Via Paul Krugman and the Financial Times news that the World Trade Organization has indicated that it will endorse border taxes on imports from countries that don’t participate in an international agreement to reduce carbon dioxide emissions.
That means the end of the free rider problem. Provided the big players (US, EU and China) sign up to an agreement, any country that chooses to hold out will be committing economic suicide. And, in the initial bargaining between the developed countries and China, the pressure on China to reach an agreement has been greatly increased.
Obviously a great deal hangs on getting the Waxman-Markey bill through the Senate in the US. If necessary, the US Administration should be prepared to dump the absurd 60-vote convention that has developed in recent years, making it clear to the Republican minority that they can only have a say if they are willing to make a positive contribution.
Among the developed countries, the government that must be most concerned is that of Canada. Although Canada was a leader in early negotiations, the minority Harper government has repudiated its Kyoto obligations, rejected proposals for a carbon tax, and given lots of encouragement to delusionists. It would be a good idea for the Canadian Parliament to dump Harper forthwith, and install a government capable of avoiding the rocks towards which Harper has been steering.
For developing countries, the need now is to focus on getting a “contract-and-converge” agreement in which existing inequalities in emissions entitlements are phased out over time.