The China/India hole in the American climate strategy

The House Energy and Commerce Committee marked up the Waxman-Markey cap-and-trade climate change bill this week. Much of the discussion focused on the domestic impacts of the legislation, and how the policy design would affect various American constituencies. I would like to zoom out and think about how a policy like Waxman-Markey fits into a global strategic climate context, from the perspective of American policymakers.

I’m going to punt on the scientific questions in this post. I want to focus on strategy instead. For now I will stipulate that there is a significant enough risk of long-term environmental damage that policy actions should at least be considered to address that risk. I reserve the right to reconsider this later. From a practical standpoint, U.S. policymakers are headed down a path that makes this presumption, and I want to explore the consequences of their lack of a complete climate strategy.

I will use data from the Energy Information Administration (EIA) at the U.S. Department of Energy. EIA produces rigorous, reliable, and unbiased data and analysis. This data is for CO2 emissions in 2006. Ideally we would have data that compared all greenhouse gas emissions, but I think the CO2 emissions data should serve our purpose.

The international climate change debate centers on two ways to divide up countries for a climate discussion: big vs. small, and rich vs. not rich. Before 2007, global climate change negotiations were structured based on countries that were either “developed” (rich) or “developing” (not rich). The United Nations Framework Convention on Climate Change (UNFCCC) calls the developed countries “Annex II” countries, and assumes that these rich countries will bear a disproportionate share of the economic burden of reducing global greenhouse gas emissions:

[Annex II countries] are required to provide financial resources to enable developing countries to undertake emissions reduction activities under the Convention and to help them adapt to adverse effects of climate change.

According to EIA, in 2006 seventeen countries accounted for about three-fourths of all CO2 emissions. Let’s think of these as the “big” nations. The other 175 countries account for the other quarter of CO2 emissions. I think of them as relatively “small” in this context.

In 2007, President Bush created the Major Economies process, in which the largest economies meet as a group to see if they can reach agreement on climate change. If they are successful, that agreement can serve as the starting point for a broader discussion involving all 192 countries in the UNFCCC. The Major Economies process has been productive so far, and has been continued by the Obama Administration.

This table shows how these two approaches divide countries into four groups. The UNFCCC developed/developing breakdown is the separation between the rows of the table, in which there are greater obligations imposed on countries in the top row than in the bottom row. The Major Economies process is the separation between the columns of the table, based on the presumption that if the seventeen countries that represent about three-fourths of global emissions can reach agreement, then it should be much easier to get agreement with everyone else. It is hard to negotiate with 192 countries in the same room, and clearly China has a bigger impact on the global climate than Burkina Faso.

Major Not major
Developed  

 

 

 

 

AustraliaCanada

European Union

France

Germany

Italy

Japan

United Kingdom

United States

 

 

 

 

(9 countries, about 36% of global CO2 emissions in 2006)

AustriaBelgium

Denmark

Finland

Greece

Iceland

Ireland

Luxembourg

Netherlands

New Zealand

Norway

Portugal

Spain

Sweden

Switzerland

 

 

 

 

(15 countries, about 5% of global CO2 emissions in 2006)

Developing  

 

 

 

 

BrazilChina

India

Indonesia

Korea

Mexico

Russia

South Africa

 

 

 

 

(8 countries, about 38% of global CO2 emissions in 2006)

everyone else  

 

 

 

(160 countries, about 21% of global CO2 emissions in 2006)

Source: U.S. Energy Information Administration for CO2 data

To simplify even further, we can see that the four biggest CO2 emitters in 2006 accounted for half the global total:

Rank Millions of Metric Tons of CO2 (2006) % of world total cumulative % of world total
1 China 6,018 21% 21%
2 U.S. 5,903 20% 41%
3 Russia 1,704 6% 47%
4 India 1,293 4% 51%
5 Japan 1,247 4% 55%
6 Germany 858 3% 58%

Source: U.S. Energy Information Administration for CO2 data

China and the U.S. dominate everyone else in CO2 emissions. Each is larger than the next five biggest emitters combined. China has recently passed the U.S., and the gap is expected to grow as China industrializes at a rapid rate. If you believe that we need to slow the growth of global emissions, the arithmetic demands that you slow the growth of emissions not just from the U.S., but also from (China + Russia + India). It is arithmetically infeasible to get significant reductions in future total global greenhouse gas emissions if this >30% of the total is allowed to grow unchecked. This point is only strengthened if you include the additional 7% from the five other major developing economies: Brail, Indonesia, Korea, Mexico, and South Africa, or if you include the additional 21% from the 160 small developing countries.

