The Institutional Origins of Transatlantic Discord on Climate Change

1
The Institutional Origins of Transatlantic
Discord on Climate Change
Jonathan B. Wiener Duke University, RFF, EHESS
CIRED IDDRI, Paris 31 January 2006
2
Why the US-Europe Discord on Climate Policy?

1. National Net Benefits (perceived)?
2. Design of the Climate Treaties?
3. Ideology/culture against climate, against
   precaution?
4. Domestic Political Institutions?

3
Disaggregating Decisions a Multi-level Game
Global Net Benefits
National Net Benefits
National B gt C
National B gt C

• Domestic Institutions
• Executive
• Legislative
• Judicial
• Other

Institutions
Institutions
Actors Firms, NGOs, Individuals, Parties
Actors
Actors
4
1. Role of National Net Benefits in the
Tragedy of the Climate Commons

• Atmosphere open-access disposal site for GHGs.
• Control is costly to each emitter but Benefits
  of control would be shared widely. Incentives
  for overuse.
• Uncertainties? Yes, but is it real or a hoax?
  wrong question.
• Neither all true nor all false
  probabilistic risk scenarios.
• Rate of change (not just ultimate level) matters.
  Gradual/anticipated may benign
  Faster/Abrupt/unanticipated more damage. Varies
  by regional resilience. Even with uncertainty,
  expected value of damages gt 0.
• Yet even if very real, solutions are not
  simple. Diagnosis vs. remedy.
• Its worth limiting access to the commons, where
  B gt C for the collective group (Kaldor-Hicks).
• International law of treaties participation
  requires consent, so requires B gt C for each
  individual party (Pareto-improving).

5
National Net Benefits? A Very Rough BCA for the
US

• Benefits Costs
• (not incl. abrupt change)
• KP, CO2 only, no trading 0.1-0.3 GDP 1.0-3.0
• CO2, Annex B trading 0.1-0.3 0.5-1.5
• Multigas, Annex B trading 0.1-0.3 0.2-0.6
  
• Multigas, Full Trading 0.1-0.3 0.1-1.0
• with global participation
• Sinks biodiversity lower
• Include China, DCs lower
• Optimal path targets lower
• See Stewart Wiener, Reconstructing Climate
  Policy (2003), pp. 45-46.

6
National Net Benefits (perceived) ?

• Recall that the US joined the Montreal Protocol
  in 1987 in part based on a BCA done by EPA and
  Council of Economic Advisers, showing B gt C.
• Does the KP yield net benefits to the EU ?
• Not clear whether KP yields national net benefits
  to the US.
• EU initial opposition to flexibility mechanisms
  (trading) raise costs less incentive for US
  to join.
• Irony since 2001, the EU is using trading (ETS)
  originally urged by the US while the US is
  using government technology funding. The Market
  and the State have switched sides of the
  Atlantic!
• Russia and China may perceive benefits to global
  warming (agriculture).
• Need to reduce costs, increase benefits, offer
  side payments to attract their participation.
• Russias demands to join KP extra allowances to
  sell, more sink credits, and favorable treatment
  re WTO natural gas.
• Opposition to, or neglect of, engaging China
  India US fear of leakage (competitiveness
  losses, plus undermines environmental
  effectiveness) US reluctant to join. EU should
  have engaged China India to engage the US.
  Just cajoling the US wont work.

7
Varying Impacts of Climate Change Losers,
Winners ? Tol (2001)
Source Richard S.J. Tol, Estimates of the
damage costs of climate change, Part II. Dynamic
estimates, working paper, Hamburg University /
Vrije University / Carnegie Mellon University,
May 2001, Figure 13, p.38. In lower panel,
impacts for CEEFSU are on left axis, all others
on right axis.
8
Varying Impacts Mendelsohn et al. (2000)
From R. Mendelsohn, W. Morrison, M. Schlesinger
and N. Adronova. "Country-Specific Market Impacts
from Climate Change, Climatic Change 45 (2000)
553-569.
9
Does greater use of BCA in the US explain US
opposition? But convergence on BCA?

