Stern is mistaken to think binding targets will work

Expe­ri­ence alone should make any stu­dent of his­to­ry or eco­nom­ics deeply skep­ti­cal of a nego­ti­at­ed assign­ment of effec­tive emis­sion targets. 

  • Tar­gets do not work as a means of dis­trib­ut­ing pro­duc­tion or con­sump­tion in nation­al or inter­na­tion­al spheres because the pri­vate incen­tives ofthe par­tic­i­pants are typ­i­cal­ly not well aligned to tar­get objec­tives; par­tic­u­lar­ly when the objec­tives con­cern a ‘com­mons’ such as the atmos­phere. With a suf­fi­cient­ly large num­ber of par­tic­i­pants (180 or so ‘sov­er­eign’ gov­ern­ments) and a suf­fi­cient­ly com­plex or sen­si­tive domain (car­bon-based pro­duc­tion or con­sump­tion), such “incen­tive incom­pat­i­bil­i­ty” is guaranteed 
  • Mul­ti­lat­er­al orga­ni­za­tions such as UNFCCC have demon­strat­ed their inabil­i­ty to set and enforce mean­ing­ful tar­gets by nego­ti­a­tion. Nego­ti­a­tion of tar­gets dete­ri­o­rates, instead, into ‘tar­get bar­gain­ing’ which is very like­ly to divert atten­tion from under­ly­ing objec­tives into bar­ren exchanges over words. The Mon­tre­al Pro­to­col is an excep­tion that proves this rule (for rea­sons Cass Sun­stein has described)

Stern’s argu­ment is, briefly, that the scale of the task of cut­ting GHG emis­sions by 50% from 1990 lev­els by 2050 (a cut that he says will keep tem­per­a­ture ris­es to 2 — 3° Cel­sius) is fea­si­ble with appro­pri­ate dis­tri­b­u­tion of bind­ing tar­gets, inter­na­tion­al emis­sions trad­ing, a sig­nif­i­cant tech­ni­cal assis­tance to devel­op­ing coun­tries and a reformed “Clean Devel­op­ment Mech­a­nism”. It implies, he says, an 80% cut in emis­sions in devel­oped economies and small­er cuts in devel­op­ing economies. 

But his ideas about how to nav­i­gate the steps from this analysis—even assum­ing it is correct—to an inter­na­tion­al regime of bind­ing GHG tar­gets are mis­tak­en, at best. 

The build­ing of the deal and its enforce­ment will come from the will­ing par­tic­i­pa­tion of coun­tries dri­ven by the under­stand­ing of the peo­ple that action is vital. It will not be a ‘wait-and-see’ game as in World Trade Organ­i­sa­tion talks, where noth­ing is done until every­thing is set­tled. The nec­es­sary com­mit­ments are increas­ing­ly being demon­strat­ed by polit­i­cal action and elec­tions around the world. A clear idea of where we are going as a world will make action at the indi­vid­ual, com­mu­ni­ty and coun­try lev­el much eas­i­er and more coher­ent.”(

His impli­ca­tion that nego­ti­a­tions in the WTO are some­how dif­fer­ent because there’s no deal until the whole deal is done is sim­ply wrong. He has—apparently—no expe­ri­ence of mul­ti­lat­er­al nego­ti­a­tion of bind­ing treaties. This is how they’re all done. The Law of the Sea, to take one exam­ple, took a decade of tra­vail in the 1980s for the same rea­son. It’s not a func­tion of the WTO’s ‘sin­gle under­tak­ing’. It’s the nature of mul­ti­lat­er­al agree­ments designed to meet a vari­ety of nation­al objec­tives. It is very dif­fi­cult to arrive at such bar­gains and it always takes a long time. Glob­al agree­ments involv­ing mul­ti­ple fac­tors and gov­ern­ments can­not be made piece­meal any more than you can cross a bridge ‘pro­gres­sive­ly’.

It flies in the face of expe­ri­ence, too, to imag­ine that pop­u­lar demand, expressed at the bal­lot-box will bring about bind­ing agree­ments on green-house gasses. There’s not much evi­dence of pop­u­lar demand for car­bon emis­sion lim­its in places like Chi­na, or Rus­sia or India, Viet­nam, Nige­ria, Indone­sia or most oth­er large, ener­gy-inten­si­fy­ing emerg­ing economies. And even if there were, we could not expect it to trans­late into a coher­ent pro­gram that gov­ern­ments will fol­low. The fact is that effec­tive pri­vate inter­ests in eco­nom­ic legislation—whether about cli­mate, or trade or aid—are nev­er expressed through the bal­lot box.

In fact, Stern’s own lec­ture con­tains a good exam­ple of a use­less mul­ti­lat­er­al tar­get. While advo­cat­ing increased tech­no­log­i­cal assis­tance for devel­op­ing coun­tries, he rec­om­mends that rich coun­tries live up to a promise that appar­ent­ly has strong pop­u­lar sup­port but has been lit­tle more than an embar­rass­ment to them in the thir­ty years since OECD gov­ern­ments com­mit­ted to it: the 0.7% of GDP they pledged to devote to aid trans­fers in the ear­ly 1980s. 

But most puz­zling of all, to me, is why Stern believes that even a large sub-set of the 180-or-so mem­bers of the Unit­ed Nations are like­ly to accept mean­ing­ful tar­gets to restrict emis­sions when the restric­tion has such dif­fer­ent val­u­a­tion in each econ­o­my? I’ve con­sid­ered this prob­lem in more depth in my sub­mis­sion to the Aus­tralian government’s enquiry into emis­sions trad­ing schemes. In sum­ma­ry, car­bon-reliant Chi­na has, and will have for many years, a val­u­a­tion of each tonne-of-GHG-fore­gone that is vast­ly dif­fer­ent from the val­u­a­tion in e.g. France (where 90% of elec­tric­i­ty is pro­duced by nuclear pow­er). What makes Stern think that they will accept a ‘glob­al’ val­u­a­tion for each tonne of GHG, set by inter­na­tion­al trad­ing, even if the new glob­al val­ue is tem­porar­i­ly dis­guised by a ‘dif­fer­en­tial’ tar­get that allows them to ignore the full costs for a peri­od of time.

This is a coun­try that is even more ded­i­cat­ed to admin­is­tered pric­ing than Europe. A gov­ern­ment that resists pres­sure from all sides to allow the mar­ket to val­ue it’s cur­ren­cy more accu­rate­ly, is going to have lit­tle time for a ‘mar­ket’ val­u­a­tion of its eco­nom­ic growth ‘exter­nal­i­ties’.

Final­ly, I do not mean to say that tar­gets for emis­sion lev­els have no use. They can help shape the dia­log and they can have moti­vat­ing force. My argu­ment is that they are worse than use­less as an orga­niz­ing prin­ci­ple for a col­lab­o­ra­tive mul­ti­lat­er­al agree­ment with eco­nom­ic provisions.

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