There are huge national differences in the effects of climate change. Some differences are geographic: Russia would probably benefit from a warmer planet, as they would face lower heating costs and have more arable land. Low-lying island states are at greater risk from a significant sea rise. Other differences are economic: a rich country like the U.S. can better adapt to a changed environment than can a poor country. These differences mean that that countries will have different views on the importance of addressing the risk of severe long-term climate change. As an example, if one ignores diplomatic considerations, from a pure national self-interest standpoint it is hard to see why the government of Russia should sacrifice anything to keep the planet from warming.

For the sake of this discussion, the form of a national policy that limits a country’s carbon emissions is less important than the size of that effect. There are important differences between a cap-and-trade policy and a carbon tax, but for the sake of this discussion I think we can hand-wave past them and just think of a country imposing an incremental price added to the cost of carbon emissions, either directly through a tax, or indirectly through a quantity-limiting cap. A positive carbon price addresses some or all of the damage that we’re stipulating is done to the (global) environment by your carbon emissions. This price results in slower economic growth in your country, as it generally raises the price of energy.

The strategic challenge (for the world, not just the U.S.) is that the governments of China, Russia, and India are big economies with big shares of total world emissions. They have so far not indicated any willingness to self-impose a positive carbon price, and its resulting economic burden, on their economies.

What, then, is the rational American strategy? Let me construct a much simpler example to crystallize the negotiating issues. Let’s pretend we live in a two-country world, the U.S. and China, and that each emits half of the world’s total carbon emissions. Let’s further assume that a ton of carbon emissions does $30 of damage to the world, and that the damage is again split evenly, so that a ton of carbon emissions from either nation does $15 of damage to the U.S. and $15 of damage to China.

I imagine a member of Greg Mankiw’s Pigou Club might say, “Just impose a global carbon tax/price of $30 per ton of carbon and you’re done. The market will handle everything else, as long as you have solid and consistent enforcement. Individual actors will then appropriately balance the costs and benefits of their carbon-producing actions. It is clean, simple, and fair.”

But suppose the government of China says, “We’re not going to impose any additional cost on the Chinese economy to limit our carbon emissions. No carbon tax, or if we agree to a cap, it will be sufficiently high that we are confident it won’t require us to slow our economic growth. We are happy to do things like adopt energy efficiency technologies and limit more traditional forms of pollution, and some of those actions will also result in reduced greenhouse gas emissions. But we are not going to impose a positive price of carbon on the Chinese economy. Near-term economic growth is far more important to us than possible long-term climate change benefits decades or centuries from now.”

What, then, are the U.S. options? I think there are two decisions U.S. policymakers need to make to have a complete strategy:

  1. What tools should we use to try to convince the government of China to impose a positive carbon price as part of a global effort? (choose one or more)
    1. Leadership: U.S. goes first and self-imposes a price. Then we use diplomacy to try to convince the Chinese to do the same.
    2. Carrots: The U.S. pays the Chinese to reduce their emissions.
    3. Sticks: The U.S. imposes import tariffs on Chinese goods as long as the government China does not impose a carbon price.
  2. What carbon price should we set in the U.S. while the government of China is telling us they’re at zero?
    1. $30 – We are altruistic and will account for all damages that U.S. emissions do to the world.
    2. $15 – We will account for all damages that U.S. emissions do to the U.S.
    3. $0 – We will wait until China joins us.

On decision (1), we need to consider the effectiveness of each tool: how likely is it to convince the government of China to change their policy? This is a question for the intelligence community and diplomats.