• USA
• Congress requires BCA TSCA (1975), Paperwork
  Reduc. Act (1980), UMRA (1995), SDWA amdts.
  (1996). But also often forbids BCA (e.g. CAA
  109).
• Every President since Jimmy Carter has required
  BCA of new regulations
• Carter EO 12044 (1978) economic impact
• Reagan EO 12291 (1981) Bs must outweigh Cs,
  else OMB return letter
• Clinton EO 12866 (1993) justify R-R,
  qualitative, distributional effects
• 2001- still using Clinton EO. More Return
  letters. Plus new Prompt letters also using
  BCA to say Yes (e.g. trans-fat labels,
  defibrillators).
• New RIA Guidelines (2003) more CEAs lower
  discount rates (3 as well as 7) probabilistic
  scenarios if gt1b BCA of homeland security regs.
• Europe
• Proportionality principle BCA
• Communication on PP (Feb. 2000) PP requires
  BCA
• Member States implementation of PP cost,
  proportionality criteria added.
• Better Regulation initiative Impact Assessment
  guidelines (2002, 2005) BCA
• But institutional gap no OMB/OIRA to
  supervise BCA.

10
2. Design of the Climate Treaties

• Goals
• EU initial position 1989 taxes then targets
  timetables
• US 1989 unclear, then no 1993-97 yes
  2001 no
• Scope (coverage of gases, sectors, sinks)
• EU 1989 energy sector CO2 only, no sinks
• US 1989 a framework treaty, then a protocol on
  each gas
• Instrument choice
• EU 1989 taxes, or national caps with no
  trading
• US 1989 trading, but no caps
• Participation of major emitters
• EU 1989 unaddressed, or industrialized
  countries act first
• US 1989 unaddressed
• Selection criteria
• Effectiveness
• Cost max(B-C)
• Dynamic innovation
• Fairness

11
Comprehensive scope Advantages

• EU position 1989 CO2 only, energy only, no
  sinks
• US proposal late 1989 comprehensive approach
  all GHGs, sources sinks
• Environmental advantages
• Prevents perverse cross-gas shifts from
  regulating one gas alone (e.g. CO2 to CH4 or CO2
  to N2O)
• Encourages conservation of forest sinks
  (biodiversity)
• Economic advantages
• Different countries have different emissions
  portfolios some more energy CO2, others more
  Land Use Forestry, more CH4, etc.
• Lowers cost of abatement 60 or more

12
ScopeIndex of Global Warming Potential (GWP)
(Source D. Schimel et al. in IPCC, Climate
Change 1995 The Science of Climate Change 65-131
(1996))
13
Comprehensive coverageprevents perverse
Cross-Gas Shifts
14
Comprehensive scope solution to Risk-Risk
Tradeoffs
(Cambridge MA Harvard University Press, 1995)
15
Comprehensive scope also reduces Costs
Comprehensive FCCC, Kyoto Not (energy CO2
only) EU ETS, RGGI,
16
Comprehensive scope Disadvantages

• Negotiation costs -- increase or decrease ?
• Administrative practicality ?
• GHG index
• need some index cant avoid comparing
• imperfect index value is better than zero
• can improve index over time
• Monitoring emissions
• can monitor diverse GHGs
• can improve monitoring, via incentives
• precautionary paradox uncertainty inaction

17
Comprehensiveness in Kyoto GHGs
FCCC Article 4(2)(b) covers emissions of
carbon dioxide and other greenhouse gases not
controlled by the Montreal Protocol.
4(2)(c) Calculations should take into account
the best available scientific knowledge,
including of the effective capacity of sinks and
the respective contributions of such gases to
climate change. Kyoto Protocol, Article 3(1)
covers aggregate anthropogenic carbon dioxide
equivalent emissions of the greenhouse gases
listed in Annex A Annex A 6 sets of
greenhouse gases carbon dioxide
(CO2) But methane (CH4) Black carbon
(soot) ? nitrous oxide (N2O) Sulfate
aerosols ? hydroflourocarbons (HFCs) perflouroca
rbons (PFCs) sulfur hexaflouride (SF6)
18
Comprehensiveness in Kyoto Sinks

• Kyoto Protocol
• Allows credit for sinks
• Restricts credit to new sinks neglects
  conservation of existing sinks (biodiversity)
• Restricts credit for sinks in CDM
• The Hague (Dec. 2000) EU sought limits on sinks
• Bonn / Marrakech (2001)
• Put quantitative limits on sink credits (though
  not as tight as sought at The Hague)
• Russia got extra sink credits

19
Instrument Choice

• Selection criteria
• Effectiveness
• Cost
• Dynamic innovation
• Fairness
• Conduct
• technology standards
• policy efforts
• Quantity
• fixed emissions caps
• cap trade (Kyoto, EU ETS, McCain-Lieberman,
  )
• Price
• emissions taxes
• civil tort liability
• subsidies for emissions abatement, technology
  RD
• Information
• disclosure of emissions, liabilities

