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This article appears in the following Oxford Review of Economic Policy issue: CLIMATE CHANGE [View the issue table of contents]
A new global deal on climate change
* Smith School of Enterprise and the Environment and James Martin Institute, Saïd Business School, University of Oxford, and New College, Oxford, e-mail: cameron.hepburn{at}economics.ox.ac.uk
** Grantham Institute, India Observatory, and STICERD at the London School of Economics and Political Science, e-mail: n.stern{at}lse.ac.uk
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A global target of stabilizing greenhouse-gas concentrations at between 450 and 550 parts per million carbon-dioxide equivalent (ppm CO2e) has proven robust to recent developments in the science and economics of climate change. Retrospective analysis of the Stern Review (2007) suggests that the risks were underestimated, indicating a stabilization target closer to 450 ppm CO2e. Climate policy at the international level is now moving rapidly towards agreeing an emissions pathway, and distributing responsibilities between countries. A feasible framework can be constructed in which each country takes on its own responsibilities and targets, based on a shared understanding of the risks and the need for action and collaboration on climate change. The global deal should contain six key features: (i) a pathway to achieve the world target of 50 per cent reductions by 2050, where rich countries contribute at least 75 per cent of the reductions; (ii) global emissions trading to reduce costs; (iii) reform of the clean development mechanism to scale up emission reductions on a sectoral or benchmark level; (iv) scaling up of R&D funding for low-carbon energy; (v) an agreement on deforestation; and (vi) adaptation finance.
Key Words: H41 • Q54 • Q56
The authors are grateful to Claire Abeillé, Dennis Anderson, Alex Bowen, Sebastian Catovsky, Peter Diamond, Simon Dietz, Ottmar Edenhofer, Sam Fankhauser, Graham Floater, Su-Lin Garbett, Ross Garnaut, Roger Guesnerie, Geoffrey Heal, Daniel Hawellek, Claude Henry, Paul Joskow, Jean-Pierre Landau, James Mirrlees, Ernesto Moniz, Steven Pacala, Nicola Patmore, Vicky Pope, Laura Ralston, Mattia Romani, John Schellnhuber, Matthew Skellern, Robert Socolow, Martin Weitzman, Dimitri Zenghelis, and all of those who worked on and guided the Stern Review team. Particular thanks to Simon Dietz, Dieter Helm, Tim Jenkinson, Robert Ritz, and participants in the Oxford Review of Economic Policy seminar in February 2008.
1 Some of the more influential approaches include the ‘reflective equilibrium’ notion of Rawls (1971), the ‘argument from received opinion’ discussed by Hare (1971), the use of opinion polls (Miller, 1999), the theory of ‘discourse ethics’ (Habermas, 1990), and works by Griffin (1996), Barry (1995), and others. See Dietz et al. (2008) for further discussion in the climate-change context, and Saelen et al. (2008) for a specific application which aggregates stated public preferences through an internet survey of 3,000 people.
2 The survey was conducted for the BBC World Service by the international polling firm GlobeScan together with the Program on International Policy Attitudes (PIPA) at the University of Maryland. GlobeScan coordinated fieldwork between 29 May and 26 July 2007.
3 Nisbet and Myers (2007) sifted through 20 years of polls in the USA, and found that awareness of global warming as a problem has increased steadily from 39 per cent in 1986, to 58 per cent by 1988, 74 per cent by 1990, and reaching 91 per cent in 2006.
4 See Hepburn (2006) for an overview of the advantages and disadvantages of taxes and trading.
5 Hypothecation may not be considered credible when ‘new’ revenues are, in fact, merely allocated to pre-existing programmes, with the funds for the pre-existing programmes returning to the general budget. Here, however, the new financial flows from allowance auctions would significantly exceed existing flows to low-carbon R&D, thereby guaranteeing a net R&D increase.
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