdf ("Annual mean increase of precipitation over the entire territory of Russia dramatically exceeds the [projected] global changes.");
8. IPCC, The Physical Science Basis, supra note 4, at 875 fig. 11.5, 883 fig. 11.9.
9. On the United States, see sources cited and discussed in Jason Scott Johnston, Climate Change Confusion and the Supreme Court: The Misguided Regulation of Greenhouse Gas Emissions Under the Clean Air Act, 84 Notre Dame L. Rev. 1, 26-29, 33-36 (2008);
10. on agriculture in Canada and Russia, see William R. Cline, Global Warming and Agriculture, Fin. & Dev., March 2008, at 23, 25 (finding that in a Ricardian equilibrium model of agriculture and climate, warming generates no change in agricultural productivity in either Russia or Canada, but that when carbon fertilization effects are taken into account, averaged across the Ricardian economic model and a crop-based model that does not incorporate equilibrium adjustment by farmers, Russia can expect a six percent increase in agricultural productivity, while Canada can expect a twelve percent increase in agricultural productivity).
11. Cf. Robert Mendelsohn et al., The Distributional Impact of Climate Change on Rich and Poor Countries, 11 Env't & Dev. Econ. 159 (2006) (finding that poor countries will suffer the bulk of damages from climate change in large part because of their location in the low latitudes where temperatures are already high).
12. IPCC, Impacts, Adaptation and Vulnerability, supra note 4, at 393 (cautioning, however, "that these will be outweighed by the negative effects of rising temperatures worldwide").
13. IPCC, The Physical Science Basis, supra note 4, at 850 (emphasis omitted).
14. Id. at 851 (emphasis omitted).
15. Id. (emphasis omitted).
16. See, e.g., Andrew C. Revkin, Poorest Nations Will Bear Brunt as World Warms, N. Y. Times, Apr. 1, 2007, at A1.
17. IPCC, Impacts, Adaptation and Vulnerability, supra note 4, at 457 (internal citation omitted).
18. Id. at 495 (internal citation omitted).
19. See, e.g., Alexandra Berzon, Tuvalu Is Drowning, Salon, Mar. 31, 2006, http://www.salon.com/news/feature/2006/03/31/tuvalu/(last visited Apr. 30, 2009) (on file with the Harvard Environmental Law Review).
20. IPCC, Impacts, Adaptation and Vulnerability, supra note 4, at 697.
21. Id. at 711.
22. See, e.g.. Ramus Heltberg et al., Addressing Human Vulnerability to Climate Change: Toward a "No-Regrets" Approach, 19 Global Envtl. Change 89, 90 (2009);
23. Mendelsohn et al., supra note 6.
24. Perhaps the most dramatic and apparently unexpected example of the resilience of traditional economic systems comes from the Sahelian region in Africa, where satellite images confirm that over the last thirty years, through changes in farming and husbandry practices, at least 7.4 million acres have been reforested in Niger. See Lydia Polgreen, In Niger, Trees and Crops Turn Back the Desert, N. Y. Times, Feb. 11, 2007, at A1;
25. see also Fabiano Toni & Evandro Holanda Jr., The Effects of Land Tenure on Vulnerability to Droughts in Northeastern Brazil, 18 Global Envtl. Change 575 (2008) (presenting evidence that traditional farming systems are not necessarily more vulnerable to drought).
26. Mohammed Eazlul Karim & Nobuo Mimura, Impacts of Climate Change and Sea-level Rise on Cyclonic Storm Surge Floods in Bangladesh, 18 Global Envtl. Change 490 (2008).
27. See, e.g., IPCC, The Physical Science Basis, supra note 4, at 869 (discussing projections for the Sahelian region of Africa and noting that "[i]ndividual models generate large, but disparate, responses in the Sahel").
28. See, e.g., Andrew J. Leach, The Welfare Implications of Climate Change Policy, 57 J. Envtl. Econ. & Mgmt. 151, 152 (2009) (discussing how the benefits of climate change policies are much more uncertain than the costs);
29. Juan-Carlos Altamirano-Cabrera & Michael Finus, Permit Trading and Stability of International Climate Agreements, 9 J. Applied Econ. 19, 26 fig. 1 (2006) (showing how benefits of climate change cap-and-trade regimes vary widely across countries).
30. Sonja Boehmer-Christiansen, Global Climate Protection Policy: The Limits of Scientific Advice, Part 2, 4 Global Envtl. Change 185, 194 (1994).
31. See S. Fred Singer, The Kyoto Protocol: A Post-Mortem, 4 New Atlantis 66, 70 (2004);
32. see also Charles D. Kolstad, The Simple Analytics of Greenhouse Gas Emission Intensity Reduction Targets, 33 Energy Poly 2231, 2232 (2005) ("Germany and the UK did very well... in reducing the GHG intensity of [their economies during the 1990s], though the absorption of East Germany made this somewhat easier for Germany and the introduction of North Sea gas (and phase out of coal) made this easier for the UK.").
