Protecting the Global Climate: Inte

Protecting the Global Climate: Internationally Tradeable Emission Permits
Virtually unlimited opportunities for low-cost reduction of greenhouse gas emissions are another
grossly undervalued resource in potentially high demand in the North and for which the South has a comparative advantage to supply in exchange for financial and technological resources. While
reductions of CO 2 emissions from fossil fuel consumption in Japan and the EEC might cost over
US$100 per ton, in developing countries, such as India and China they would cost under US$10 per
ton. If CO 2 emission reduction were a conventional commodity, there would be no doubt about where developed countries would seek to obtain these supplies from. Today two obstacles stand in the way of emissions reduction trading. First, there is no binding obligation on countries to contain their emissions. The Climate Convention could change that, especially if amended to set an aggregate ceiling on greenhouse gas emissions, allocated among countries according to population size or a combination of population size and some other variable such as GDP or historical level of emissions. Any allocation mechanism that has any chance of being accepted by the South would result in excess demand for emission permits by the developed countries and excess supply by the developing countries, setting the stage for emissions trading. Even if allowable emissions are frozen at historical
levels, growth would generate demand for additional emission permits which could be more easily
obtained from developing countries through improved energy efficiency rather than from developed
countries such as Japan or Germany where further improvements in efficiency or reductions in
emissions could only come at a high cost.
Allowing emissions trading across nations would obtain a given reduction of emission at the lowest possible cost and also encourage technology transfer and flow of financial resources from North to South in the interest of both the protection of global climate and sustainable development. For most developing countries, tradeable emission permits would be a major source of financial inflow and technology transfers and a strong incentive to become more efficient to save emission permits for sale to other countries or for their own industrial expansion.
Joint Implementation and Carbon Offsets
Joint implementation is a bilateral arrangement between developed and developing countries to
collaborate on a global commons problem in recognition of the potential mutual benefits arising from differential opportunity sets (determined by differences in the level of development, technology, and preferences). A developing country with low-cost carbon emission reduction opportunities and in need of new technology and financial resources may cooperate with a developed country that has both the technology and the financial resources but needs low-cost carbon emission reductions (or sequestration) opportunities to meet its obligations under the Global Climate Convention. The cooperation, or rather, joint implementation may take the form of the developed country transferring help to the developing country in terms of financial resources and technology—helping them to become more energy efficient by switching fuels (e.g. coal to natural gas) and protective of their forests (planting trees in degraded watersheds) in exchange for carbon reduction credits against the country's international obligations. These exchanges or carbon offsets, as they are known, could take place between the two countries' governments or private sectors (with government endorsement).
One such type of carbon offset is between a developed country utility and a developing country forest company or forest department. The power utility finances a shift to reduced impact logging techniques, enrichment planting (or reforestation), or forest conservation in a developing country in exchange for credit for the carbon saved or sequestered by the funded forestry activity. The potential benefits are substantial (arising from differential costs of CO 2 reductions between developed and developing countries) and shared between the parties involved (both private and public). While several such pilot offsets have been initiated in recent years (e.g., New England Electrical System with the Sabah Foundation and Applied Energy Systems of Virginia with Guatemala), North-South carbon offsets have not yet been sanctioned by governments or the global community as a legitimate means of meeting CO 2 reduction obligations under the Climate Convention. Despite criticism of this and other joint implementation mechanisms, there is sufficient interest by both the North and South to warrant further study and experimentation. Carbon offsets is one mechanism by which the global value of carbon sequestions can be internalized by the local populations of developing countries. Joint implementation, if properly designed and implemented to be efficient and equitable, is indeed an application of the cost-effectiveness and beneficiary pays principles of efficiency and equity, respectively.