CLIMATE CHANGE AGREEMENT THAT CONSERVATIVES WILL LIKE
Is there such a thing as a climate change agreement that a market-driven, efficiency-minded skeptic of international institutions could love? If there is, the deal concluded this month in Paris might just be it.
It’s not hard to see why some would be wary of an international climate deal. Multinational institutions can be bureaucratic and inefficient, out of touch with local needs and marketplace realities. But after years of failing to win support for a top-down approach to managing the risks of climate change, negotiators in Paris took a radically different strategy.
Instead of imposing mandates from on high, this agreement relies on each country to determine not only what’s locally achievable, but how to get it done. Whatever works best for each country’s national circumstances — forest protection, nuclear energy, pollution limits — is encouraged under this deal. The decisions about how to meet this challenge will be made not by UN officials, but by leaders in places like Washington, London, Beijing and New Delhi – not to mention Austin, Carson City, and Tallahassee.
The Paris agreement is, in many ways, Kyoto turned on its head. Under the Kyoto Protocol only 37 countries, all from the developed world, made pledges to cut their emissions. In Paris, over 180 nations have obligations, including China, India, Brazil, and other large emerging economies. Each nation, regardless of its economic status, faces the same requirements to make commitments, report emissions, be reviewed on their progress, and come back to the table to strengthen those commitments. In Kyoto, countries were told how much to cut. In Paris, each nation decided for itself.
Perhaps the most radical element of this accord is plain old accountability. The double counting of emissions reductions — a bookkeeping trick that helps politicians but cheats the environment — is explicitly prohibited. Each country has to report the progress they are making on reducing pollution. And those reports go to a panel of experts for technical review, so we’re not taking anyone’s word for their Paris pledges. It’s the environmental version of President Reagan’s “trust, but verify.”
For those of us who have long promoted the ability of smartly designed markets — instead of command and control government regulations — to solve environmental problems, there’s more good news. This agreement gives a strong boost to the use of markets, with two separate options depending on national preference. There is encouragement for the growing use of bottom-up agreements between jurisdictions to link markets for greater efficiency, as California and Quebec have done. There’s also the option of an international structure, with strong rules and accounting, for countries and states that prefer that approach.
As the talks began in Paris, Bill Gates and other investors announced plans to focus billions on early-stage clean energy research. By encouraging market-based solutions, the Paris pact will also drive clean energy development around the world. The most powerful signal will come when jurisdictions correct the market failure that lets anyone pollute for free and shifts the cost of impacts to taxpayers. By putting a price on adding climate pollution to the atmosphere, we can aggressively drive innovation. And, indeed, this innovation and entrepreneurism is what will ultimately solve climate change.
The upside for America is substantial. As with any economic transformation, there will enormous opportunities for inventors, investors and workers. Building the clean energy economy – not just in the United States, but for the world – will require exactly the kind of innovation and activism that American capitalism does best. Just as we have dominated the new world of the Internet, we can do so on the much larger scale of the emerging world market for clean energy.
You might ask if this almost libertarian approach to international agreements will achieve results, since the emissions targets are not legally enforceable. The truth is that even “legally binding” diplomatic agreements depend on peer pressure to achieve results. With very few exceptions, nations can always decide to flout worldwide agreements without specific legal penalties. But the pressure — from other governments, activists, and world opinion — that compelled 188 countries to make commitments to address their emissions will also help hold them to it. And, with built-in accountability, we’ll know if they don’t.
The fact that the emissions targets are non-binding actually encouraged more participation, with nearly 99% of global emissions covered by the pact. Kyoto only covered a quarter of global emissions, a number that has since shrunk to 12%. And the “binding” aspect only meant that countries who missed their targets withdrew from the pact, as Canada did.
For an agreement designed to protect us from such a large threat, it’s a remarkably humble mechanism. There is no high commissioner in New York or Geneva telling sovereign nations what to do with their energy or economic policy. In the best sense of governance, the deal sets up a strong legal structure and rules for accountability, and then leaves the decisions on methods and implementation to a diversity of smaller entities and the private sector. The delegates also had the modesty to recognize that no major environmental problem is solved with one document; and, indeed, the Paris agreement only gets us about half the emissions reductions we need.
We have no choice but to manage against the likely costs of climate change. Citibank estimates a prices tag in the trillions if we don’t act. The smartest way to do that is to use a flexible, accountable framework to reduce the cause of the problem. Surprising as it sounds, that’s what was delivered in Paris.
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