Estimates of the costs of Kyoto-Marrakesh versus the McKibbin-Wilcoxen Blueprint

Abstract

[Conclusion]: The Kyoto Protocol never had much chance of reducing greenhouse gas emissions significantly because its design was deeply flawed. Following the withdrawal of the United States and the weakening of the protocol’s targets at COP6 and COP7, it is likely to do nothing to reduce global emissions through the end of the 2008-2012 commitment period. The protocol’s core flaw is its focus on “targets and timetables” that, in effect, require participants to agree to reduce greenhouse gas emissions to specified levels regardless of the cost. Our results confirm that the costs of the protocol are very sensitive to key economic variables that cannot be predicted with any precision. A single, modest change in projected productivity growth in Russia changes the costs of the protocol substantially. Many other variables would have similarly large effects. In order to ratify the protocol, therefore, a country must be willing to undertake an uncertain and possibly very expensive commitment. Moreover, unexpected future changes in economic conditions could raise the cost of the protocol sharply, which would create strong pressures for participating countries to withdraw at that point. In short, the protocol’s emphasis on emissions targets undermines participation for two reasons: (1) it discourages countries from ratifying the agreement; and (2) it causes the protocol to be particularly vulnerable to future events. The Blueprint policy, in contrast, is more attractive to initial participants because it does not require an open-ended commitment, and it is more sustainable over long periods because future events have little effect on compliance costs. The Blueprint, in other words, is transparent: the upper bound on annual permit prices allows a potential participant to determine its maximum compliance costs in any future period without having to know in advance how the myriad uncertainties surrounding climate change will be resolved. A country considering participation in the agreement will know exactly what to expect and will have little reason to abandoning the policy later. Moreover, the Blueprint has the potential to achieve greater cumulative emissions reductions than the Kyoto Protocol, and to achieve them at lower cost, because it would encourage wider participation and earlier reductions. Overall, it is a viable and promising alternative to the Kyoto Protocol. Show more