33. Miranda A. Schreurs & Yves Tiberghien, Multi-Level Reinforcement: Explaining European Union Leadership in Climate Change Mitigation, Global Envtl. Pol., Nov. 2007, at 19, 33.
34. Id. at 39;
35. see also Cass R. Sunstein, The World vs. the United States and China? The Complex Climate Change Incentives of the Leading Greenhouse Gas Emitters, 55 UCLA L. Rev. 1675, 1689 tbl. 3 (2008).
36. For example, the productivity and quality of northern European vineyards is expected to increase.
37. See Orley Ashenfelter & Karl Storchmann, Using a Hedonic Model of Solar Radiation to Assess the Economic Effect of Climate Change: The Case of Mosel Valley Vineyards 17-18 (Nat'l Bureau of Econ. Research, Working Paper No. 12, 380, 2006), available at http://www.ssrn.com/abstract=921546. Other agricultural impacts in Europe may be positive as well.
38. See Gianpiero Maracchi et al., Impacts of Present and Future Climate Variability on Agriculture and Forestry in Temperate Regions: Europe, 70 Climatic Change 117, 131-32 (2005).
39. See Altamirano-Cabrera & Finus, supra note 22, at 26 fig. 1.
40. See id. at 26.
41. See id. at 26 fig. 1.
42. 2 Emissions from Fossil Fuel Consumption and Cement Production, 35 Geophysical Res. Letters 1, 1 (2008);
43. Maximillian Auffhammer & Richard T. Carson, Forecasting the Path of China's CO2 Emissions Using Province-Level Information, 55 J. Envtl. Econ. & Mgmt. 229, 229-30 (2008).
44. The relatively large marginal benefits to the United States presented by Altamirano-Cabrera and Finus, supra note 22, at 26 fig. 1 are, it must be stressed, somewhat dated. Recent work discussed in Johnston, supra note 6, at 21-36, for example, suggest that the United States might get very real agricultural, recreational, and health benefits from a moderately wanner climate, thus suggesting that the benefits to the United States from cutting GHG emissions may well be much smaller than Altamirano-Cabrera and Finus estimate.
45. On benefits and costs to Brazil and India, see Altamirano-Cabrera & Finus, supra note 22, at 26 fig. 1, 27 fig. 2.
46. 2 emissions in 2004).
47. For a discussion of environmental treaty-making, including, but not limited to, GHG treaties, see, for example, Scott Barrett, Environment and Statecraft (2003).
48. See sources cited and discussed in Johnston, supra note 6, 21-41.
49. Consider just the impact on water resources in the western United States: one study estimates that a five degree centigrade increase in temperature would increase withdrawals of Colorado River basin water by so much that welfare would fall by $175 million (in 1994 dollars).
50. See Brian Hurd et al, Economic Effects of Climate Change on U. S. Water Resources, in The Impact of Climate Change on the United States Economy 133, 160 tbl. 6.5 (Robert Mendelsohn & James E. Neumann eds., 1999).
51. Gerard H. Roe & Marcia B. Baker, Why Is Climate Sensitivity So Unpredictable?, 318 Science 629 (2007).
52. Id. at 630.
53. For a succinct explanation of the role of water vapor as a GHG and the water vapor feedback effect
54. see Jose P. Peixoto & Abraham H. Oort, Physics of Climate 30 (1992).
55. See also IPCC, The Physical Science Basis, supra note 4, at 632-35.
56. Roe & Baker, supra note 38, at 631.
57. For a lucid explanation of the standard analysis
58. see Charles D. Kolstad, Environmental Economics 183-88 (2000).
59. Nicholas Stern, The Economics of Climate Change: The Stern Review (2007) is perhaps the best known economic analysis that discounts by very little remote but significant benefits of reducing the risk of catastrophic harm from global warming.
60. See id. at 35 (arguing that "if we treat the welfare of future generations on par with our own," it is hard to see any ethical justification for discounting future benefits).
61. Consider for example, cloud feedback. Summarizing the enormous uncertainty surrounding this particular feedback, Graeme L. Stephens, Cloud Feedbacks in the Climate System: A Critical Review, 18 J. Climate 237, 246 (2005) says: "the diagnostic tools currently in use by the climate community to study [cloud] feedback, at least as implemented, are problematic and immature and generally cannot be verified using observations."
62. 2 doubling becomes very small the higher the temperature increase; hence when policy attaches weight to such very large, catastrophic temperature increases, the probability that such increases are not realized, and that policy is ex post wrong, increases.
