Robin Hahnel, U.S. left libertarian economist and stalwart of participatory economics, has long been a friend of EcoEquity, and of the Climate Equity Framework that defines much of its work. In this guest essay, he argues that a fair shares climate transition can most effectively be financed by a global emissions trading system. Such an idea will of course be anathema to many of today’s activists, but note well that Hahnel speaks for a system in which “trades” only count towards a nation’s fair share if they are aggregated and accounted at the national level — like so:
“(1) If they wish any country government should be allowed to certify emission reduction credits for emitters within its national territory who apply for credits to sell.
(2) When calculating whether a country has complied with its national pledge to reduce emissions, any emission reduction credits purchased by anyone within the country will be added to the country’s national emission allowance, and any emission reduction credits sold by anyone within the country will be subtracted from the country’s national emission allowance.”
By Robin Hahnel. Robin can be reached at robinhahnel1946@gmail.com
Ideally an international climate agreement would be:
- Effective: Reduce global emissions sufficiently to reduce the danger of cataclysmic climate change to an acceptable risk before it becomes too late.
- Equitable: Countries’ responsibilities for emission reductions should depend on (a) how much they contributed to creating the problem and (b) how capable they are of contributing to its solution.
- Efficient: The overall cost of reducing global emissions should be minimized.
Readers should always ask whether, and to what extent, any proposal under discussion achieves these three goals – what we might call the three “E’s” for an international climate agreement.
In Climate Change Not All Countries are Created Equal!
Before presenting a proposal for an agreement that would be effective, equitable, and efficient I want to explain where the distinction between “economically more developed countries” and “economically less developed countries” came from, and the important role it has played in international climate negotiations. The terminology “more developed countries,” or MDCs, and “less developed countries,” or LDCs, is taken from the development economics literature. More economically developed countries traditionally include countries like the United States, Canada, Australia, Japan, and the countries which comprise the European Union. Most other countries, whose citizens have yet to enjoy the benefits of economic development, are traditionally designated as less developed countries.
Under the Kyoto protocol, which was negotiated in Kyoto Japan in 1997 and entered into force in 2005 after it was ratified by 192 countries, but not the United States, only countries designated as more developed were expected to commit to mandatory emission reductions, while less developed countries were excluded from mandatory emission reductions, presumably until they reach some higher level of economic development. However, this binary distinction between more and less developed countries fails to take account of important differences within each category. For example, China and the Republic of the Congo were both classified as less developed countries under the Kyoto protocol. But China bears much more responsibility for causing climate change and has much more capability to contribute toward its solution than the Republic of Congo; even though China bears far less responsibility and capability than the United States, which of course is classified as a more developed country.
While international negotiations continue to be dominated by disputes between less developed and more developed “blocs,” in truth the binary distinction between more developed and less developed countries is quite imprecise. For years nobody had developed procedures to overcome this problem. However, fortunately, that is no longer the case. We can now measure different levels of responsibility and capability on a continuum.
Global emission reductions
Climate Scientists have told us in no uncertain terms that unless global carbon emissions are reduced by at least 80% by 2050, and, if possible, by even more, humanity is taking a risk no sane person would take. It’s that simple. So why isn’t the solution simply to hold every country responsible for reducing its national emissions by the same percentage, i.e. by at least 80% by 2050?
National Fair Shares
Beginning in Rio de Janeiro in 1992, and at every COP meeting since, those assembled have acknowledged the principle that countries’ responsibilities for emission reductions should be guided by different responsibilities for having caused the problem, and different capabilities for contributing to its solution, or what is referred to as common but differentiated responsibilities and capabilities, or CBDRC. This is not to say debate about CBDRC has not always been difficult and contentious. Indeed, perhaps agreement on CBDRC is only “real” in the sense that no country has come out and publicly challenged the principle. Instead, even when a Republican administration in the US has withdrawn from participation in COP, the rationale it offers is to claim climate change is not a serious problem, rather than to openly challenge the principle of CBDRC.
