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  • Author: Joseph E. Aldy, William A. Pizer
  • Publication Date: 01-2014
  • Content Type: Working Paper
  • Institution: Belfer Center for Science and International Affairs, Harvard University
  • Abstract: The comparability of domestic actions to mitigate global climate change has important implications for the stability, equity, and efficiency of international climate agreements. We examine a variety of metrics that could be used to evaluate countries' climate change mitigation effort and illustrate their potential application for large developed and developing countries. We also explain how transparent measures of the comparability of effort can contribute to the design of international and domestic climate change policy along several dimensions. For example, such measures can facilitate participation and compliance in an agreement if they can illustrate that all parties are doing their "fair share." Second, these measures can inform the bilateral linking of domestic cap-and-trade programs in a manner akin to how nations negotiate the lowering of trade barriers more generally in trade policy. Third, assessments of the comparability of effort can affect whether to implement and, if necessary, the stringency of unilateral border measures (e.g., a border tax). Finally, such assessments demonstrate the need for a well-functioning policy surveillance regime.
  • Political Geography: Europe
  • Author: Martin L. Weitzman
  • Publication Date: 01-2014
  • Content Type: Working Paper
  • Institution: Belfer Center for Science and International Affairs, Harvard University
  • Abstract: It is difficult to resolve the global warming free-rider externality problem by negotiating quantity targets. By contrast, negotiating a single binding minimum carbon price (the proceeds from which are domestically retained) counters self interest by incentivizing agents to internalize the externality. The model of this paper indicates an exact sense in which each agent's extra cost from a higher emissions price is counterbalanced by that agent's extra benefit from inducing all other agents to simultaneously lower their emissions. Some implications are discussed.
  • Topic: Climate Change, Economics, Energy Policy, Industrial Policy, International Cooperation
  • Political Geography: Europe
  • Author: Henry Lee, Scott Moore, Sabrina Howell, Alice Xia
  • Publication Date: 10-2014
  • Content Type: Working Paper
  • Institution: Belfer Center for Science and International Affairs, Harvard University
  • Abstract: In recent decades there has been a gradual transformation in environmental policy away from command-and-control policies and toward the use of more flexible, market-based mechanisms. This transformation is evident in the environmental policy of the United States, and the European Union where many scholars and policymakers have accepted the argument that, in comparison with more traditional regulatory approaches, market-centered solutions offer a cheaper and more efficient way to achieve many environmental policy objectives. While market mechanisms may work in certain economies and certain countries, whether they are appropriate for addressing the problem of climate change for countries without an institutionalized domestic market economy, such as china, is still an open question. This report summarizes the discussions, conclusions, and questions posed during The Harvard- Tsinghua Workshop on Market Mechanisms to Achieve a Low-Carbon Future for China. As the report makes clear, most participants believe that market mechanisms have a powerful role to play in achieving a low-carbon future for China. However, considerable differences emerged among the participants regarding the proper design and implementation of market mechanisms, and sig-nificant questions remain concerning the proper role of market mechanisms in addressing climate change. This report, and the workshop it summarizes, does not attempt to resolve these differences, but aims to contribute to an ongoing discussion on the future of climate policy in China. The re¬mainder of this Introduction describes the context for the workshop, its three thematic sessions, and outlines three over-arching themes that emerged. These themes are explored in the summaries of the three thematic sessions, while the Conclusion raises issues for further research. The impetus for the workshop was laid out in three public keynote speeches that addressed, respec¬tively, China's desire to achieve a low-carbon future, reasons to prefer market mechanisms over other potential solutions, and the importance of sustaining innovation in achieving climate policy objectives. China has adopted pilot cap-and-trade programs in five Provinces and two cities – to¬gether accounting for seven percent of the country's total carbon dioxide emissions. These pilots support a vision of achieving a “third industrial revolution” where economic growth and value-creation is de-coupled from carbon dioxide emissions. Second, market mechanisms are generally preferred by economists to regulation and subsidies as a means to reduce emissions because they achieve reductions at a lower overall cost, tend to direct emissions to their highest-value uses, and demand less institutional capacity since emitters rather than governments decide how to reduce emissions. Third, emissions reductions need to be linked to continual technological and policy in¬novation, as well as the need for proper design and implementation of market mechanisms. This point was emphasized with reference to the European Union Emissions Trading System (EUETS), where initial carbon permit prices were too low to incentivize low-carbon research and develop¬ment. The low initial price of the EUETS made it more palatable to industry, but too low to send a significant market signal due to institutional weaknesses and the economic downturn. The keynote addresses framed the discussion for the remainder of the workshop, which consisted of three off-the-record thematic sessions. Each thematic session focused on a different set of mar¬ket mechanisms to address different facets of the climate policy challenge. The first session exam¬ined instruments designed to limit and reduce emissions of carbon dioxide, either by imposition of a tax designed to internalize the external cost of climate disruption or through establishment of a cap-and-trade system whereby permits to emit carbon dioxide are issued under an overall cap set by government, and which can then be traded as some emitters make efficiency improvements. The second session examined the use of subsidies and other incentives to encourage clean technol¬ogy innovation, and the third session examined the potential for a water-rights trading system to allocate water resources under conditions of increasing scarcity triggered by disruption in precipi¬tation and increased evaporation rates. The workshop concluded with a session devoted to developing a framework for further research and debate on the use of market mechanisms to refine and advance China's climate policy. The framework centered on three over-arching issues concerning market mechanisms: policy mix, innovation systems, and governance. The first of these issues concerns the inclusion of market mechanisms in a broader mix of policy responses, including command-and-control, which may be combined to achieve specific policy objectives. The second concerns the use of market mecha¬nisms to develop, sustain, and enhance innovation systems that continually create new solutions and technologies to achieve a low-carbon future. The third concerns the importance of institutional design and governance systems to ensure the proper functioning of market mechanisms.
