To most observers outside the academia, the contribution of research may appear unclear and very often distant from the real life policy challenges the world has to face to cut Greenhouse Gases Emissions rapidly. Still, even an academic debate can give an important contribution to the negotiation process, especially if it is among the most recognized experts on climate change negotiations and coalition formation, as Valentina Bosetti, Carlo Carraro, Astrid Dannenberg, Partha Dasgupta, OttmarEdenhoffer, Michael Finus, Philipp M. Hannam, Bard Harstad, Michael Hoel, Simon Levin, and Alessandro Tavoni.
The topics of this selective international workshop on “Climate Change and Public Goods“, held in Venice on June 9-10, 2014, were centred around cutting edge research and theoretical aspects of cooperation and coalition formation. However, in the midst ofdeep technical discussions and questioning, sound policy advice emerged between the lines. Let’s see a few of these recommendations skipping the most technical ones. As recalled by Partha Dasgupta from Cambridge University in the introduction: “Carlo Carraro pioneered the field demonstrating already 20 years ago why coalitions to protect the climate actually tend to fail”, as indeed they have so far. So what has increased our understanding of these issues in the last 20 years, and simplified the issue at stake “how to best protect climate”?
Approaching the problem from the fundamentals of international cooperation, it could be interesting to compare negotiations on GHGs against negotiations on ozone depletion substances. What are the differences between the Montreal and Kyoto protocols, why did the first work perfectly, while the second actually failed? To put it as Astrid Dannenberg from Columbia University, climate negotiations represent in fact a prisoners’ dilemma: with no mechanism for enforcement for the Kyoto Protocol and with no sanctions, “altruism seems unreliable”. A better approach would be to promote coordination, for instance amending the Montreal Protocol to include hydrofluorocarbons (HFCs) or sectoral agreements coupled with trade restrictions, for instance on aluminium production. Bard Harstad from the University of Oslo agrees that compliance has indeed been the main problem for Kyoto but “international technology standards could easily ensure compliance”, keeping however in mind article 114 of the Cancun Agreement confirmed in Durban, which states that “technology needs must be nationally determined, based on national circumstances and priorities”.
Do decentralise action
Instead of seeking global agreements, most of the scholars in the room pointed out the benefits arising from smaller groups for climate negotiations. Phillip M. Hannam from Princeton University illustrated through a model the benefits and co-benefits of clubs, or of incomplete agreements, as a way to sustain climate and energy cooperation from the bottom-up. Successful clubs do have a number of features in common, for instance these are formation driven by domestic interests and by states with the strongest interests, non-binding participation structure, sequentially constructed but limited participation, and the capability of restructuring incentives of the broader regime. In more technical terms, cooperation in smaller club configurations yields larger non-excludable public goods benefits than cooperation in more inclusive forums.
Ignazio Musu from the University of Venice stressed that a polycentric approach seems more consistent with government decisions. Furthermore, a successful bottom-up process can test and later set the path for future adequate global governance. Many successful examples do exist today, for instance community decisions in urban traffic regulation, local policies to promote energy efficiency and renewable energies with experiments of distributed energy generation, participation of traditional indigenous communities in sustainable agriculture and forest management. The keyword is “integration” between the polycentric efforts made by communities and local initiatives, individual governments’ policies, also thanks to a proper use of market opportunities.
The fundamental role of risk, uncertainty, R&D and thresholds
The ability of a climate protection coalition to endure over time with a group of committed participants (its “stability” in a coalition theory jargon) is known to be sensitive to a number of factors, such as : the differences among the participants, thenumber of participants, the stringency of the environmental target itself. Among these factors the workshop stressed the peculiar role played by the perception of risk and uncertainty, the availability of information about R&D and the importance and locus of possible tipping points in the climate system.
Alessandro Tavoni from the Grantham Research Institute pointed out, for instance, that adding R&D to the bargaining table in climate negotiations could help stabilise coalitions. On the other hand, when the “overall perception of risk is too small, such as today, the only coalitions that tend to be stable are the small ones, details Jorge M. Pacheco from the University of Minho. In fact, “local institutions play a crucial role when perception of risk is small”, he insists, while global institutions such as the UN may provide just marginal improvements in promoting cooperation, provided there are adequate pre-plays before the negotiations and low scientific/political uncertainties regarding the targets to be met.
Furthermore, Andreas Lange from the University of Hamburg pointed to a particular dimension of uncertainty, additional to the more standard ones to be aware of: the one which characterizes the differences between the negotiators delegated by the member countries to the United Nations Framework Convention on Climate Change process and the national governments or parliaments, which have to ratify international agreement once they are signed.
Also threshold in damages – such as tipping elements in the climate system – may be fundamental for the stability and potential of coalitions. Based on existing theoretical work by Scott Barrett, Valentina Bosetti from Bocconi University and FEEM presented first results from more applied models of coalitions on climate policies. The results suggest that the possibility of crossing a climate threshold leads to a more stable coalition, as all countries will have the tendency to avoid “catastrophes” in this sense. The researchalso points out that the locus of thresholds is indeed crucial for stability, coalition size and abatement strategies. Carbon taxes are more efficient than labour taxes.
The financial benefits of a Carbon Tax
For a long time the application of a carbon tax has been widely recognised by economists as the most efficient way to mitigate GHGs. They commonly add to the equation the co-benefits of a double dividend as environmental taxes can allow inefficient labour taxes to be reduced. But what would the role of a carbon tax be solely from the point of view of finance ministers .i.e., even if no climate externality were considered? Based on preliminary results of his research, Ottmar Eddenhofer from PIK finds that for infrastructure investments in the presence of capital mobility, the carbon tax is superior to capital taxes. This fiscal motivation for the introduction of the carbon tax may in the long run facilitate environmental policy: “this could really be a game changer able to facilitate negotiations within the UNFCCC”. However, adds Edenhofer more informally: “ the political risk of proposing a carbon taxation is still too high in most countries to realistically see a wide implementation of such a fiscal reform by national or local governments”.
As can be testified by the many lessons learned during this workshop, but also more broadly by the whole IPCC process, research can indeed support policy action with a number of concrete insights and different perspectives. Nevertheless, solving the climate stalemate is today eminently a question of political will, rather than scientific understanding. In this sense, the very recent declarations by US President Mr. Obama accompanying the EPA plan to cut GHGs by 30% shed some optimism on the possible outcomes of future climate negotiations. Climate research remains fundamental, continuing its frontier work – also thanks to occasions like the one in Venice it is called to generate knowledge, collaborations, publications in peer reviewed journals, but also viable solutions.
*This article was originally published on FEEM’s e-magazine Re3.