The climate change agreement concluded in Paris in December 2015 has been hailed as historic, durable and ambitious. Under the agreement, developed and developing countries alike have agreed to limit their emissions to relatively safe levels (limiting the increase in global temperature to 2 degrees Celsius with an aspiration of 1.5 degrees Celsius) and conduct regular reviews with a view to increasing these commitments over time in line with technological change and scientific advice. In addition, financing will be provided to poor nations to subsidize the cost of cutting emissions, adapting to extreme climate events, and aid such as are affected by climate-related disasters. Several countries, notably the US, China and recently, India, have all signed up to the accords.
The Paris agreement is only the latest stage in a seemingly endless process of negotiations relating to climate change under the United Nations Framework Convention on Climate Change with prominent earlier staging posts being the Kyoto Protocol and the Copenhagen Accord.
The limited success of the Kyoto Protocol and the well-documented problems associated with its implementation are testament to the difficulties linked to ensuring participation and compliance in a broad-based multilateral initiative that aims to go further than what individual countries are unilaterally willing to commit to. This is hardly surprising. By delaying participation and compliance in any such global initiative, deviant nations can continue to reap the rewards of continuing with high carbon activities given that there is little evidence to suggest that nature will eventually single out such deviants for special retaliation (see, for example, Chatterji and Ghosal (2009)).
Ever since the Copenhagen Accord, a key feature of the global negotiations relating to climate change is that the actions the various countries have agreed to undertake assume the form of unilateral commitments. This feature characterizes the Paris agreement as well. The agreement recognizes these unilateral actions relating to mitigation and adaptation activities of various parties as being pivotal, and sets out a multilateral (albeit limited) international framework for the monitoring, updating and diffusion of these actions. Under what conditions do such unilateral measures provide an adequate foundation for global climate change mitigation?
Unilateral actions and Global Learning
It is worth noting that although national level commitments to emission cuts have been hard to achieve, there is a variety of unilateral measures to cut emissions already underway. Examples include community-based programmes such as free bicycle plans as in Copenhagen, or watershed renewal programmes in rural communities bordering major rain forests in Mexico. Why would economic agents within a country undertake unilateral emission cuts in the absence of a global agreement to cut emissions? Evidently, because it is in their self-interest (e.g., adaptation to the local impacts of climate change) to do so. As such, most unilateral measures consist of a mix of local adaptation together with increasing capacity in renewables and a reduction of energy consumption either directly and indirectly (via energy saving techniques, infrastructure renewal and increased efficiency). The objectives of such measures are typically more heavily focused on reduced energy consumption (which implies reduced emissions) rather than directly on emission mitigation. Furthermore, the diversity of these unilateral initiatives reflects an underlying heterogeneity of interests, beliefs and motivation at the level of countries, regions and groups. These could limit at any point in time the size of the group who would be willing to unilaterally undertake costly emissions cuts. As a consequence, though unilateral measures may exist at various subnational levels, a national level commitment to emission cuts may not emerge as the outcome of a broad political process.
When a small group of cities unilaterally introduces measures to induce greater use of public transport, it provides information about the cost of adopting such a policy in other cities elsewhere in the world; as more cities in different parts of the world adopt measures that induce greater use of public transport, the actual cost of adopting such a policy for any one city also becomes lower. A similar point can be made for the switch to other forms of low carbon activities like reducing the cost of generating electricity using wind/solar power.
The point is that unilateral commitments induce innovation in technologies that could lower the cost of switching to low carbon economic activities across different locations, initiating thereby a process where over time, economic agents in different countries gradually learn the cost of cutting emissions and switch to low carbon activities. This leads to cumulative emissions reduction over time (see Chatterji, Ghosal, Walsh and Whalley (2014)).
Are there any historical instances where such a mechanism has worked in practice? The Montreal Protocol that successfully cut the use of chlorofluorocarbon (CFCs) to limit damage to Ozone is a case in point; the initial commitment to cut 50% of CFCs in the Montreal Protocol was critical to its success as it lowered the costs of making even bigger reductions by providing a real incentive for the development of substitutes to CFCs. Although there is a difference in scale, the events surrounding the Montreal Protocol may be taken as a precedent for the potential of such a mechanism underpinned by an appropriate global policy framework.
Elements of a Global Policy Framework
The crisis presented by climate change in unprecedented, and while the Paris agreement seems to indicate that the world is gravitating to a response, criticisms abound. It has been argued that the emission caps are too loose and admit the possibility of warming well in excess of the threshold mandated by scientists as the one beyond which the effects of climate change could become both catastrophic and irreversible. Poor countries are also concerned that the money provided to them will not be nearly enough to protect them from extreme climate events or whether there will be funding for the diffusion of relevant technologies to either high emissions areas or those places where adaptation is already becoming a critical concern.
It is also questionable whether the financing and the institutional design of the global policy regime that follows up on the unilateral initiatives announced in Paris is able to induce innovation and technology transfer on a scale sufficient to bring about the required transition to a low carbon paradigm. Such a regime would have to be negotiated so as to include measures for developing a platform for the exchange of information and subsidized monitoring, strengthening spillovers across subnational actors in different countries, as well as a new global intellectual property regime involving subsidized, targeted technology transfer of low carbon activities in key sectors like energy, infrastructure and transport. Evidently, these subsequent negotiations will be critical in determining the eventual impact of the Paris agreement.
Chatterji, S. and S. GHosal (2009), “Technology, unilateral commitments and cumulative emissions reduction”, CESIFO Economic Studies, (symposium “Economics of Climate Change” (ed. John Whalley)), 55 (2) 286-305, 2009.
Chatterji, S, S. Ghosal, S. Walsh and J. Whalley (2014), “Unilateral emissions mitigation and global learning”, (with), Climate Change Economics, Vol. 5, No. 2.