20
Trading reduces Cost (OECD Model Results for
2020)
Source Barrett (1992)
21
Instruments in Kyoto Emissions Trading
Kyoto Protocol, Article 17 The conference of
the Parties shall define the relevant principles,
modalities, rules and guidelines, in particular
for verification, reporting and accountability
for emissions trading. The Parties included in
Annex B may participate in emissions trading for
the purposes of fulfilling their commitments
under Article 3. Any such trading shall be
supplemental to domestic actions for the purpose
of meeting quantified emission limitation and
reduction commitments under that
Article. 1990s US advocated, EU opposed
emissions trading The Hague (Dec. 2000) EU
sought quantitative limit on trading, via
supplementarity Bonn / Marrakech (2001) EU
agreed that no quantitative limit on trading is
implied by supplemental. But added sellers
reserve requirement. 2005 EU launches its own
Emissions Trading System. CO2 sources only.
22
Instruments in Kyoto JI and CDM
FCCC Article 4(2)(a) ... These Annex I
Parties may implement such policies and measures
jointly with other Parties Kyoto Protocol
Article 6 (1) For the purpose of meeting its
commitments under Article 3, any Party included
in Annex I may transfer to, or acquire from, any
other such Party emission reduction units ,
provided that (a) Any such project has the
approval of the Parties involved (b) Any such
project provides a reduction in emissions by
sources, or an enhancement of removals by sinks,
that is additional to any that would otherwise
occur ... (d) The acquisition of emission
reduction units shall be supplemental to domestic
actions for the purposes of meeting commitments
under Article 3. Kyoto Protocol Article 12
(1) A clean development mechanism is hereby
defined. (3) Under the clean development
mechanism (a) Parties not included in Annex I
will benefit from project activities resulting in
certified emission reductions and (b) Parties
included in Annex I may use the certified
emission reductions accruing from such project
activities to contribute to compliance . . .
23
But Small Effect of Kyoto Protocolon Global
Emissions, Concentrations
Effect of the Kyoto Protocol (shown in blue) on
(1) the projected total, worldwide emission of
CO2 and on (2), the resulting concentration of
the gas in the atmosphere (in parts per million
by volume, ppmv), if Kyoto caps applied through
the year 2100. Emissions are in units of
petagrams (1015 grams) of carbon, or
equivalently, billions (109) of metric (2,200 lb)
tons per year. In each figure the black reference
line (labeled IPCC) is the projected scenario,
called IS92a, developed by the Intergovernmental
Panel on Climate Change. Shown for reference in
the second figure is the pre-industrial CO2
concentration of roughly 275 ppmv. (From Jae
Edmonds, Beyond Kyoto Toward A Technology
Greenhouse Strategy, Consequences, vol. 5 no. 1
(1999), Figure 1, pp. 17-28, at
http//www.gcrio.org/CONSEQUENCES/vol5no1/beyond.h
tml .) Assumes US joins, and zero leakage to
non-Annex I countries.
24
(Washington DC AEI Press, 2003)
25
Engaging Participation Importance of
Developing Countries
Source Council of Economic Advisers
(CEA),Economic Report of the President (1998)
p171
26
Institutions MatterVoting Rules for Adopting Law
Majority Rule by N/2 1
Unanimity Rule by N
Fiat Rule by 1
See Buchanan Tullock, The Calculus of Consent
(1962)
27
Institutions MatterVoting Rules for Adopting Law
Coercion. Consent. Costs to dissenters, Costs
of free riding, e.g. rents extracted e.g.
slow to act
Majority Rule by N/2 1
Fiat Rule by 1
Unanimity Rule by N
Assumed in National International many
analyses law law
Collective Net Benefits Individual Net
Benefits (Kaldor-Hicks) (Pareto-improving) Pol
luters Pay Beneficiaries pay
28
Problem Cooperation among Countries with
Heterogeneous Interests
Source only (bear costs of policy) e.g.
Russia, China? Coop. losers?
Victim only (reap benefit from policy) e.g.
small island countries
Both Source Victim (both costs and
benefits) e.g. most countries. Some free riders.
Free riders share benefits prefer Free ride
gt Both act gt Neither acts gt Act
alone. Cooperative losers lose from others
acting (e.g., gain from global warming)
prefer Neither acts gt Free ride gt Both act gt
Act alone. Raises side payment needed
to attract participation.
29
Disadvantages ofPartial, local action

• (e.g. by EU only, or US only, or RGGI,
  California)
• Emissions growth not limited in unregulated areas
• Leakage of emissions to unregulated places
• Undermines effectiveness
• Raises costs
• Political fear of leakage unwilling to adopt
  policy
• Higher abatement cost (lost trading
  opportunities)
• Market power by fewer permit sellers
• Patchwork of different rules
• Constitutional constraints on action by US states

