One issue of fairness likely to arise in negotiations to control emissions of greenhouse gases is the equitable distribution of costs. Simple cost-sharing rules lessen the complexities of determining such a distribution, but cannot alone guide the negotiation process. Strategic issues such as the relative urgency with which parties view the need for an agreement and the perceived benefits accruing from it will influence the evolution of fairness standards. With no clear precedent for allocating costs fairly, consensus on procedural matters, such as the role of nongovernmental organizations in the negotiations, is needed to smooth the way for an agreement.
Fairness is a key aspect of any international agreement. An agreement among sovereign states is fundamentally different than the resolution of a domestic dispute, in which parties have recourse to the force of law. International undertakings will not induce compliance unless the decision makers in each participating country, and the key interest groups influencing those decision makers, believe that national interests are being adequately served.
This general observation about the importance of equity in international agreements takes on added importance in the context of recent negotiations about limiting global emissions of carbon dioxide (CO2) and other greenhouse gases. The costs of abating these emissions are quite uncertain but likely to be high (see "Estimating the cost of carbon dioxide abatement" in this issue). The potential benefits of abatement are even more controversial, and likely will be reaped mostly by future generations. In addition, individual nations approach the greenhouse gas issue with very different attitudes about what should be done (see "The global warming issue: viewpoints of different countries" in this issue). Generally, wealthier developed countries profess a greater willingness to take action (though the U.S. position favors more modest abatement efforts and more research). In contrast, developing countries and members of the former East European bloc are more concerned with their immediate development and environmental problems. These differences in attitude increase the burden negotiators face in seeking an outcome that participants can embrace as fair.
Possible rules for sharing costs
To simplify the process of negotiation, negotiators will attempt to seek out rules of thumb for which there are precedents in other negotiations and around which they may naturally coordinate their individual actions. In addressing the issue of how to equitably distribute the costs of limiting emissions of greenhouse gases, negotiators will look for simple focal points for sharing costs that command widespread acceptance as having fair outcomes while simultaneously being compatible with the interests of individual parties.
Ability to pay and polluters pay are two of the possible rules for the sharing of costs to reduce greenhouse gas emissions.
One such rule might be an equal percentage reduction of emissions. Under this rule, each country reduces its emissions by the same fraction, and each bears the full cost of that reduction. Each country's share of total abatement costs will depend on the particular ease or difficulty of abatement in that country. For example, countries heavily dependent on fossil fuels will find it more difficult to limit emissions.
Another rule negotiators might use focuses on ability to pay. Under this rule, once the responsibilities of individual nations for emissions reduction are established, costs are shared according to income levels in each country. To implement the rule, transfer payments from richer to poorer countries would be needed to equalize the relative cost burdens.
A third rule is based on the principle that polluters pay. Under this rule, once the responsibilities of individual nations for emissions reduction are established, costs are shared according to the amount of greenhouse gases they emit. Developed countries with higher total emission levels would bear more of the costs than developing countries with lower emissions, but developing countries would bear a rising share of the costs over time as their economic development raised their share of global emissions.
A fourth rule is based on the idea of a natural right to emit in which the capacity of the atmosphere to absorb greenhouse gases is treated as a common property resource to which all people should have access, regardless of income or other circumstances. Implementing this rule might entail the allocation of emissions rights to nations according to population. In allocating these rights, adjustments might be made for the industrial countries' heavier past use of the atmosphere's absorptive capacity. Provisions might also address the higher population growth rates in developing countries so as not to reward a population explosion. The effect would be to place greater responsibility on developed countries either to restrict emissions or to purchase the unused emission rights of developing countries. Provided that they did not exceed their own emissions limits, the opportunity to collect revenues from these transactions would give developing countries a financial capability and an incentive to restrict the growth of their own emissions.
