Of Climate Change and International Policy Architecture

by Samantha Guidon*

StavinsERobert Stavins, Albert Pratt Professor of Business and Government, Harvard University. Courtesy of Stephanie Nam/Penn Law.

On February 27, 2013, Harvard University’s Albert Pratt Professor of Business and Government Robert Stavins came to Penn for a presentation entitled “Climate Change, the IPCC, and International Policy Architecture” as a part of the Risk Regulation Seminar Series, an initiative jointly sponsored by the Penn Program on Regulation, the Wharton Risk Management & Decision Processes Center, and the Wharton Initiative for Global Environmental Leadership (Wharton IGEL).

After delving into the background of climate change logistics and the functions of the IPCC, Dr. Stavins explained some of the difficulties that accompany international climate policies. Pressing challenges include the international free-rider problem and the need for an overall cooperative approach towards a decrease in greenhouse gas emissions. The speaker argued for the establishment of a strong foundation through durable international institutions, that can ensure that environmental effectiveness, aggregate economic performance, and distributional impacts can be feasible for all entities involved.

Dr. Stavins then began to share his work on the Harvard Project on International Climate Agreements, which includes three levels of climate policy architecture:

  • Centralized (the Kyoto Protocol)
  • Harmonized (national carbon taxes)
  • Decentralized (linkage of cap and trade systems)

Each approach certainly has advantages and disadvantages. Centralized architectures, such as the Kyoto Protocol, are relatively complex and take into account concepts such as progressivity (requiring richer countries to incur more severe cuts), latecomers (gradual cuts for post-1990 emissions), and equalization (attempting to bring all countries involved on an levelized playing field).

In theory, centralized approaches are logical; however in practice they are relatively difficult to apply. For example, the Kyoto Protocol imposes a fee to a participating country if it doesn’t meet its annual goals, but does not penalize it financially if it leaves the agreement, a perverse incentive that makes it difficult to retain member countries. The second approach is a harmonized architecture that may consist of a national carbon tax, yet Dr. Stavins does not believe this to be a realistic approach due to the lack of political will and difficulty with transfer payments. Furthermore, a decentralized approach of linkages of national or regional tradable permit systems may serve as a functioning technique; however this approach presupposes an already advanced harmonized system within participating regions and/or countries. Three main takeaways from Dr. Stavins are:

  • A market-based approach is essential
  • The need for getting carbon prices right is necessary but not sufficient
  • The participation of developing countries is vital

After discussing policy architecture, Dr. Stavins moved into the number of climate negotiations that have taken place in addressing climate change on an international scale. Efforts began in 1992 with the UN Conference on Environment and Development in Rio de Janeiro with a focus on climate change and biodiversity. Stemming from those efforts, the first Conference of the Parties (COP) took place in 1995, which established the Berlin Mandate and the foundation for a forum to discuss international climate issues. Since then, several COPs have followed, including the most recent Doha Climate Change Conference in 2012. Dr. Stavins described Doha as relatively uneventful, with no progress but “causing no harm”. He added that the “baton was passed”, referring to the fact that while a solution has not been reached at this COP, negotiations and work on reaching cooperation on climate policy will continue. Dr. Stavins also mentioned the controversial “Loss and Damage” concept, a mechanism for compensating loss and damage relating to climate change, that was raised at Doha. Overall, it will be extremely interesting to see what occurs in Warsaw later this year.

StavinsE2Courtesy of Stephanie Nam/Penn Law.

Dr. Stavins concluded his presentation by answering questions on California’s cap and trade system and sharing his ideal approach to international climate policy. He believes that California’s cap and trade system is extremely aggressive, but that it is vital for this program to succeed in order for the country to maintain a positive view of cap and trade as a viable emissions reduction technique. Dr. Stavins is collaborating with the state to ensure a positive outcome. Finally, Dr. Stavins’ ideal scenario would consist of building on existing national institutions and organizations instead of relying on global institutions with unilateral actions to create a large-scale cap and trade system. In his view, national institutions and organizations would operate independently under a de facto international regime.

Overall, Dr. Stavins stressed the point that a catastrophe will not speed up international climate change policies because climate change is a unique case. Due to its international nature, in the eyes of a single country the costs of decreasing emissions far outweigh the benefits it would receive. This makes it difficult to direct financial resources towards climate change adaptation and mitigation programs. Therefore, it is vital to the future of the planet that international cooperation takes place, soon.

The Risk Regulation Seminars Series continues on April 9th with Richard Falkenrath, Principal of The Chertoff Group, presenting on the subject: “The Hackers’ Market: Cybersecurity in the Digital Age.”

*Samantha Guidon is a Master of Environmental Studies candidate at
University of Pennsylvania, concentrating in Environmental Policy with
a particular interest in hydraulic fracturing. Sam also has a
bachelor’s degree in Environmental Policy from Union College

2 responses to “Of Climate Change and International Policy Architecture

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