30
Examples of Side Payments to attract
Participation in International Environmental
Regimes
31
Disadvantages of Side Payments

• Aid/cash direct subsidies for abatement without
  caps (e.g. government aid, CDM payments)
• Perverse incentive / moral hazard increases MC
  but reduces AC, may increase total emissions
  (Oates, Kohn)
• CDM projects may induce domestic leakage (no
  caps)
• CDM sales may undercut attraction of formal
  trading why agree to a cap, if CDM credits sell
  at the same price?
• Government aid programs may be distorted by
  politics
• Tax pay undermine incentive effect of tax
• Compare Cap Trade with headroom allowances
  as side payment (as in 1990 Clean Air Act, and
  Kyoto for Russia)
• Cap avoids perverse incentive
• Decentralized, competitive, private sector,
  innovation
• Or linkage to other issues, e.g. WTO entry,
  health co-benefits

32
Participation Efficiency Instrument Choice
under Consent Voting Rule
Minimize sum of CNP CP CNP Costs of
non-participation (uncontrolled sources,
leakage of emissions to unregulated countries,
higher abatement cost, market power) CP
Costs of securing participation, i.e. costs of
making side payments (out of pocket costs,
perverse incentives)
33
Participation Efficiency of Alternative
Instruments
34
Trading vs. Taxes a broader comparison

• Uncertainty
• Taxes superior if MC gt MB otherwise
  Trading superior (Weitzman 1974 Pizer)
• Stock pollutant flat MB ? But abrupt damages
  steep MB ?
• Dynamic adjustment
• More difficult with quantity rules than with
  price rules? E.g., NY City taxicab medallions,
  vs. tax changes.
• Engaging participation
• Tax would not attract participation by key
  players
• Who would administer?
• Tax plus side payment undermines incentive
  effect of tax?
• Fiscal cushioning principal/agent problems
• Domestic tax/subsidy games to cushion key
  industries
• Tax authority may maximize revenues, not tax
  externality
• More costly to monitor true compliance with tax
  than with cap
• Undermines environmental performance of taxes

35
Pros and Cons of Kyoto

• Pros
• Scope Comprehensive all GHGs, sources and
  sinks
• Instrument Cap trade (plus JI, CDM)
• Participation
• headroom allowances to engage Russia
• Cons
• Scope limits on use of sinks, no credit for
  conserving forests
• Instrument limits on full trading
• Participation
• Failure to engage China, India, Brazil, etc.
• As a result, failure to engage US, Australia
• Targets
• 2012 too stringent 15-30 below BAU tighter
  than optimal path (Hammitt 3 below BAU) US
  would bear 50-80 of the total required
  reductions from BAU
• Post-2012 ??? (Hammitt 5 below BAU by 2020,
  20 by 2050)
• Compliance ??

36
3. Ideology?Public Attitudes on Climate

• Americans
• Favor US action to limit GHGs if other G8
  countries act 86
• Favor US doing as much or more to limit GHGs than
  average of G8 98
• Assume US is already doing as much or more to
  limit GHGs than average of G8 68
• US should join Kyoto Protocol 73
• Assume Bush favors Kyoto Protocol 43
• Assume Bush opposes Kyoto Protocol 43
• There is a consensus among scientists that global
  warming exists and could do significant damage
• Republicans Yes 41, No 46
• Democrats Yes 62, No 33
• Favor McCain-Lieberman bill 83.
• Even if it costs 15/household/month 68.

From Program on International Policy Attitudes,
poll conducted June 2005, data at http//www.pipa
.org/OnlineReports/ClimateChange/ClimateChange05_J
ul05/ClimateChange05_Jul05_rpt.pdf
37
Comparing Risk Regulation More Precautionary
Than Thou ?
In the US they believe that if no risks have
been proven about a product, it should be
allowed. In the EU we believe something should
not be authorized if there is a chance of risk.
-- Pascal Lamy, EU Trade Commissioner, 1999
US
EU
More and More, Europeans Find Fault with US
Wide Range of Events Viewed as Menacing -- NY
Times, 9 April 2000, p.A1 Precaution is for
Europeans NY Times, April 2003 Europe is
considered fairly risk-averse America, on the
other hand, is often seen as having a strong
risk-taking culture The Economist, 24 January
2004

• View espoused by
• EU officials
• NGOs
• News media
• Scholars

• Genetic Engineering, GMO foods / crops

• Hormones in Beef, including rBST

• Climate Change

• Toxic Chemicals

E.g. Vogel et al. (2000, 2003), Kramer (2004)
Reversal (flip-flop) in relative US/EU
precaution over 1970-2000

• Guns

• Antitrust

38
Comparing Precaution Hypotheses about the
Evolution of US and European Policies

• Globalization yields Harmonization

• Convergence
• Divergence
• Flip-Flop
• Hybridization

• EU risk-averse, US risk-taking ? Or,
• US adversarial legalism, EU informal corporatist
  ?

