By Rudi-Ann Miller
The current international environmental treaty mechanism has achieved little in combatting the issues of climate change. However, economics can offer us a solution. On Friday, September 26, Sterling Professor of Economics William Nordhaus proposed his fix: the creation of “climate clubs” to override current international dysfunction.
Sponsored by the Yale Institute of Biospheric Studies, Nordhaus’ talk was well received by the gathering of forty students and academics.
According to Nordhaus, climate treaties like the Kyoto Protocol rely on citizens, civil society and countries exerting moral pressure to ensure that members stay true to their promises. However, since the environment belongs to no single nation, none have taken the initiative to manage its upkeep. Known in economics as the “free-rider problem,” this mode of conduct has caused an unprecedented rise in Earth’s temperatures. Nordhaus believes the notion of being “a moral country and pulling yourself up by your bootstraps is getting us nowhere” and instead calls for the creation of a “climate club”.
If countries only join treaties if it’s in their national interest, then a climate club can design a system in which the benefits of membership will outweigh the costs of abating greenhouse gas emissions. In Nordhaus’ climate club system, members are restricted from jumping in and out of the group. Countries privy to this climate club must “pay dues” in the form of higher carbon prices but non-members face penalty tariffs on their exports to member countries. Nordhaus’ model sets the carbon price at $25 per ton of carbon dioxide with a 5 percent penalty tariff. Tariffs, Nordhaus believes, are the most effective strategy because they are a peaceful punishment yet disruptive to a country’s economy.
William Nordhaus came upon this idea in 2012 after examining the behaviors of countries seeking to join and remain in the European Union (EU). Greece, Nordhaus observed, has struggled since the implementation of austerity measures yet continues under the program because of their desire to remain in the Union. “It’s a great club, a club that people are banging on the doors to join. So why can’t we do that for climate change?” Nordhaus says.
Climate clubs could provoke a comprehensive reduction in emissions rather than just targeting individual industries. But implementing climate clubs would require nations, including world powers like the United States and China, to commit to creating and joining the club in a manner similar to the creation of the United Nations.
Moreover, the climate club model may only have room for one hegemonic club. It’s debatable whether more than one climate club can exist due to the tariff penalty. For instance, if the European Union (EU), African Union (AU), and the Union of South American Nations (UNASUR) started their own regional climate clubs, each club would institute its own tariffs against the other’s climate club members, which could have disastrous effects on global trade.
Current international agreements to control carbon offsets are ironically unsustainable. Whether or not the international community warms to Professor William Nordhaus’ strategy, the fact remains that scholars and policymakers must move at more than a glacial speed.
Rudi-Ann Miller is a sophomore in Silliman College. She can be contacted at rudi-ann.miller@yale.edu.