Author(s)
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
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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.
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The United States refuses to agree to emissions targets unless developing countries also bear the same burden. But developing countries cannot afford this.
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Europe and the United States are likely to play the role of “enforcer” nations, but countries like China are less likely to cooperate.
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To solve this problem, some way must be found to enforce emissions targets. Traditional punishment mechanisms are not very appealing.
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Imposing trade sanctions on China will hurt the United States and other countries that use them as much or more than the targets.
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Enforcing nations should establish a fund held by an escrow agent. The fund serves two purposes.
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One purpose is to offer violators a reward for complying with emissions reduction goals.
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A second is to compensate enforcers for their costs of punishing a violator that refuses to comply with the goals.
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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.
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This solution would make the threat of sanctions more credible and effective.