The Measurement Breakthrough
For decades nobody knew how to make the principle of common but differentiated responsibility operational, that is how to calculate national fair shares based on differential responsibility and capability. Fortunately, the intellectual problem of turning differential responsibility and capability into a continuous variable has now been solved. In fact, a number of analysts have accomplished this task, that is, have found ways to quantify differential responsibility and capability. But in my opinion the best of these approaches is the one developed by the Climate Equity Reference Project (CERP) which provides concrete benchmarks for international negotiations that countries cannot easily dismiss. Moreover, CERP provides an online calculator that allows visitors to compare for themselves countries’ most recent pledges to what they should take responsibility for based on their responsibility and capability.
Anyone can visit https://calculator.climateequityreference.org/ and calculate if a country they are interested in is pledging to do its fair share of emission reductions. When using the Climate Equity Calculator one must choose: (1) a “level of ambition,” i.e how much to reduce global emissions, (2) how much weight to put on “responsibility” vs. “capability,” and (3) what year to begin when calculating countries’ “historic responsibilities.” For the calculations discussed here I chose to use the 1.5 degrees Celsius “standard pathway” for ambition, 50% weights for both responsibility and capability, and 1990 as the year to start measuring historic emissions. If one chooses different weights of course results will differ. But only rarely will results for a country differ significantly for different choices for weights. Which is very fortunate, because otherwise arguments over weights would complicate negotiations greatly. But fortunately, except in rare cases, it turns out that the choice of weights does not make a great deal of difference because when countries began to develop economically, and how developed they now are, not surprisingly turns out to be highly correlated.
It is worth mentioning that the Climate Equity Reference Project approach goes beyond simply comparing different countries’ overall levels of economic development when assessing their fair shares. CERP begins by stipulating that emissions by citizens who have yet to achieve a minimal standard of living should not count toward a country’s responsibility irrespective of where they live, i.e. whether they live in a less developed country, or they live in a more developed country. Obviously a lower percentage of people live below the poverty line in more developed countries than in less developed countries… that’s what more developed and less developed mean! But the point is that none below the poverty line no matter where they happen to live should bear any responsibility for addressing climate change because their “right to development” should take priority. Instead, only those living above the poverty line, including residents of less developed countries who do so, should “count” when calculating a country’s fair share of emission reductions.[1] In my opinion this gives CERP’s system for assigning fair shares to countries an even greater moral standing, if you will. It may also prove helpful to less developed countries when presenting their future pledges of action. Responsibility and capability are not really a question of more developed countries vs. less developed countries. It is a question of the rich vs. the poor wherever they might live.
What are the results? What do we find?
- The good news is that by 2022 almost every less developed country had already pledged to reduce their emissions by what it is fair to expect them to do given their lower levels of responsibility and capability. And if all countries would do likewise, we would be within reach of an effective and equitable international agreement.
- The bad news is that no more developed country has yet to pledge to do its fair share given their higher levels of responsibility and capability.
For example, the latest United States’ pledge was 16.1 metric tons per capita below its fair share, and the European Union’s pledge was 9.0 metric tons per capita below its fair share. In contrast, South Africa’s pledge was 0.4 metric tons per capita above its fair share. Nigeria’s pledge was 0.4 metric tons per capita above its fair share. Senegal’s pledge was 0.1 metric tons per capita above its fair share. Kenya’s pledge was 0.5 metric tons per capita above its fair share. Mozambique’s pledge was 0.5 metric tons per capita above its fair share. And Egypt’s pledge was only 0.1 metric tons per capita below its fair share.[2]
Overcoming More Developed Country Recalcitrance
It is easy to conclude that thirty years of intransigence by more developed countries dooms hopes of any effective international agreement, as many climate activists have done. But I believe it is premature to throw in the towel on international negotiations, not only because if they are not eventually successful we will not avoid cataclysmic climate change, but also because a careful examination reveals a silver lining in the pledges more developed countries have already made. But let me begin by acknowledging that it is certainly possible to be discouraged by the failure of every more developed country to pledge to do its fair share of greenhouse gas emission reductions given their greater responsibility for having created the problem and their greater capacity to contribute toward its solution, as was once again demonstrated at COP 29 hosted by Azerbaijan.
