Atmospheric pressure

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Why some environmental agreements work and others don’t?

WHY did the Montreal Protocol succeed and the Kyoto Protocol fail? Both were environmental

treaties negotiated over perceived threats to the atmosphere. In Montreal, the threat came mainly

from the harm that chlorofluorocarbons (CFCs) do to the ozone layer ; in Kyoto, from gases such as carbon dioxide that many scientists say are changing the climate.

Both treaties thus tried to tackle problems that potentially effect every country, and are caused by activities that occur in every country. Both were negotiated against a background of scientific un-

certainty. The science of ozone depletion was uncertain when the Montreal Protocol was negotiated in 1987 ; the uncertainties surrounding the science of climate change are huge.

However, the Montreal Protocol seems to have been a success. Only a handful of countries have not signed (they include Afghanistan and Iraq, which have had other preoccupations). The build-up of ozone-depleting chemicals in the atmosphere peaked in 1994 and is now falling. The ozone layer is now on track to recover, and the concentration of ozone in the stratosphere should be back to its pre- 1980 level by mid-century.

The Kyoto treaty, though consciously modelled on Montreal, has been a shambles. It has been ratified by almost 100 countries but mainly those for which the treaty specifies no ceiling on emissions of carbon dioxide. By contrast, the world’s biggest emitter of the gas, the United States, has refused to sign not surprisingly, given that doing so would now require a reduction in emissions of 30-35its business-as-usual level by 2008-12. No government could have made such a promise. The world output of carbon dioxide shows every sign of busting the Kyoto targets and continuing to do so for some time to come.

What’s in it for us ?

A new book* by Scott Barrett, professor of environmental economics at Johns Hopkins University, argues that the different fortunes of these two treaties shed light on why some international agreements work and others fail. Such treaties, he argues, work only if they are self-enforcing. Every country wants to avoid paying to protect the environment. But each also recognises that, if every country took this approach, the overall result would be worse. So each country in a successful treaty prefers to bridle its behaviour than to accept the consequences if everyone goes it alone. There are many more environmental treaties than ever before : only four of the 225 currently in force were adopted by 1945. So it is important to make them work. Because a treaty is made between sovereign nations, it needs to include incentives to persuade countries to alter their behaviour. These take various forms. Mr Barrett points to one of the oldest environmental agreements, the North Pacific Fur Seal Treaty, as an example of how to get it right. The treaty, among the four main seal-hunting countries, was introduced in 1911 and reversed a rapid decline in the population of fur seals caused by over-hunting. It did so by banning hunting at sea, where they were common property and therefore over-exploited : seals could then be killed only on the territory of individual governments, which acquired an interest in protecting them. That created an overall gain (more seals), which could be distributed to leave all countries better o_, and therefore with an incentive to stick to their agreement. Such successes are hard to replicate. If the gains from co-operation are great, there is a big incentive to be a free rider : to take the gains without paying the cost. But in that situation, with large gains, punishing free riders is harder, because the co-operating countries usually suffer too. With the Montreal Protocol, as with the fur-seal treaty, participants have largely complied. Why ? Partly, because it contained an enforcement mechanism, unlike most environmental treaties. The penalties included trade sanctions against products containing or (more controversially) made by using CFCs.

More important, the costs of implementing the protocol were relatively low and the benefits from complying such as the avoidance of skin cancers and cataracts were huge. To secure these benefits, rich countries needed the co-operation of many poorer countries. So the treaty included a fund to help to pay for the cost of switching to CFC-free technologies. Such side-payments help to spread the benefits and reduce the costs.

And Kyoto? Here, argues Mr Barrett, the balance between costs and benefits is much less promising. Some countries may gain from climate change : agriculture in Canada and Russia (two big producers of fossil fuels) may benefit, even if farming in tropical countries suffers. For the United States, the benefits of reducing carbon-dioxide emissions would be much smaller than the harm done by doubling the concentration of the gas in the atmosphere. The harsh truth, says Mr Barrett, is that ozone depletion may be the more serious environmental problem…Ozone depletion kills people.

Current studies do not show climate change to be as deadly. And the costs of climate mitigation are far higher than those of giving up CFCs. The economics of ozone and climate policy are really very different.

The alternative, he suggests, might be a technology-based approach, mandating standards that move the world away from dependence on carbon-based fuels. Such a policy would start from asking that kind of behaviour could be enforced, rather than, like Kyoto, incorporating enforcement as qn afterthought. Mr Barrett may be right. But more probably, there can be no workable treaty on climate change, at least with the present state of knowledge. Unless gains are clearly seen to exceed costs, the world will choose to adapt, not agree.

Atmospheric Pressure

Scott BARRETT

The Economist

17 avril 2003

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