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The Regime Complex for Climate Change

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There is no integrated regime governing efforts to limit the extent of climate change. Instead, there is a regime complex: a loosely coupled set of specific regimes. We describe the regime complex for climate change and seek to explain it, using functional, strategic, and organizational arguments. This institutional form is likely to persist; efforts to build a comprehensive regime are unlikely to succeed, but narrower institutions focused on particular aspects of the climate change problem are already thriving. Building on this analysis, we argue that a climate change regime complex, if it meets specified criteria, has advantages over any politically feasible comprehensive regime, particularly with respect to adaptability and flexibility. Adaptability and flexibility are particularly important in a setting, such as climate change policy, in which the most demanding international commitments are interdependent yet governments vary widely in their interest and ability to implement them.
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Robert O. Keohane
Woodrow Wilson School of Public and International Affairs
Princeton University
USA
David G. Victor
School of International Relations and Pacic Studies
University of California, San Diego
USA
The Regime Complex
for Climate Change
The Harvard Project on International Climate Agreements
January 2010
Discussion Paper 10-33
Email: climate@harvard.edu Website: www.belfercenter.org/climate
The Regime Complex for Climate Change
Robert O. Keohane
Professor of International Affairs
Woodrow Wilson School of Public and International Affairs, Princeton University
rkeohane@princeton.edu
David G. Victor
Professor; Director, Laboratory on International Law and Regulation
School of International Relations and Pacific Studies, University of California, San Diego
david.victor@ucsd.edu
Prepared for
The Harvard Project on International Climate Agreements
THE HARVARD PROJECT ON INTERNATIONAL CLIMATE AGREEMENTS
The goal of the Harvard Project on International Climate Agreements is to help identify key
design elements of a scientifically sound, economically rational, and politically pragmatic
post-2012 international policy architecture for global climate change. It draws upon leading
thinkers from academia, private industry, government, and non-governmental organizations
from around the world to construct a small set of promising policy frameworks and then
disseminate and discuss the design elements and frameworks with decision-makers. The
Project is directed by Robert N. Stavins, Albert Pratt Professor of Business and
Government, John F. Kennedy School of Government, Harvard University. For more
information, see the Project’s website: http://belfercenter.ksg.harvard.edu/climate
Acknowledgements
Major funding for the Harvard Project on International Climate Agreements has been
provided by a grant from the Climate Change Initiative of the Doris Duke Charitable
Foundation. Additional support has been provided by Christopher P. Kaneb (Harvard AB
1990); the James M. and Cathleen D. Stone Foundation; Paul Josefowitz (Harvard AB 1974,
MBA 1977) and Nicholas Josefowitz (Harvard AB 2005); the Enel Endowment for
Environmental Economics at Harvard University; the Belfer Center for Science and
International Affairs at the Harvard Kennedy School; and the Mossavar-Rahmani Center for
Business and Government at the Harvard Kennedy School.
Citation Information
Keohane, Robert O. and David G.Victor. “The Regime Complex for Climate Change”
Discussion Paper 2010-33, Cambridge, Mass.: Harvard Project on International Climate
Agreements, January 2010.
The views expressed in the Harvard Project on International Climate Agreements
Discussion Paper Series are those of the author(s) and do not necessarily reflect those of the
John F. Kennedy School of Government or of Harvard University. Discussion Papers have
not undergone formal review and approval. Such papers are included in this series to elicit
feedback and to encourage debate on important public policy challenges. Copyright belongs
to the author(s). Papers may be downloaded for personal use only.
1
The Regime Complex for Climate Change
Robert O. Keohane and David G. Victor1
Abstract:
There is no integrated, comprehensive regime governing efforts to limit the extent of
climate change. Instead, there is a regime complex: a loosely coupled set of specific
regimes. We describe the regime complex for climate change and seek to explain it, using
functional, strategic, and organizational arguments. It is likely that such a regime
complex will persist: efforts to build an effective, legitimate, and adaptable
comprehensive regime are unlikely to succeed. Building on this analysis, we argue that a
climate change regime complex, if it meets specified criteria, has advantages over any
politically feasible comprehensive regime, particularly with respect to adaptability and
flexibility. These characteristics are particularly important in an environment of high
uncertainty, such as in the case of climate change where the most demanding
international commitments are interdependent yet governments vary widely in their
interest and ability to implement such commitments.
1 Princeton University; University of California, San Diego. We are indebted for comments on an earlier
draft to Kal Raustiala, Burton Richter, and participants at a seminar at the Woods Institute, Stanford
University, December 3, 2009. Thanks also to Linda Wong for research assistance.
2
For two decades, governments have struggled to craft a strong, integrated and
comprehensive regulatory system for managing climate change. Instead their efforts
have produced a varied array of narrowly-focused regulatory regimes—what we call the
“regime complex for climate change.” The elements of this regime complex are linked
more or less closely to one another, sometimes conflicting, sometimes mutually
reinforcing. 2
This paper explores the continuum between comprehensive international
regulatory institutions, which are usually focused on a single integrated legal instrument,
at one end of a spectrum and highly fragmented arrangements at the other. In-between
these two extremes are nested regimes and regime complexes, which are loosely coupled
sets of specific regimes. We outline an analytical framework to interpret and begin to
explain why regulatory efforts in different issue-areas yield outcomes that vary along this
spectrum. Further, we argue that for the case of climate change the structural and interest
diversity inherent in contemporary world politics tends to generate the formation of
regime complexes rather than a comprehensive, integrated regime. For policy makers
keen to make international regulation more effective, we argue that the outcome is not
just likely but also may allow for more effective regulation when compared with
comprehensive regimes. In settings of high uncertainty and policy flux, regime
complexes are not just politically more realistic but they also offer some significant
advantages such as flexibility in substantive content and scope.
In Part I we describe the regime complex for climate change, which has not been
comprehensively designed but rather has emerged as a result of many state choices at
different times and on different specific issues. The description of these institutional
arrangements provides almost a textbook illustration of a regime complex.