The risk of (1A) is that it could be ineffective. In a true global context (rather than my simplified two-country example), I believe there is power in moral and diplomatic suasion, but I question how much of a $30/ton gap diplomacy alone can close.

In (1B), the payments can be direct through higher U.S. taxes and direct transfers to China. Or we could follow the path of the Waxman-Markey bill and cap U.S. emissions. If the U.S. policy then allows U.S. emitters to buy carbon offsets from Chinese firms, we would be choosing a policy that will transfer American resources to China as the most efficient path to reductions in carbon emissions. This what the Europeans have been doing. I think this is probably unacceptable to most Americans and their representatives in Congress.

(1C) risks starting a global trade war. In a world with more than two countries, it is also possible that we would impose a tariff that would hurt American consumers of Chinese goods, and other nations would not do the same. The government of China might then choose not to change their carbon policy, and instead just sell more goods to countries other than America.

On decision (2), we need to consider that firms and workers in China compete with firms and workers in the United States. The difference between the self-imposed U.S. and Chinese carbon prices is a direct and measurable disadvantage to U.S. firms and workers relative to their Chinese counterparts. So if we preemptively impose a $30/ton of carbon price in the U.S. while China has a zero carbon price, then we are significantly handicapping American firms and American workers relative to their Chinese competitors.

The Waxman-Markey bill attempts to solve this problem by having U.S. taxpayers subsidize those disadvantaged firms. Setting aside the impossibility of a government accurately targeting those subsidies, and ignoring the likelihood that this will become a rent-seeking regulatory process, this solution merely shifts the costs from one subset of the U.S. to another. The underlying economic disadvantage to Americans would remain unaddressed.


America appears to lack a high-probability strategy for how to get China, India, and Russia to agree to self-impose a significant positive carbon price.

The Administration and its Congressional allies are trying to impose a significant carbon price in the U.S. through something like the Waxman-Markey bill, while entering an international negotiation process in which as much as 60% of global carbon emissions could face little to no carbon price. The likely outcome would dramatically tilt the global economic playing field, harming U.S. workers and firms relative to their counterparts in China and India. At the same time, it would make little progress toward addressing the risk of severe global climate change, as a large portion of global carbon emissions would remain effectively uncapped.

From an American standpoint this seems extremely unwise. It is an incomplete climate change strategy, with a hole about how to deal with China, India, and other large developing nations.

Here are questions for the Administration and those House Members supporting the Waxman-Markey bill:

  1. Given that China, India, and Russia account for 30% of global carbon emissions, and given the apparent lack of a high-probability American strategy to convince their governments to impose a carbon price on their workers and firms, how large of an additional cost are you willing to impose now on U.S. workers and firms before knowing the likely economic and emissions endpoints?
  2. What is your strategy to get the governments of China, India, and Russia to impose a carbon price on their economies that is comparable to the one you would impose on American workers and firms?
  3. Given the competitive effects on American workers and firms, how big of a difference between the carbon price imposed by the U.S. and that imposed by China and India is acceptable at the end of the international negotiating process? How much of a competitive disadvantage are you willing to impose on U.S. workers and firms because the U.S. is comparatively wealthy relative to China, India, Russia, and other developing countries?

I believe the answers to these questions are more important than any detail of the Waxman-Markey bill, and that legislation should not move forward until Congress has answers to each of these questions.

If the Administration and its Congressional allies are going to propose imposing large costs on American workers and firms, let’s at least have a complete strategy.

(I would ask and challenge commenters to focus on these strategic questions, rather than the usual scientific back-and-forth. And please remember the comments policy: I hope we can have a vigorous and yet civil debate.)

17 responses

  1. First off, the very fact that this bill has even cleared committee is a testament to the fact that the people behind it don’t care about the strategy. It isn’t about strategy. Or rather, it is–and the strategic goal is to hurt the American economy and help the leftist chunk of the American government. I don’t believe this is the view of most members of Congress. I do believe it is Henry Waxman’s, Barbara Boxer’s, Nancy Pelosi’s, and Ed Markey’s. One thing is for sure: it isn’t about climate change. It’s about the larger aims of the green movement (read: not environmental aims).