• US more PP in 1970s, EU more PP since 1990s

• Borrowing, learning
• Heterogeneity across within regulatory systems

39
Flip-Flop Evidence
US
EU

• 1970s Sweden German Vorsorgeprinzip

• Lead phaseout (Ethyl Corp. v. EPA, D.C. Cir.
  1976)

• 1980s Marine treaties

• Species (TVA v. Hill, S.Ct. 1978)

• 1990s Rio treaties. Maastricht Treaty 130r
  (now 174) adopts PP. Member States adopt PP.
  No to GMOs, beef.

• Default assumptions in RA

• Benzene (S.Ct. 1980) (OSHAct) (show us your
  risk assessment before you regulate). Alar
  controversy.
• Carter, Reagan, Clinton Exec. orders requiring
  Cost-Benefit
• 27 Questions re Communication

• 2000 Commission issues Communication on the
  PP

• 2001 ECJ on BSE. Late Lessons.
• 2002 Action Plan - Better Regulation, Impact
  Assmts. (BCA)
• ECFI case on antibiotics in feed
• 2005 REACH

• Revisions at Rio Cartagena
• WTO case on Beef Hormones
• No to Kyoto. Joburg WSSD.
• Iraq War. WTO case on GM foods. San Francisco
  adopts PP.

40
Comparing PrecautionMethod 1 Case Studies

• Narrow and deep inquiry
• Not just GMOs, Climate
• Fosters pragmatic dialogue, reduces acrimony over
  abstract rhetoric of principle
• Sheds light on real policies, consequences,
  choices
• Greater detail on institutional context and
  process history (Blomquist) - surrounding the PP,
  e.g. Implementation Enforcement,
  Proportionality Principle, Impact Assessment,
  Tort law as a backup to ex ante regulation.
• But sampling bias remains my cases vs. your
  cases

41
The Reality of Precaution Project
Project Objective Move beyond abstract rhetoric
to compare actual policies over a wide array of
cases.

• Four Transatlantic Dialogues
• Bruges, January 2002
• Airlie House, June 2002
• Berlin, June 2003
• Duke Univ. Sept. 2004

• Genetically Modified Foods
• Mad Cow Disease (BSE)
• Acrylamides in food
• Chemicals (TSCA and REACH)
• Phthalates
• Marine Environment
• Biodiversity
• Nuclear Energy
• Automobile Fuels (Diesel)
• Ozone Depletion Climate Change

• New Drug Approval
• Medical Errors, ADRs, Patient Safety
• Health Supplements
• Childrens Health
• Antibiotics in animal feed
• Smoking
• Cell phones
• Youth violence
• Terrorism WMD
• Information Disclosure Policies

42
CFCs and GHGs

• Stratospheric Ozone Depletion US acted first,
  favored targets
• Molina Rowland paper 1974
• Bans on CFCs in aerosols Oregon 1975, all of US
  in 1978
• US halts SST. Europe goes ahead with Concorde.
• Europe adopts production cap that exceeds current
  production
• Ozone Hole 1985
• Montreal Protocol 1987, followed by London,
  Copenhagen phaseout
• Climate Change EU acted first, favored targets
• Arrhenius 1896 rising CO2 concentration hotter
  years 1988- .
• Europe presses for treaty US joins FCCC (Rio
  1992) provided no targets timetables.
• US signs Kyoto Protocol (1997) but Clinton Admin.
  never submits to Senate for ratification. Bush
  Admin. withdraws (2001).
• EU moves ahead with Kyoto targets, emissions
  trading.

