Seeking agreement on international climate policymaking.

• Author: Dunn, Seth
• Position: Ecology

JUST A FEW of the leading emitters of greenhouse gases--the United Kingdom, Germany, and Russia--have met their Rio de Janeiro Convention on Climate Change targets and are on course to meet their Kyoto Protocol goals. Nevertheless, most governments of industrial nations are stepping up their activity in the area of climate policy. Indeed, the International Energy Agency (IEA) has identified more than 300 separate measures that its members undertook during 1999 to address climate change. The IEA placed these actions in five general categories: fiscal policy, market policy, regulatory policy, research and development (R&D) policy, and policy processes, and noted that "good practice" climate policies should maximize economic efficiency and environmental protection, be politically feasible, minimize red tape and overhead, and have positive effects on other areas, such as competition, trade, and social welfare.

While there is no "silver bullet" climate policy that can be applied across all countries, experience suggests that getting the prices fight through subsidy reform and tax policy is crucial. Market approaches and a mix of policies--including voluntary agreements, standards, incentives, and R&D--are needed, too. Important as well are monitoring and assessment, good institutions, and international cooperation. Even if their rationale is strong, however, climate policies run into the formidable barriers of perceived high cost and limited political will to act.

Climate-related fiscal policies have become increasingly popular, with nearly all industrial nations adopting such measures, although most are modest in size. These are appealing because they tend to reduce greenhouse gas emissions while stimulating national economies. A good example is the phase-down of coal subsidies in Belgium, Japan, Portugal, and the United Kingdom from more than $13,000,000,000 in 1990 to less than $7,000,000,000 by the end of the decade. Subsidies are being added to promote more-efficient vehicles and renewable energy in power generation, the most-successful example being the German electricity feed law, which has spurred the wind power business and been replicated in several other European countries.

Nineteen industrial nations are planning more than 60 tax policy changes that will affect emissions, although just 11 of these are defined as carbon or emissions taxes. The most-effective carbon taxes to date are found in Scandinavia. Norway's levy, for instance, was adopted in 1991 and has reportedly lowered carbon emissions from power plants by 21%. One reason such taxes have been adopted slowly or contain exemptions is that their impact on fairness and competitiveness is often overstated by industry.

Interest in market-based mechanisms has also risen, due to their expected cost-effectiveness and the success of the U.S. sulfur emissions trading program, which has helped to reduce such emissions by 24% since the program was instituted in 1990. Several countries, along with the European Union (EU), have adopted greenhouse gas emissions trading proposals, and a growing number are considering their adoption. A Pew Center study on global climate change reported that emissions trading is becoming a "policy of choice" for addressing the issue. An international greenhouse gas market is emerging--an estimated 85-105,000,000 tons of carbon dioxide (C[O.sub.2]) equivalent have been traded since 1996, nearly half of this in 2001 alone--but in the absence of an international agreement, it is evolving in fragmented fashion. For instance, the British, Danish, and EU systems vary considerably in approach, and it will be necessary to reconcile them into a global framework if the trading is to be as economically and environmentally effective as possible.

The third discernible area of growing activity is voluntary agreements, which arise from negotiations between government and business or industry associations. These are attractive because they arouse less political resistance from industry than coercive measures, require little overhead, and can be complemented by fiscal and regulatory measures. Twenty-one voluntary agreements were initiated in 1999 by industrial nations, including four for power generation, two for transport, and 11 for industry and manufacturing. With respect to stringency, they are characterized by the IEA as "strong" (in the Netherlands), containing legally binding objectives and the threat of regulation for noncompliance; "weak" (in Canada), lacking penalties for noncompliance, but having incentives for achieving the targets; or "cooperative" (in U.S. manufacturing), with incentives for developing and implementing new technology, but lacking specific targets.

While voluntary agreements are relatively new, some interesting results already have emerged. The German and Japanese business communities have made substantial progress in meeting efficiency targets. Also worth mentioning are the Netherlands' long-term agreements...