Building on Kyoto: Jeffrey Frankel (left) discusses his proposed global climate policy architecture at a Belfer Center directors’ lunch in March. Also pictured: Stephen Walt.
Belfer Center Photo

"A Proposed Global Climate Policy Architecture"

Newsletter Article, Belfer Center Newsletter, Belfer Center for Science and International Affairs, Harvard Kennedy School

Summer 2009

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

Belfer Center Programs or Projects: Harvard Project on Climate Agreements

A Conference of Parties to the UN Framework Conventional on Climate Change will meet in Copenhagen in December to try to decide a successor regime to the Kyoto Protocol.  This study offers a proposal that builds on the foundations of Kyoto, in that it accepts the framework of national targets for emissions and tradable permits. But it attempts to solve the most serious deficiencies of that agreement: the need for long-term targets, the absence of participation by the United States and developing countries, and the incentive for countries to fail to abide by their commitments. Although there are many ideas to succeed the Kyoto Protocol, the existing proposals are typically based on just one or two out of the following three factors: science (e.g., capping global concentrations at 450 ppm) or equity (equal emissions per capita across countries) or economics (weighing the economic costs of aggressive short-term cuts against the long-term environmental benefits). The plan for emissions reductions proposed in this paper is more practical because it is based heavily on politics, in addition to those three considerations.

Overview

The proposal calls for a successor international agreement that establishes a global cap-and-trade system. The emissions caps are set using formulas that assign quantitative emissions limits to countries in every five-year period from now until 2100. Three political constraints are particularly important in specifying the formulas. First, developing countries are not asked to bear any cost in the early years. Second, even later, developing countries are not asked to make any sacrifice that is different from the earlier sacrifices of industrialized countries, accounting for differences in incomes. Third, no country is asked to accept targets that cost it more than 5 percent of GDP in any given year.

Under the formulas, rich nations begin immediately to make emissions cuts. Developing countries agree to maintain their business-as-usual emissions in the first decades, but over the longer term agree to binding targets that ultimately reduce emissions below business as usual. This structure precludes energy-intensive industries from moving operations to developing countries (so-called "carbon leakage") and gives industries a more even playing field. However, it still preserves developing countries' ability to grow their economies; they can also raise revenue by selling emission permits. In later decades, the emissions targets asked of developing countries become stricter, following a numerical formula. However, these emissions cuts are no greater than the cuts made by rich nations earlier in the century, accounting for differences in per-capita income, per-capita emissions, and baseline economic growth.

This system of targets results in a world price of carbon dioxide that reaches $20-$30 per ton in 2020, $100-$160 per ton in 2050, and $700-$800 per ton in 2100, according to economic simulations using the WITCH climate model. Most countries sustain economic losses that are under one percent of GDP in the first half of the century, but then rise toward the end of the century. Atmospheric concentrations of CO2 stabilize at 500 ppm in the last quarter of the century, and world temperatures increase by about 3 degrees.

We have not yet been able to achieve year-2100 concentrations of 450PPM while obeying the same political-economic constraints.

Key Findings & Recommendations

Any future climate agreement must comply with six important political constraints. First, the U.S. will not commit to quantitative targets if China and other major developing countries do not commit to quantitative targets at the same time, due to concerns about economic competitiveness and carbon leakage. Second, China and other developing countries will not make sacrifices different in character from those made by richer countries that have gone before them. Third, in the long run, no country can be rewarded for having "ramped up" its emissions high above the levels of 1990. Fourth, no country will agree to participate if, in any year, the present discounted value of its future expected costs is more than, say, 1% of GDP. Fifth, no country will abide by targets that cost it more than, say, 5% of GDP in any year. Sixth, if one major country drops out, others will become discouraged and the system may unravel.

Future emissions caps should be determined by a formula that incorporates three elements: a Progressivity Factor, a Latecomer Catch-up Factor, and a Gradual Equalization Factor. The Progressivity Factor requires richer countries to make more severe cuts relative to their business-as-usual emissions. The Latecomer Catch-up Factor requires nations that did not agree to binding targets under Kyoto to make gradual emissions cuts to account for their additional emissions since 1990. This factor prevents latecomers from being rewarded with higher targets, or from being given incentives to ramp up their emissions before signing the agreement. Finally, the Gradual Equalization Factor addresses the fact that rich countries are responsible for most of the carbon dioxide currently in the atmosphere. During each decade of the second half of the century, this factor moves per capita emissions in each country a small step in the direction of the global average of per capita emissions.

Conclusion

The framework here allocates emission targets across countries in such a way that every country is given reason to feel that it is only doing its fair share. Furthermore, the framework - a decade-by-decade sequence of emission targets determined by a few principles and formulas - is flexible enough that it can accommodate major changes in circumstances during the course of the century.

Jeffrey Frankel is the James W. Harpel Professor of Capital Formation and Growth, Harvard Kennedy School, and Belfer Center faculty affiliate.

For the complete research writings underlying this summary: "An Elaborated Proposal for Global Climate Policy Architecture: Specific Formulas and Emission Targets for All Countries in All Decades," for the Harvard Project on International Climate Agreements, see: http://belfercenter.ksg.harvard.edu/publication/18597/ and http://belfercenter.org/frankelclimateproposal

For more information about this publication please contact the Belfer Center Communications Office at 617-495-9858.

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