    Second, I think KH’s strategic analysis is probably right, and, as usual, very helpful. And it highlights how insane this whole idea is. Russia will never lift a finger to do anything on this score (not just because they benefit from climate change, but because they benefit from us crippling ourselves). India might maybe play along a little, although I suspect they will bristle at the suggestion that “a developing country” should share any economic burden with Goliath. Lastly, China has been playing that “developing country” game for a decade, and as far as compromise goes, they are even less inclined to do so than Russia is, and for perfectly good reasons I might add.

    Third, this points to the larger idiocy of the whole idea, which is that it assumes that for those other countries, climate change “strategy” is NOT subordinate to national interest strategy, as is everything else. Would that we had a national interest strategy, but since we’ve been purified post-January 20, interest means we no longer have to make the “false choice” between our tactics and our values. Since the presupposition of the effort is surreal (or unreal), the result will be a disaster massaged rhetorically into a miraculous cessation of sea-level ascendancy.

    Fourth, KH is right that option 1(C) would mean a trade-war, and very probably a war. Part of China’s strategy, if the commissars are feeling savvy, must be to manipulate us into threatening to use the stick, then threatening us back, and finally driving us to 1(B) or to some sort of friction in the Taiwan straits. In fact, they might condition even 1(B) on a de facto acceptance of terms about operations in the straits and the Sea of Japan, and god knows what else (internet licensing outsourcing? giving up for x years anti-EMP research?). Anyway, the usual goal behind Chinese grand strategy is to soften the antecedent in the water for an eventual power play on land. It should be no different here. I have no idea what will actually happen, anyway, but China will be thinking in those terms, while we hymn encomia to our dear leaders and flagellate our productive classes.

    All of which means there will either be no deal or a very dangerous one. Which means we are officially in cloud-cuckoo land, braying at the moon.

  2. Given that China emits about 6 times more CO2 than does the US per $1000 GDP (and India 3 times more than the US), carbon legislation in the US will have the pernicious effect of shifting production to China and India and thereby increasing global CO2 emissions. this legislation is not about dealing with global warming.

  3. Not to mention the fact that cap-and-trade seems designed less to reduce emissions and more to direct the allowances to favored constituents. It seems silly at best, and childishly naive at worst, to believe that China, Russia, India, etc… will sacrifice their ascent from poverty at the alter of “climate change,” which must seem to them to be only the type of self-abuse that is affordable in the rich, developed countries. The result must be that cap-and-trade is designed to centralize what will be left of US economic power in the hands of Waxman and Co.

  4. Sorry, I can’t force myself to comment on the strategical aspects of this debate, because the whole idea is an unmitigated farce.

    If the “developing world countries” listed in your article were to all reduce their man-made CO2 emissions to ZERO, the net effect on global CO2 emissions would be a reduction of less than 3/10 of one percent.

    Let’s just make certain that this “Crap & Trade” Legislation never sees the light of day. Thankfully, it looks as though 8 or 10 Democrat Senators are not about to walk the plank when the bill comes up in the Senate.

  5. Henry Waxman is all over the web today, caught in a video, admitting that he has not only not read the bill, he doesn’t really know what is in it. It must, however, be a good thing since it conforms to the consensus science of the IPCC.
    As a committed skeptic, I keep wondering how we are going to keep warm when we have capped CO2, closed the coal mines and shut down the coal-fired power plants as the earth grows cooler. The rent-seekers of the favored United States Climate Action Partnership will all be a little richer, and better insulated.

  6. Another well-done post, Keith. I hate to come off as a Pollyanna, but there is a POSSIBILITY, it seems to me, of an upside to the US taking a seemingly self-burdening posture on climate-linked emission. It grows out of the fact that these other countries (China especially) are not simply competitors to the US, but also markets for us. (This is always the under-mentioned aspect of trade policy.)

