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.

Chapter 5: The future evolution of the Kyoto Protocol: costs, benefits and incentives to ratification and new international regimes

Carlo Carraro and Marzio Galeotti

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


5. The future evolution of the Kyoto Protocol: costs, benefits and incentives to ratification and new international regimes Carlo Carraro and Marzio Galeotti 1. INTRODUCTION The diverging views of the science of climate change and the need for fair and politically feasible mechanisms for implementing an international agreement to control climate change have been lurking under the surface of the UNFCCC negotiations and have become more explicit in the process of the ratification of the Kyoto Protocol. This process has been and is difficult and controversial. A few years ago, it appeared that the EU countries were waiting for other developed countries – the USA in particular – to take action at the same time (see, for example, the EU Council Conclusions of 1997). But, more recently, at the Bonn and Marrakesh Conferences of the Parties, the EU was strongly committed to implementing the Kyoto Protocol even independently of the decision – taken by the USA at the beginning of 2001 – to withdraw from the Kyoto Protocol. In 1999, the US Senate linked ratification of the Kyoto Protocol with the ‘meaningful participation’ of key developing countries. However, in 2001, the USA unilaterally decided not to ratify the Kyoto Protocol for reasons mostly unrelated to the participation of developing countries. In 2000, at the Hague, developed countries have been unable to achieve an agreement on specific aspects of the treaty – specifically the balance between domestic actions and Kyoto mechanisms, the role of sinks, the implementation of sanctions,...

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