Another suggestion is that we drop or weaken the consensus requirement in the UNFCCC process. Both this proposal and the one to reduce the size of the participating face the following problem: ultimately we need most countries to adopt a treaty on greenhouse gases, which presumably requires that they have some say in its drafting. Will countries agree to adopt a treaty that they did not play a role in constructing? 5. Economic Incentives Leading to Tipping Ultimately the solution seems to lie in getting the economic incentives right and structuring a treaty so that it is in all emitting countries’ interests to adopt it (see Barrett (2003)). This goal runs into the classic problem that each country bears its costs of cutting emissions while the benefits are shared by all countries. Even if the benefits of action exceed the costs globally, there is no incentive for any country to act on its own. Given the apparently intractable nature of the challenge, it is worth pausing to look at some cases in which a problem of this type has in fact been resolved. 5.1 Illustration 1: unleaded gasoline In moving from leaded to unleaded gasoline, are three fixed costs: one is the research to find an alternative to lead as an additive, the second is adapting refinery capacity to deal with the new additive and the third is modifying automobile engines to burn the reformulated fuel. The U.S. moved first to adopt unleaded gasoline, and in doing so solved the first and third problems: it found a new additive and worked out how engines needed to be modified for this. Once this change was in place, the incremental costs of adoption for other countries were only the costs of modifying refinery capacity. In fact, adoption was made even easier because the Japanese and European motor industries both export extensively to the U.S. Their manufacturers had to start making engines for lead-free fuel as soon as the U.S. made its move. So for the second and subsequent movers the incremental costs of going lead-free were negligible. An interesting detail is that in Europe, Germany went lead-free before Italy: many affluent German tourists visit
Another suggestion is that we drop or weaken the consensus requirement in the UNFCCC process. Both this proposal and the one to reduce the size of the participating face the following problem: ultimately we need most countries to adopt a treaty on greenhouse gases, which presumably requires that they have some say in its drafting. Will countries agree to adopt a treaty that they did not play a role in constructing? 5. Economic Incentives Leading to Tipping Ultimately the solution seems to lie in getting the economic incentives right and structuring a treaty so that it is in all emitting countries’ interests to adopt it (see Barrett (2003)). This goal runs into the classic problem that each country bears its costs of cutting emissions while the benefits are shared by all countries. Even if the benefits of action exceed the costs globally, there is no incentive for any country to act on its own. Given the apparently intractable nature of the challenge, it is worth pausing to look at some cases in which a problem of this type has in fact been resolved. 5.1 Illustration 1: unleaded gasoline In moving from leaded to unleaded gasoline, are three fixed costs: one is the research to find an alternative to lead as an additive, the second is adapting refinery capacity to deal with the new additive and the third is modifying automobile engines to burn the reformulated fuel. The U.S. moved first to adopt unleaded gasoline, and in doing so solved the first and third problems: it found a new additive and worked out how engines needed to be modified for this. Once this change was in place, the incremental costs of adoption for other countries were only the costs of modifying refinery capacity. In fact, adoption was made even easier because the Japanese and European motor industries both export extensively to the U.S. Their manufacturers had to start making engines for lead-free fuel as soon as the U.S. made its move. So for the second and subsequent movers the incremental costs of going lead-free were negligible. An interesting detail is that in Europe, Germany went lead-free before Italy: many affluent German tourists visit
Tipping%20Climate%20Negotiations%20Jan%2023%202011.docx