Who Should Foot the Bill on Climate Change?

This piece first appeared in YaleGlobal and then Policy Innovations.

As the human influence in changing the global climate has become clearer, identifying who should take the lead with action has become murkier. While the rich countries are responsible for the historic buildup in the stock of greenhouse gases in the atmosphere, developing countries are increasingly responsible for the growth in emissions. They will also be the most affected by climate change. At the same time, these countries face a pressing need to raise their standard of living.

So, which countries should act, and how?

The so-called Berlin Mandate, agreed to in 1995 by parties to the UN Framework Convention on Climate Change, said that the developed countries should reduce their emissions first; developing countries should do so later. It is for this reason that the Kyoto Protocol imposes emission constraints on the EU and Japan, but not China and India.

The logic of the Berlin Mandate was that the developing countries should be allowed to "catch up" to the rich countries and then reduce emissions. The developed countries, by contrast, had a responsibility to lead in reducing their emissions, since they were largely responsible for the rise in atmospheric concentrations. Morally, this may make sense. From the perspective of reducing emissions, however, the Berlin Mandate got the order exactly wrong.

Another problem with the Kyoto Protocol is that it focuses on the short term. It asks just a small number of industrialized countries to reduce their emissions by a bit between 2008 and 2012. It does not ask for deeper reductions or require action after 2012.

It is more important to reduce emissions substantially in the longer term than to reduce them marginally in the short term. To reduce emissions substantially in the long run, however, requires fundamentally new technologies. These need to be invented, developed and then diffused globally.

The fast-growing developing countries should transition to new technologies as a priority; they should be given incentives not to develop as the industrialized countries have done. China brings a new coal-fired electricity plant on line every week, plants that last 40 years or more. If developing countries like China continue to develop as the rich countries have done, by relying on carbon-based fuels, then greenhouse-gas concentrations will continue to rise for many decades.

The industrialized countries, by contrast, should embrace the new technologies gradually, as their installed base of carbon-intensive capital depreciates. This may not seem fair, but it is the cost-effective way to reduce global emissions--and emissions will have to be reduced cost-effectively if they are to be reduced substantially.

Fairness can be addressed another way. The industrialized countries can simply help pay for the costs of transitioning developing countries onto a new, low-carbon development path.

The climate conference held in Nairobi in November 2006 highlighted how developing countries are especially vulnerable to climate change. Most are located in the lower latitudes and are already "too warm." Agriculture as a share of national income is much higher in the poor countries than in the rich. Finally, poor countries tend to have weak institutions and are thus less able to adapt to climate change.

Adaptation is essential because no matter how much is done to reduce emissions, the climate is sure to change. The common view about adaptation is that it is a reactive policy: Dikes should be built higher as the seas rise; crops should be shifted as the temperatures rise or rainfall increases or decreases, and so on. But adaptation needs to be thought of more broadly. The focus in the near term should be on making developing countries resilient to climate change.