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Making Kyoto Work

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Back in 1997, many hoped that the Kyoto accords would be the final word on global cooperation to stop climate change. But with the refusal of key nations—most notably the United states—to sign on, this landmark protocol of the United Nations Convention on Climate Control has produced more controversy than results.

The future of the accords became an even greater question during last summer’s G8 Summit. There, President Bush pegged his first significant acknowledgment of the need to address global warming to a proposal to start an entirely new round of negotiations, outside the framework of the United Nations.

But Professor Larry Karp, chair of Agricultural and Resource Economics, casts doubt on the impulse to start from scratch. “Kyoto is the only game in town,” he says. “We need to be thinking about how to modify it.”

In a recent Giannini Foundation working paper, Karp and co-author Jinhua Zhao of Iowa State University propose amending Kyoto to allow signatories to pay a fine as an alternative to meeting abatement goals. Such a fine, he says, would offer nations insurance against the potentially high costs of decreasing emissions. The money collected from nations who do not meet their emissions goals would be paid out among all signatories. Together, the cost ceiling and payout should make ratification of the treaty more attractive to everyone. Even better, Karp’s plan would also give the Kyoto agreement some teeth, allowing the U.N. to actually enforce it.

In theory, this system would also give new signatories the clout to pressure fine-paying nations toward abatement. Karp poses a theoretical example: “Suppose that there are initially 10 members and that the nominal fine is $100. If a signatory decides not to abate, it pays $100. All signatories get an equal share of that fine. That’s a $10 rebate, which makes the cost of not abating $90. Now, suppose that a new country joins: the rebate for everyone is now $100 divided by 11, so the cost of not abating increases to about $91. This may seem like a small increase, but each of the signatories faces this increase, so the effect of it on the aggregate level of abatement can be large.”

-Stephanie Ludwig


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