In Part II we seek to explain why efforts to regulate climate change have yielded
a regime complex and also interpret the changes that have occurred over time. We first
describe the variety of problems that are addressed by regulatory action on climate
change. Different problems imply different tasks; that is, there are functional reasons that
help to account for the observed outcome of a regime complex. However, we also
consider strategic and organizational explanations, which usefully supplement the
functional account.
Our objective is to think about international regimes and regime complexes in
ways that could facilitate effective action on the pressing contemporary set of problems
surrounding climate change. In Part III we therefore explore some implications for
policy from these insights. In our view pressures favoring regime complexes over
integrated regimes are strong. Efforts to create an integrated, comprehensive regime are
therefore unlikely to be successful and may even divert attention from more practical
efforts to create regime complexes. Furthermore, such regime complexes have some
advantages over coherent, integrated regimes. They may well be more flexible and
adaptable—a point we illustrate with examples from international emissions trading,
forestry and land-use innovation, accommodation of border tax adjustments, and
1Raustiala and Victor 2004, 295.
3
cooperation on technology policy. Yet the fact that such regimes are comprised of
loosely coupled elements does not necessarily make them superior. They still need to
meet standards of coherence, effectiveness, determinacy, sustainability, accountability,
and epistemic quality.
I. The Regime Complex for Climate Change
In this section we first discuss the concept of a “regime complex,” then describe
the contemporary international institutional arrangements for coping with climate change
in these terms.
The Concept of a “Regime Complex”
States construct international regimes on the basis of their interests. Under
conditions of complex interdependence, state interests will reflect the interests of the
major constituencies that exert influence over state leaders. The weighting of these
interests in determining international outcomes depends on the power resources, relevant
to the issue-area, that are available to the states involved. Power will reflect
asymmetrical interdependence: bargaining power will depend both on the impact of
one’s own decisions on others (a reflection of size) and on favorable asymmetries in
interdependence leading to better default (no-agreement) positions for the state.3
Information and beliefs are also important.4
All of these fundamental features of the situation – interests, power, information,
and beliefs – change over time, at different rates in different countries, and on different
issues. Since interests and power vary among states governments often form “clubs,” and
seek to create club goods, limiting benefits to states that do not share their interests or
seek to act as free riders.5 As a result, international regimes vary in membership.
Furthermore, international regimes often come about not through deliberate decision-
making at one international conference, but rather emerge as a result of “codifying
informal rights and rules that have evolved over time through a process of converging
expectations or tacit bargaining.”6 That is, they emerge in path-dependent, historically-
shaped ways.7
Our focus in this paper is on what emerges from the process. If there is
agreement on regulatory arrangements, an international regime or regimes results. In
thinking about the resulting regimes and regime complexes, it is helpful to imagine a
continuum. At one extreme are fully integrated institutions that impose regulation
through comprehensive, hierarchical rules. At the other extreme are highly fragmented
collections of institutions with no identifiable core and weak or nonexistent linkages
3 Keohane and Nye 1977.
4 Keohane 1984; O’Neill 1999.
5 Keohane and Nye 2001; Kahler and Lake 2003. On club goods see Cornes and Sandler 1996. The club
argument can also be extended to relationships among sub-units of governments, which can form
governmental networks. See Slaughter 2004.
6 Young 1997, 10.
7 Pierson 2000.
4
between regime elements. In between is a wide range that includes nested (semi-
hierarchical) regimes with identifiable cores and non-hierarchical but loosely coupled
systems of institutions. 8 What we are calling “regime complexes” are arrangements of
the loosely coupled variety located somewhere in the middle of this continuum: there are
connections between the specific and relatively narrow regimes, but no overall
architecture that structures the whole set.
We expect comprehensive regimes when interests of essentially all the most
powerful actors are sufficiently similar, across a broad issue-area, that they “demand”
international institutions as ways to achieve their objectives through reducing contracting
costs, providing focal points, enhancing information and therefore credibility, and
monitoring compliance.9 Powerful demand by all key players around a common
objective yields a single institution and no viable rivals. Institutional design can also
encourage integration. The evolution of the GATT, for example, encouraged (until about
a decade ago) investment in a single integrated regime because private benefits from the
regime were large and readily extended to all members through the norms of most
favored nation status and reciprocity.
But often several narrow regimes coexist in the same issue-area without clear
hierarchy. Under these conditions, which favor fragmentation, conflicts between
individual regulatory elements may be especially likely to arise. Even if the conflicts are
not acute, the existence of different forums frequently leads to forum-shifting: “moving a
regulatory agenda from one organization to another; abandoning an organization; or
pursuing the same agenda in more than one organization.”10 To solve problems in each
forum, governments try to link issues in the forum to other issues in ways that will help
them achieve their objectives.11 Yet institutional design may favor continued
fragmentation, such as when it is administratively difficult to create extensive links
between distinct regulatory elements. The result, as we discuss in more detail below, can
be a regime complex. When patterns of interests (shaped by beliefs, constrained by
information and weighted by power) diverge to a greater or lesser extent, major actors
may prefer a regime complex to any feasible comprehensive, highly integrated,
institution.
In the rest of this paper we explore how the forces for integration or fragmentation
interact, using the example of climate change. The climate change regime complex, as
we will show, is a loosely coupled system of institutions—it has no clear hierarchy or
core yet many of its elements are linked in complementary ways.
8 For more on the different species of regime complexes see Alter and Meunier 2009 and the symposium
they introduce.
9 Keohane 1984.
10 Braithwaite and Drahos 2000, 29. See also Busch 2007.
11 Alter and Meunier 2009.
5
The Climate Change Regime Complex
We now turn to climate change. The climate change issue-area is governed by a
regime complex rather than a comprehensive regime or a fully fragmented, dispersed set
of institutions. The most visible efforts to create climate institutions cluster around the
United Nations Framework Convention on Climate Change (UNFCCC). By design the
UNFCCC is nearly universal in membership. It spawned the Kyoto protocol with the aim
of being a thickening and comprehensive regime. In practice, because Kyoto placed no
obligations on developing countries and because the United States never ratified the
agreement, its practical effect was narrow, thin and ultimately symbolic.12 The Kyoto
Protocol is now being renegotiated and extended under the auspices of the UNFCCC, in
addition to which several other clusters of institutional efforts are taking shape. None is
organized in a hierarchy. Figure 1 illustrates the arrangements. At this writing it is not
clear which of these efforts will gain traction.
