The Wrong Trousers, The Right Trousers, Or No Trousers At All

The much talked-of paper by Gwin Pryns and Steve Rayner, The Wrong Trousers: Radically Rethinking Climate Policy , in which they urge dumping the Kyoto protocol, has appeared in its full form just in time for the Bali Summit. Discussion of the alternative strategy presented in an earlier version of their paper, the "silver buckshot approach" (or the "do nothing and pray for a market miracle approach") has been offered here and here, among other places.

These are a few of my own comments on the final product.

Prins and Rayner argue that the Kyoto Clean Development Mechanism (CDM), which is a GHG emissions trading program designed to encourage sustainable development in countries such as India and China, should be dismantled and replaced with a series of "grass roots"--national or sub-national--cap and trade schemes, which may or may not merge together in the fullness of time to become one big global emissions market. The problems they identify with the CDM are real and have been pointed out before, including by me, here. However, a couple of things.

Firstly, whether the issues with the CDM require that it be scrapped, or whether a "mend it, don't end it" response is more in line with the magnitude of its defects, is a point open to debate. Since most of the abuses involve nation states taking advantage of the "rules of the game", why not adjust these rules to tighten up some of the loop-holes rather than throw the whole thing out? (especially since, in practical terms, carbon trading through the CDM has become a multi-billion dollar industry and ain't going anywhere anyhow)

Secondly, one of the problems with the CDM--finding legitimate projects to invest in--is writ larger the smaller the scale. Looking close to home, how many farmers interested in adopting no-till methods can you find in Canada, for example? Enough that every emitter can meet their targets? Probably not, which is why many Canadian companies have lobbied our federal government to allow investments overseas as a means of upholding their commitments under any nationally adopted carbon regulation system--to allow investment in the CDM or something very much like it, in other words. It is entirely unclear whether replacing the international CDM with a bunch of tinier, national, state or provincial CDMs, will lead to a better result and, should the results prove unsatisfactory on the regional level, is it not a good thing to have the existing international carbon market already sitting there for these various smaller sub-markets to integrate into?

Thirdly, Prins and Rayner argue for a greater emphasis on adaption over mitigation measures. It sounds like they want the U.S. to commit about $80 billion a year on things like lofting giant mirrors into space or inhibiting coastal development. Beyond the sheer unlikelihood of some of the projects--if you don't want people living close to the sea-shore, where will you send the millions of them that are already there? for example--the question arises: how are you going to pay for that? The odds of any government being able to do the kind of things Prins and Rayner seem to like (the space mirrors) without doing the kind of things they don't like (instituting a carbon tax) seem pretty minimal.

Finally, a new paper by Richard Eckaus, economics professor emeritus at MIT, seems to suggest that Prins and Rayners emphasis on technology and R&D (over regulation) is wrong headed:

"We found that, in spite of increasing energy prices, technological change has not been responsible for much reduction in energy use, and that it may have had the reverse effect," said Eckaus...

The good professor has been kind enough to send me a .pdf of "The implications of the historical decline in US energy intensityfor long-run CO2 emission projections". However, it involves some very complex economic modelling and, given my one quick reading, I would be lying if I said I could follow his argument at any length. However, in Mr. Eckaus opinion:

"Putting your money on technological change is risky," Eckaus said. "If you want to have less energy use from fossil fuels and less carbon emissions, society is going to have to pay for it."

Just for kicks, here is Mr. Eickhaus Unemployment Effects of Climate Policy, wherein he suggests that a policy of wage subsidies can offset many of the negative economic effects of limiting greenhouse gas emissions.


And, for reading this far, you get a picture of someone who is definitely not wearing trousers.