Stiglitz on global warming

Joseph Stiglitz at The Economists’ Voice proposes practical solutions to global warming issues. Stiglitz sees the Kyoto Protocol as positive but recognises (i) that the world’s biggest polluter (the US) has not agreed to join it and (ii) that developing countries, which will shortly be contributing 50% of all emissions, are left without firm commitments to do anything under it. While Kyoto requires that countries bring emissions back to 1990 levels, developing countries complain, with some justice, that their energy consumption was low then relative to developed countries so the cutback requirement is unfair.

Stiglitz’s approach is to provide an enforcement mechanism. Non-signatories to Kyoto, such as the US, who continue to spoil the earth’s atmosphere, should have a WTO case of unfair subsidisation brought against them by countries who have signed such as Japan and Europe. Even the US recognises the role of such actions - it prohibited the import of Thai shrimp that had been caught in 'turtle unfriendly' nets. With respect to global warming the subsidies are the costs to the global environment caused by US firms not paying the full global costs of production. Complainant countries should accordingly prohibit the import of goods that benefit from such subsidies or at least levy hefty taxes on them. This is a bit like earlier proposals for counterveiling tariffs to help enforce international agreements.

Problems of bringing about change in the developing world could be resolved by scrapping the Kyoto agreement but introducing a global environmental tax on emissions that achieves global reductions in emissions equivalent to the Kyoto targets. This tax might change as information about global warming improves and technologies evolve. Each country could collect and utilise its tax revenues as it saw fit and could cut pre-existing taxes on capital and labour in response to the new revenue source. Such taxes would improve efficiencies because they are directed at a ‘bad’ (pollution) not a ‘good’ (like work and saving). Such taxes would have low costs – in some cases there might be net benefits.

These are worthwhile suggestions that apply the notion of unpaid social costs at the global level and which recognise the superiority of green taxes with their ‘double dividend’ advantages at the national level.