Figure 1: The Regime Complex for Managing Climate change. Boxes show the main
institutional elements and initiatives that comprise the climate change regime complex. (For a thorough
recent description of many elements of the regime complex se Michonski and Levi, 2010). Elements inside
the oval represent forums where substantial rule making has occurred, focused on one or more of the tasks
needed to manage climate change; elements outside are areas where climate rule making has required
additional, supporting rules.
12 For an early discussion, see Victor 2001.
6
Several governments have tried to create smaller “clubs” of key countries that
could cooperate on climate change issues. Some of these club efforts are de novo, which
has required club leaders to incur the costs of organization. Others build on existing
institutions, which offers the advantage of lower transaction costs but the disadvantage
that membership and expectations are already largely formed. We have identified four
nascent club-making efforts. The first, created by the United States under George W.
Bush in the wake of criticism about the US decision to abandon the Kyoto treaty, is the
Asia Pacific Partnership (APP). Six countries on the Asian rim agreed to cooperate on
research and deployment of new low-carbon technologies. APP was intended to chart an
alternative path to the Kyoto process while also forging special relationships that might
lead to commercially viable deployment of low-carbon technologies. All of its members
had in common their lack of adherence to strict targets within the Kyoto treaty—two
were industrialized countries (the U.S. and Australia, which also rejected Kyoto but has
since changed course with a new government) and four were developing countries,
among them China and India. In practice, the U.S. never fully realized the potential of its
APP club, in part because pockets of the Bush administration remained hostile to any
effort to reduce global warming and thus the private goods offered through the APP were
not widely seen as credible.
Soon after creating the APP the Bush administration saw that its club was too
small, and it led to the formation of the Major Emitters Forum (MEF) in 2007. This club
of sixteen states first met before the Bali conference and aimed to set its own rules for a
more flexible strategy to reduce emissions. The MEF exists to this day—expanded to
seventeen members and renamed as the Major Economies Forum on Energy and Climate
Change. In parallel, the G8 club took up the climate issue, which has been relatively easy
since the G8 already existed and was in perennial search of agenda items. Every G8
meeting during the last five years included a prominent statement on climate change.
Each G8 meeting has also included a stepchild session where G8 leaders met with leaders
from the five most pivotal developing countries (the so-called “G8+5”); climate change
has always been on their agenda.
Finally, the G20, a forum originally created by finance ministers in the wake of
the Asian financial crisis in the late 1990s, in 2009 replaced the G8 on non-security
issues, so has become the major forum for the high-level discussion of energy and
climate issues. Because the G20 engages finance and industry officials much more
readily than other clubs such as the MEF and the APP it has been a locus for some
progress on low-cost measures that help reduce emissions. For example, the September
2009 G20 summit in Pittsburgh found it difficult to gain traction on the broad issue of
regulating warming gases—energy was just one of 17 issues on an agenda that included
more urgent troubles such as financial market regulation—but it did forge an agreement
to reduce fossil fuel subsidies.13 With lower subsidies, fuel users see more accurate
prices and will use fuel in more frugal ways, leading to lower emissions.
13 “The Pittsburgh Summit: Key Accomplishments,”
http://www.pittsburghsummit.gov/resources/129665.htm.
7
In addition to these clubs, nearly all the large industrialized countries that are
most worried about climate change have created bilateral deals of various types. The
U.K. has created a bilateral partnership with China to test advanced coal combustion
technologies. Australia and China also forged such a deal, and a competition is now
under way among essentially all western governments to strike the most relevant
arrangements with China. The U.S. has created a variety of partnerships with China—
some of which have failed, such as the “FutureGen” scheme to build advanced coal
plants cancelled at the end of the Bush administration (then restarted) and no longer seen
as credible in China. It has also forged a major partnership to give India access to fissile
material and technology that had been unavailable because India was not part of the
nuclear nonproliferation treaty. That arrangement, which will lead to massive reductions
in India’s emissions relative to the expected level, required in turn new deals with the
Nuclear Suppliers Group as well as difficult domestic negotiations in both India and the
United States. 14
Quite distinct from the regulatory efforts on climate change are the efforts to
assess the scientific basis for concern about unchecked climate change—notably through
the Intergovernmental Panel on Climate Change (IPCC). IPCC’s membership is
universal, and under that broad umbrella it sponsors in-depth scientific reviews that
provide the public good of consensus knowledge. IPCC also entertains requests, which
come at arm’s length, from other institutions such as the UNFCCC to provide technical
information, such as the reporting procedures for emissions inventories. In parallel with
the multilateral IPCC process several governments have undertaken their own
assessments—often looking expansively not just at impacts at home but also around the
world. The U.K.’s “Stern review” is one example.
While most efforts to set targets for warming emissions have focused on the
UNFCCC, other regulatory treaties have a big impact on emissions of these gases.
Indeed, some studies have concluded that the Montreal Protocol on Substances that
Deplete the Ozone Layer has actually had a much bigger impact than the Kyoto Protocol
on warming gases.15 Frustrated by lack of progress in the UNFCCC system, some
governments have explored fuller use of the Montreal Protocol to cut some of the
specialized industrial gases that are linked to the ozone layer problem and also contribute
to climate change. Several regional air pollution institutions may ultimately play an
important role in climate change as well. Some of the pollutants they regulate mask
warming—notably sulfate particles (which cause acid rain and thus are regulated, but
they also make clouds brighter and thus dampen warming). Increased attention is now
focused on particulate pollution, which is presently regulated because it contributes to
local air pollution; there is mounting evidence that particulate pollution (also called
“black carbon”) is a big cause of climate change.16
14 For details on the potential reductions from a wide array of Indian policy initiatives, including this one,
see Rai and Victor 2009.
