Economic Students: A recent paper published by Chinese climate change researchers and modelling statisticians has claimed that developed nations carry the bulk of the responsibility to reduce carbon emissions. Up until 2005, emissions from the U.S., Europe, Australia and other rich nations have accounted for 60 to 80 per cent of all global warming. Developing nations such as China and India have long contended that today’s global warming is a result of the industrialisation and rapid growth of Western countries, and that they have an ethical responsibility to lead the world in global climate change action.
But as China’s economy surpasses the U.S.’s, so does its total volume of carbon emissions. Per capita wise, Australia is still the highest emitter, a testament perhaps to its fuel-based economy, and relatively small population. Although China’s fast-growing economy pushes the country’s total emissions ever higher, its per capita impact is undermined by its dense population. At the 2010 United Nations Climate Conference held in Cancun, Mexico, it was agreed that China and India would base their pledges on reducing emissions intensity, while other countries expressed their pledge in reaching absolute emissions reduction targets.
Per capita emissions of key economies in 2005 and 2020 (low and high end pledge)
*The low and high end pledge represents countries who pledged to reduce emissions within a certain range.
It can be seen from the graph that while other countries agreed to reduce emissions, China and India will continue to increase their total emissions. China is determined to reach a level of economic prosperity for which they are reluctant to compromise by adhering to certain international climate change agreements; the need for which they believe is a consequence of other countries’ actions. As such, it has only pledged to reduce emissions intensity, which is the amount of carbon emitted per unit of GDP.
Emissions intensity of key economies in 2005 and 2020 (low and high end pledge)
After the embarrassment of the Copenhagen summit in which ambitious targets were set and neglected, latter international climate change agreements have been modest and noncommittal.
Forged in 2009, the Copenhagen Accord recognised the need for immediate climate change action to prevent global mean temperature increases beyond 2 degrees Celsius. The summit was held to propose a post-Kyoto agreement, however no binding targets were set for developing nations and despite the U.S. having signed the Kyoto protocol, it was never ratified. Other developed nations have often cited the U.S.’s inaction as an excuse to further postpone climate action. Research has shown that even if high-income countries committed to their targets, prospects of avoiding a 2 degrees Celsius increase are extremely low.
An updated version of the Regional Integrated model of Climate change and Economy (RICE-2010) shows the effects on climate change under different policies. The RICE model incorporates climate change into economic growth theory. In standard neoclassical optimal growth models, society invests in capital goods and reduces current consumption so as to increase future consumption. RICE model extends capital investments to include climate investments, called “natural capital”. Concentrations of greenhouse gases are “negative natural capital” and emissions reduction equates to lowering the quantity of negative natural capital. Such reduction efforts lower consumption today, but by preventing economic consequences of climate change, increase consumption possibilities in the future.
Global temperature increases (°C from 1900) under alternative policies
The five different policy scenarios modelled:
Baseline: No climate-change policies are adopted.
Optimal: Climate-change policies maximise economic welfare, with full participation by all nations starting in 2010 and without climatic constraints.
Temperature-limited (Lim T<2): The optimal policies are undertaken subject to a further constraint that global temperature does not exceed 2°C above the 1900 average.
Copenhagen Accord: High-income countries implement deep emissions reductions, with developing countries following in the next 2 to 5 decades.
Copenhagen Accord with only rich countries: High-income countries implement deep reductions as in scenario 4, but developing countries do not participate until the 22nd century.
Under any of the Copenhagen arrangements, global mean temperature is still projected to rise above an increase of 2 degrees Celsius. The hopelessness of the Copenhagen Accord, and difficulty under which the unrealistic target was negotiated, gives future international climate change cooperation a bleak outlook. But regardless of whether a set target is reached, countries must work together for climate change action to be effective. Given that emissions reduction has large costs for the economy in the short-term, and that countries have little incentive to take action where the costs are localised but the goods (being a better environmental outcome) are widely dispersed, no country is willing to take the first step, resulting in stagnation.
Australia, being one of the first countries to introduce a Carbon tax has been commended by international climate change commentators, but within the nation there is a strong belief that we do our economy a disservice by giving our international competitors a trade advantage. This trade advantage would not exist if other countries imposed a carbon tax. Similarly, the EU’s emissions trading scheme, which was extended to enforce purchase of carbon permits for any airline wishing to land their aircraft in the EU, has come under fire for increasing the airfare of certain flights, including non-direct flights where only the EU leg will be taxed. Again, such discrepancies would be eliminated if all countries adopted the same scheme. However, China has banned all airlines in the country from joining the EU ETS, they are forbidden to increase their fares or add new charges for the scheme. Likewise, the U.S. Senate is hoping to pass a bill prohibiting compliance with the EU law. International discord like this reveals each country’s true interests in the climate debate, and makes international cooperation difficult to attain.
- For a more detailed overview of the Cancun agreements – http://www.climatechange.gov.au/government/international/global-action-facts-and-fiction/international-pledges.aspx
- A paper presenting the RICE-Model, developed by William Nordhaus, Professor of Economics at Yale University – http://www.pnas.org/content/107/26/11721.full
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