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… the Lima Climate Change Conference


Lima, January 2009

Today is the last day of the Lima Climate Change Conference in Lima, Peru. I’ve become fairly convinced that climate change is the most important issue confronting human beings, so I figured I would follow-up on my post a week ago with a wrap-up of the summit.

It seems that the end result of the summit is a commitment by each of the 195 countries in attendance to reduce greenhouse gas emissions. The kicker is that each country will draw up its own commitments. There is no grand total that needs to be reached or higher benchmarks for developed countries to hit. Each country will have until March to submit its plan.

The problem with this is a classic in economics, the Prisoners’ Dilemma:

Two members of a gang are arrested for committing a crime together and are held separately from one another. They are going to be sent to jail for one year for their crime. However, they are both offered a deal. They can testify at the trial of their accomplice, betraying her, with the following possible outcomes:

  • If they both betray each other, they will both serve two years in jail
  • If only one betrays the other, the one convicted of the crime will serve three years, while the betrayer will be set free and not serve jail time
  • If neither of them betray the other they will serve the one year

Rationally, you would expect that neither of them betray each other. By cooperating they effectively minimize their likely jail time. However, given the fear that the other will betray you while you remain quiet, most people in this situation would themselves betray, setting them both up for two years in jail. This is the dilemma. Rationally, we should take one action, but behaviorally we are likely to take another which is not the ideal choice.

In the case of international climate change, the countries of the world are our prisoners. And since each country has to draw up their own greenhouse gas reduction commitments, they can either “cooperate” by reducing proportionally to their share of emissions and warming, or they can “betray,” letting the other countries do all of the heavy lifting. Rationally, all countries should cooperate, but behaviorally we expect them to betray each other, dooming the international climate change treaty to ineffectiveness.

Again, I feel like the key to success is a money transfer from developed to lesser developed countries (LDC’s). Of course, the money transfer would be under the condition that LDC’s do their proportional part in reducing greenhouse gas emissions, the money being used to offset the change in their growth trajectories by converting to more expensive technologies. The problem is, the amount of money to transfer is hard to pin down. In 2009 at the climate accords in Copenhagen developed countries committed $100 billion annually, starting in 2020, to offsetting transfers. However, the United Nations Environmental Program is now estimating that costs may rise to $300 billion a year.

Since each country is now going to be drawing up its own commitments to emission reduction, pinpointing a global, annual transfer amount is all but impossible. If LDC’s fall into the prisoners’ dilemma $300 billion will not be necessary, but they could use the developed world’s refusal to give $300 billion as a reason for not cutting their emissions enough in the first place. On the contrary, if LDC’s are convinced to cut their emissions proportionally, they may want more than $300 billion, which developed countries may not be able to muster.

To me, the clearest way out of this dilemma is to concretely pinpoint how much money will need to be transferred if the global emission reduction benchmark is reached. This will give developed countries leverage in negotiations and can convince LDC’s to cooperate.

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