Seeker Blog

Typically, countries come together to do something in their collective interest when the immediate cost of failing to act is blatantly evident… Inconveniently, the case for collective action to mitigate climate change cannot be built, for the time being, on the same kind of manifest basis.

I liked Prof. Zedillo’s pithy summary of why Kyoto-type deals won’t work,

The new agreement must also provide clear and predictable market signals that will encourage the generation and deployment of new cost-effective energy technologies. It must have low transaction costs, avoid significant income transfers among countries, be practically invulnerable to fraud and corruption and lend itself to easy verification of compliance.

whereas carbon taxes will work. Greg Mankiw writes

Ernesto Zedillo, director of Yale’s Center for the Study of Globalization and former president of Mexico, joins the Pigou Club:

Frankly, a Kyoto-type framework–one with global quantitative emissions targets allocated among countries–that meets the above conditions is not feasible. The only approach that will fulfill the conditions and relieve countries’ apprehensions regarding sovereignty and free riding is one in which all countries agree to penalize their carbon emissions in such a way that, over time, an internationally harmonized carbon price prevails. Consequently, the negotiation’s focus would not be on emissions quotas but on the harmonized carbon-price trajectory.

Of course, carbon taxes (on burning fossil fuels) would provide the easiest way for countries to comply with the system, and each country could then decide what to do with the tax revenue. Some might make their carbon tax revenue-neutral by reducing other taxes. The regime would allow countries (or associations of countries such as the EU) to comply with the internationally agreed-upon carbon price by means of their own national cap-and-trade systems. It would also let poor countries move toward the agreed trajectory of carbon prices more slowly than rich countries.

If you’re worried about climate change but don’t like carbon taxes, think about the messy or even impossible alternatives!

I recommend Zedillo’s entire essay — I just filed in our digital archive.

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