Thirteen Plus One: A Comparison of Global Climate Policy Architectures

Abstract

We critically review the Kyoto Protocol and thirteen alternative policy architectures for addressing the threat of global climate change. We employ six criteria to evaluate the policy proposals: environmental outcome, dynamic efficiency, cost-effectiveness, equity, flexibility in the presence of new information, and incentives for participation and compliance. The Kyoto Protocol does not fare well on a number of criteria, but none of the alternative proposals fare well along all six dimensions. We identify several major themes among the alternative proposals: Kyoto is "too little, too fast"; developing countries (DCs) should play a more substantial role and receive incentives to participate; implementation should focus on market-based approaches, especially those with price mechanisms; and participation and compliance incentives are inadequately addressed by most proposals. Our investigation reveals tensions among several of the evaluative criteria, such as between environmental outcome and efficiency, and between cost-effectiveness and incentives for participation and compliance.

Second-best theory and the use of multiple policy instruments

“…Economists have argued for developing country participation on cost-effectiveness grounds (Stavins 2001(Stavins , 2005. But targets for developing countries, even if indexed by economic performance, are widely viewed by developing countries themselves as inequitable (Aldy et al 2003). The policy eventually established in the Kyoto Protocol combined specific targets for developed countries with optional provisions in the form of the Clean Development Mechanism for developing countries.…”

The Tuvalu Syndrome

“…Hence, the realist observation that IEAs with broad participation are usually shallow, in that treaty commitments diverge little from a nation's non-cooperative strategy. Barrett and Stavins (2003) show that there is a tradeoff between participation and compliance; one can have a "narrow and deep" or "wide and shallow" treaty, but not both.…”

“…Trade sanctions are a more promising enforcement mechanism and have been incorporated into several proposals for a successor treaty to Kyoto (Aldy et al 2003). In the case of simpler environmental problems such as ozone-depleting chemicals, trade sanctions may provide a credible threat that is sufficient to deter free riding (Barrett 1997).…”

The Perception and Valuation of the Risks of Climate Change: A Rational and Behavioral Blend

“…This is equivalent to the belief that a stock that has gone up recently in price is no more favorable going forward than one that has moved little. 7 For reviews of the policy debate, see Aldy, Barrett, and Stavins (2003), Schelling (1997), and Stewart and Wiener (2003). 8 See, among the most important contributions, Tversky and Kahneman (1974), and Kahneman and Tversky (1979).…”