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Brooks Wilson's Economics Blog: U.S. Negotiations with China to Reduce Carbon Emissions

Thursday, June 11, 2009

U.S. Negotiations with China to Reduce Carbon Emissions

nilateral action by the United States to reduce carbon emissions will do little to reduce global carbon emissions and will impose significant costs to households. (HT Mankiw) Martin Feldstein, a professor of economics at Harvard University, makes the point in, "Cap-and-Trade: All Cost, No Benefit," Washington Post, June 1, 2009.
The Obama administration and congressional Democrats have proposed a major cap-and-trade system aimed at reducing carbon dioxide emissions. Scientists agree that CO2 emissions around the world could lead to rising temperatures with serious long-term environmental consequences. But that is not a reason to enact a U.S. cap-and-trade system until there is a global agreement on CO2 reduction. The proposed legislation would have a trivially small effect on global warming while imposing substantial costs on all American households. And to get political support in key states, the legislation would abandon the auctioning of permits in favor of giving permits to selected corporations...

The Congressional Budget Office recently estimated that the resulting increases in consumer prices needed to achieve a 15 percent CO2 reduction -- slightly less than the Waxman-Markey target -- would raise the cost of living of a typical household by $1,600 a year. Some expert studies estimate that the cost to households could be substantially higher. The future cost to the typical household would rise significantly as the government reduces the total allowable amount of CO2.

Americans should ask themselves whether this annual tax of $1,600-plus per family is justified by the very small resulting decline in global CO2. Since the U.S. share of global CO2 production is now less than 25 percent (and is projected to decline as China and other developing nations grow), a 15 percent fall in U.S. CO2 output would lower global CO2 output by less than 4 percent. Its impact on global warming would be virtually unnoticeable. The U.S. should wait until there is a global agreement on CO2 that includes China and India before committing to costly reductions in the United States.
I made a similar point here, arguing that negotiation would be very difficult and costly for a variety of reasons. I missed an important reason a country might want to use carbon based fuels, the main reason: they are a cheap way to provide the energy for economic growth. Kathrin Hille of the Financial Times describes the difficulty the U.S. has encountered in negotiations with China to reduce carbon emissions in both countries ("Biggest emitters fail to show the way forward," June 11, 2009).
China and the US failed to achieve a breakthrough at their latest round of climate talks on Wednesday, raising the stakes in the global effort to fight global climate change.

The two countries responsible for almost half of the world’s greenhouse gas emissions ended three days of negotiations in Beijing...

Chinese officials maintained that the two countries should have a “common but differentiated approach” – code for Beijing’s reluctance to adopt a formal domestic mandate to reduce its carbon emissions. The US Congress is considering a bill that would reduce US emissions to 83 per cent of 2005 levels by 2020. China wants the US to cut its emissions to 40 per cent below 1990 levels by 2020 – a different order of magnitude. It also wants the US to pledge up to 1 per cent of its gross domestic product to pay for clean technology in China and elsewhere.

1 comment:

  1. Hi Mr Wilson,

    Wanted to respond to that FT article you quoted, but FT doesn't allow comments. So the following is not an attack on yourself, but on that author Kathrin Hille from FT instead.

    That article is yet another example of the media trying to vilify the Chinese and its government.

    The 2nd paragraph in that news article (” … code for Beijing’s reluctance to adopt … to reduce its carbon emissions.”) is clearly designed to mislead the public and fan anger at China and the Chinese government. In fact, what they didn’t say is that :

    (1) China is by far one of the largest (if not THE largest) investor in green energy in the entire world.

    (2) On top of that, China has just announced YET another US$440bn to expand its renewable energy use. As far as I know, no other country on this planet even come close.

    (3) China’s commitment to fight climate change didn’t just start today. Even back in 2006, China’s efforts to fight climate change was ahead of most countries. Back then, China unilaterally kicked off the most aggressive energy-efficiency program in the history of the entire world, which aimed to produce carbon dioxide emissions reduction almost 5 TIMES greater than the ENTIRE European Union had committed to achieve under the Kyoto Protocol.

    (4) On top of all this, China which was already by far the world’s leader in thermonuclear fusion technology in 2007, is also going to contribute billions in the world’s most expensive clean energy project (ITER) together with a few other countries. This clean energy project was originally spearheaded by NONE OTHER THAN China in 2006 to create the so-called “artificial sun”.

    I wish the Western media would stop these non-stop attacks.


    By the way, on a different topic in case you are interested, you and your readers are most welcome to check out the following 2 articles on my site :

    Article 1 : "Topics on Democracy (Part 1) — Democracy War Game"

    Article 2 : "Topics on Democracy (Part 2) — A Model for the 21st Century"