Each of the above fairness rules has some precedent. Equal-percentage rules frequently arise in international undertakings in which uncertainties or institutional constraints limit the direct sharing of costs. Ability-to-pay considerations underlie the creation of financial and technical assistance for developing countries to phase out ozone-destroying chlorofluorocarbons (CFCs). The polluter-pays principle underlies many domestic rules concerning liability for environmental damages and is the stated means for addressing trans-boundary pollution issues within the Organization for Economic Cooperation and Development. Finally, the idea of common-property resources is confronted whenever a resource is held to be a common heritage of mankind, as in negotiations over the Law of the Sea Treaty.
Can simple rules guide negotiations?
The number of possible focal points, including others not listed above, illustrates the difficulty of finding simple rules of thumb for coordinating the sharing of costs. The diversity of rules would not be a major problem if the rules had similar consequences. However, an illustrative comparison of the outcome of implementing ability-to-pay and polluter-pays rules to limit CO2 emissions suggests that this is unlikely to be the case (see table, p. 11). According to this comparison, the polluter-pays approach would cost the developing countries a larger share of their national income than the ability-to-pay approach. Although their emissions are low relative to those of the industrial world, their income is even lower relative to that of developed countries. Conversely, industrial countries outside North America, with relatively high incomes and lower CO2 emissions than the United States, would face lower relative costs under the polluter-pays approach than under the ability-to-pay approach.
A comparison of the outcome of these approaches with that of equal-percentage and common-property approaches is hampered by a lack of information on abatement costs in different countries and regions. Nevertheless, some general observations can be made. Equal restrictions on emissions relative to current emission rates might have consequences similar to a polluter-pays approach if abatement costs were to be similar across countries. However, this is almost surely not the case. In many developing countries abatement costs might be low relative to costs in industrial countries (albeit high relative to income in developing countries) because of low levels of energy efficiency. (An important exception might be China, which has low energy efficiency but vast coal reserves that could be greatly devalued by an effort to limit greenhouse gases.) Thus the equal-percentage approach might yield an outcome somewhere between the polluter-pays and ability-to-pay approaches for many regions of the world.
In sharp contrast, assigning emissions rights based on population under the common-property rule would put a large share of the abatement burden on the developed countries. For example, with a global emissions reduction target of 20 percent and rights allocated according to population, the developed world would have to cut emissions by more than 70 percent (more than 80 percent in the United States) or borrow emission rights from the developing world. Given realistic estimates of the industrial countries' marginal abatement costs, which would affect the price of emissions permits, the financial transfers to developing countries would be so large that it is difficult to believe developed countries would accept this approach.
Comparison of Income-Based and Emissions-Based Cost-Sharing Criteria for Carbon Dioxide Reduction
Strategic aspects of negotiations
Disparities in outcome among fairness rules, the lack of clear precedent for any one approach, and the wide variance observed in national attitudes toward greenhouse warming make it unlikely that simple rules of thumb alone can successfully guide the negotiation process. In the absence of a clear focal point that could serve to coalesce the expectations of negotiators and guide their actions, strategic aspects of the negotiations will likely play a heightened role in determining the outcome. Furthermore, if an agreement is achieved, it would serve as an important precedent for the future. Thus strategic and procedural aspects of negotiation can be viewed as essential to the evolution of a commonly shared standard of equity that must accompany an international agreement.
Standards of equity will be shaped by how parties view the need for and benefits of an agreement, and by possible options outside an international agreement.
One factor of strategic importance is the relative urgency with which participants view the need for agreement: those who see delay as costlier will be more willing to accept a larger cost burden for constraints on emissions of greenhouse gases, other things being equal. A second strategic factor is how different parties view the risk that negotiations might be unsuccessful; again, those who perceive larger risks will be more willing to accept a larger cost share.
As stated previously, perceptions of both the benefits and costs will be important to the ability to reach an agreement. National populations that perceive themselves as less threatened if global warming is not slowed will be less inclined to absorb a major cost burden. National perceptions of global warming are often tempered by more immediate financial concerns or by doubts about the ultimate severity of the problem. As long as nations view the cost of failing to reach agreement in this way, concrete agreements to constrain emissions of greenhouse gases may be slow in coming.
