Perverse Incentives and Global Warming

Cass Sunstein in the Washington Post offers an excellent explanation of why an international deal on global warming is so unlikely:

The obstacle stems from the unusual incentives of the United States and China. As the world's leading contributors to climate change, these are the two countries that would have to bear the lion's share of the cost of greenhouse gas reductions. At the same time, they are both expected to suffer less than many other nations from climate change -- and thus are less motivated to do something about it. And while the international spotlight has rightly been on the behavior of the United States, China will soon present the more serious problem.

In recent years the United States has accounted for about 21 percent of the world's greenhouse gas emissions. China comes in second at about 15 percent. While many countries have stabilized their greenhouse gas levels, emissions from both nations, but especially China, are growing rapidly. Current projections suggest that by 2025 total emissions from the United States will increase by about one-third.

By that year, China's emissions are expected roughly to double, making China the planet's leading source of such gases. (Emissions from the United States will, of course, continue to be far higher on a per-capita basis.) Within 20 years China will account for nearly one-quarter of the world's greenhouse gas emissions. It follows that if an international agreement requires reductions, China and the United States will have to bear the brunt of the expense.

By contrast, the biggest losers from greenhouse gas pollution are likely to be India and Africa. Some of the most detailed, careful and influential projections have been made by Yale University's William Nordhaus and Joseph Boyer. Nordhaus and Boyer show that in terms of human health and agricultural loss, India and Africa are by far the most vulnerable regions on Earth. Because of an anticipated increase in malaria, Africa will probably be hit especially hard, and India is expected to suffer a large increase in premature deaths as well.

If climate change occurs at the rate expected by many scientists, it will have a much less serious effect on the United States, and even less than that on China. In the United States, agricultural production is expected to suffer relatively little. In China, agriculture is actually projected to benefit from a warmer climate.

Any suggestions on how to fix this perverse mess of incentives? It seems to me that our only hope for a solution comes from the leaders of China and the U.S. recognizing that they have a moral obligation to protect the impoverished citizens of Africa and India. Needless to say, I'm not holding my breath: economic incentives generally trump altruism.