A Silver Lining
However, I believe there is a “silver lining” if we examine more developed country pledges carefully. Many more developed countries have already pledged to reduce their domestic emissions sufficiently. For example, consider the graph on the Climate Equity Calculator website plotting greenhouse gas emissions for the US from 1990 to 2035. The black line represents actual emissions from 1990 to 2025 and projected emissions from 2025 to 2035 under a “business as usual scenario.” The blue line represents what US emissions should be starting from 2017 to 2035 given the US’s high levels of capability and responsibility. The red diamonds represent actual pledges the US made several times during international negotiations when the President was a Democrat. As you can see, all the pledges are considerably above the blue line, indicating that they all fall far short of what the US should have pledged. However, all the US pledges are on the hashed green line which is an estimate of what US domestic emissions should be. In other words, the US has pledged to reduce emissions by amounts that are what it can be reasonably expected to accomplish domestically. What the US has failed to do, however, is to pledge to pay for additional reductions the US should take responsibility for which could be made more cheaply elsewhere.
If you check the graphs for other developed countries you will discover this is a common pattern for most MDCs. Put differently, the problem is that more developed countries’ greater responsibility and capability requires them to pay for considerably more emission reduction than they can accomplish reasonably cheaply through domestic reductions. But that need not mean “game over.” Fortunately, more developed countries can make up for the remainder of their fair share of reductions at a reasonable cost if emission sources in more developed countries are allowed to buy “certified emission reduction credits,” or CERs, from sources in less developed countries as I explain below. For example, a recent study by the Political Economy Research Institute at the University of Massachusetts estimates the cost of both domestic reductions and credits purchased for reductions elsewhere for the US to do its fair share would be roughly 1.5% of GDP… which is far less than the 3.5% of GDP the US currently spends on our military.
How to Police an International Carbon Market
I am painfully aware that “carbon markets” have become a virtual bugaboo among climate activists. Nothing disgusts many climate activists more than the idea of selling the right to pollute, and stories of bogus carbon credits in the European Union as well as in the Clean Development Mechanism under the Kyoto Protocol are legion. But the hard truth is this:
It is all but impossible to reduce the cost of deep developed country reductions to levels their governments will accept without permitting sources in more developed countries to purchase reduction credits from sources in less developed countries for less than those reductions would cost them to do domestically.
Fortunately, there is a simple way to insulate buying and selling CERs from the kinds of loopholes and shenanigans that have plagued ill-designed programs to date.
All that Countries Need to Agree On
(1) If they wish any country government should be allowed to certify emission reduction credits for emitters within its national territory who apply for credits to sell.
(2) When calculating whether a country has complied with its national pledge to reduce emissions, any emission reduction credits purchased by anyone within the country will be added to the country’s national emission allowance, and any emission reduction credits sold by anyone within the country will be subtracted from the country’s national emission allowance.
This can be difficult to wrap one’s mind around, so let me explain further: A country’s allowance sets a limit on its national emissions, and when set according to differential responsibility and capability allowances will be more restrictive the more developed a country is. Under my proposal a country can meet its cap in two ways: (1) Sources of emissions within the country can reduce their emissions. Or (2)they can pay for the reductions to be done elsewhere by purchasing certified emission reduction credits. When sources in a country buy emission reduction credits this allows the country to emit more domestically than the emission cap the international agreement assigned them. When sources in a country sell emission reduction credits this requires the country to emit less domestically than the emission cap the international agreement assigned them.
Because it is generally cheaper for sources in lesser developed countries to reduce their emissions than it is for sources in more developed countries to do so, sources in lesser developed countries would generally be sellers of emission reduction credits and sources in more developed countries would generally be buyers of emission reduction credits under my proposal. But why will this prevent the problem of bogus certification and phantom reductions critics have complained so much about in the past… with good reason!
