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Escape From Kyoto: Saving the Protocol

The right to weasel out of greenhouse-gas agreements might be just what's needed to make them work.

Part of the problem in addressing global climate change is that we often think of it as the wrong kind of problem.

“It’s a matter of atmospheric chemistry and meteorology — in that sense, it’s a scientific phenomenon,” said Robert Stavins, co-director of the Harvard Project on International Climate Agreements. “On the other hand, it’s not really a scientific ‘problem.’ We know what to do.”

It is — in the reality of negotiating a successor to the Kyoto Protocol — an economic and a political problem.

“If it weren’t costly to address it, if it were free or very cheap,” Stavins said, “it would (have been) addressed several years ago.”

Because it is none of those things, the sensitive debate is already under way to navigate a path to the next Kyoto when the current treaty — which the United States declined to ratify — expires in 2012. The Harvard project has commissioned 28 research papers from across the globe to propose solutions that would be not only scientifically sound but also economically and politically pragmatic. In September, the project also announced the winner of an open-call competition for visions of Kyoto II.

Its authors, a pair of economists, have a novel idea: The next global climate treaty should include an escape clause.

Jinhua Zhao, an economist at Michigan State and one of the paper’s authors, knows that phrase will produce a visceral reaction in many people.

“I think inherently, especially among environmentalists, in environmental circles, there’s a very gut reaction in opposition to an escape clause,” he said. “When we talk about an escape clause, a red flag would be flashed. ‘OK, wait a moment. What do you mean? You sign a treaty, but now you don’t abate? That would destroy the whole purpose.’”

But this escape clause wouldn’t be free. If countries chose to invoke it, they would have to pay a fine — a concept Zhao knows is equally objectionable in other circles, among many ordinary citizens.

Why, they might wonder, would we enter into an agreement that could require us to pay fines when our initial intention was to do good by the environment?

“An escape clause is not a clause that punishes a country,” Zhao said. “It gives more flexibility to a country that signs the treaty. That’s a safety valve. The two objections are just not true.”

The particular construction of this escape clause gives something to both parties — the environmentalists and those afraid of the excessive costs of abatement — while addressing the two most glaring weaknesses of the current protocol: It hasn’t encouraged broad participation, and it has no mechanism to enforce “mandatory” emissions cuts among those countries that have participated.

Zhao and Larry Karp, an economics professor at the University of California, Berkeley, started from the premise that all other design elements of Kyoto II will be irrelevant if we don’t first get countries to participate.

“An agreement that doesn’t involve the U.S. is just dead in the water,” Karp said. “Maybe that’s a bit of an exaggeration, but it’s not going to be very effective. So you have to get the U.S. to be involved.”

The U.S. has at times also made its participation contingent upon the participation of other countries, a circular logic that has so far led nowhere and diluted any American talk of being a “leader” on climate change.

An economist, more so than a biologist or a chemist, understands that we must ask economic questions beyond the moral imperatives: How do we craft a treaty that appears in the self-interest of sovereign nations? How do we balance the cost of participation with the benefits of abatement? How do we, in short, eliminate the excuses not to participate?

The U.S., for example, has had two legitimate concerns. The Bush administration did not want to sign a treaty with uncertain — and possibly enormous — costs. We simply don’t know exactly how much money it will take to reduce our greenhouse-gas emissions.

And if the U.S. reduces emissions from “dirty” industries, what guarantee do we have that those industries won’t decamp for countries with laxer environmental standards, thereby undercutting our abatement and eroding our competitive advantage? That last fear is known as “carbon leakage.” And it’s partly why we need developing countries India, China and Brazil to participate in some form as well.

“In general, you don’t sign an agreement to change your own behavior,” Karp said. “The reason you sign it is because you hope to change other people’s behavior.”

Otherwise, we would all voluntarily reduce emissions on our own, without entering into an international agreement. The next Kyoto treaty, then, must give us all some kind of leverage over each other — which the current protocol lacks and which the escape clause would provide.

The escape clause would remove the upper uncertainty of how much abatement will cost by setting a ceiling; if our costs of complying surpass that ceiling, we can invoke the escape clause — of course, at the expense of paying the fine. That fine would then be redistributed to all of the treaty’s signatories, including the offending country, which would be reimbursed, for example, one-twentieth the cost of the fine if 20 countries participate. Nations could then use that money however they chose, on climate projects or not.

The more countries that participate, the smaller the reimbursement gets, the greater the advantage to each of us not to invoke the escape clause — and, obviously, the greater the advantage to each of us as global emissions drop collectively.

Zhao and Karp have left several details of the fine’s construction to negotiation, suggesting among other things that it could be replaced by trade sanctions under an already-existing World Trade Organization framework. The size of any penalty could also be tied to the severity of a country’s failure to abate. As a fine, its monetary value would have to lie around some minimal critical level — which Zhao and Karp have not yet calculated — without being trivial.

The escape clause in effect translates a vague and lofty goal (reducing our greenhouse-gas emissions) into a concrete concept (a debt or trade sanction) that already exists in other international commitments. An escape clause, Zhao and Karp found, would directly increase participation.

As for the carbon leakage, their model would invite the participation of developing countries but not impose mandatory emissions cuts upon them. China and India, for example, would sign on to Kyoto II without immediately cutting emissions. In exchange, they would agree not to undercut abatement in other countries and to commit to emissions reductions in the next round, Kyoto III. They would also benefit in the present from liberalized green technology and projects through the United Nations’ Clean Development Mechanism.

Karp and Zhao envision this next step, Kyoto II, as lasting only eight to 10 years (a short time frame that would force us to stop procrastinating and prevent politicians from collecting credit on future promises).

This two-class model — with a high set of standards for developed countries and a lower one for developing countries — implicitly acknowledges that to date the bulk of the problem has been caused by wealthy nations like the U.S. and in Europe. Those countries today are also the best equipped to start solving the problem.

In the last year, China has overcome the U.S. as the single greatest current emitter of greenhouse gases (a point often made by U.S. critics of any treaty that wouldn’t also include China). But greenhouse gases are a “stock” pollutant, not a “flow” pollutant, meaning today’s climate-change problems are caused by a long accumulation of emissions. China is today emitting more than the U.S., but it will take China decades to catch up to the total emissions America has contributed to the atmosphere over time.

“The U.S. response to that would be, ‘Look, it doesn’t matter who caused the problem. The point is that without the participation of countries like China, India and Brazil, we cannot solve the problem,’” Karp said. “It’s sort of like the discussion you have today about the financial crisis to say, ‘We have to do something about the problem. Never mind who created it.’”

Researchers like Karp and Zhao must constantly stop to ask themselves how the U.S. might object — and how to eliminate those objections — since one of Kyoto II’s greatest political challenges will be to bring the U.S. into the fold. It's a thought exercise that has been rendered all the more difficult — until this week — by uncertainty over who would be in the White House in January.

The world will meet in Copenhagen in December 2009 to begin formulating Kyoto’s successor.

“The problem with 2009 in Copenhagen is that’s only 10 months after the inauguration of the next U.S. president,” Stavins said, “and only six months after the next president is likely to have in place his team of people who might begin to develop a negotiation position.”

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