Eric A. Posner and Cass R. Sunstein (University of Chicago Law School and University of Chicago – Law School) have posted Should Greenhouse Gas Permits Be Allocated on a Per Capita Basis? on SSRN. Here is the abstract:
Many people believe that the problem of climate change would be best handled by an international agreement that includes a system of cap and trade. Such a system would impose a global cap on greenhouse gases emissions and allocate tradable emissions permits. This proposal raises a crucial but insufficiently explored question: How should such permits be allocated? It is tempting to suggest that in principle, allocation should be done on a per capita basis, with the idea that each person should begin with the same entitlement, regardless of place of birth. This idea, pressed by many analysts and by the developing world, can be defended on grounds of either welfare or fairness. But on both grounds, per capita allocations run into serious objections. If fairness is understood in terms of equally or proportionally sharing the burdens of a climate treaty, per capita allocations are not fair because they do not take into account all the effects of such a treaty. Any agreement to reduce greenhouse gas emissions will give more benefits to some nations than to others, and will impose more costs on some nations than on others; in these circumstances, per capita emissions rights give the appearance but not the reality of fairness. For those who seek redistribution to those who need help, on grounds of either welfare or fairness, per capita allocations of emissions rights are at best a mixed blessing. Some rich nations are highly populated, and some poor nations have small populations; there is essentially no relationship between size of population and per capita wealth. Per capita allocations would also create serious incentive problems, and they would face decisive objections from the standpoint of feasibility: Per capita rights would transfer hundreds of billions of dollars annually from the United States to China and India, and the United States is most unlikely to sign a treaty with that consequence. Comparisons are drawn between per capita allocations and other approaches, including those based on existing emissions rates and those with self-conscious redistributive aims. A general goal is to balance welfarist and fairness goals with feasibility constraints; per capita allocations do a poor job of achieving that balance, and an insistence on that approach might make the climate change problem intractable. These conclusions have general implications for thinking about normative goals and practical limitations in the context of international law.
This paper covers a lot of ground at a high level of sophistication. Highly recommended to anyone interested in climate change or international justice. I do have a comment or two about particular issues raised by the paper.
Posner & Sunstein do a very nice job of framing the issues from a welfarist perspective, and there brief discussion of distributive justice is mostly on target. I have some reservations about their discussion of the "common property" argument. Here is the relevant passage:
There is another type of fairness argument, to the effect that the atmosphere, with its beneficial carbon-absorbing characteristics, is common property, belonging to everyone in the world.74 A climate treaty closes a commons, converting it into private property. It is only fair to distribute the parcels of property to the former users of the commons, namely, everyone in the world, on a per capita basis. One might draw an analogy to minerals discovered in the sea bed under the high seas, which are outside the sovereignty of any country. The Convention on the Law of the Sea provides that revenues from exploitation of these minerals should be distributed “equitably.”75
But the analogy is at best partial and in fact reveals the limits of this argument. A climate treaty, like a treaty allowing for the exploitation of minerals, has two effects of present interest. First, both treaties generate revenues—for permit sellers, in the climate case, and for mining companies, in the mineral case. Second, both treaties generate benefits for consumers—people who benefit from abatement of climate change, and people who benefit from the lower price of, say, oil. Because virtually everyone benefits from lower oil prices, the effect is spread around the world. Thus, the only remaining question in the case of the mineral treaty is how to distribute revenues fairly. In the climate case, the climate effects are extremely variable—hurting some people very badly, others not all, and benefiting still others. From the standpoint of fairness, it would be stranger to ignore these latter effects while considering only the revenue effects. The analogy to property is not helpful; it distracts from the relevant question, which is the distribution of all treaty effects across the world’s population.
This argument seems to miss the mark. The common-property argument (when articulated in its strongest form) claims that there is a moral entitlement to equal shares in rights to the atmosphere as a commons. When the commons is converted to private property, each and every person with rights in the commons is morally entitled to an equal share in the private property. The second of the two paragraphs quoted above simply misses the point–addressing the question of fair distribution of the benefits of conversion. If the moral entitlement claim were correct, then the fair distribution question is beside the point. The deep version of this point can be made with respect to ownership of one’s body and labor: if each individual has a moral entitlement to their own body and its labor, then the question of fair distribution does not arise. (I am not taking a position here about whether the moral entitlement claim is correct; my only point is that Posner and Sunstein have missed the point of the claim.)