Another important strategic factor is the possible existence of options outside an international agreement that different participants could resort to if negotiations were unsuccessful. For instance, many nations may have the option of pursuing unilateral strategies for adapting to climate change—such as the construction of sea walls or the introduction of new agricultural practices—that they could pursue in the absence of or even in addition to a multilateral agreement. (For a discussion of adaptation measures, see "Adapting to climate change" in this issue.) Nations are unlikely to accept negotiated outcomes that are more costly than unilateral adaptation measures, so these outside options will serve as constraints on international agreements.
In the absence of a clear precedent for negotiations, standards of equity also will be shaped by the negotiating process itself—the opportunities for communi-cation, the emergence of leaders, and the extent to which the process is seen to be cooperative problem-solving rather than just bickering over shares of a burden. And, to some degree, the actions of negotiators might be motivated by a sense of altruism or global responsibility. However, the limits of altruistic motives are highlighted by debates over current levels of foreign aid. Representatives from some developing countries have been adamant that climate-related income transfers not compete with other aid for purposes they view as more urgent. At the same time, there appears to be little sentiment within wealthier countries to increase current foreign aid solely on altruistic grounds. Thus the prospects for reaching an international accord on climate change may be best served by the design of an agreement that is motivated by the material self-interests of the signatories, rather than altruism.
Although simple fairness rules may not be able to resolve climate negotiations, they nevertheless will influence how negotiators view the opportunities for reaching agreement. The negotiating process must be seen as a two-level undertaking, involving both interactions among negotiators and interactions by negotiators with their national societies and groups. Domestic public opinion will be an important constraint on the actions of negotiators. Understanding of such a complex process remains limited, both in theory and in practice. However, public perceptions of fairness may hinge on issues of procedure as much as on those of allocation. If the process of negotiations is perceived as fair, the prospects for agreement will be heightened.
Perceptions of fairness may hinge on issues of procedure as much as on those of allocation of burden.
Implications for negotiations
With manifold uncertainties surrounding the issue of greenhouse gas emissions and global warming, and with only weak precedents to guide nations toward an equitable allocation of responsibility for the costs of mitigation, questions of procedural equity emerge as a source of greater concern. The perceptions of the general population are important in this regard, and one goal of the negotiation process should be to educate and involve disparate interest groups. Thus the practice of involving nongovernmental organizations in the negotiation process will be important in facilitating eventual agreement and implementation. Government negotiators and other participants need to establish a negotiating process that provides for consideration of a variety of attitudes and proposals while uncertainties are being reduced and fairness standards are being forged. Otherwise it is difficult to envision widespread national adherence to the negotiating process itself, let alone any substantive requirements emerging from the process.
A focus on procedural fairness should be embodied in the current pursuit of a framework agreement for limiting CO2 emissions and other contributions to global climate change by human activities; such an agreement should set the stage for subsequent protocols requiring specific actions (such as a stabilization or reduction of CO2 emissions). Two issues that may be especially important to consider in developing a framework agreement concern the linkage of global warming to other issues and the mechanism that would govern international cost redistributions. Rules need to be established that delimit the ability to couple an agreement to limit the emission of greenhouse gases to other issues, such as foreign development aid, trade barriers, population, and so forth. Decisions should also be made about the options available for cost redistribution—direct financial aid versus aid tied to a target such as energy efficiency. Prior agreement on such procedural matters could help smooth the way for substantive limits on emissions of greenhouse gases in the future.
Michael A. Toman is a senior fellow in the Energy and Natural Resources Division at RFF. Dallas Burtraw is a fellow in the Quality of the Environment Division at RFF.
A version of this article appeared in print in the May 1991 issue of Resources magazine.
A version of this article appeared in print in the May 1991 issue of Resources magazine.
