Economics of Climate Enforcement, The

Innovation and Economic Growth

Article Snapshot

Author(s)

Omri Ben-Shahar and Anu Bradford

Source

University of Chicago Law & Economics Olin Working Paper #512, 2010

Summary

This paper looks at how to further international cooperation to address global warming.

Policy Relevance

Nations should establish a fund to help nations enforce international agreements addressing global warming.

Main Points

  • To address global climate change, nations must cooperate. But each nation has an incentive to refuse its cooperation, leaving the costs of reducing emissions to be borne by other countries.
    • The United States refuses to agree to emissions targets unless developing countries also bear the same burden. But developing countries cannot afford this. 
    • Europe and the United States are likely to play the role of “enforcer” nations, but countries like China are less likely to cooperate.

  • To solve this problem, some way must be found to enforce emissions targets. Traditional punishment mechanisms are not very appealing.
    • Imposing trade sanctions on China will hurt the United States and other countries that use them as much or more than the targets.

  • Enforcing nations should establish a fund held by an escrow agent. The fund serves two purposes.
    • One purpose is to offer violators a reward for complying with emissions reduction goals.
    • A second is to compensate enforcers for their costs of punishing a violator that refuses to comply with the goals.

  • If your neighbor is dumping trash on your lawn to save $100 in trash removal costs, you might put $50 in to a fund and offer it to him if he stops. If he does not stop, the $50 could be used to pay a trash removal service to put the trash back on his lawn. 

  • This solution would make the threat of sanctions more credible and effective.

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