4. 100+ Unique Commitments

The Kyoto approach, of individual national emission targets, requires each country to commit to its own cap. This is particularly difficult for three reasons:
  1. Upwards of 100 individual targets need to be negotiated.
  2. The factors determining a fair commitment are numerous, complex and lacking an agreed method for evaluation.
  3. Emission caps reproduce in monetary form the free-rider problem caused by the climate externality.
The severity of these difficulties has seemed inevitable and has thereby avoided scrutiny. To clarify the extremity of the problem, it will help to jump ahead and introduce the concept of a commitment to a global price target. In direct contrast, a global price commitment is simpler for three reasons:
  1. Only 1 target needs to be negotiated.
  2. Each country need only consider its cost-benefit ratio to evaluate its position.
  3. The global price target largely internalizes the climate externality.

1. The first simplification is definitional, but it's made possible by the fact that price is a measure of effort that scales with the amount of fossil fuel used. So, while identical caps make no sense, the use of a single price target starts out quite equitably. Rich, high-emission countries must make a proportionally greater effort.*

2. Countries must still decide what price target to favor in international negotiations, and the will do this by looking at the cost to their country of a given carbon price, and the benefit to their country, from climate improvement, of all participants adopting that price target.

3. If all countries were identical, they would still all want their particular emission target set to be as weak (high) as possible. This is because the higher it is the more carbon permits they can sell in the international carbon market. Caps are money. This means that in each of the 100+ cap negotiations, the most interested party will be working for system of cap which is useless.

By contrast if all countries were identical, they would all want the same ideal global price target. In this case the price target would completely solve the free-rider problem instead of reproducing it. Of course some countries will be damaged more than average by climate change, and some less, so there will be a spectrum of opinions about how high the price target should be. But they will cluster near the socially desirable answer.

In conclusion, the negotiating emission targets require 100 times too many negotiations, all of which are highly complex and with out an agreed method, and all of which result in the central party working for a weak outcome. None of this is necessary, it is simply the result of picking the wrong target for negotiation.

* Proportional effort is not enough to make the system equitable, but it is a very good start. The system of Flexible Global Carbon Pricing presented here includes a Green Fund to adjust equity as required.