15 Velders et al. 2007.
16 See Ramanathan and Carmichael 2008 among many other papers by Ramanathan and colleagues.
8
Existing multilateral institutions, notably the World Bank, have also been a locus
of institution building on climate change. For example, the World Bank sponsored the
Prototype Carbon Fund (PCF) in the late 1990s to channel early investment into the
Kyoto Protocol’s Clean Development Mechanism (CDM)—the mechanism that
encourages investment in low-emission technologies and practices in developing
countries. The experience with PCF projects, in turn, helped speed the process of
designing rules for the CDM and probably raised the quality of the subsequent CDM
projects. The Bank, working with other multilateral institutions and through the Global
Environment Facility (GEF), also manages the formal financial mechanisms that pay for
developing country participation under the UNFCCC and the Kyoto treaty. (It plays a
similar role in other multilateral environmental institutions.) In addition to these efforts,
which are formally subordinate to the UNFCCC institutions, the Bank also manages
several other funding windows that are formally distinct. It is organizing a large fund to
invest in projects that reduce deforestation—this effort has advanced even as formal
UNFCCC-based talks on deforestation have worked on these same issues in parallel. The
Bank has also created a special fund to help countries adapt to the effects of climate
change. And perhaps most important is that the Bank has adopted an across-the-board
effort to bring climate change concerns into its main lending and granting activities, thus
creating much larger leverage on the money that flows into agriculture, power plants,
infrastructure and other investments that cause or are affected by the changing climate. 17
Beyond these efforts that involve formal coordination in some manner, there are
also unilateral initiatives that are intended to encourage changes in behavior not just
within the entity making the initiative but also in other jurisdictions. For example,
frustration at the slow progress of U.S. federal legislation has led at least two sub-units
within the United States to adopt their own limits on emissions—California (under
AB32) and the northeastern states (under the Regional Greenhouse Gas Initiative, or
RGGI). Both those systems include “docking” provisions for international trading, which
would allow these states to set rules that created valuable private goods (emission credits)
that firms could generate in other countries. At this writing, the RGGI system is
struggling to remain relevant since its auctions have yielded prices that are so low they
are unlikely to have much impact on behavior; the California system, by contrast, is
likely to be more robust and may even remain in place alongside any U.S. federal
legislation.18
Thus there is a wide array of activities under way that, mostly, are not organized
hierarchically. Some are attached to existing narrow and deep regimes—such as bilateral
initiatives that are making it easier for India to obtain fissile material, or the efforts to
mainstream climate change issues within the existing robust World Bank system for
lending. Others involve nascent institutions, such as the emerging markets for carbon
offsets and trading, that in some cases have not progressed beyond initial modest efforts
(e.g., the RGGI market) while others are becoming deep quickly (e.g., the EU’s emission
trading scheme and probably the California scheme). These efforts are akin to the
17 See, e.g., World Bank 2008 and World Bank Independent Evaluation Group 2009.
18 For example, see section 96400 in California Air Resources Board 2009. By contrast, see auction prices
for RGGI at www.rggi.org.
9
Cambrian explosion—a wide array of diverse institutional forms emerges, and through
selection and accident a few will be chosen.
II. Solving Climate Change Cooperation Problems
Climate change is politically a difficult problem for three fundamental reasons.
First, it is a global problem, whose solution cannot be achieved through the efforts of any
single state or small group of states. Second, the negative effects of climate change are
not observable now, but are only expected to occur some years in the future. It is
therefore an intergenerational problem: present generations are expected to pay costs for
the benefit of their successes two or more generations into the future. Political leaders
seeking effective action on climate change have to persuade their publics both that their
own actions can make significant difference, partly by encouraging other countries to act,
and that costs borne today are in the interests of successor generations. Third, changing
practices with respect to climate change requires changes in the habits of billions of
people, as well as organizations such as firms; but practical policies to generate
incentives for these behavioral changes require action by governments that, in many
cases, may not have the interest or ability to exert much influence on their subjects.
These difficulties are accompanied at a more specific level by problem diversity:
the specific problems inherent in the concept of “climate change” are enormously
diverse. The diversity of problems is, in turn, associated with parallel diverse political
patterns of interests, power, information and beliefs. Both because of problem diversity
and the associated political diversity, and because of the difficulty of moving away from
an equilibrium that has been established, we do not expect an integrated and
comprehensive climate change regime to be instituted in the foreseeable future.
Diverse Problems, Diverse Institutions
The diversity of institutional efforts suggests, as summarized in Figure 2, that the
“climate change problem” is actually many distinct problems—each with its own
attributes, administrative challenges and distinctive political constituencies. Some of
these problems are loosely coupled and some are tightly coupled. For example, funds to
compensate developing countries for the cost of adapting to climate change are
mobilized, in part, by taxing the flow of emission offset transactions under the CDM—
along with a diverse array of other funding sources. And the majority of funds used to
pay for emission controls in developing countries arise from the CDM. Many of the
problems that, together, comprise the cooperative challenge of climate change are marked
by extreme difficulties in crafting effective cooperation because free riders can
undermine collective efforts. In these settings—where the issue of “climate change” is
actually many distinct problems, where couplings vary, and where institutional design
must overcome barriers to collective action—it is not surprising that we observe variety
of institutional forms. Especially in the early stages of building a regime, many
institutions are tried; only some of them thrive.
