Firms, Governments and Climate Policy

Firms, Governments and Climate Policy

Incentive-based Policies for Long-term Climate Change

ESRI Studies Series on the Environment

Edited by Carlo Carraro and Christian Egenhofer

This book analyses the policy mixes that provide the best possible incentives for firms and governments to act on climate change and sign up to international climate agreements. In doing so, the authors address a multitude of related issues including the linkages between flexible mechanisms and voluntary agreements; regulation and taxation; the opportunities and barriers of the Kyoto Protocol for industry; and the incentives for firms to undertake climate-related R & D and investments. As well as illustrating the environmental benefits and cost-effectiveness of alternative policy mixes in reducing GHG emissions, the authors also offer sensible policy prescriptions for increasing the numbers of countries that ratify and implement climate agreements.

Introduction

Carlo Carraro and Christian Egenhofer

Subjects: economics and finance, environmental economics, environment, asian environment, climate change, environmental economics

Extract

Carlo Carraro and Christian Egenhofer The current international climate debate is dominated by conflicts about the efficiency and equity effects of the international climate regime with an emphasis on the economic and legal aspects on the one hand, and on the environmental on the other. No balanced compromise over the complex tradeoffs that characterize the climate change problem is likely to appear in the short run, irrespective of the results of the seventh climate summit in Marrakesh in November 2001. Marrakesh has kept the international climate change process alive and arguably is a major step towards entry into force of the Kyoto Protocol. But the Kyoto Protocol is only one (small) step on the way to an effective climate policy, which will call for far greater greenhouse gas reductions and the full engagement of the USA and ultimately developing countries. With these difficulties as background, this book approaches climate change policy from the following perspective: rather than focusing on short-term issues dealing with the implementation of the Kyoto Protocol (ceilings, sinks, monitoring, enforcement, liability and so on), this study looks at the fundamentals of the climate problem. It takes a long-term perspective on climate change and concentrates on identifying incentives both for governments and industry to adopt climate change policies. The book aims to determine whether certain incentives will induce the adoption of a climate policy, and if so, which incentives are provided by different policy instruments. Hence the focus of the study is on the tools...