"Frankel Proposal: Formulas for Quantitative Emission Targets"

Policy Brief, Harvard Project on International Climate Agreements, Belfer Center for Science and International Affairs, Harvard Kennedy School

September 5, 2007

Author: Jeffrey Frankel, James W. Harpel Professor of Capital Formation and Growth

Belfer Center Programs or Projects: Harvard Project on Climate Agreements

Summary:

Jeffrey Frankel has proposed a climate policy architecture that builds on the quantitative targets and timetables infrastructure of the UNFCCC and Kyoto Protocol.  He calls for a sequence of negotiations (one per decade) to determine the global greenhouse gas emissions cap and a formula for allocating this global cap among all participating countries.  The formulas for setting national-level targets would reflect historic emissions (e.g., 1990 levels), current emissions, population, income, and other relevant factors (such as resource endowment), but in the long-term the formulas would converge on a per capita allocation.  Targets derived from the formulas would be progressive, with higher income countries required to undertake more ambitious mitigation relative to business as usual than lower income countries.  To insure against unintended stringency or laxity, quantitative targets also could be indexed to economic growth.  Emission allowances allocated through the national targets could be traded among countries and banked for future use.  Developing country quantitative targets would initially be set at a level so that in expectation they would be on net a winner with emission trading: the economic benefits of selling unused emission allowances would exceed the costs of mitigating their emissions.  As an insurance policy against unexpectedly high costs, Frankel also supports a safety valve that effectively puts a ceiling on the price of tradable allowances.  He rejects setting a century-long goal as impractical and impossible to enforce on future world leaders.

Pros:

This proposal rests on the existing multilateral policy foundation established by the Kyoto Protocol, and is thus recognizable and salient to many stakeholders.  It provides a mechanism for integrating developing countries and the United States into the future architecture, and offers an approach to setting targets that may be more transparent than the ad hoc target-setting at the Kyoto Conference.  Focusing on emission trading – across countries and across time – can promote least-cost mitigation.  Employing a suite of mechanisms to address concerns about high costs – such as emission trading, banking, a safety valve, indexing targets to economic growth – could promote compliance by reducing the probability of adverse outcomes that could result in non-compliance.  Setting targets one decade at a time may allow for learning about climate science, economics, and R&D to inform subsequent goals.

Cons:

Developing countries have previously rejected the offer of generous emission targets and the potential gains under a well-functioning international emission trading system.  This proposal does not provide any additional carrots for their participation.  Along a similar line, Frankel does not propose a compliance mechanism to create incentives for countries to live up to their agreed commitments.  The flip side of flexibility in setting targets over time is the concern that long-term goals should be enumerated to create the incentive for long-term climate-friendly R&D.  Finally, some countries may not find a target-setting formula as a desirable substitute for negotiations.  Instead, such formulas may serve as a starting point or focal point for negotiations.

For more information about this publication please contact the Harvard Project on Climate Agreements Coordinator at 617-496-8054.

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