Modeling the Economics of Greenhouse Gas Mitigation Summary of a Workshop (2011) / Chapter Skim
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The Politics and Economics of International Carbon Offsets--David G. Victor
The Politics and Economics of International Carbon Offsets--David G. Victor
Pages 132-142
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From page 132... ...
132 MODELING THE ECONOMICS OF GREENHOUSE GAS MITIGATION The PoliTics and economics of inTernaTional carbon offseTs David G Victor77 May 17, 2010 Offsets are the "sleeper" issue in climate policy.
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From page 133... ...
The most important effect of politics on the design of the CDM has been the strong political pressure to gen erate high volumes of offset credits at the expense of quality. Firms and governments in industrialized countries seek offset credits to assure that they will be able to comply with strict emission targets.
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From page 134... ...
offsets market could also create more elasticity and make it easier to negotiate with offset oligopolies. The Political Origins of International Offsets At its core, international climate diplomacy suffers from a problem of incompatible incentives.
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the economic advantages of global emission trading while avoiding the toxic problem of setting emission targets for developing countries. It was a way to encourage those countries to join on a volunteer basis -- project by project -- while avoiding the need for large government-to-government funds.
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Carbon capture and storage has struggled to gain approval even as renewable energy projects that are more costly, yield a lesser impact on emissions, and are probably not truly additional have readily earned CDM credits. From its formation, the CDM has been steeped in a particular vision of decarbonization based on small projects involving renewable energy and efficiency.
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From page 137... ...
One standard approach for solving this problem is to calculate the financial return on a project in the absence of CDM credits and then compare that with the value of the credits. Other approaches have been tried as well -- such as assigning standard baselines, which is attractive in theory yet nearly impossible to implement in the real world -- but for most of the investments that are relevant to global warming it is hard to avoid an approach that relies on some form of financial counterfactual.
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trading scheme included a price cap, which would dampen fears that compliance will be onerous and reduce the need to rely on international offsets as a cost control mechanism. (I favor such a price cap -- for that reason and because a price-like instrument is a better way to slow global warming.)
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From page 139... ...
How would countries that adopted hybrid policies -- for example, emission trading schemes connected to direct regulation or to price caps -- integrate their national trading systems with nations that had different kinds of hybrids? As governments got serious about controlling emissions there was no reason to think that every nation would adopt the same national regulatory approach.
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From page 140... ...
A second area for analytical efforts concerns hybrid national regulations. For too long we have analyzed poli cies that are convenient for models -- such as global emission taxes or simple globally-integrated emission trading schemes -- rather than policies that are convenient for politicians.
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Those predictions can help policy makers design better international offsets markets, and demand for those designs may be acute in the next few years as the United States devises its green house gas regulatory program. They can also help analysts develop models and scenarios that allow scrutiny of politically realistic outcomes.
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From page 142... ...
(2009a) "Climate Accession Deals: New Strategies for Taming Growth of Greenhouse Gases in Developing Countries." In Post-Kyoto International Climate Policy: Summary for Policymakers.
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