Why This Can Work
It is difficult to determine how many credits to award an applicant for reductions that are additional to what would have occurred in any case. This requires not only verifying if the emission reduction credits which an applicant applies for are real, and not fictitious, which is hard enough for a certification agency to do. It also requires a certification agency to estimate what would have happened in any case, i.e. had the applicant for the credits done nothing. In other words, the certification agency must determine if the reductions are “additional” to what would have happened in any case. As anyone working in the field knows, judging “additionality” is even more difficult than deciding if the reductions an applicant for certification claims a project will yield are realistic and not over exaggerated.
It is because these two tasks are difficult and subject to challenge, and because there are clearly cases where “excessive” and even “bogus” credits have been awarded in various programs to date, that critics have understandably soured on carbon markets.[3] However, while it is admittedly difficult to decide how many credits a particular project deserves, perhaps surprisingly it is relatively easy to measure actual annual national emissions, which must be measured in any case to determine if a country is in compliance with any international agreement. Which brings us to the crucial point:
If a country government makes a mistake and awards more credits than it should, as long as national emissions are capped and compliance with national emissions are enforced, any mistake in awarding credits cannot undermine global reductions. Instead, the erroneous awarding of credits only harms others within the country who will have to make up the difference if the country’s certifying agency awards excessive, or bogus credits.
In other words, as long as any credits sold abroad are added to the amount of emissions a country is required to reduce, and any credits purchased from abroad are subtracted from the amount of emissions a country is required to reduce, global emissions reductions will be exactly what the international agreement called for. Since this can be difficult to wrap one’s mind around, let me use a hypothetical example to illustrate how it works.
A Hypothetical Example to Explain How This Works
There is an electric utility in the US, where US environmental laws have already induced the US utility to shift from coal to natural gas to reduce its carbon emissions by 1 gigaton. But now US law requires the US utility to reduce its emissions by an additional gigaton, and reducing this second gigaton will be considerably more expensive than reducing the first gigaton.
There is an electric utility in India which is still producing all its electricity by burning low grade coal. However, by substituting natural gas for some of the low-grade coal it is burning, the Indian utility can reduce its emissions by 1 gigaton comparatively cheaply.
If the utility in the US does not reduce the second gigaton domestically but instead buys emission reduction credits for 1 gigaton from the utility in India, and the utility in India truly does reduce its emissions by 1 gigaton, global carbon emissions have been reduced by 1 gigaton. They were simply reduced in India, where they were cheaper to reduce, rather than in the US, where it would have been more expensive to reduce them. And the price the US utility pays the utility in India for 1 gigaton of emission reduction credits simply divides this “efficiency gain” from relocating them from the US to India between the two utilities. At least this is how we economists teach it in our environmental economics classes! But would it really work this way? Let me walk readers through a worst-case scenario where actors with an incentive to cheat get away with cheating — the nightmare scenario that keeps critics of emission reduction credits awake at night.
What if the certifying agency in India — say India’s Environmental Protection Agency, or EPA — does a terrible job of judging whether the emission reduction credits the electric utility in India is applying to have approved are real? What if the utility in India lies about making reductions? What if it claims it reduced its emissions by 1 gigaton, but in truth it did not reduce its emissions at all — it goes right on producing all its electricity, burning low grade coal and therefore emitting the same large amount of greenhouse gases as before. However, assume the EPA in India certifies that the Indian utility did really reduce its emissions by 1 gigaton, and awards it credits for 1 gigaton. This might be because the India EPA made an honest mistake. As explained above, it is often not easy to ascertain how much emissions will be reduced, much less how much more they will be reduced than they would have been reduced in any case. Or it could be that the India EPA was bamboozled by the India utility’s clever misrepresentation. Or it could be that the officials working for India’s EPA were corrupt, and in cahoots with the utility, and knew they were awarding bogus credits, but did so because the utility bribed them. The important point is that there is clearly what economists call a perverse incentive for the Indian utility to try to cheat, and also a perverse incentive for corrupt officials at the Indian EPA to co-conspire… because the Indian utility is going to get paid for the credits it will sell, and in my example of a worst case scenario, the Indian utility has incurred no expense at all. What will happen?