    Suppose the US undertakes to impose energy restrictions on itself that its competitors are not matching. A competitive disadvantage, clearly – except, suppose that leads US scientists and researchers to get ahead of other countries in developing the technologies needed to achieve the cutbacks sought. Suppose further that these technologies are expensive for early adopters but become less so as their adoption is more widespread. Now then, might not the development of these technologies create a marketing opportunity for the US to sell the technologies to, say, China – which would come under continual pressure to match our emissions reductions, and which would have a steadily weakening argument against doing so once our technological leadership had reduced the price of doing so?

    In effect, it seems to me, this is what has happened in the auto industry. Very high fuel prices in Europe and Japan (relative to the US) do not seem to have wrecked their economies. On the contrary, they have caused their auto manufacturers to develop energy-efficient technologies that have led these manufacturers to (relative) prosperity while ours are near collapse.

    So is it possible – possible – that if the US takes the lead in climate-related innovation, we could benefit in the same way?

  7. Your two-country model strikes me as a variation on the Prisoner’s Dilemma from game theory, except the other guy doesn’t particularly care if he goes to jail (or in this case, emits CO2). At that point, I’m not even sure there’s a rational course of action that can be derived. No matter what you do, you’re screwed.

    To say that European economies are unaffected by their high taxes is a bit of a stretch. We are just now experiencing the kind of unemployment that is endemic to Europe. I suppose from that standpoint a stimulus package seems superfluous, maybe we can explain to our President that if he won’t bankrupt the country we’ll cease with the hand-wringing until inflation reaches 15%.

    While it is admirably optimistic to assume that burdening ourselves with real taxes to forestall fractional increases in trace gases will result in scientific breakthroughs, I believe it overlooks the very real costs to American consumers while the lab boys are (hopefully) cranking out a green solution. Technological progress does not occur on a schedule, unless Intel can get into the industrial-scale energy business. Furthermore, coal is really, really cheap for a country that already has it and is willing to sacrifice however many coal miners are necessary to get it out of the ground.

    It’s not enough to make alternative energy and transportation that works, and we’re not there yet. It’s not even enough to make alternative energy and transportation that works AND costs slightly less than fossil fuels plus the associated emissions permits. You have to make it cost equal to or less than the cost of the fossil fuels, because you’re not going to give away the secret to nonpolluting energy for free. Now you’re looking at a price goal of coal minus whatever it costs per unit of electricity to replace coal. However many years it takes to get there, you’re operating at a competitive disadvantage.

    I believe the US can invent alternative energy systems that will be successful, and maybe even cost-competitive with legacy fuels. But I also believe that it is important to differentiate between problems you can throw money at with an expectation of return, and ones that are unresponsive to budgetary bloat. Basic sciences are one of the things that are unresponsive to money beyond a point, what they need is money AND time. The time we spend with a fiscally-damaging carbon trading scheme is time we lose economic standing and dull our competitive edge for nebulous benefit. At the end of the day, or decade, our CO2 savings will have been swallowed many times over by the emissions of our developing trading partners.

    And finally, whether or not CO2 has a significant impact on climate, this will be a major expansion of government power, with the development of a new revenue stream TO the government. I don’t know 537 politicians I believe in enough to entrust with the power, much less a new income stream. Those substances are the heroin of bureaucracy and entrenched interests.

  8. I said “inflation” in the second paragraph, I meant “unemployment”. My point is that if we acted like Europeans and didn’t get upset with 10% chronic unemployment, maybe we could dodge being taxed like Europeans. This is, of course, facetious.

  9. David Shaffer, if China respected intellectual property laws, I would say your scenario would have more chance of happening but they don’t have that habit so I suspect they would instead “borrow” whatever technology they find potentially useful. Takers in Europe, Japan or India would still be a bonus though, assuming they didn’t beat us to it. Gov’t investment will probably be required to get us ahead of the curve.

    One problem with this scenario is that China and Russia will always act in what they perceive to be their own best interest. Unfortunately, the West will not fail to appease them out of fear. (At least it’s largely economic fear now but the military fear is still lurking there only ever so slightly out of focus.) It’s hard to see how capping carbon emissions can be in either country’s economic best interest without the West playing hardball, which they won’t. Too scary. Will we ever realize with these guys that real friends have your best interest in mind, too? China and Russia are our rivals and best, possibly enemies if it comes down to it. We don’t have a lot of influence. They out strategize us at every turn.

