10.2 International Regimes and Policy Options
Previous chapters provide some answers to the most relevant policy questions
related to the climate change problem. Issues such as the timing of optimal
responses to climate change, the role of technological innovation and diffusion,
the choice between domestic action and the adoption of Kyoto mechanisms,
the importance of co- and ancillary benefits, etc., have been analyzed from
different perspectives. However, it is important to notice that the costs and
benefits of all the above options crucially depend on the characteristics of
the international agreement on climate change that is adopted. In particular,
they depend upon two main features of the international regime: the number of
signatories, and the size of their quantitative commitment to control GHG emissions.
It is therefore impossible to assess the costs and benefits of the Kyoto Protocol
or of other potential agreements on climate change independently of the number
of signatories of the agreement and of their abatement targets and/or policy
commitment. However, the number of signatories is endogenous and depends on
the abatement targets and mitigation polices adopted in various countries. Hence
the weakness of most of the available literature on costs and benefits of climate
change policies, which widely neglects the full interdependency between policies,
costsbenefits, and signatories (more generally, the structure of the international
agreements). For example, studies analyze the costs of implementing the Kyoto
Protocol either through a set of domestic policies and measures or through a
system of international tradable permits, with a fixed number of signatories.
But the adoption of either policy crucially affects the number of signatories,
which can be larger or lower under policies and measures than under tradable
permits. And the number (and identity) of signatories crucially affects the
costs and benefits of different agreements.
Therefore, this section aims to provide an analysis of the effectiveness of
climate policies by focusing on the link between policy options on the one hand
and the structure of the agreements and international regimes on the other.
Some of the most important theoretical results are reviewed first, and then
the existing literature is revisited to see which information it provides on
the interdependencies described above. In particular, can such an analysis show
whether there exist the conditions for an agreement on climate change to be
signed by all or almost all world countries (see Carraro, 1998; Carraro and
Siniscalco, 1998; and Barrett, 1999 for a theoretical analysis of these conditions)?
Also, would it show which countries can play a leadership role with respect
to achieving the largest possible coalition by proposing strategies, measures,
and institutions that help expand the number of countries that commit to control
their emissions (see Grubb and Gupta, 2000)? Notice that in this way we also
analyze which strategies can be proposed to reduce the costs of mitigation policies.
But this is a quite different approach to those analyzed in the previous sections
of this chapter and in Chapters 8 and 9.
The reason is that here a countrys goal is not to identify a new climate
friendly technology or an adequate redistribution of costs across sectors. Now
the goal is to affect other countries behaviour to increase the number
of those that share the burden, and to share the burden more equitably.
The equity issue is also very important to understand which countries are going
to reduce and/or control5
their emissions. As a consequence, given what is said above, equity is crucial
to assess adequately the costs of emission reductions at the global and country
level. It has been argued that some countries are allowed to reduce emissions
less than other countries, both within (Kram, 1998) and outside the European
Union (EU) bubble (Bosello and Roson, 1999; Metz, 1999; Rose and Stevens, 1999).
Even when applying the Kyoto mechanisms, some countries will benefit from the
agreements more than other ones (Nordhaus and Boyer, 1999). It has also been
argued that some countries can exploit their monopolistic power in a future
trading system (Burniaux, 1998). All these remarks address the problem of optimal
burden-sharing (the distribution of costs) of climate change control. This problem
is strictly related to the features of an international agreement on climate
for two main reasons. First, increasing the number of participating countries
reduces the direct costs for each signatory; second, an agreement in which the
burden is equitably shared is more likely to be signed by a large number of
countries (Convery, 1999). Therefore, equity and the structure of the international
agreement (number and identity of signatories) are strictly linked. However,
the number of signatories affects and is affected by costs. Hence, equity and
efficiency cannot be separated.
These remarks reinforce the previous basic statement. An analysis of the costs
and benefits of different policy options, and of the distribution of these costs
and benefits across countries, cannot be done independently of an analysis of
the likely features of the prevailing international regime (i.e., of the incentives
that lead countries to sign an international agreement to control GHG emissions
and to set quantitative emission targets).
Notice that an analysis of the features of climate international agreements
and of their repercussions on the choice of different policy options (and vice
versa) must take into account:
- basic features of the climate problem recalled in Section
10.1, and particularly the public-good nature of GHG abatement in the
absence of a supranational authority;
- scenarios that describe the future evolution of economic and environmental
- economic incentives for countries to sign an international agreement on
climate change control, that is under what conditions, in terms of the number
of countries, damaging effects of free-riding (leakage), structure of costs
and benefits, can a coalition (i.e., a group of signatories of the
international agreement) emerge?6
- the political and institutional dimension of an international climate agreement,
its history, the possibility of monitoring and sanctioning deviations, the
links with other agreements.
This section is devoted to the analysis of the above issues and also aims to
provide a framework to understand how future negotiations on climate change
can evolve, and how costs and benefits of climate policies are modified by these