An Alternative Approach to International Action on Climate Change

Campus discourse on climate change seems to indicate that Stanford students are aware of the science, concerned with the impacts, and intent on action being taken. On Friday, Al Gore, the current chairman of the Climate Reality Project and the United States’ face of global warming, will speak at Stanford University’s Know Tomorrow* rally (while other distinguished speakers do the same at rallies across the country) about the importance of demanding international climate action at this year’s United Nations Climate Conference. However, while it is important to be excited and hopeful, it is often overlooked how difficult it would be to achieve ambitious climate action goals in an international agreement without compromising feasibility.

In late November, delegations from 196 nations will arrive at the 2015 Paris Climate Conference with the goal of achieving the first universal and legally binding agreement to reduce greenhouse gas emissions. The current bottom-up approach of intended nationally determined contributions (or INDCs), in which each nation submits a plan for how much it will work to reduce carbon emissions, will not be sufficient to achieve the necessary emissions reductions, but a top-down approach would require some sort of incentive for participation (or implied repercussions for non-participants).

The United States has never entered into a binding agreement to reduce emissions before, and its 2015 delegation, which will be composed of representatives from the executive branch, does not have the Constitutional authority to enter into a binding treaty without Senate approval. Considering the current Republican mindset on climate change, it is unlikely that a Republican-led Senate would approve strong action to reduce carbon emissions in the United States. With this in mind, why would nations like India sign an agreement if they cannot be credibly assured that the United States will also comply with that agreement?

The most straightforward and popular approach to limiting greenhouse gases is a carbon tax. Economists have long argued that pricing emissions is an appropriate method to combat the risk of catastrophic global warming. Pricing carbon would be more efficient at reducing emissions than regulatory measures such as efficiency standards, renewable energy portfolios, or subsidies to alternative energy companies for it would directly address the problem rather than prescribe specific solutions. A price on carbon, quite fairly, rewards the use of low-carbon energy by proportionately penalizing the use of coal, petroleum, natural gas, and renewable energy sources according to their carbon intensity. Moreover, a carbon tax avoids much of the bureaucratic legislation that accompanies cap-and-trade programs, an alternative method of pricing emissions. By levying a tax on greenhouse gas emissions, manufacturers would acquire higher costs of production, which would be passed down to consumers in the form of higher prices, incentivizing the purchase of products with lower carbon content. Revenue from such a tax should be used to offset its regressivity, possibly by rebates to low-income families.

However, despite its popularity among economists and environmental activists, because of the political aversion to additional taxes, a carbon tax seems infeasible with our current American government, especially with a Republican-led Congress. But unilateral action on climate change would be both costly to the United States and futile to the fight to curb global greenhouse gas emissions anyway. The concept of leakage suggests that if one state aims to reduce its carbon emissions by regulatory measures, pricing emissions, or subsidizing alternative energy sources, the consumption of fossil fuels and carbon-based products in that state may decrease, but the emissions may simply be “exported” to unregulated states, resulting in just as many, if not greater, total emissions.

Global warming is an issue that is, well, global. The benefits of one state’s carbon emissions reductions are distributed while the costs are isolated to the individual state. Steps taken to reduce emissions by some states can be negated by increases in emissions in other states. So if action is to be taken on climate change, it must be done so cooperatively. Fortunately, the 2015 Paris Climate Conference provides an opportunity to do just that. Unfortunately, the current approach for the international negotiations relies heavily on the INDCs submitted by each participating nation, and there is no incentive for each nation to self-impose high emissions reduction goals. However, not all hope is lost.

If, in addition to the INDCs, the United Nations convention were to set up a framework for domestic carbon taxes that would support participating states in achieving their emissions reduction goals, nonparticipating states would be incentivized to join the program. Suppose that at the 2015 Paris Climate Conference, a reliable price per ton of carbon emissions (that predictably increases with time) is determined based on the schedule of implementation and the necessity to reach specific emissions reduction goals. Furthermore, suppose the convention agrees upon an independent body to measure and estimate the carbon intensity of energy sources and products of both participating and non-participating states. The independent body would serve to prevent false reporting of carbon emissions and to provide accurate measurements or estimates so the tax can accurately be assessed by participating states. Rather than being framed as a component of an international treaty (which would require universal agreement at the summit), it would be framed as an opt-in program so that states may decide to implement the agreed-upon carbon tax domestically at any point after the summit.

Revenue from the tax would be collected by the state that assesses the tax. It would be recommended that the tax be made revenue-neutral, meaning that revenue would be redistributed to citizens in a progressive manner to balance the inherent regressivity of the tax. This allows the tax to serve not as a burden on citizens of participating states but rather as a deterrent to buying carbon intensive products.

But why would a Republican-led Congress be any more inclined to impose a tax on its citizens simply because other nations are doing so? What exactly is the incentive to participate? Quite simply, it would be an economic disadvantage not to do so. If products manufactured in the United States are taxed in participating nations, the United States gains no competitive advantage in international trade, but the participating state that assesses the tax reaps the benefit of the revenue, which would be redistributed to its citizens rather than to Americans. Furthermore, products manufactured in participating nations but sold in the United States would already include the added cost of the tax, but the burden of the tax would be on the American consumers while the revenue is collected by the participating state.

What should especially be noted about this arrangement is that it would not be a violation of the free trade provision of the United Nations Framework Convention on Climate Change since such border tax adjustments serve to level the playing field rather than provide an unfair trade advantage to the participants. Products produced at the same costs, regardless of the nation of production, would include the cost of carbon. The only variable would be the governments that assess the tax. Republicans in Congress might be averse to the notion of a tax, but if presented with the reality that the United States has nothing but to gain by self-imposing the tax, it would be illogical to continue to refuse to participate.

Sadly, we can’t say the GOP has never been illogical. However, since this opt-in program of a carbon tax would not be an international treaty, it could be taken on by individual states without the required approval of Congress. For example, it would be very possible for California to transition its current cap and trade program to the aforementioned carbon tax program. An even greater incentive for universal participation would arise as more states within and without the United States participate, as the only way to avoid the burden of the tax would be to avoid imports from participating states, an almost impossible measure in today’s seemingly inextricably-tied trade-based economy.

Reducing carbon emissions bears tremendous costs, thus it seems overly optimistic to assume that every nation will, out of purely good intention and a desire to see a more sustainable future, agree to reduce enough carbon emissions to avoid the supposed catastrophic level of global warming. However, some (e.g. the European Union) who do seem to understand the gravity of the situation can ultimately influence the participation of others (e.g. the United States) that are more hesitant to participate for monetary reasons. The adoption of an international framework for a carbon tax would make meaningful international action on climate change much more realistic. The costs and risks of climate change will only increase with time, making it imperative that we not only demand some climate action, but that we demand an approach that will incentivize global cooperation.

*Know Tomorrow is a student-led campaign to highlight the importance of acting on climate change and to amplify the hope that the United Nations conference this December will result in significant international climate action.

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Ruairí Arrieta-Kenna, a sophomore studying political science, is a staff writer at Stanford Political Journal.