Those worried about the future of the earth’s climate are hoping that this year’s climate change convention in Lima, Peru, December 2014, will yield progress toward specific national commitments, looking ahead to an international agreement at the make-or-break Paris meeting to take place in December 2015.
Markets can fail. But market mechanisms are often the best way for governments to address such failures. This has been demonstrated in areas from air pollution to traffic congestion to spectrum allocation to cigarette consumption. Markets for emission allowances – in which those firms that can cheaply cut pollution trade with those that cannot – achieve desired environmental goals at relatively low economic costs. As of a decade ago, that long-standing economic proposition had become widely recognized and put into action. Yet the political tide on both sides of the Atlantic has been against “cap and trade” over the last five years.
Most observers judged as a failure the December meeting in Copenhagen of the Conference of Parties of the UN Framework Convention on Climate Change (UNFCCC). But then the usual way of judging such meetings is to look for a communiqué that voices sweeping aspirations, such as the G-7 “decision” at L’Aquila last summer to limit global warming to 2 degrees centigrade. In reality, without any evidence of countries agreeing what is each one’s share of the burden, such proclamations are worthless. Better tiny steps on the ground than giant flights of rhetoric.