Thursday, April 22, 2010

Barrett on "Climate Treaties and Backstop Technologies

The always innovative Scott Barrett has produced a new working paper (available here) that presents a mathematical game-theoretic model demonstrating the potential economic and political advantages of negotiating separate climate treaties around different technologies. Here is the abstract:
In this paper I examine the design of climate treaties when there exist two kinds of technology, a conventional abatement technology with (linearly) increasing marginal costs and a backstop technology (“air capture”) with high but constant marginal costs. I focus on situations in which countries can gain collectively by using both technologies. I show that, under some circumstances, countries will be better off negotiating treaties that are not cost-effective. When countries prefer to negotiate self-enforcing agreements that are cost-effective, the availability of the backstop technology causes cooperation in abatement to increase significantly.
Scott's model indicates that countries may be made better off by first negotiating a treaty for the use of very expensive "backstop technologies," such as air-capture filters (which remove carbon directly from the air at a cost of $100-$200/tCO2eq), that would only be cost-effective if global mean temperatures rise by more than 2 degrees Celsius. Although it is not entirely clear from the paper itself, I presume that the "backstop technology" treaty would only be triggered at some time in the future when global mean temperatures rise by a predesignated amount or to some predesignated level, as ascertained by some official body such as the IPCC. As Scott notes (on page 4), such a treaty would presumably be less costly to negotiate than a treaty requiring immediate mitigation using less-expensive technologies because "unlike emissions reduction, industrial air capture could be deployed by a single country, or by a 'coalition of the willing,'" thus reducing the transaction costs of collective action.

Most importantly, a "backstop technology" treaty could create a sufficiently credible commitment to very expensive future action to avert dangerous climate change that it could well induce countries, including in some simulated cases countries in addition to those that negotiated the first treaty, to engage in separate treaty negotiations around less-expensive emissions technologies that might minimize global mean temperature increases in order to prevent the first treaty's more expensive technological solutions from being triggered.

I always find Scott's ideas interesting and influential. In the case of this paper, I would add, very exciting. Not only is his policy proposal novel, I think it is probably doable, if climate policy makers in the US, China, and Europe are paying attention.

No comments:

Post a Comment

I actively moderate comments for spam, advertisements, and abusive or offensive language.