63. For a graphical representation, see Kolstad, supra note 42, at 183-85 fig. 10.4.
64. On relative carbon dioxide emissions, see Gregg et al., supra note 31, at 2 fig. 1.
65. See also Sunstein, supra note 26, at 1688 tbl. 8.
66. See, e.g., Stewart & Wiener, supra note 1, at 66.
67. See Altamirano-Cabrera & Finus, supra note 22, at 29.
68. See id. at 27 fig. 2.
69. See Stewart & Wiener, supra note 1, at 42 (arguing that "many and probably most" developing countries have limited resources and have more immediate and pressing priorities than long-term climate protection).
70. See supra note 33 and accompanying text.
71. See, e.g., Altamirano-Cabrera & Finus, supra note 22.
72. For further details on such per capita schemes, see Eric A. Posner & Cass R. Sunstein, Should Greenhouse Gas Permits Be Allocated on a Per Capita Basis?, 97 Cal. L. Rev. 51 (2009).
73. See also Jeffrey Frankel, Formulas for Quantitative Emissions Targets, in Architectures for Agreement 31, 40 (Joseph E. Aldy & Robert N. Stavins eds., 2007) (noting that advocacy of equal per capita emissions rights has "long been India's position").
74. See, e.g., Stewart & Wiener, supra note 1, at 59-75.
75. See sources cited infra Part III. C. 2.
76. U. S. C. A. §§ 7651a-o (1990).
77. See 42 U. S. C. A. § 7651b (b) (setting out the criteria for trades).
78. See A. Denny Ellerman et al., Markets for Clean Air: The U. S. Acid Rain Program 109-196, 253-296 (2000).
79. Id. at 109.
80. See EPA, EPA-430-R-06-015, Acid Rain Program: 2005 Progress Report 7 (2006) (noting that the penalty for non-compliance set a $2000 penalty that went into effect in 1990 but has been adjusted annually for inflation).
81. 2 Trading Program, in Emissions Trading: Environmental Policy's New Approach 115, 117 (Richard F. Kosobud et al. eds., 2000).
82. See discussion supra Part III. A.
83. Niels Anger, Emissions Trading Beyond Europe: Linking Schemes in a Post-Kyoto World, 30 Energy Econ. 2028, 2035-36 (2008).
84. Id. at 2035.
85. Id. at 2035, app. A1 tbl. 3, available at http://dx.doi.Org/10.1016/j. eneco.2007.08.002;
86. see also Christoph Bohringer et al., Assessing Emission Regulation in Europe: An Interactive Simulation Approach, 26 Energy J. 1 (2005).
87. See Euractiv, EU Emissions Trading Scheme (2009), http://www.euractiv. com/en/climate-change/eu-emissions-trading-scheme/article-133629?-print (noting that the transport and building sectors are excluded from the ETS) (last visited May 12, 2009) (on file with the Harvard Environmental Law Review);
88. Deutsche Bank Research, New Era Unfolding for the Automobile Industry (2009), available at http://www.dbresearch.com/PROD/DBR-INTERNET-DE-PROD/ PROD0000000000239030.pdf (noting the very high abatement costs for the German auto industry and the complex political compromises necessary to bring the industry, eventually, into the ETS).
89. Marginal abatement costs in the German auto industry have been estimated as ranging from 260-1530 Euro, almost ten times more than in the ETS trading segment. Ferdinand Dudenhöffer & Marcus Krüger, Kohlendioxid: Zu viele unter-schiedliche Preise für den Autofahrer, 61 ifo Schnelldienst 17 (2008).
90. Anger, supra note 64, at 2039-40.
91. Id. at 2039, 2046. For a succinct summary of these and other key aspects of the Kyoto Protocol
92. see Joseph E. Aldy & Robert N. Stavins, Introduction: International Policy Architecture/or Global Climate Change, in Architectures for Agreement, supra note 54, at 1, 8-9.
93. For an introduction and further background, see United Nations Framework Convention on Climate Change, The Mechanisms under the Kyoto Protocol: Emissions Trading, the Clean Development Mechanism and Joint Implementation, http://unfccc.int/kyoto-protocol/mechanisms/items/1673.php (last visited April 25, 2009) (on file with the Harvard Environmental Law Review).
94. Kathryn Harrison & Lisa Mcintosh Sundstrom, The Comparative Politics of Climate Change, Global Envtl. Pol., Nov. 2007, at 1, 3.
95. See Michael W. Wara & David G. Victor, A Realistic Policy on International Carbon Offsets (Stanford Program on Energy & Sustainable Dev., Working Paper No. 74, 2008), available at http://iis-db.stanford.edu/pubs/ 22157AVP74-final-final.pdf
96. Id. at 9.
97. Id. at 11.
98. Id.
99. Id.
100. Id. at 12-14.
101. Id. at 13.
102. Id. at 14.
103. Id. at 18 (recommending that the definition of CDM credits be tightened, with the shortfall in developing country GHG emission reduction, and transfers, made up by direct bilateral aid for new technological and infrastructure investments in the developing world).