43
Diesel Emissions

• EU promotes Diesel
• to reduce CO2
• gt 20 of passenger vehicle fleet
• US restricts Diesel
• to reduce fine Particulate Matter (PM)
• PM reductions majority of net benefits of all
  US federal regulation, 1980-2004
• lt 3 of passenger vehicle fleet
• Simultaneous precaution, but vs. conflicting risks

44
BSE/vCJD Policies

• UK EU USA
• Cases of BSE 200,000 2,000 2
• (1986-) (1990-) (deer/elk 2001-?
• Canada 2003)
• Ban on UK Beef No Temporary Yes
• (1996-99) (1989-)
• Ban on MBM in feed Yes Yes Yes
• (1988) (1994) (1997)
• Ban on eating SRM Yes Yes No
• (1989) (1997)
• Ban on beef gt 30 months old Yes No No
• (1996)
• Testing at slaughter No Yes No
• (2000)
• Ban on UK, EU Blood Donors No No Yes
• (leukodepletion) (1999-)

(Source Wiener Rogers, 2002 George Gray,
Harvard School of Public Health, 2002)
45
Comparing Precautionary Cases More Precautionary
Than Thou ?
US
EU

• 1970s 80s
• New drug approval
• CFCs
• Nuclear power
• Endangered species
• Lead (Pb) in gas/petrol

• 1970s 80s
• Marine environment
• Guns

• 1990s - present
• Hormones in Beef, rBST
• GM foods / crops
• Climate
• Toxic Chemicals
• Diesel - more (CO2)

• 1990s - present
• BSE in Beef, Blood
• Smoking
• Diesel - less (PM)
• Youth violence
• Terrorism WMD

46
Comparing Precaution Method 2 Aggregate
Quantitative Data

• Larger database all risks mentioned in risk
  literature (254 references) in US and EU,
  1970-2004.
• 2878 risks. Broad, but shallow.
• Unbiased sampling random stratified random
• But
• True universe of risks?
• Random vs. Representative sampling
• Less information regarding foreign law, member
  state law ?
• Variation within each system over time
• Policies by member states within US, EU
• Rise of EU its competence over E/H/S issues,
  since late 1980s
• Change in EU membership over 1970-2004
• Scoring ambiguities e.g., ambient vs. emissions
  standards
• Scoring measures standards, not implementation
  enforcement
• Scoring counts earliness stringency, not degree
  of uncertainty

47
Constructing a Larger Sample
Universe of all risks
11,086 verbatim risks from 254 sources in
literature on risk perceptions, ranking, and
classification, 1960-2003, in US and Europe
3,000 unique risks (recom-bining essentially
identical verbatim risks) In 19 categories and
95 sub-categories
2,878 unique risks In 18 categories and 92
sub-categories (dropping 122 unique risks, 1
category, and 3 subcategories)
100 in random sample 92 in stratified random
sample
48
Table I. Risks by Type Percentage in Code
Category Matrix Sample 1 Crime and
violence 1.8 3 2 Alcohol, tobacco, and other
drugs 3.0 3 3 Medication and medical
treatment 6.8 8 4 Transportation 8.2 13 5
Accidents not elsewhere classified 2.4 2 6
Recreation 5.5 8 7 War, security, and
terrorism 1.5 3 8 Toxic substances 9.8
8 9 Food and agriculture 9.5 9 10 Pollution
7.5 8 11 Energy production 5.0 3 12
Political, social, and financial 3.4 1 13
Ecogeological 4.0 2 14 Global 2.2
1 15 Human disease/health 9.7 9 16
Occupational 15.0 17 17
Consumer products 3.4 2 18 Construction
1.4 0 Total percentage 100
100 Total number 2,878
100
49
Testing Hypotheses Evidence from the Random
Sample

• Scoring method
• Drew 100 risks at random
• Scored each risk in each year, 1970-2003
• 1 if greater EU stringency
• 0 if tie
• -1 if greater US stringency

• Convergence
• Divergence
• Flip-Flop
• Hybridization

50
From Hammitt, Wiener, Swedlow, Kall Zhou
(2005).
51
(No Transcript)
52
Summary of Quantitative Sample

• No significant trend over 1970 2004
• Slight shift toward greater precaution in EU over
  19902004
• But very slight lt10, or equivalent to a switch
  toward greater EU precaution in only 3-6 of
  sample
• Much diversity across risks
• Shift toward greater EU precaution 21 risks
• Shift toward greater US precaution 14 risks
• Always equal 33 risks
• EU always more precautionary 11 risks
• US always more precautionary 9 risks
• Precautionary Particularity risk selection.
• Why? Perceptions? Institutions?

53
4. Domestic Political Institutions?