    India will eventually play along because they are more interested in aligning with the U.S. and Europe, partially as a hedge against China and Russia and maybe Pakistan. Carrots and sticks will, I think, be effective with them.

    Another problem for us is that the Democrats seem to hold the view that economic growth occurs independent of government regulation. Watching the past few months would almost lead you to believe their formula goes something like this:

    government spending + loose monetary policy = economic growth

    A few people I’ve talked to about the economic policies of this administration honestly believe that the only way wealth can be created is for money to be printed, which, coincidentally, is why it is so unfair for only a few people to have so much of it. Is it possible Obama and his buddies believe the same? If they do, Keith, your three questions aren’t really relevant because businesses aren’t responsible for economic growth. The Fed is. That makes Waxman-Markey (Why no sponsor from the right side of the aisle?) all about the redistribution of the mostly static supply of wealth to their allies, their voters and themselves.

  10. Your description of the negotiating challenge is woefully incomplete because you fail to cite per capita emissions – which are at least five times higher in the United States than in China.

    Any fair deal would see Chinese emissions increase, but more slowly than they would have done, for another ten years or so – and then fall to around half of current levels by 2050.

    The US would need to reduce by more than 80% by 2050 to end up with similar per capita emissions to China. That means immediate and rapid reductions.

    Why would China sign a deal that meant that American citizens were perpetually allocated great emissions rights than Chinese ones?

  11. Great post, Mr. H! Very thought provoking.

    I am not aware of any evidence that shows the efficacy of moral leadership in international relationships.

    Let’s also remember that, since Senate Democrats & Republicans joined in a successful bipartisan effort to kill US participation in Kyoto back in the Clinton/Gore days, the US has actually done more to reduce CO2 emissions than the Kyoto signatories. But it is hard to see the return on that example of moral leadership.

    If we were serious about alleged Anthropogenic Global Warming, we would be rebuilding the US capacity to manufacture nuclear power plants. But the proponents of legislation are not serious. Waxman & his merry bunch have no intention of creating American jobs for American workers — only of expanding their own control over their fellow citizens.

    Either that, or Waxman and crew really do value future faint praise from snotty Europeans very highly indeed.

  12. Gavin, that’s a key point I failed to mention in my response. Our attitude toward nuclear power is the biggest weathervane for our thinking on AGW. Rarely has there been such an obviously bipartisan solution available to any problem–for instance, I would support massive capacity-building, and I think AGW is coconut oil.

    Greens should love it too, as should the left in general, but no. Weathervane–they instead prefer cap-and-trade, ethanol, windmill farms, and draconian CAFE standards. It’s doubly disingenuous, in fact, because if they genuinely believed their tripe about “investment” producing miracles in technology development, then they would apply it to miracles in nuclear technology development too. Ah, yes, but nuclear power is exhausted, nothing more to do there. Only wind turbines hold promise. And setting a moral example by playing Russian roulette.

    As the radicals in the sixties used to say, “The issue is never the issue.”

  13. I’ve always found parallels between nuclear negotiations and climate negotiations. Unilateral disarmament during the cold war would have brought severe limitations in our exercise of sovereign power and we may have been subject to nuclear blackmail. Since most of the push for climate action has come from Europe we should look at their fuel mix for a clue to their strategic advantage. Germany has benefited greatly by retiring dirty East German industry, France from nuclear power and England from the switch from coal to natural gas. Each major country has a distinct advantage in meeting climate goals over the US. Since these advantages give Europe a stronger negotiating position, what they give up is less than what we have to give up their support for climate action is stronger. As a result any equivalent action by the US is by its nature a unilateral action and puts us at an economic disadvantage vis a vis Europe. A good negotiator for the US would always demand less stringent action by the US to preserve our economy.