Assuming that I am right that Posner and Sunstein’s argument is not sufficient, doe they have an alternative line of reply? Let me suggest the following. The global atmospheric commons is not currently "owned" by individuals. Rather, as in the case of the ocean floor mineral rights, the system of international law assumes that the moral entitlement (protected by international law) vests at the level of the nation state. Each and every nation state has an entitlement to unlimited use of the atmospheric carbon absorbtion commons; and termination of this right requires an agreement, e.g., a treaty establishing the regime of tradeable permits. Precisely because the parties to the treaty (the nations) are the holders of the entitlement, their agreement that is the necessary and sufficient condition the justice of the treat insofar as preexisting entitlements are concerned. That is, the flaw with the global atmospheric commons argument is that there is no moral entitlement at the level of the individual.
Posner and Sunstein’s discussion of feasibility is equally interesting. Here is a taste from that section of the paper:
Treaties require the consent of treaty partners, and so states must believe that by entering a treaty, they are serving their national interest. Of course the idea of national interest can be specified in many different ways. But as a first approximation, nations care about the welfare of their own citizens, and the welfare of citizens in other places are not a primary consideration and may not matter greatly.93 A workable climate treaty will have to be one that serves the interests of the United States and other major industrial nations, including developing nations such as China and Brazil. We use the term international Paretianism to refer to this pragmatic constraint on treaty-making: a treaty is not possible unless it makes all its signatories better off.
It should be clear, from the foregoing discussion, that we reject international Paretianism in principle. From a welfarist perspective, a step, such as genocide prevention, might be justified even if its national benefits are exceeded by its national costs, so long as the global benefits exceed the global costs. Nor do we insist that international Paretianism is always a firm constraint on domestic judgments. It is imaginable, for example, that domestic forces will favor at least some degree of altruism, so that nations will take steps that promote global welfare without promoting domestic welfare. The only point is that domestic self-interest imposes a significant limitation on what is feasible, and that nations should not be expected to sign a climate change agreement from which they are large-scale net losers. China is not likely to sign an agreement that would cost it, on net, hundreds of billions of dollars each year; the same is true of the United States. An important question, then, is whether a proposed allocation of emissions rights will require one nation to give a great deal, in monetary terms, to others.
They then go on to make the obvious argument that the costs to wealthy nations that have high per-capita Greenhouse gas emissions of per-capita allocatoin of permits is such that it makes their agreement unlikely. It is not actually clear to me that Posner & Sunstein have established that per-capita allocation would not make all signatories better off than the status quo. Per-capita allocation would cost wealthy high-greenhouse-gas-emitting nations an enormous amount, but so wood failure to reach agreement! Of course, discount rates may be key here–as the truly enormous costs of global warming will accrue decades in the future and the enormous costs of per-capita permit allocaton would accrue whenever the scheme is implemented (several years but not several decades in the future).
This raises an interesting question that Posner and Sunstein do not directly address. What is the "feasible choice set"? That is, what range of agreements would satisfy the criterion of international Paretianism for inclusion in the feasible choice set? Given the enormous costs of nonagreement, it would seem that the feasible choice set is actually quite large–with many different distributions of costs and benefits lying inside the feasible set. Given that the range is large and the distributional effects of choice within the set are also enormous, the problem of reaching agreement within the set are likely to be substantial.
The feasibility problem becomes more complex once we drill down through "international Paretianism’ to the questions of feasibility that arise at the level of the individual nation state. Treaty ratification and implementation requires the cooperation of a variety of political actors. In the United Staets, for example, there are two veto players: (1) the President, who must assent to a treaty, and (2) any group of 34 Senators (since 2/3rds of the Senators present must vote to ratify a treaty). Of course, any climate treat will be evaluated by Senators along multiple dimensions, but the treaty must satisfy the domestic political equivalent of Sunstein and Posner’s "international Paretianism." That is, the treaty must be viewed as superior to the status quo by the President and by 67 Senators. Even if the treaty improves the welfare of the United States as a whole, that does not guarantee that the treaty will be viewed as an improvement by 67 Senators. Perhaps this problem can be solved by side payments, but because of the very long-run nature of the problem, it may be difficult to guarantee long-run side payments and short-term side payments may (or may not) themselves be feasible.
Great paper. Download it while its hot!