The Kyoto Protocol

After having a brief look at how people assess risk and make decisions, we can extend the analogy covered in the previous post to our analysis of abrupt climate change. I will like to discuss this in terms of the Kyoto Protocol. 

The Kyoto Protocol was enacted to combat a persistent rise in greenhouse gas concentrations and global warming. It has led to a large increase in the efficiency of energy use and the development of alternative sources of energy. Governments have also tried to work out market inefficiencies and market failures by implementing emissions trading platforms and clean development mechanisms. 

Böhringer (2003) presents a review of the Kyoto protocol and his perspectives of what should be changed to the protocol and how it can be improved. He starts off with describing the problems with managing climate change and coming out with 'first-best','second-best' or 'third-best' policies. It comes as no surprise that one of the problems is that of uncertainties and the different risk perceptions of different countries. 

He defines mitigating global warming as a problem of provision of a global public good. This means that the benefits of mitigation are non-rivalry (the marginal cost of providing the good is zero) and non-excludable (others who do not pay for it are not excluded from the benefits). He acknowledges that due to the uncertainties involved in calculating the costs and benefits of abatement, this has delayed the progress in policy solutions. He mentions that 'together with [the] irreversibility of both [greenhouse gas] accumulation in the atmosphere and accumulation of capital investments, [uncertainties] imply a trade-off between the risk of premature abatement action and risk of delayed action.

In my opinion, this is reflective of the discussion on risk perceptions and disaster preparedness. Similar to the correlation that Miceli et al (2008) discovered between risk perception and disaster preparedness, if people were to perceive abrupt climate change as possible and most probable, they will likewise be more willing to invest in precautionary measures (such as investment in green technology and cutting back emissions). 

However, Böhringer also mentions that there is a problem of incentives and we are faced with a problem of 'tragedy of the commons'. Although all countries could be better of if they behaved cooperatively, each has an incentive to deviate from the Pareto-efficient outcome. This suggests that there might be less incentives for countries to bear the costs of abatement. One example is the withdrawal of Canada from the Kyoto Protocol as the country believes that it has been marginalised by undertaking abatement measures. Since the implementation of the policy, the greenhouse gas emission cuts have been more than replaced by the increase in emissions by non-participating countries. However, heavy costs are still imposed on participating countries which have led to one country, Canada, withdrawing form the program. Hence, this shows that it is important for policy actions to be more equitable and fair across countries. 

For more information about the Kyoto Protocol:
-visit the UNFCCC website


References:

Böhringer, C (2003) 'The Kyoto Protocol: A Review and Perspectives', ZEW Discussion Papers, No. 03-61, http://hdl.handle.net/10419/23995.