10
Tasks:
Nature of the
problem:
Provide
credible
information
about
climate
change
dangers and
options:
Monitor
policies Create
and
maintain
emissions
trading
systems
Create and
maintain
institutions
for
investments,
including
technology
Create and
maintain
institutions
for
adaptation
Create and maintain
institutions for solar
radiation
management
(“geoengineering”)
Manage a
CPR. x x
Create a
public good X x x x x
Provide
compensation x x
Prevent a
public bad x
Figure 2: Climate Change Cooperation Problems and Tasks
Emissions control involves common pool resources, or CPRs. A CPR is a
“global commons”: a resource that it is difficult or impossible to exclude others from
enjoying but that is degraded by use. In this case, the desired global commons is an
atmosphere with a lower concentration of greenhouse gases than would otherwise be the
case. (The UNFCCC sets the goal as avoiding “dangerous” climate change, but nobody
has been able to agree on what that term actually means.) Actions to cope with a CPR
face a serious collective action problem. CPRs are therefore not self-managing;
promoting sustained cooperation requires formal institutions involving rules and social
norms.19 Since emissions control has the characteristics of a CPR, in the absence of
further institutions many benefits of emissions control will be nonexcludable: that is,
available even to those who do not control their own emissions. In Figure 2 we have
identified two problems of climate change associated with managing a CPR: providing
credible information about dangers, benefits and options; and setting, monitoring, and
enforcing meaningful state policy efforts.
Very closely related to the CPR problems are issues involving the supply of
public goods. Those public goods include institutions and reliable information. Other
public goods include R&D on technologies that allow for reducing emissions and
adaptation to climate change—while some of the knowledge that comes from R&D
yields private benefits, such as lucrative new products, the most important ideas usually
diffuse widely. There is no threatened common pool resource, but incentives to free-ride
are nevertheless strong. CPR and public goods problems both require careful design of
contracts—often relying on institutions to help lower the cost of contracting, monitoring,
19 Ostrom 1990.
11
and enforcement—because deep cooperation requires overcoming incentives to free ride
that arise whenever goods are not excludable
Some climate change problems involve re-aligning incentives when parties do not
perceive an immediate interest in an outcome that others favor. In these cases,
compensation may be needed. Reluctant governments may demand side-payments
before they will agree to cooperate. For example, Russia and essentially all developing
countries at the Kyoto talks were unwilling to agree on measures limiting emissions in
the absence of payments through mechanisms such as the CDM. Compensation may
also be needed for private actors, such as firms that bear the cost of installing costly new
technologies or of investing in public goods. Provision for compensation provides one
of the most important linkages between emission trading systems and cross-border
investments.
Finally, those forms of geoengineering that involve measures to limit or deflect
energy from entering the atmosphere pose entirely different political and institutional
problems. With respect to solar radiation management, as these measures are called, the
problem is that action by one or a few actors may be too easy and need to be prevented.20
That is, solar radiation management involves a problem that is essentially the analytic
opposite of the CPR problem: how to make it more difficult rather than easier to act.
Managing CPR Problems: Limiting Emissions
Many of the distinct problem types presented in figure 2 are difficult to solve.
Here we focus on the one that is most pivotal to taming the impacts of global warming:
the protection of the CPR of a safe atmosphere. What’s at stake is the mixture of
warming gases in the atmosphere that produces a climate to which humans and other
existing forms of life have adjusted. This resource is being degraded as a result of the
aggregation of individual actions. Yet people, firms and states that fail to limit their
greenhouse gas emissions cannot feasibly be excluded from the benefits of a benign
climate, and those that do act to limit their emissions do not individually benefit thereby.
On the face of it, CPR problems are difficult to solve and much of the early
literature on this question was pessimistic.21 Yet practical solutions to seemingly
intractable CPR problems can emerge--usually involving strategies that change
incentives.22 Put differently, the CPR can be transformed into a different type of problem
that is easier to solve. At least four approaches have been followed, which we discuss in
order—starting with approaches for which a capable regulatory regime is not needed to
solve the CPR problem, turning later to those in which such a regime is required.
1. The first-mover advantage situation in which actions that promote CPR
preservation have very large individually appropriable benefits to firms or
states, which therefore have incentives to move first. The development of green
technology that could generate large profits in the future is a possible case in
20 Victor et al. 2009.
21 Hardin 1968.
22 Ostrom 1990; Keohane and Ostrom, eds. 1995; Ostrom, Janssen, and Anderies 2007.
12
point. “Blockbuster” drugs are a current example of such a situation where
analysts assumed that a collective action problem existed (ie, under-investment
in supplying the public good of research) that was solved when first movers
discovered the potential for earning extra-normal profits. 23 Some of the flood
of resources into new energy technologies may be explained by a belief that a
new blockbuster mode of industrial organization could prevail in the low-carbon
economy. First mover advantages are pervasive in regulated industries. For
example, firms often find it easier to obtain collusive outcomes when a few
leading firms support the creation of regulatory instruments that raise barriers to
entry and stabilize competition.24
2. The CPR co-benefits situation in which behavior that promotes preservation of
the CPR is sufficiently motivated by other benefits to be engaged in without
external enforcement or threatened exclusion from a regime. This was true with
the ozone regime: substitutes were often cheaper than the ozone-depleting
chemicals. In this situation there are incentives to comply although not
necessarily to move first. For example, some greenhouse gas emissions – such
as those of black carbon – also cause local air pollution and health problems,
creating self-interested incentives for governments to limit them.
3. The CPR benefits exclusion situation in which there is a hierarchy of power,
and actors not promoting preservation of the CPR, or not adopting measures that
make CPR-promotion virtually costless to them, can be excluded at low cost
from other benefits of the regime by its dominant members. An example is the
ocean oil-pollution regime after the implementation of the International
Convention for the Prevention of Pollution from Ships (MARPOL) in 1973 and
a subsequent protocol in 1978. After MARPOL was in place, compliance with
anti-pollution rules rose sharply since non-compliers could be excluded from
major ports.25 In climate change, offering access to rich country carbon
markets to countries that implement tighter emission controls and adopt other
complementary policies are examples. Such institutional arrangements get the
incentives right although there can be resentment and resistance to exclusion.
4. The small-group reciprocity situation, in which a small number of identifiable
players can monitor one another’s behavior and can sanction, through
reciprocity, agents that refuse to accept jointly agreed rules or who fail to
comply with rules that have been established.26 The North Pacific Fur Seals
treaty offers an example. A small number of countries found it relatively easy to
monitor and enforce rules while also excluding others. 27
23 Pisano 2002. Of course, realizing these first-mover advantages did require a regime that sufficiently
assured protection of intellectual property resources.
