At the beginning of December, the nations of the world meet in Paris for the 2015 UN Climate Conference. The ultimate goal of the summit is to sign an agreement that will curb CO2 emissions and limit the warming of the earth's atmosphere to two degrees Celsius. If no action is taken to reduce emissions, experts warn that a temperature increase of four or five degrees could be in the cards. Unchecked global warming would also lead to stronger temperature fluctuations, rising sea levels and other changes that pose massive ecological and economic risks.

One would assume that all countries have in interest in seeing CO2 emissions reduced. A key problem, however, is that there is a fundamental mismatch between who pays for and who benefits from reduced greenhouse gas emissions. Expenditures made by individual countries to limit emissions benefit all countries in the form of reduced global warming. Each individual country thus has considerable economic incentives to minimise its contributions, while encouraging others to bear costs. Accordingly, climate policies to combat global warming at the national level are insufficient for achieving emissions reduction targets.


It has repeatedly been said that German and the European Union should set a positive example and adopt ambitious emissions reduction targets, regardless of the action taken by other states. Indeed, Europeans have already made considerable commitments in the run-up to the summit in Paris. While European intentions are in the right place, this strategy has considerable disadvantages. Specifically, it reduces the incentives for other countries to engage in efforts to slash emissions, for the European contribution is already a sure thing.


Significant progress in battling climate change can only be made through negotiations that put pressure on all countries to make a fair contribution. Clearly, the most important countries, including the US, China and India, must be involved. However, such negotiations are plagued by the "free rider problem" as well - individual countries have clear incentives to make a minimal contribution to preventing global warming.

Two additional problems plague climate policy negotiations. First of all, it is important to reduce emissions in economic sectors and geographical locations where reductions are the least expensive. There are two ways to achieve this: The first is to create a global emissions certificate trading system. Global emissions reduction goals would determine the number of certificates in circulation; certificate trading would ensure that emissions are reduced where they are least expensive. Another option is to agree to a global minimum price for CO2 emissions. This price could then be implemented by each country according to its preferences, e.g. via taxes or certificates.


The second problem that complicates a global agreement on climate change relates to the fair distribution of the burdens of taking action. In this regard, industrialised nations need to make concessions to developing and emerging nations. In any event, if we are to make real progress on climate protection, it will be essential for China to rethink its ongoing massive expansion of coal power and to bear a substantial part of the costs associated with its energy policy.


What can the conference in Paris achieve? The commitments made thus far are not enough, yet experts estimate they would be sufficient to limit global warming to around three degrees. Accordingly, these commitments are far from solely symbolic in their impact. Nevertheless, they must be used as a springboard for negotiations that will continue after the conference.

Reducing emissions is of course essential. Yet agreements to measure and monitor emissions levels are equally important. In many countries, the political will to reduce emissions is contingent upon the contributions made by other nations. Robust action on a global scale thus depends crucially on a credible regime for tracking and monitoring emissions reductions. If the Paris conference were to bear fruit in this regard, that alone would make it a success.

Date

25.11.2015

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