[Guest post from Jim Roumasset]
Sometimes
crass analogies help to focus attention. Before dumping your
girl/boyfriend, you might consider 1) whether s/he is better than
nobody and 2) the prospects for improving the relationship. From
Nordhaus and others, an ideal cap and trade system is better than
nothing, but many cap and trade agreements would be worse. Leakage,
moral-hazard-inducing giveaways, game-theoretic prospects (green
paradox), subsidy and mandate add-ons, and failure to integrate across
industrial and non-industrial sources and sinks can very easily render
the total benefits from reform less than costs. This means that
sustainable development will be undermined and that poverty alleviation
will likely be dampened if not reversed.
The best we can hope for from Copenhagen may be a framework from which
a win-win agreement can emerge. Generous mitigation schedules for
developing countries (Olmstead-Stavins), REDD and sequestration
programs ("REDD+"), and financial/technical assistance for adaptation
can go a long way towards developing country participation, thus
ameliorating the leakage, green paradox, and integration problems.
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