24 Stigler 1971; Peltzman 1989.
25 Mitchell 1994.
26 Axelrod 1984; Ostrom 1990; Ostrom 2005.
27 Barrett 2006.
13
This variety of situations implies a variety of strategies, focused on different
incentive problems. Institutions can be created, or modified, to affect any of the four
situations listed above: first-mover advantages, co-benefits, benefits exclusion, and small-
group reciprocity.
Policies directed at increasing incentives for first-movers include making
intellectual property rights more secure, which often enhances incentives to innovate.
Although responding to climate change is a daunting task, technological innovation could
largely transform the problem. For example, in the early days of the ozone regime people
thought responding to ozone depletion would be a very hard problem. The appearance of
new technology, spurred by regulation and lowering the costs of phasing out ozone-
depleting chemicals, changed the nature of problem by changing incentives, making a
deep and comprehensive regime feasible. 28
With respect to co-benefits, governments and other actors could design
institutions to provide information about co-benefits or provide scientific, technical, and
financial help in responding to emissions that damage both local and global
environments. Such functions of institutions may be particularly appropriate toward
governments that may face constraints of knowledge, finance, and technical skill in
implementing measures that could align with local priorities while also yielding global
emissions reduction as a beneficial side-effect.29 In the European acid rain regime, most
national policies that contributed to the regional goal (less acid rain) also delivered the
benefit of less local air pollution. Most countries that exported some of their pollution
were, in fact, also their largest self-polluter.30
Much attention has been paid to the crucial issue of excluding free-riders from the
benefits of others’ efforts to reduce emissions. Coalitions of regime leaders can generate
policies to exclude non-contributors from benefits, as in the MARPOL case when non-
adherents were excluded from important ports. Applied to the case of climate change, the
careful use of border tariff adjustments could compensate for price differentials resulting
from differential efforts to cut emissions and, in turn, deter free riding.31
Finally, contracting could be made easier, monitoring improved, and specific
issues dealt with by small groups of states, so that reciprocity operates better. An
important way to improve the operation of monitoring is to ensure that action is taken
through a sequence of small steps (“repeat play”), so that each agent’s next progressive
step is conditional on the last move of her partners. Both trade negotiations and arms
control illustrate this point.32 So far, there are very few examples of reciprocity and
repeat play at work in the effort to build institutions on climate change. Partial examples
include the EU’s effort to create an emission trading system through a series of rounds
28 Parson 2003.
29 Rai and Victor 2009.
30 Levy 1993.
31 Since there are obvious dangers of opportunistic protectionism with respect to implementing border taxes
it would be important to make sure that these measures are linked tightly to the WTO regime and its dispute
settlement mechanism. See the WTO-UNEP report, Trade and Climate Change 2009.
32 Axelrod 1984; Axelrod and Keohane 1985.
14
with rule adjustments at each round. A full blown, permanent trading system would not
have been credible in the early 2000s when EU bureaucrats first created the system.
Knowing that the key to any market approach is investor confidence, the EU has limited
its adjustments in each round with the knowledge that future efforts to convince investors
to invest in low-emission technologies will be undermined if present changes in the rules
are too onerous or introduce excessive regulatory risk.
The key point is that climate change problems involve diversity “all the way
down.” Rewiring the incentives to allow effective cooperation on problems whose
structure appears uninviting for cooperation will require different approaches to different
problems. As Elinor Ostrom and colleagues have emphasized, there are no panaceas.33
Furthermore, and perhaps more important from a political standpoint, the diversity of
plausible approaches will attract a variety of supporters, each attracted to approaches that
are aligned with their own interests and beliefs. Powerful interests will skew the chosen
approach in their own directions – and there is every reason to believe that these
directions will be different in different countries or sectors. World politics is so
fragmented and heterogeneous that there is little reason to expect the reflection of world
politics in climate change regimes to be more coherent.
Toward Explaining Loose Coupling and Fragmentation
We can now offer a tentative account of why the problem of climate change is
likely neither to yield an integrated, comprehensive regime nor to be fully fragmented.
Our account seeks to explain the observed outcome of a loosely coupled collection of
independent regulatory elements—a “regime complex.” Our argument is threefold,
including functional, strategic, and organizational components.
From a functional standpoint, as we have emphasized above, the specific
problems involved in regulating climate change are so varied that a single institutional
response is exceptionally difficult to organize. Indeed, the diversity of problems is
typically accompanied by a diversity of complexes of interests, power, information, and
beliefs. Where contracting around these individual cooperation problems is coupled to
other institutional arrangements it is prohibitively complicated to arrange all couplings ex
ante into a single comprehensive regime. The framework that we have sketched in this
paper emphasizes the role played by the perceived self-interests of states in their
decisions. They create institutions to help solve problems of collective action, but they
have imperfect information and ability to regulate behavior through those institutions. In
turn, these institutions can shape incentives and change what particular interest groups
see as their interests.
Our second argument is strategic. On the one hand, specific regimes are often
anchored on private goods supplied to a small number of actors whose interests are
similar to each other but dissimilar to other actors. These interests are also
interdependent because, for example, regulatory decisions affect economic competition.
Members of this “club” will then seek to maintain these arrangements for their own
33 Ostrom, Janssen, and Anderies 2007.
15
benefit. Interest diversity therefore pushes toward fragmentation. The benefits of a
comprehensive regime may not seem sufficient to justify the bargaining efforts and
concessions that would be required. On the other hand, a fully fragmented response is
unlikely to satisfy the interests of the leading states that make the largest investments in
building institutions and which expect first-mover advantages. They will seek linkages
among issues.