• The 2-Level Game national positions in
  negotiations are influenced by sub-national
  politics. (Robert Putnam, Frederick Mayer)
• Perceived national net benefits depend on
  domestic institutions for
• implementing policies
• adopting policies
• formulating national preferences
• Key institutions
• Executive The Presidency
• Legislative The Congress
• Judicial The Courts
• Federal-State relations

54
Institutions The Presidency

• Consistent skepticism of KP by US Presidents
• Pres. George W. Bush rejected the KP in March
  2001, citing cost (assuming no trading, and CO2
  only).
• In December 1997, Vice President Al Gore went to
  Kyoto to seal the deal on the KP, and Pres. Bill
  Clinton signed it. But Pres. Clinton announced
  the next day that he would not submit it to the
  Senate (until meaningful participation by
  developing countries).
• The Clinton-Gore administration insisted on the
  same Treaty design elements as the first Bush
  administration comprehensive (all gases,
  sources sinks) and flexible (emissions
  trading).
• In 1989-92, Pres. GHW Bush favored FCCC but
  opposed targets.
• US treaty negotiators are appointed by the
  President, hence accountable to the President and
  in turn to the entire electorate.
• In parliamentary systems, treaty negotiators are
  often members who represent local constituencies,
  or pro-environment 3rd parties such as the
  Environment Minister elected by the Green Party.

55
Institutions The Congress

• In parliamentary systems in Europe, the
  government negotiating the treaty also controls
  the legislature.
• But a US President signing a treaty is often
  facing a hostile or at least independent Senate.
  
• Under US Constitution (Art. II, sec. 2), joining
  a treaty requires 2/3 vote of US Senate 67
  Senators.
• The US Senate voted 95-0 against KP (incl. all
  Dems) in 1997.
• In October 2003, 44 out of 100 Senators voted in
  favor of the McCain-Lieberman cap trade bill.
  In June 2005, only 38 voted yes. But 53 voted
  for a separate resolution (not a law) calling for
  comprehensive mandatory market-based federal
  regulation of GHGs.
• Voting in the Senate is not proportionate to
  population (2 Senators per state). Influence
  of low-pop., high-coal agriculture states in
  the West.
• US House presumably even more opposed. Shift in
  US population House members ( electoral votes)
  over last 20 years to West, Southwest South.
• Referenda? Sometimes used in European member
  states (e.g. the European Constitution). Also
  used in some US states, but not for national
  lawmaking. Used to elect the US President (but
  not the EU President).

56
US Senate Votes on McCain-Lieberman Climate
Stewardship Act
October 2003
June 2005
From http//www.nwf.org/globalwarming/climatestewa
rdshipact9-05.cfm
57
Institutions Federal-State Relations

• In the USA, the state governments have no direct
  voice in the federal government
• State policy actions e.g. RGGI, California
• Indirect influence of States via US Senate votes,
  and via Presidential electoral votes in close
  contests. California, Texas, Florida
• In the EU, the member state governments have a
  direct voice in the EU institutions
• Commission
• Council
• In Canada and Australia, the provincial
  governments have a voice in the federal
  government
• With direct voice, strong member states can act
  as pushers or blockers.

58
Institutions The Courts

• Asymmetric enforcement and problems of credible
  commitment
• Widespread view that highly adversarial US
  legal system forces tight compliance
• government enforcement
• independent citizen suits by NGOs in US courts
• whereas European legal systems are more relaxed,
  corporatist. E.g. Robert Kagan (Berkeley).
• EU sees KP as aspirational, US sees it as
  binding, and fears less aggressive implementation
  enforcement in EU than in US (i.e. sees EU
  commitment as less credible).
• Hence, ex ante, US is reluctant to commit to
  costly rules (but ex post, more likely to
  implement them).
• Attempts by the EU to reassure the US backfire
  Dont worry, its only aspirational only
  exacerbates the fear.

59
Institutions Rent-seeking?

• More difficult at international level, where
  countries must consent, and hence can refuse to
  be bound by rules that would extract rents
• as opposed to majority vote or fiat, in which
  special interests can extract rents coercively
  from dissenters. Wiener, 87 Georgetown L.J. 749
  (1999).
• Nonetheless EU seeking to raise rivals costs
  by imposing CO2-only, no trading regime on US,
  Japan? US seeking to avoid this?
• At domestic level
• In US, coal/oil industries opposing KP, esp. in
  US West?
• In France, nuclear energy favors controls on
  CO2 to raise rivals' costs, especially carbon
  taxes to raise rivals' costs and generate revenue
  to pay for (French) nuclear energy in developing
  countries.
• EU industry seeking to raise rivals costs in US,
  Japan? EU Greens industries in Baptists
  Bootleggers coalition?
• EU Greens seeking climate policy for larger
  social engineering agenda watermelons --
  green on the outside, but red on the inside?
• Recall rent-seeking by US producers of CFCs and
  CFC-substitutes in mid-1980s (seeking predation
  by regulation via Montreal Protocol) (why did
  Europe go along? Baptists Bootleggers?)

