The Economics and Politics of Climate Change
AbstractA fundamental issue is what steps, if any, countries should take to control greenhouse gas emissions. The economics literature generally suggest that there is no reason to panic and take drastic action now to reduce greenhouse gases. The political economy literature suggested that such action is infeasible because of the serious problems in getting countries to cooperate. This volume argues that the best strategy for addressing climate change over the next decade is to help build institutions that can address climate change in the future. Those institutions include systems established at the nation-state level to measure greenhouse gas emissions, to implement cost-effective approaches for limiting those emissions, and to enforce those approaches. Over time, supervising the achievement of those objectives might evolve so that it would come under the jurisdiction of an international body, although sovereignty issues would have to be addressed. That international body would assess greenhouse gas inventories and review national policies and measures. This study recommends that the developed nations of the world craft an agreement for the next decade that provides a slight emission limitation and allows for a series of case studies. The case studies would allow for the participation of developing countries. The case study approach would take into account the interests of particular countries. For example, the Scandinavian countries, which have already implemented carbon taxes, could continue on that path, perhaps working on harmonization issues. The United States and other countries interested in tradable permits or a hybrid system could use that approach. Other European countries may want to try a combination of regulation and market-based approaches. The case studies suggested in this volume underscore the need to design national institutions. Such national institutions are crucial if novel market-based mechanisms are to be implemented effectively. The appeal of the case-study approach is that it preserves diversity and builds a useful institutional experience and knowledge. The last thing we should be doing now, in our state of ignorance about the warming problem and institutional responses, is to narrow the range of response mechanisms. Thus, the case studies cover a fairly wide range but focus on the development of cost-effective approaches for limiting greenhouse gas emissions.
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