For example, states that seek deep cuts in emissions must find ways to
compensate more reluctant nations that are also formidable economic competitors—
mobilizing the needed resources is unlikely through government-to-government transfers,
but much larger resources are available through private carbon markets. These leaders
will thus couple the compensation regime to emission control regulations that create
carbon markets. Efforts to promote greater innovation in low-emission technologies also
benefit from loose linkages to effective emission controls in at least some key markets—
so that innovators see a market pull for new ideas that can become profitable. Similarly,
important linkages have emerged between the system for providing information about
climate dangers and emission control efforts. The “Bali Roadmap” that set the agenda
for the Copenhagen conference, for example, explicitly used the IPCC’s findings about
“safe” levels of warming gases in outlining the countries that must participate in efforts to
control emissions, broadly, the level of control that would be required.
Our third argument rests on path-dependence and organizational practices.
Different countries and sectors have become interested in serious action on climate
change at different times. When the timing of action varies, the “leaders” construct partial
institutions that suit their purposes and their interests. Once they have done so, they are
likely to resist changing these arrangements fundamentally, since it is costly to change
organizational structures and state leaders are likely to engage in satisficing behavior so
as long as the regime complex performs essential functions passably well.34
For example, Europe and Japan have been much more committed to the Kyoto
process than most other industrialized countries, including notably the United States. The
EU has invested heavily in the construction of international regulatory regimes for
climate change that are based on legally binding targets and timetables as well as
international emissions trading. In turn, the EU has crafted its own policies at home to
align with that international approach. For the EU, different approaches are difficult to
envision and implement—even as other countries find that they favor other regulatory
schemes not anchored in targets and timetables. It may therefore be easier to build
parallel elemental regimes as part of a regime complex than to try to re-open negotiations
to achieve a comprehensive, integrated regime. Indeed, the final compromise reached at
the Copenhagen conference explicitly creates legal flexibility so that some nations can
continue the formal Kyoto legal mechanisms while others (notably the United States)
adopt different approaches. And most analysts expect that dispersion to continue as a
greater number of countries with diverse interests and capabilities—the developing
countries—are more fully engaged in regulation.
34 Simon 1959.
16
III. Implications for Policy
As governments attempt to coordinate international institutions on climate change
the outcome is unlikely to be an integrated, comprehensive regime. Instead, a regime
complex is emerging and likely to persist due to differences in interests, the weak private
incentives for leaders to create integrated regimes, lack of strong hierarchical authority in
the issue-area, uncertainty about effects, and contrasting beliefs about responsibility for
damage. Unlike international rules on trade, which until a decade ago were largely
integrated and comprehensive, the incentives for individual governments to orient
themselves around a single common set of rules are weak while powerful forces
encourage dispersion. Our exploration of implications for policy is rooted in this central
observation.
The Advantages of Climate Regime Complexes
We argue that, in the current state of great uncertainty and rapid change, regime
complexes are more likely outcomes than an integrated comprehensive regulatory
regime. If the integrated, comprehensive regimes that could emerge were viewed as
legitimate, adaptive and effective—criteria we explore in more detail below—then such
an approach would probably be superior to regime complexes. But any politically
feasible comprehensive regime is likely, as with the Kyoto Protocol, have only modest
impact on most countries while also creating expectations that are an obstacle to later
reforms in light of new information. It is important, therefore, not to compare actual
regime complexes with hypothetical but unrealistic comprehensive regimes. From a
normative standpoint, regime complexes have some advantages over politically feasible
integrated, comprehensive regimes. With care, policy makers who seek more effective
limitation on the magnitude of climate change can use regime complexes to their
advantage.
The potential advantage of regime complexes lies, in part, in the faults of
integrated regulatory systems that are already apparent in the UNFCCC and the Kyoto
Protocol. These dysfunctions arise in part because it is difficult to design effective
systems in the context of extreme uncertainty about what measures governments are
willing and able to implement. They also arise because integrated regimes are, by
definition, institutional monopolies. Once they exist it is difficult to craft rival
institutions. Heroic efforts concentrate on the monopoly; rival efforts, even when they
could be more effective, are pilloried as distractions. For example, the broad coalition of
developing countries—the G77 and China—lambasted attempts to work in small groups
and outside the UNFCCC process at the close of the most recent formal negotiating
sessions of the UNFCCC, despite mounting evidence that these formal sessions are
making little progress.35
35 Ibrahim 2009.
17
The dysfunctions of the UNFCCC monopoly are especially evident in two areas.
First, perhaps the most important aspect of the Kyoto Protocol is its system for
encouraging low-emission investments in developing countries—the CDM. Over the
long term, engagement with developing countries is essential since it is mathematically
impossible to reach deep cuts in world emissions of warming gases without these
countries’ participation.36 Yet studies suggest that a large fraction—perhaps two-thirds
or even more—of the CDM credits issued do not represent bona fide reductions in
emissions due to poor administration.37 Despite this realization, it is proving very
difficult to fix the CDM within the complex and highly politicized nature of decision-
making within the UNFCCC; indeed, there are strong pressures for an even larger supply
of credits, rather than higher quality credits. The CDM monopoly has effectively
excluded offsets in some areas (e.g., carbon storage and nuclear power) while favoring
offsets in areas that may be less cost-effective, such as small, rural renewable energy
projects. Since these rules create path dependence, such offsets rules are likely to be
transposed into a new comprehensive regime with the result the carbon equivalent of
Gresham’s law. Allowance for a wider array of offsets, and competition between them
for quality, could reverse these perverse incentives.
Secondly, the UNFCCC/Kyoto arrangements for linking national trading systems
have encountered difficulties. The Kyoto architects envisioned that national emission
control systems could be linked together to form an international trading system. but in
practice, the rules for “docking” have proven to be inflexible and do not encourage much
additional effort by governments. More flexible docking rules would allow a wider array
of countries to sell allowances into established carbon markets, conditional on setting
country-wide or sectoral caps, and would therefore broaden the scope of carbon trading
systems.38 Yet it has proved difficult for countries to change their status under the
UNFCCC/Kyoto system in ways that would amplify emission controls. Indeed,
Kazahkstan has sought for over a decade to join Annex I of the Kyoto Protocol so it can
participate in carbon markets; but it has not been permitted to do so.39 This situation
constitutes an example of a situation in which a voluntary action that would contribute to
the objective of the Kyoto Protocol is prohibited by procedural barriers and veto-points
built into that international agreement.
