Sunday, October 24, 2021

"...bottom line is that climate policy has not progressed over the last three decades": The "wobbly" Paris Agreement and the "syndrome of free riding"

The two opening paragraphs of the article this post is all about should really catch the attention of all IB Higher level and Standard level candidates (and, teachers IMO).  Section 2.8 of the new (current) syllabus is "Market failure—externalities and common pool or common access resources". Candidates are expected to know how to clearly and with the use of appropriate diagrams explain negative externalities of production as well as common access resources and to also explain responses that include international agreements.  

Of particular interest and significance is the next learning outcome which is an AO3.  AO3 means that these topics can feature in questions that use as command terms 'evaluate', 'discuss' and 'examine', typical in part (b) of Paper 1 (HL&SL) essays where real world examples are expected (and will make the difference in allocating marks).  Here is the learning outcome: "Strengths and limitations of government policies to correct externalities and approaches to managing common pool resources of effectiveness'.  The syllabus continues with this AO3 learning outcome: Importance of international cooperation" that includes "Challenges faced in international cooperation" as well as "Monitoring, enforcement".

It should be clear from the above that IB Economics students (HL&SL) should invest some time on studying the 2015 Paris Agreement as they should be able to present, explain and evaluate / discuss this agreement as a most important 'example' of international cooperation  (you can read the official agreement here and read about it in a nutshell from the UNCC here). 

The article I was referring to in the opening sentence of this post was published in Foreign Affairs.  It is by William Nordhaus, who received in 2018 the Nobel Prize "for integrating climate change into long-run macroeconomic analysis" (see also this to get an idea about his most impressive career/work and interests).  The article is titled "The Climate Club: How to Fix a Failing Global Effort".  These are the opening paragraphs:

Climate change is the major environmental challenge facing nations today, and it is increasingly viewed as one of the central issues in international relations. Yet governments have used a flawed architecture in their attempts to forge treaties to counter it. The key agreements, the 1997 Kyoto Protocol and the 2015 Paris climate accord, have relied on voluntary arrangements, which induce free-riding that undermines any agreement.

States need to reconceptualize climate agreements and replace the current flawed model with an alternative that has a different incentive structure—what I would call the “Climate Club.” Nations can overcome the syndrome of free-riding in international climate agreements if they adopt the club model and include penalties for nations that do not participate. Otherwise, the global effort to curb climate change is sure to fail.

The problem with the Paris Agreement is that after 25  "climate meetings (COPs) (and here) there is very little progress in meeting the goals as "there is no binding international agreement on climate change". 

As mentioned in the title of this post, at the heart of the problem is the 'syndrome of free riding':

The reason is free-riding, spurred by the tendency for countries to pursue their national interests. Free-riding occurs when a party receives the benefits of a public good without contributing to the costs. In the case of international climate change policy, countries have an incentive to rely on the emission reductions of others without making costly domestic reductions themselves.

Nations have failed to stop nuclear proliferation, overfishing in the oceans, littering in space, and transnational cybercrime. 

and, Nordhaus continues:

When it comes to climate change policies today, nations speak loudly but carry no stick at all.

Are we doomed? Are there 'solutions' as a dear colleague likes saying? 

The key to an effective climate treaty is to change the architecture, from a voluntary agreement to one with strong incentives to participate. 

Successful international agreements function as a kind of club of nations. Although most people belong to clubs, they seldom consider their structure. A club is a voluntary group deriving mutual benefits from sharing the costs of producing a shared good or service. The gains from a successful club are sufficiently large that members will pay dues and adhere to club rules to get the benefits of membership.

The principal conditions for a successful club include that there is a public-good-type resource that can be shared (whether the benefits from a military alliance or the enjoyment of low-cost goods from around the world); that the cooperative arrangement, including the costs or dues, is beneficial for each of the members; that nonmembers can be excluded or penalized at relatively low cost to members; and that the membership is stable in the sense that no one wants to leave.

So, what are the conditions?

The first is that participating countries would agree to undertake harmonized emission reductions designed to meet a climate objective (such as a two-degree temperature limit). The second and critical difference is that nations that do not participate or do not meet their obligations would incur penalties. 

Please, do read the article for the specifics that Nordhaus proposes.

And, do jot down a few points to remember in a May or November IB Economics exam.

Remember, that questions relating to issues of global importance are always sought by examiners / question-setters.  It only makes sense. 

PS: You could also read about the main points of the Nordhaus article 

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