    The economic idea of environmental Kuznets curves is that as we grow wealthier we pollute less. There is a robust literature on the subject that a simple google will uncover. However, I will point you to a counterpoint http://www.steadystate.org/KuznetsCurve-Stern.pdf (The author is no relation to the author of the Stern Review.) There are economists who find that we are decarbonizing without strict environmental taxes and regulation. See: http://www.pnas.org/content/105/35/12774.abstract for a treatment of the concept of Dematerialization or Engel’s Law where as affluence increases the consumption of a variety of commodities declines as percentage of income.

    “A century after this phenomenon was noticed, Houthakker (23) wrote, ‘‘Few dates in the history of econometrics are more significant than 1857. In that year, Ernst Engel (1821–1896) published a study on the conditions of production and consumption, in which he formulated an empirical law that the proportion of income spent on food declines as income rises. Similar laws have also been formulated for other items of expenditure.’’ Consumption that follows Engel’s law has an income elasticity b1. Given the generality of Engel’s law, it is no surprise that a variety of energy use, crop production, and wood obey it in Figs. 1 to 4.”

    I cannot find reference to these phenomena in IPCC WGIII. If anyone can point me to where these phenomena are adequately treated in WGIII I would be most grateful.

  14. Quoting from the above referenced PNAS paper

    “Recent Chinese and American statements about carbon emission
    exemplify the arrival of the intensities of use and impact at
    the crux of affairs. Rather than emitting fewer tons of carbon,
    ‘‘[China] reiterated the target that it set a year ago of reducing
    energy consumption per unit of economic output by 20% between
    2006 and 2010.’’ (2). The U.S. target combined dematerialization
    and decarbonization: ‘‘Reducing U.S. emissions intensity by 18%
    between 2002 and 2012.’’ (3). Asian-Pacific nations wrote the
    Sydney Declaration on climate change in terms of lower energy
    intensity (4). (Italics added).”

    Emissions intensity and declining environmental impact as a function of increasing wealth are center stage in the two party talks between the US and China. Initiated at the end of Bush administration I would expect these discussions to continue. Many have viewed these talks and similar talks between the US and developing countries as an end run around global agreements. These talks result in non-binding agreements like the Sydney Declaration from APEC and have no enforcement power. However, I think because of the focus on the drivers of declining intensities, namely increasing wealth, the chances of developing adequate policy responses, like technology sharing through APNET and more open trade like the proposed Pacific Rim Free Trade Zone, are better than mandatory targets. Any policy that would decrease wealth can be expected to see as a result of that policy decreasing intensities that would result in emissions resistent to reductions.

  15. As Steve Graves indicates in his comment, the whole subject is moot, because 95% of the heat trapped in our atmosphere is done so by water vapor. Of the other 5%, less than 2% is caused by Carbon Dioxide, and of that low number, well less than half, or about 0.3% of the total heat retention, is caused by man made CO2.

    It is frightening that those in the political community will not step back a second from the hysteria, and ask any competent atmospheric physist to “run the numbers” as Steve and I have, and then get on to issues of importance where a legislative process might actually produce a positive result.

  16. Blaze,

    You say that “government spending + loose monetary policy = economic growth” does not work. But You have stated in words the static IS/LM model. Expansionary fiscal policy will shift the IS curve to the right and expansionary monetary policy will shift the LM curve to the right. Equilibrium is at a higher output. There are lags involved that dynamic models handle.

  17. “Your description of the negotiating challenge is woefully incomplete because you fail to cite per capita emissions – which are at least five times higher in the United States than in China.”

    Keith did specifically note that China et al. are considerably poorer than the United States, and that that might lead people to give them allowances to increase emissions that we would not allow the US. You’re quite correct that China has little incentive to sign a deal suggesting that their emissions be restricted when it’s already lower. However, that is also evidence that the US going alone will not necessarily persuade China.

    As a technical note, even if China institutes a similar price on carbon as the US, that would not mean that they would be “perpetually allocated fewer emissions rights,” just that the asymptotic value would be similar.

    In any case, if our strategy is not to care because China deserves (at least in their mind) to emit as much as the US and will not sign a deal, then perhaps as Keith notes that should be stated.

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