  • Political Geography: United States, China, Europe
  • Author: Amy Myers Jaffe, Meghan L. O'Sullivan
  • Publication Date: 07-2012
  • Content Type: Working Paper
  • Institution: Belfer Center for Science and International Affairs, Harvard University
  • Abstract: Some of the most dramatic energy developments of recent years have been in the realm of natural gas. Huge quantities of unconventional US shale gas are now commercially viable, changing the strategic picture for the United States by making it self-sufficient in natural gas for the foreseeable future. This development alone has reverberated around the globe, causing shifts in patterns of trade and leading other countries in Europe and Asia to explore their own shale gas potential. Such developments are putting pressure on longstanding arrangements, such as oil-linked gas contracts and the separate nature of North American, European, and Asian gas markets, and may lead to strategic shifts, such as the weakening of Russia's dominance in the European gas market.
  • Topic: Climate Change, Economics, Energy Policy, Natural Resources
  • Political Geography: Europe, Asia
  • Author: Marwa Farag
  • Publication Date: 11-2009
  • Content Type: Working Paper
  • Institution: Belfer Center for Science and International Affairs, Harvard University
  • Abstract: This paper presents an overview of health spending and health outcomes in the WHO Eastern Mediterranean region over the time period 1995-2006, using cross-country and over-time comparisons. Overall, the region experienced improvements in health outcomes measured in terms of reductions in infant, under-5 child mortality and maternal mortality. However, there are notable exceptions to this trend of declining mortality in countries such as Afghanistan. In addition to providing an overview of changes in health outcomes and health spending over the 12-year period, the paper examines the following two issues: 1) The responsiveness of health care spending to changes in a country's income, and 2) The impact of spending on health care services on health outcomes. The methodological approach adopted in this paper is multivariate regression analysis. I employ random effects models with year dummies, which are appropriate for panel data analysis. I also use double-log formulas for econometric necessity and ease of interpreting the results. The findings indicate that a 1 percent increase in GDP per capita is associated with 0.89 percent increase in health spending in the region and that income growth does not explain all the variation in health spending, indicating that other factors, such as the organization of the health care system, influence health care spending levels. This is an important finding because it suggests that on the one hand cost-containment and on the other mobilizing more funds for the health care sector are possible with appropriate interventions. The findings on the importance of spending on health care for achieving better health outcomes demonstrate that investing in health care matters; a 1 percent increase in health spending is associated with 0.11 percent reduction in infant mortality and 0.14 percent reduction in under-5 child mortality. These results are likely to be underestimating the effect of health spending because of the inclusion of a country's income in the models. Gender parity in secondary school education also had a significant impact on reducing infant and child mortality. Government effectiveness had a strong and significant effect on reducing maternal mortality. The results contradict the notion that increases in income through better nutrition and living conditions alone are responsible for improvements in health outcomes. The results of this analysis clearly indicate that investing in health care also matters.
  • Topic: Health
  • Political Geography: Afghanistan, Europe, Middle East, Arabia
  • Author: Stephen J. Ramos
  • Publication Date: 11-2009
  • Content Type: Working Paper
  • Institution: Belfer Center for Science and International Affairs, Harvard University
  • Abstract: To understand Dubai's modern history since its founding in 1833, one must go further back in time to explore the regional history that frames its foundation. European powers, beginning with the Venetians, and, then subsequently, the Portuguese, the Dutch, and finally the British, were interested in the Gulf region as a means to secure trade routes to and from the Indian Subcontinent and points eastward. This meant that from the fifteenth century through the late nineteenth century, if trade routes could move uninterrupted through the Gulf region, European powers were not involved in the societal affairs of settlements as a traditionally colonial ruling class, nor did European merchants bother to extensively explore trade within the region, believing that it required more effort than either the climate or the local economies were worth. The region's local tribes were divided among the maritime coastal groups and those that were nomadic and land-bound, and conflict among these groups occurred in parallel with the larger European conflicts also playing out in the region. The intersection of the two came with the increase in piracy, which, in very basic terms, represented a kind of cultural disagreement on trade customs. The Europeans felt that they were unjustly looted and local groups simply sought to protect themselves from foreign incursion while taking what they believed was their share. Historians still debate this issue today, but in relation to Dubai, the piracy of the times serves as an example of how looser understandings of the licit and illicit, particularly in terms of trade, could be capitalized upon as business venture. The smuggling of gold, weapons, and other goods throughout Dubai's history may have been seen as illicit from perspectives outside Dubai's ports, but the merchant-friendly environments of these ports and the adherence to local autonomy allowed them to trade freely.
  • Topic: Economics, International Trade and Finance, Oil
  • Political Geography: Europe, India, Arabia, Dubai