Experts Converge

Perhaps in response to the combined Kyoto-Copenhagen failure, there has been a convergence of views on a different approach to negotiations. Both Stiglitz and Nordhaus have shifted from advocating a global carbon tax to advocating a global price on carbon. More recently, Weitzman has published a theoretical paper arguing that a global-price approach is necessary to prevent free-riding and explaining why the individual pledges of the Kyto-Copenhagen-Paris approach fail to address this central problem.

Their point is: We’ve been playing the wrong game, so failure was inevitable.

This page summarizes (in their own words) the views of four leading policy experts regarding the four key aspects of global carbon pricing on which they agree:

1. Global warming is a problem of the global commons.
2. To solve it, implement a global carbon price.
3. National flexibility: allow emissions trading, carbon taxes or both.
4. Make Green fund payments for participation by poor countries.

Joseph Stiglitz (Nobel Prize in Economic Sciences — 2001) 

1. Problem of the commons: Global warming is a global problem, yet no one wants to pay to fix it. Everybody wants a free ride on the efforts of others.
2. Global price: Perhaps it is time to try another approach: a commitment by each country to raise the price of emissions (whether through a carbon tax or emissions caps) to an agreed level, say, $80 per ton.
3. National flexibility: ( Included in 2. )
4. Green Funds: These commitments by themselves will remain largely gestures unless the rest of the world can be brought along. This may entail significant assistance to developing countries.”

William Nordhaus (President of the American Economic Association)

1. Problem of the commons: Climate change is a member of a special kind of economic activity known as global public goods.
2. Global price: At a minimum, all countries should agree to penalize carbon and other GHG emissions by the agreed upon minimum price.
3. National flexibility: Some countries might simply use carbon taxes. Others might implement their commitment using a cap-and-trade mechanism.
4. Green Funds: The best mechanisms for the encouraging of participation of low-income countries would be a combination of financial and technological assistance …

Martin Weitzman (Harvard Economics professor. Among the most influential in the theory of climate economics)

1. Problem of the commons: Global warming is a global public-goods externality whose resolution requires an unprecedented degree of international cooperation and coordination.
2. Global price: The important thing is acquiescence by each nation to a binding minimum price on carbon emissions.
3. National flexibility: Nations or regions could meet the obligation of a minimum price on carbon emissions by whatever internal mechanism they choose –a tax, a cap-and-trade system, a hybrid system, or whatever else results in an observable price of carbon.
4. Green Funds: The transfer payments to lubricate compliance with harmonized national carbon prices could take the form of “contributions” from the developed countries that are earmarked for helping the developing countries …finance low-carbon technologies.

Stéphane Dion and Éloi Laurent (Dion is a Canadian Member of Parliament, former Minister of the Environment and Chaired the U.N. Climate summit in 2005.)

1. Problem of the commons: As long as individual countries hope that other countries will do the job for them, … our efforts will fall far short of the mark.
2. Global price: The way to put an end to carbon leakage and climate free-riding is to establish a global carbon price signal.
3. National flexibility: We propose: … pricing carbon emissions through a tax or a cap and trade.
4. Green Funds: In the name of the “Common But Differentiated Responsibility” principle, developed countries would be required to set aside part of their revenue to help developing countries introduce policies to attenuate emissions, …

 World Bank:

1. Problem of the commons: 
2. Global price: 
3. National flexibility: Depending on each country’s different circumstances and priorities, various instruments can be used to price carbon, such as domestic emissions trading systems, carbon taxes, and/or payments for emission reductions.
4. Green Funds: 

Comparison Topics Covered on Individual Sub-Pages

The list below shows the points on which the expert views are compared on the following pages (see menu above for list of experts).

1. Fundamentals

   1. The international climate problem is a free-rider problem
   2. A global carbon price is needed
   3. Carbon caps and taxes can both comply
   4. Green Fund transfers are essential

2. Why a Global Price Is Easier to Negotiate

   1. A price simplifies negotiations
   2. A global price provides a countervailing force against free riding
   3. A uniform price is a powerful focal point
   4. Caps appear unfair to poor countries
   5. Why global cap-&-trade is not like national cap-& trade.

3. Treaty Mechanics

   1. Monitoring
   2. Compliance/Enforcement
   3. Uniformity of the Global Price
   4. Hitting a Target with a Price
   5. The Cost of Pricing is Low
   6. The Use of Carbon Revenues
   7. Who Should Initiate the Treaty?

4. Comparisons Assuming Successful Negotiations

   1. Price Volatility
   2. International Payments
   3. Corruption