We have no real reduction of 1 gigaton of greenhouse gas emissions by the utility in India, which continues to burn very low-grade coal just as before. But that utility in India is awarded credits for 1 gigaton by India’s EPA… which the Indian utility sells to the utility in the US… which satisfies its obligation to reduce its emissions by an additional 1 gigaton by turning in the credits for 1 gigaton of reductions it purchased from the utility in India to the US EPA. What is the result?
One gigaton which the US utility would have had to reduce in the US if there were no credits to be purchased is now no longer reduced in the US. But there is no reduction in India, or at least no reduction which would not have taken place in any case. At this point in the analysis, it looks like the nightmare critics of international carbon trading fear and loath, who therefore conclude: “You see? We’re now 1 gigaton of greenhouse gas reduction short. All of us fighting to prevent climate change, and all who suffer when we fail to do so, have been cheated.”
However — and this is the key feature of my proposal – despite first appearances this bogus emission reduction credit scam will not diminish global reductions one iota under my proposal. And this is why: The country of India is still responsible for whatever reductions it was responsible for under the treaty.
India is a less developed country with low responsibility and capability, so India’s fair share of reductions is low compared to the responsibilities and capabilities of more developed countries like the US. But under the treaty India is still responsible for whatever reductions its responsibility and capability warrant. And when the India EPA certifies 1 gigaton of reductions for the utility in India to sell, now India is responsible for 1 gigaton more than India would have been responsible for had the India EPA not certified the 1 gigaton of bogus credits. Of course, if the reduction by the utility in India had been real, then the real reduction would exactly make up for the additional responsibility. But there was no real reduction. So, what will happen under the treaty I propose?
India now must come up with 1 gigaton of reductions it would otherwise not have had to achieve to meet its treaty obligations. Put differently, when the treaty is enforced, India will be found in non-compliance unless someone else in India reduces emissions by 1 gigaton, that is, 1 gigaton of reductions which someone else in India would not have had to reduce had the bogus credits not been certified by India’s EPA and sold to the utility in the US.
In sum: If there is no cheating of course everything works out for the best. The global cost of achieving reductions is reduced by locating them where they cost the least, and both the utility in the US and the utility in India are better off financially than had the utility in the US not been permitted to buy credits from the utility in India. In short, all is as we economists teach it in our economic textbooks. In the second scenario, however, either an honest mistake was made by the India EPA, or crimes were committed by the utility in India who misrepresented their reductions, and/or corrupt officials in India’s EPA who approved bogus credits.
And whether it was an honest mistake or a crime, there are victims! But the victims are whoever in India ends up having to reduce emissions by 1 gigaton more than they otherwise would have had to. The International community is not harmed by the crime. Nobody outside India is harmed by the crime. What my proposal does is immunize or insulate everyone outside India from becoming victims of either honest mistakes or cheating by an Indian utility and perhaps corrupt officials working for the Indian EPA.
As should now be clear, my proposal does not prevent crimes from being committed, nor eliminate victims. When emitters in less developed countries cheat, and when EPAs in less developed countries either make honest mistakes when carrying out what is admittedly a difficult task – awarding reduction credits accurately – or conspire with cheaters, there are victims! But the victims are whoever must reduce emissions by more than they should have had to inside India.
Because victims of cheating are innocent parties inside India is why I recommend that countries should be allowed to certify emission reduction credits for sale only if they wish or choose to do so. Countries would be well advised to consider whether they are up to this difficult task. As explained, it is hard to judge how many credits should be awarded for a project. And there are perverse incentives for applicants and officials who evaluate proposals to cheat. And, when bogus credits are awarded, this will impose hardships on others inside the country, who must then reduce emissions more than they should have had to. So, if a country government does not feel up to this task, they should not certify credits for sale.
