Now that the falsehoods and obfuscation of climate denialism have finally been silenced, addressing climate change has become the world’s top priority.
However, time is running out, and the IMF has said that any further delays on implementing policies to mitigate global warming would only add to the economic cost of the transition to a low-emissions economy.
Worse, there is still no concrete, pragmatic strategy for tackling the problem. Although economists have made a robust case for why carbon taxes are the best solution, this option has proven politically infeasible, at least in those countries that account for some of the highest emissions — namely, the US.
Illustration: Mountain People
Commentators have also said that climate change is a shared problem involving important cross-border externalities that must be addressed through a multilateral approach to global coordination.
However, as with carbon taxes, this argument has fallen on deaf ears. Given the geopolitical climate and the increasing fragmentation of the global economy, there is little hope that the message will get through anytime soon.
Having committed to assisting developing economies as they confront climate change, the World Bank finds itself limited by the country-based model underlying its financing operations. It is earnestly weighing its options and considering how to coordinate climate-related financing across borders.
Yet while such efforts are well meaning and consistent with the spirit of multilateralism, they are sure to delay concrete action. World Bank financing would have to be completely restructured, and coordinating action across multiple countries that have limited financial resources and often conflicting interests seems an impossible task.
For example, while some developing economies are rich in fossil fuels, others are starved for energy sources.
Given these limitations, pragmatism dictates focusing on the biggest polluters. Global carbon dioxide emissions are concentrated among only a handful of countries and regions. China, the US, the EU, Japan and Russia collectively account for 63 percent of the total, and none of these top polluters is a low-income country anymore.
China, the poorest of the group, represents about 30 percent of all emissions, making it by far the world’s largest polluter in absolute terms.
However, its government is taking steps to accelerate its transition to green energy — a winning strategy, given the country’s abundance of rare earth metals.
India, the third-largest emitter, accounts for approximately 7 percent of global carbon dioxide emissions, and its size and growth trajectory imply that it could easily surpass China as the leading polluter, barring stricter climate policies.
When it comes to helping developing countries decarbonize, considerable progress could be made simply by targeting India alone. The big advantage of this strategy is that it would avoid the paralysis associated with attempts to adopt a multilateral approach in an increasingly fragmented world.
This does not mean that projects aimed at climate mitigation or adaptation in other countries should be eschewed, but there would be no need to wait until everyone is on board before doing anything.
Those insisting on a multilateral approach should learn from the experience of the ultimate multilateral institution: the WTO. Its requirement that every single provision in every multilateral agreement gain unanimous support has left it increasingly paralyzed, prompting demands for institutional reform.
Of course, India is not low-hanging fruit. It is rich in coal and has little incentive — beyond the health of its citizens — to hasten the transition to green energy. In focusing on India, the carrot, not the stick, should be used.
Since the stick generally takes the form of pressure to implement carbon taxation, it is a non-starter. A tax would be ineffective, because it would incite massive domestic opposition, as has been the case in the US. It would also be morally objectionable, because it is unfair to ask a lower-middle-income country to bear the burden of reducing carbon dioxide emissions when rich countries such as the US have failed to do the same.
Moreover, even if China and India are now two of the world’s biggest polluters, they bear little responsibility for the past, cumulative emissions that led to the climate crisis.
That leaves the carrot, which would come in the form of tax incentives or subsidies to support green energy. When paired with other policies, these could ease firms into adapting to higher environmental standards, such as those associated with a cap-and-trade program.
However, such policies are expensive, which means that tackling climate change would require richer countries to help finance them. Whether or not India becomes the new China, it is still possible to ensure that it does not become the new outsize polluter.
Pinelopi Koujianou Goldberg, a former World Bank Group chief economist and editor-in-chief of the American Economic Review, is a professor of economics at Yale University.
Copyright: Project Syndicate
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