This paper can be downloaded without charge at: The Fondazione Eni Enrico Mattei Note di Lavoro Series Index: http://www.feem.it/web/activ/_activ.html Social Science Research Network Electronic Paper Collection: http://papers.ssrn.com/abstract_id=XXXXXX The opinions expressed in this paper do not necessarily reflect the position of Back to Kyoto? US Participation and the Linkage between R&D and Climate Cooperation Summary The US decision not to ratify the Kyoto Protocol and the recent outcomes of the Bonn and Marrakech Conferences of the Parties drastically reduce the effectiveness of the Kyoto Protocol in controlling GHG emissions. The reason is not only the reduced emission abatement in the US, but also the spillover effects on technology and countries' relative bargaining power induced by the US decision. Therefore, it is crucial to analyse whether an incentive strategy exists that could induce the US to revise their decision and to comply with the Kyoto commitments. One sol.
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The US decision not to ratify the Kyoto Protocol and the recent outcomes of the Bonn and Marrakech Conferences of the Parties have important implications for both the effectiveness and the efficiency of future climate policies. Among these implications, those related with technical change and with the functioning of the international market for carbon emissions are particularly relevant, because these variables have the largest impact on the overall abatement cost to be borne by Annex B countries in the short and in the long run. This paper analyses the consequences of the US decision to withdraw from the Kyoto/Bonn Protocol both on technological innovation and on the price of emission permits (and, as a consequence, on abatement costs). In particular, the analysis highlights mechanisms and feedbacks related to technological innovation, technological spillovers and R&D which could be relevant and which modify some policy relevant conclusions. First, we identify two feedback effects which explain why our results lead to a less significant fall in the price of permits than in most empirical analyses recently circulated. We show that the US defection from the Kyoto Protocol, by inducing a decline in the demand and price of emission permits, lowers the incentives to undertake energy-saving R&D. As a consequence, emissions increase and feed back on the demand and supply of permits, thus implying a lower decline in the price of permits than previously estimated. At the same time, as a result of the reduced R&D investments and the augmented emissions, climate change damages intensify and require an increase in investments that are again coupled with a growth of emissions. By thus again increasing the demand for permits and reducing their supply, this effect enhances the previous mechanism. Notwithstanding the lower decline in the price of permits, the paper still identifies a smaller price than would occur with a US participation. Therefore, we emphasise in a second step the crucial role of Russia in climate negotiations due to a large increase in Russia’s bargaining power.
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Global Environmental Politics
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