However, because it would be highly advantageous for emitters in less developed countries with low reduction costs to sell legitimate reduction credits for more than the emission reductions would cost them to emitters in more developed countries with high reduction costs, it would be very helpful if the Intergovernmental Panel on Climate Change (IPCC) offered to provide technical assistance to any government in a less developed country which asks for help to make their certification process as competent as can be hoped for. Under the Koto Protocol the executive board of the Clean Development Mechanism developed considerable expertise in this kind of work. While the absence of caps on less developed country emissions under Kyoto was a fatal flaw, and the backlog of applications also caused problems which critics jumped all over; in many ways the historical record of the Clean Development Mechanism suggests that the IPPC could be of great help to less developed countries asking for its technical assistance in evaluating applications for reduction credits.[4]
In Sum…
For all the reasons critics have pointed out… and I was and remain one such critic… it is often very difficult to make an honest assessment of how much and when any project will reduce carbon emissions. Moreover, there is every reason to assume there will be two kinds of dishonest actors: (a) Applicants who know full well their project will not reduce emissions by as much as they claim it will. And (b) officials with the power to award credits who can be induced to award more than they know are deserved in exchange for a bribe from the applicant. And finally, whether mistakes are honest or due to corruption, there will be victims! My proposal does not prevent mistakes from being made, nor eliminate victims. What it does is change who those victims are.
When bogus credits are sold by emitters in a country whose national emissions are not capped, as they were not under Kyoto, and as they are still not capped to this day; the victims are all who suffer from climate change everywhere in the world because the bogus credits increase global emissions. But when bogus credits are sold by emitters in a country whose national emissions are capped, the victims will not be, indeed cannot be those who suffer everywhere from climate change, because the country’s emissions are capped and therefore are not increased. Instead, the victims are others within the country which is awarding bogus emission credits who must make up the difference so the country’s national emissions will still be under its national cap. My proposal does not solve the problem of how difficult it often is to know how much any proposal will truly reduce emissions. Nor does it solve the problem that applicants and officials awarding credits may be tempted to lie and cheat. What it does is shift the damage caused by honest and dishonest mistakes from all who suffer from climate change to those within the country where any mistake is made who must make up the difference.
What is the Alternative?
Broadly speaking there are two ways to share the costs of the transition from today’s Fossil-fuel-estan economies to tomorrow’s Renew-conserve-estan economies equitably. There are two ways to get more developed countries to not only reduce their domestic emissions sufficiently, but to also pay for the additional reductions their greater responsibility and capability warrant which can be done more cheaply elsewhere.
- One is the certified emissions reduction system I have just described. Which I believe can work because it solves the policing problem, and it induces more developed countries to do their fair share out of self-interest, rather than out of charity.
- The other is for more developed country governments to agree to help pay for the transition from Fossil-fuel-estan to Renew-conserve-estan in less developed countries directly. This can be through technology transfers, adaptation funds, various forms of what amount to grants, or a variety of loans whose key features must be (1) a very low interest rate, and (2) refinancing on favorable terms when needed.[5]
Up to now those fighting for a response to climate change that treats less developed countries fairly have chosen the latter approach. Spokespersons for less developed countries have made a compelling moral argument for climate debt, reparations, and subsidization. And at COP 29 in Azerbaijan less developed country delegations followed up on their efforts at COP 28 in Dubai and once again made the fight for financial assistance in various forms their top priority.
However, for the umpteenth time at COP 29, the hard truth that guilt and charity are far less powerful incentives in today’s world than self-interest was all too evident.
COP 29 in Azerbaijan made it even more apparent that no matter how compelling the moral case is, efforts to prevent climate change fairly through direct financial assistance in some form or another will not only yield much less than what less developed countries deserve, but also much less than needed to induce less developed countries to sign onto an effective agreement.[6] A quick perusal of the most recent pledges from more developed country governments at COP 29 in Azerbaijan reveals that while grants, transfers, and subsidies would have to be in billions of dollars a year to achieve a fair agreement, and therefore be acceptable to less developed country delegations, pledges once again were only in millions of dollars a year, as they were before at COP 28 in Dubai.[7]
On the other hand, if national emission caps are set fairly, as I have explained we now know how to do, self-interest will drive sources in more developed countries to purchase certified emission reduction credits from sellers in less developed countries, and not only dramatically reduce the overall global costs of preventing cataclysmic climate change, but also in all likelihood yield the largest flow of payments from the Global North to the Global South in world history. Hopefully the thirty year struggle to address climate change fairly at twenty-nine COP meetings and counting will now pivot to the more realistic approach I have suggested here at COP 30 to be held in Brazil next month, because that approach can succeed, while the previous approach has come up empty time and time again.
