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A Technology Strategy for Global Warming—Meeting Summary—October 1, 1999

Related Bios: David G. Victor, Adjunct Senior Fellow for Science and Technology, and Rodney W. Nichols, President and CEO Emeritus, New York Academy of Sciences
October 1, 1999
Council on Foreign Relations

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[Note: A transcript of this meeting is unavailable. The discussion is summarized below.]

In ameliorating the problems posed by global warming, two basic strategies present themselves. The first is to control the quantity of emissions. The second is to control their price with a tax. A diverse group of policy experts assembled to explore the second, price-based strategy for the October 1 session of David Victor and Rodney Nichols’ Study Group, “A Technology Strategy for Global Warming.”

Emissions taxes have been largely overlooked as a viable international solution to the global warming problem since the 1997 Kyoto Protocol, which advocated an international emissions trading system. The quantity-based strategy promoted by the Kyoto Protocol would issue a limited quantity of tradable emissions permits to industrialized and some developing nations around the world. As David Victor points out in earlier chapters of the book, the emissions trading strategy is deeply flawed by the problem of allocation, among other things. A finite number of permits would be initially printed and distributed, which would result in the inflation and devaluation of the permits as developing countries attempt to join the agreement.

Overall, the group agreed that taxation offers some clear advantages over emissions trading. First, the fixed allocation problem that plagues a trading program is less severe in a tax system. The agreement could be fairly readily expanded to developing countries. Second, a tax, like trading, would harness the power of the market to find cost-effective solutions. Aside from one proponent of increased government intervention on the basis of the national interest, the group agreed that using markets—rather than direct government intervention—in this issue would be beneficial for all parties in question.

How might an emissions tax realistically be implemented on a global level? There was consensus amongst the participants that an internationally harmonized tax would be infeasible, due to the combined effect of countries’ various political and environmental climates. Taxes are rarely embraced and generally permitted only so long as a real need for them is felt. Different regimes possess entirely disparate means and methods for implementing policies (including taxation).

Several participants brought to the group’s attention a recent change in the current study of global warming, namely the unevenness of the effects of global warming. Past studies have been based upon global statistics that averaged climate changes measured per country. Current research is focused upon regional patterns in climate change. This is important for a number of reasons. Countries that do not suffer the ill effects of global warming—as well as countries whose economies might actually benefit from a slight increase in temperature—are less likely to approve a stringent international tax on emissions. Any policy that seeks international implementation must attend to the substantial regional variation in the extent of the global warming problem.

Policy-makers can exploit regional climate change variation to facilitate an emissions tax by aiming their efforts at audiences who have been harder hit by global warming. The type of tax that emerges from this regionally based strategy avoids the problems posed by an internationally harmonized tax. It would be staggered to meet the interests of disparate countries around the globe.

Regionally based policy would also help to address the issue of compliance, which was raised by a few members of the group as a potential problem that plagues emissions taxes just as it plagues a trading scheme. In contrast, globally based policy would require the development of blanket rules which would have to be quite weak in order to be broadly applicable. Compliance would be more likely amongst a smaller group of participants whose self-interest would encourage deeper action to ameliorate the global warming problem. Coupled by the presence of existing international institutions that already measure differences among economies, a regionally based system could substantially improve compliance.

A further question arose with regards to the object of the proceeds of the tax. Levied against emissions producers, where would the funds be directed? The optimal response, the group concluded, would be to structure the tax so that its proceeds would accelerate the development of clean technology.

The second half of the Study Group was dedicated to the subject of specific technology polices that could work in tandem with an emissions tax to decrease global warming. The group agreed that while most of the action should take place at the national level, international coordination—in some cases, international R&D programs—is essential. However, loose international standards and consultative information sharing were deemed preferable to the unilateral imposition of strict procedures. David Victor’s chapter outlines in greater detail many of the elements for such international coordination that are already in place.

Some questions emerged regarding the specific types of R & D to be pursued at the international level. Should R&D be directed toward adaptation or mitigation? One participant emphasized the importance of carbon sequestration over other geoengineering measures that are currently being advocated such as space-based mirrors that could cool the planet by reflecting some light. One participant pointed to aviation—rather than the automobile industry , which will become increasingly clean due to fuel cells without much additional government intervention—as a growing source of emissions that recommends an increased focus of R&D.

In sum, the group’s conclusions were fairly optimistic. Taxation could both operate as a price signal that would encourage the direct promotion of innovation in clean technology and a source of income for international institutions that would monitor compliance, engage in continuous research into the nature of the problem, and invest in technologies that would be used toward its solution. And while taxing tea pales in comparison to taxing air as a perceived government affront, the clear benefits of a taxation policy to combat global warming might convince even the decendents of our tax-resistant Founding Fathers.

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