60
Summary The Institutional Origins of Discord on
Climate

• National Net Benefits
• Use of BCA
• Varying BCA by country
• BCA for US depends on participation by China,
  India et al.
• Design of the Treaties
• Cost comprehensiveness, trading
• Participation failure to engage China, India et
  al.
• Ideology? Not a major difference
• Domestic Institutions
• Presidency and appointed negotiators
• Congress and rules of the Senate
• Courts and asymmetric enforcement

61
Ways forward? What to do now?

• New developments at COP 11 in Montreal, December
  2005 ?
• Negotiation of post-2012 KP, without the US or
  China
• Continuing discussion under FCCC without targets
• Study Compensated Reductions in developing
  countries
• USG approach technology RD. But thats only
  the supply side also need a demand side
  incentive to foster diffusion/adoption. Hence,
  need to internalize cost of climate change into
  transactions on energy, agriculture, forests,
  etc. ? Taxes or allowance trading.
• Victor et al., bottom-up approaches -- misnamed
  Madisonian -- our reply letter in Science
  (20/1/2006) re gradual self-organizing norms vs.
  need for some top-down incentives with
  international transfers. ? Taxes or allowance
  trading. 
• Stewart Wiener approach Engaging China
  India along with the US in a parallel regime
  (plus Australia, India, Brazil). How to manage
  side payments? ? Trading with headroom
  allowances. Merge with KP?
• Need to address domestic institutions, e.g.
  National Net Benefits, votes in US Senate,
  expected enforcement.

62
Next Steps?

• 1) US stays out of Kyoto (forever)
• Carbon trade wars ?
• EU Emissions Trading System. Linking by
  non-parties?
• Shift to adaptation instead of mitigation?
• 2) US joins Kyoto now, or in 2nd Commitment
  Period (gt2012)
• Stick with KP as is.
• Costs to EU, Japan, Canada of US accession
  increase allowance prices
• Still little effect on global emissions.
• Renegotiate KP re sinks, DC obligations, US
  target?
• Too late after Entry into Force (2/05) (but
  competitiveness concerns in Europe?)
• High transaction costs of achieving universal
  accord.

63
Next Steps?

• 3) Third path New parallel international
  regime, in which the US engages major developing
  countries -- China, India, Brazil, Mexico, et al.
  -- and perhaps Australia.
• Comprehensive -- all GHGs, sinks
• Add black carbon (soot)
• Add credit for conserving existing forests
• No maximum limit on use of sinks
• Full international allowance trading
• Whole-country CDM projects (reduces leakage)
• Compensated reductions vs. national baseline
• Full formal Emissions Trading
• Participation by major DCs
• Headroom allowances to allow growth, sales
• Targets set on optimal path to maximize net
  benefits
• Later, this regime could merge with Kyoto

64
Next Steps?

• 4) Domestic US action?
• Private sector businesses, Chicago Climate
  Exchange
• RD on energy technologies
• e.g. FutureGen, IGCC, nuclear, solar, wind
• State regulations ?
• Northeast RGGI (incl. Govs. Pataki, Romney)
• California vehicles law on CO2
• Patchwork Leakage Constitutional limits
• Federal regulations ?
• EPA list CO2 under CAA ? Secs. 108/109 202. GC
  memos.
• Clear Skies voluntary intensity target 3P or
  4P (add CO2) ? 5P (add CH4) ?
• McCain-Lieberman bill 44 votes in 2003, 38 in
  2005. Others Carper, Collins, Hagel, Bingaman,
  Lugar,
• Multi gas Sink credits International credits?
  McC-L 15 cap.
• Safety Valve ? At what price ceiling?
• Linked to / contingent on action by DCs (China) ?

65
Gains from New Parallel Regime

• Gains to US
• greater climate protection benefits, at lower
  abatement costs
• commercial benefits (trading system design
  leadership avoid carbon trade wars)
• strategic benefits (e.g. linkage to antiterrorism
  efforts)
• Gains to China
• profits from allowance sales
• reduction in co-pollutants healthier, lower-GHG
  development path
• China-US strategic partnership world leadership
• Gains to Kyoto parties (EU, Japan, Canada,
  Russia) better allowance price stability if US
  China et al. join together, rather than each
  joining separately
• Gains to all from Experimentation with
  plurilateral regime
• Lower transaction costs to negotiate (than
  universal regime)
• Learning over time