Conclusion
The road to an international agreement on how countries will share the burdens of preventing cataclysmic climate change has been long and frustrating. It is little wonder that people who have followed twenty-nine COPs dating back over thirty years have grown discouraged. But why should we be surprised when delegates from over two hundred countries, with long histories of bitter conflict, and many conflicts of interest still, find it difficult to come to an agreement they all find acceptable about how to share the burdens of solving a huge, global problem?
Nonetheless, if one looks closely, remarkable progress has been made:
- The principle that an international climate agreement must take into account that countries have different responsibilities for having created the problem, and have different capabilities to contribute to solving the problem, has not yet been officially abandoned despite constant pressure to do so.
- We now know how to quantitatively measure differences in responsibilities and capabilities so everyone can judge whether their own pledge and other countries’ pledges are fair.
- Countries are now making and revising pledges based on their own assessments of their responsibility and capability. And most importantly, most less developed countries have made pledges to do their fair share.
- And finally, after the failure to reach an agreement at COP 29 we know even more surely that the more direct mechanism for addressing the fact that less developed countries have less responsibility and capability than do more developed countries, namely adequate subsidies in one form or another, has repeatedly proven not to be acceptable to the governments of more developed countries.
Fortunately, there is another way to solve this last part of the international climate agreement puzzle which has frustrated humanity for so long. More developed country governments may well find a properly designed system of emission reduction credits both practical and palatable because it dramatically reduces their cost of taking responsibility for their fair share of reductions. An agreement along the lines outlined above to finally “close the deal” is there for the taking… and none too soon!
[1] This means that one must also choose where to draw the poverty line when calculating countries’ fair shares when using the CERP calculator. I chose the $7,500 per person per year threshold for my calculations reported here.
[2] See figure 2, page 11 of the Civil Society Equity Review: The Imperative of Cooperation, Steps Toward an Equitable Response to the Climate Crisis, available at: https://static1.squarespace.com/static/620ef5326bbf2d7627553dbf/t/636f8be1d35f0875298db39b/1668254693836/COP27_Civil_Society_Equity_Review_Report_SCREEN.pdf.
[3] There is a vast literature criticizing carbon markets. A recent article reviewing all the problems which have plagued different programs is “Are Carbon Offsets Fixable?” by Joseph Romm, Stephen Lezak, and Amna Alshamsi published in The Annual Review of Environment and Resources, Volume 50, 2025. The article is available online at: https://doi.org/10.1146/annrev-envoron-112823-06483. The authors conclude that they do not believe the problems are fixable. In effect, I am challenging that conclusion.
[4] For more on the much-maligned history of the Clean Development Mechanism under Kyoto see chapters 8 and 9 in Hahnel, Green Economics: Confronting the Ecological Crisis, M.E. Sharpe, 2011.
[5] Another way to put this is that these loans must be below going market rates, or highly subsidized if you wish. Otherwise, repayment will become “unpayable” as many loans to less developed countries have often become in the past. Instead, repayment must be easy and leave less developed country borrowers considerably better off than they would have been absent the loans.
[6] For an excellent article published months before COP 29 opened, highlighting problems with trying to achieve fairness through transfers, grants, and highly subsidized loans, see “COP 29 at a Crossroads at Azerbaijan with Focus on Finance” by Fiona Harvey, The Guardian’s chief editor for environmental issues, published in the May 17, 2024 edition.
[7] For an excellent evaluation of what did, and did not happen at COP 29 see “After COP 29: Climate Negotiations Reach Their Crisis,” by Tom Athanasiou, published in Foreign Policy In Focus at https://fpif.org/after-cop29-the-climate-negotiations-reach-their-crisis/ and also on the EcoEquity website, www.ecoequity.org.