Friday, August 18, 2006

Sunstein on Global Warming

In today's Washington Post, University of Chicago law professor Cass Sunstein has a good article explaining why a global deal on carbon emissions is likely to prove difficult:

In recent years the United States has accounted for about 21 percent of the world's greenhouse gas emissions. China comes in second at about 15 percent. While many countries have stabilized their greenhouse gas levels, emissions from both nations, but especially China, are growing rapidly. Current projections suggest that by 2025 total emissions from the United States will increase by about one-third. By that year, China's emissions are expected roughly to double.... It follows that if an international agreement requires reductions, China and the United States will have to bear the brunt of the expense.

By contrast, the biggest losers from greenhouse gas pollution are likely to be India and Africa. Some of the most detailed, careful and influential projections have been made by Yale University's William Nordhaus and Joseph Boyer. Nordhaus and Boyer show that in terms of human health and agricultural loss, India and Africa are by far the most vulnerable regions on Earth. Because of an anticipated increase in malaria, Africa will probably be hit especially hard, and India is expected to suffer a large increase in premature deaths as well.

If climate change occurs at the rate expected by many scientists, it will have a much less serious effect on the United States, and even less than that on China. In the United States, agricultural production is expected to suffer relatively little. In China, agriculture is actually projected to benefit from a warmer climate....

The two nations now most responsible for the problem have comparatively little incentive to do anything about it.

The Coase theorem says that, in the presence of such externalities, there is always a deal to be had. In this deal, all actors move to the efficient level of pollution, and appropriate side payments are made to ensure that the deal is Pareto-improving. If Sunstein is right about the facts, in this case the Coasian deal would involve payments from Africa and India to China and the United States. Somehow, it is hard to imagine that happening.