Sensible Climate Policy

Warwick J. McKibbin
Warwick McKibbin
Warwick J. McKibbin Former expert - Economic Studies, Center on Regulation and Markets, Distinguished Professor of Economics & Public Policy - Crawford School of Public Policy, The Australian National University

February 1, 2005

Executive Summary

The Kyoto Protocol enters into force on February 16, 2005. Nearly thirteen years after negotiations began at the Rio Earth Summit and seven years after the Kyoto Protocol was negotiated, this should be a cause for global celebration. Yet the basic tenets on which the Kyoto Protocol are built are flawed and leave it worryingly vulnerable to failure. Already proponents of Kyoto are looking for alternatives “beyond Kyoto”. It is no accident that it has taken so long for the Protocol to enter into force with so few of the major future greenhouse emitters effective participants. The debate has been confusing for most non-experts because the question of whether the world should respond to the possibility of climate change has been deliberately entwined with the question of whether the world should embrace the Kyoto Protocol. For an effective and realistic climate policy to emerge these questions must be addressed separately. This paper focuses on the key problem that policymakers globally need to face about climate change — that is how to manage the uncertainty surrounding all aspects of climate change over very long time horizons. The various uncertainties are summarized and the requirements of a sustainable and realistic global and national response are outlined. The flaws in the Kyoto style approach of setting targets and timetables are summarized and an alternative approach based on designing long run national institutions and clear incentives to mitigate carbon emissions over time and adapt to any emerging climate change, are outlined. This alternative approach is known as the McKibbin Wilcoxen Blueprint. Although created as part of a globally coordinated response it is designed to be implemented in individual countries. Australia could adopt this approach using much of what has been negotiated within the Kyoto framework but moving forward from that and lead the world in the debate on what to do in the post-Kyoto world. It is in the national and global interest for Australia not just to claim that Kyoto targets will be met and focus on local policy. What is needed is for Australia, through international cooperation, to steer the world away from the fundamentally flawed approaches currently being considered.