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Carbon Leakages, Climate Change ‘Free Riders’ and Copenhagen

The issue of devising an efficient and equitable global climate change mitigation agreement is examined. While there are strong damage cost reasons for self-interested, large countries to unilaterally move towards climate change mitigation there are practical reasons for them not to commit.  A key issue for developed countries is that of possible carbon leakages while, for developing countries, the need to pursue growth objectives restricts their proclivity to mitigate.  Carbon leakage issues can be addressed using such things as border tax adjustments which, however, raise computational complexity, GATT-rules consistency and, importantly for developing countries, equity issues.  If the efficiency gains from utilising BTAs are to be realised, compensation schemes must also address the equity issues that bind practical policy-making in developing countries. The specific analysis is related to devising climate change agreements that include China and the United States.

I wrote this paper while being Visiting Scholar at Peking University.  Continue reading Carbon Leakages, Climate Change ‘Free Riders’ and Copenhagen

More on the BTA debate

As I cautioned in my comments on posts by Paul Krugman and John Quiggin it is by no means clear that the recent WTO-UNEP report does give the green light to border tax adjustments (BTAs) which penalise with tariffs the exports of countries which do not mitigate their emissions.  This report which was, by luck or design, timed to coincide with the passing of the Waxman-Markey bill (it was released the same day!) is now proving to be a bone of contention in the US Senate vote on the bill with some seeking to remove the BTA provisions and other Democrats asserting that the bill won’t pass without them.  The fear is that if the bill is approved with the inclusion of the BTA amendments that this may derail the prospects for a successor treaty to the Kyoto Protocol in Copenhagen later this year. Continue reading More on the BTA debate