Historic Milestone?

The press has been a buzz about the climate agreement between Presidents Barack Obama and Xi Jinping. The agreement commits the US to reduce its greenhouse gas emissions by 26-28 percent by 2025 (2005 baseline), well ahead of current projections. China has committed to stop growth in greenhouse gas emissions by 2030 at the latest, largely by increasing its reliance on renewables and nuclear energy.

Secretary of State John Kerry (New York Times) describes the agreement as an historic milestone that “can inject momentum into the global climate negotiations” and “sends an important signal that we must get this agreement done, that we can get it done, and that we will get it done.”

Stephen Stromberg (Washington Post) seems almost as excited as the Secretary of State, noting that “Obama’s accumulating accomplishments on climate change might define his legacy.”

This [agreement] sweeps away years of anxiety about whether China and the United States — responsible together for nearly half of global greenhouse gas output — would ever cooperate on climate, rather than each perpetually waiting for the other to act. It will always be tough to get many nations to move together, and keep moving together, in the same direction. But two dominant — and historically reluctant — players now are.

Perhaps, but there is much room for skepticism. The agreement is simply that—a nonbinding agreement between two leaders who will not be around long enough to ensure implementation.

There are plenty of reasons why one should be skeptical as to China’s ability/willingness to meet its own commitments, as Tyler Cowen (Marginal Revolution) suggests.

With respect to the US, there is no binding treaty on climate that can be submitted to the Senate (for obvious reasons). Everything rests on historical trends in greenhouse gas emissions relative to GDP—the Bush administration’s “greenhouse gas intensity” much ridiculed by environmentalists—and the ability of the EPA to achieve reductions via rules grounded in decades-old statutory authority. Even if the Obama EPA is committed to climate policy, it is not clear that future presidents will appoint administrators with a comparable commitment. More importantly, Congress has proven unwilling in the past to pass new statutes to directly address climate change and quite willing to use the appropriations process to shape regulatory actions. See the Economist’s coverage here.

Bottom line: I find it difficult to conclude that the climate agreement will amount to much in the long run, despite the breathless claims of its historic importance. Ultimately, it is difficult to see how we bring about significant reductions in greenhouse gases without increasing the price of carbon-based fuels, and the most effective means of doing this is  a carbon tax. In the currently political environment, the likelihood of a carbon tax is quite limited.