Multilateral environmental agreements: from Montreal to Kyoto - a theoretical approach to an improved climate change regime.

• Author: Cumberlege, Sean

"[T]here is no durable treaty which is not founded on reciprocal advantage, and indeed a treaty which does not satisfy this condition is no treaty at all, and is apt to contain the seeds of its own dissolution. Thus the great secret of negotiation is to bring out prominently the common advantage to both parties of any proposal, and so to link these advantages that they may appear equally balanced to both parties." Francois de Callieres, De la Maniere de Negocier Avec les Souverains (1716).

1. INTRODUCTION

   Stratospheric ozone depletion and climate change are the two most significant environmental challenges facing the world today. There is no longer any doubt that an ambitious global plan must be crafted to address and reverse catastrophic environmental harm. However, the level of government cooperation that is needed and the fundamental change that is required in human economic and social behavior makes climate change and ozone depletion difficult to reverse. (1) The causes of climate change and its adverse impacts are closely linked to industrialization, economic development, poverty alleviation and energy security--necessitating an approach to climate mitigation that is sensitive to these concerns. Moreover, both climate change and ozone depletion cannot be reversed without a global effort involving all countries, and hence mandate that multilateral environmental agreements (MEAs) form the basis of any potential solution. (2)

   While climate change and ozone depletion are manifestations of different harmful processes, they share four fundamental similarities: (1) both present serious issues of international equity in that developed countries are the primary contributors to both environmental problems and, hence, need to assume predominant roles in mitigation efforts; (2) both problems involve extremely serious difficulties due to intergenerational equity, as future generations are likely to face greater environmental risks than current generations; (3) both environmental concerns involve the tragedy of commons problem, in that states are encouraged to simply "free ride" on the efforts of other states by benefiting from the significant costs borne by parties that comply with their obligations; and (4) both problems need the active participation of the United States (U.S.) for any solution to be lasting and effective. (3)

   Despite these similarities, the two MEAs that currently address ozone depletion and climate change, respectively, have enjoyed very different levels of success. The Montreal Protocol on Substances that Deplete the Ozone Layer (Montreal Protocol) has been ratified by 193 countries around the world. (4) In addition, the parties to the Montreal Protocol are complying with their obligations, and as a result, ozone-depleting substances (ODSs) have been drastically reduced, and monitoring of the ozone layer indicates that the ozone is recovering. (5) Due to the enormously successful efforts of the parties to the Montreal Protocol, the treaty is frequently hailed as the most successful environmental treaty ever devised. (6)

   The global effort to mitigate climate change, however, presents an altogether different story. Despite the fact that the Kyoto Protocol to the Convention on Climate Change entered into force in 2005 and has been ratified by 174 countries (7), it has been largely ineffective in mitigating climate change. (8) Indeed, despite high participation (with the notable exception of the United States), it is widely known that many parties to the Kyoto Protocol may not be complying with their obligations. (9) The marginal results achieved under the Kyoto Protocol have led to significant academic criticism of the climate change regime and has increased public demand for more effective international cooperation to reverse the significant environmental degradation that has been allowed to continue unchecked. (10)

   This paper, therefore, attempts to develop a dynamic theory of multilateral environmental treaty creation that builds on legal, economic and international relations theory. Based on the theoretical framework developed, this paper also seeks to outline why the Montreal Protocol has been extremely effective in curtailing the production of ODSs, and why the Kyoto Protocol has been ineffective in reducing greenhouse gas (GHG) emissions. This paper will also recommend possible improvements and changes to the Kyoto Protocol to transform it into a viable vehicle for lasting climate change alleviation. In doing so, this paper makes the assumption that states act predominantly out of self-interest. Thus, within the cooperation continuum, my analysis will be based somewhat on political economic theory within the Realist school of thought.

   Section II will propose a theoretical framework for lasting and effective multilateral environmental agreements. In doing so, this paper goes beyond mere formal treaty provisions by discussing, from a political economic perspective, extra-legal strategies to encourage participation and compliance. It incorporates basic game theory to illustrate the complexity of multilateral treaty creation. Against this backdrop, section III will examine the Montreal Protocol and highlight some of its unique mechanisms and approaches that make it an effective MEA. Section IV will examine the Kyoto Protocol by describing the negotiations leading up to its creation and highlighting the approaches and mechanisms that undermine its effectiveness and efficacy. Section V will conclude with recommended changes to the existing climate change regime, based not only on its obvious weaknesses, but also on some of the theories and approaches developed in this paper.

2. MULTILATERAL ENVIRONMENTAL TREATIES: A THEORETICAL FRAMEWORK

   1. The Complex Nature of Environmental Protection

      International environmental concerns, along with any resulting call for global action, raise a unique problem within the field of international relations. Specifically, each country does not want to pay to protect the environment, but each country also recognizes that if every other country takes this stance, the environmental implications would be catastrophic. To make matters worse, even if nations feel obliged to act, unilateral action will not work where the solution to an international environmental risk is dependent on what other countries do to advance the problem, and what other countries will do to solve the same problem. (11) In other words, actions and choices of any given state frequently affect the welfare of other states, whether positively or negatively. In this way, most environmental problems involve multilateral externalities, namely environmental effects felt from activity outside a country's border, and actions that need to be taken outside a given country's realm of direct control. (12) While many externalities are bilateral, and hence easier to overcome, in the case of climate change and ozone depletion, the multilateral externalities are reciprocal in a sense that (to varying degrees) each country imposes externalities on the other countries sharing the same resource. (13) Despite varying levels of emissions, every country emits ozone depleting substances and GHGs, and, more importantly, every country is susceptible to harmful effects caused by these emissions. But, to the extent that externalities exist in ozone and climate change concerns, they can be characterized as asymmetric because they affect nations differently. (14) Also, it is in the nature of global environmental problems that the damage each country suffers is never proportional to its share of global emissions.

      Ultimately, solutions to transnational environmental problems are difficult to create because they invariably involve (and mostly conflict with) the principle of sovereignty. (15) Thus, the absence of a world government forces states to create a system of rules and a system of incentives to change state behavior. Indeed, states are forced to negotiate and cooperate to simultaneously minimize joint costs and collectively maximize joint benefits. Reality, however, presents a difficult working environment within which to come to lasting agreement. Specifically, transaction costs are unequal, information is imperfect, bargaining power remains asymmetrical and states remain wary of "opportunism through actual or threatened intentional noncompliance." (16) Despite these impediments to cooperation, states nevertheless frequently recognize that cooperation is the only available option. The key consideration, then, necessarily becomes the means with which to achieve such cooperation. Ideally, participation in an environmental treaty must be voluntary, targets must be accepted by consensus, and obligation must be implemented and enforced by the parties to the treaty. (17) History has shown, however, that this is not easy to achieve.

   2. Restructuring Incentives to Encourage Participation and Compliance

      The object of any MEA is ultimately to change state behavior to mitigate harmful environmental degradation. In doing so, however, MEAs cannot rely exclusively on moral necessity to encourage cooperation. Instead, MEAs that seek to fundamentally alter state behavior and encourage widespread participation have to restructure incentives to overcome constraints imposed by sovereignty. (18) Treaty design becomes a key consideration, and ultimately plays a determining factor in the lasting efficacy of any agreement. Despite similarities between various environmental concerns, no two treaties can be alike. Indeed, an examination of existing international legal institutions suggests that a one-size-fits-all approach is doomed to fail. (19) The larger question therefore becomes: under what circumstances, or under what treaty design, can lasting environmental mitigation be encouraged? Scott Barrett, a prominent scholar within the Rationalist school of thought, articulates three broad requirements:

      First, a treaty must be individually...