While institutional monopolies have dysfunctions, a regime complex can also
have dysfunctional tendencies, especially if it is highly fragmented. Components may
conflict with one another in ways that yield gridlock rather than innovation; the lack of
hierarchy among elemental regimes can create critical veto points; through forum-
shopping there could in principle be a “race to the bottom.” The proponents of
comprehensive regimes often rightly point out these dangers in their argument for
concentrating climate change diplomacy in the UNFCCC process; and their force helps
account for our earlier assertion that in an ideal world comprehensive regimes are more
effective than egime complexes. Our argument is not that regime complexes are
36 Clarke et al. forthcoming.
37 Schneider 2007; Wara and Victor 2008; Wara 2009.
38 Petsonk 2009; Wagner et al. 2009; Grubb et al. forthcoming; Stavins, Jaffe, and Ranson forthcoming.
39 Petsonk 2009.
18
absolutely better than the best imaginable comprehensive regimes; but that if political
reality makes effective and legitimate comprehensive regimes impossible, we should not
despair. Indeed, regime complexes have two significant advantages over comprehensive,
integrated ones: flexibility across issues and adaptability over time.
Flexibility across issues. Without a requirement that all rules be bound within a
common institution, it may be possible to adapt rules to distinctively different conditions
on different issues, or for different coalitions of actors. Different states could sign on to
different sets of agreements, making it more likely that they would adhere to some
constraints on greenhouse gas emissions. One variant of of such a flexible approach
involves proposals popular with the Australian, US and several other governments
(including key developing countries) that states construct “schedules” of their proposed
climate change actions, rather than acceding to a common set of targets and timetables.40
This approach is similar to the flexibility afforded when large governments engage in
complex negotiations to accede to the WTO; each country’s particular accession deal is
tailored to its circumstances.41 This approach was tried early in the climate change
process under the heading of “pledge and review” but that idea lost favor when no
government made the effort to flesh out how the concept would work in practice and the
governments and interest groups most keen on emission controls—notably in the EU
governments and NGOs—favored simpler targets and timetables for emissions.42
Adaptability over time. Regime complexes may also have higher adaptability
over time. Change in different issue-areas, or within the domestic politics of different
countries, may take place at different rates. In contrast with integrated, tightly coupled
monopoly institutions, regime complexes may be able to adapt more readily—especially
when adaptation requires complex changes in norms and behavior. Loose coupling may
also be advantaged when the best strategy for adaptation is unclear and thus many diverse
efforts should be tried and the more effective ones selected through experience. Applied
to climate change, this benefit is probably particularly important for engaging developing
countries that are wary about obligations that could become too onerous too quickly, but
the particular fears vary with each country and its circumstances. The creation of the EU
benefitted, in part, from flexibility to allow for “multi speed” coordination of policy—
under a common (at times leaky) umbrella of the common market and burgeoning EU
law the many members of the EU moved at quite different rates.
These advantages of greater flexibility and adaptability stem, in part, from
decision-making structures. In global institutions such as the UN, in particular, universal
voting rules often yield inaction. For example, for years the UNFCCC did not have
formal procedures for voting on decisions because the decision to adopt those procedures
required unanimous consent and oil-exporting countries (a group generally abhorrent to
policies that would cut consumption of carbon fuels) refused to agree. Leaders are needed
40 The Minister for Climate Change and Water of Australia, Penny Wong, made this argument in a speech
at New York University, September 21, 2009.
41 e.g., Michalopoulos 2002.
42 Victor 2009. The present authors do not have the same view on the merits of “pledge and review,” so we
jointly take no stand on that question.
19
to incur the cost of organizing an effective response to CPR problems, yet those few
leaders who are willing and able to commit adequate resources may refuse to make the
effort unless they can capture a large share of the benefits. Decision-making structures
initiated by interested states enable these leaders to achieve this objective.
Variation in Regime Complexes: Criteria for Assessment
The advantages we have noted for a regime complex do not arise automatically.
Indeed, dispersed institutions can also be associated with chaos, a proliferation of veto
points and gridlock that deters policy makers and private investors from devoting
resources to the climate change problem. Proposals for elemental regimes that would
further fragment climate institutions should therefore be carefully analyzed to see
whether they are performing as well as could feasibly be expected. Whether the
proliferation of different forums working on the climate issue—such as the G20, the
MEF, various bilateral technology and investment partnerships, and private sector and
NGO initiatives—is an asset or liability depend on how these efforts are coupled.
Regime complexes can be evaluated on the basis of six criteria. Along the
dimension defined by each criterion, there is variation running from dysfunctional to
functional. Regime complexes toward the positive end of each of the five dimensions are
likely to be more effective than complexes that score lower, on balance, on these
dimensions.43
1) Coherence. The various elemental regimes of a climate change regime
complex could be compatible and mutually reinforcing; they could be
incompatible and mutually harmful; or they could be somewhere in-between
these extremes. A regime whose components are compatible and mutually
reinforcing is coherent.
2) Accountability. The elements of the regime complex should be accountable to
relevant audiences, including not just states but non-governmental
organizations and publics. Accountability means that “some actors have the
right to hold other actors to a set of standards, to judge whether they have
fulfilled their responsibilities in light of these standards, and to impose
sanctions if they determine that these responsibilities have not been met”44.
3) Effectiveness. A climate change regime complex could be more or less
effective. Effectiveness requires a reasonable level of compliance with rules,
but also requires appropriate rules. More effective regimes create more net
benefits for members than less effective ones.
4) Determinacy. A climate change regime complex could be determinate in the
sense that the rules have “a readily ascertainable normative content.”45 Or it
could be less determinate or even quite indeterminate. Since uncertainty is the
enemy of long-term planning, such as required for costly investments in fixed
43 Buchanan and Keohane 2006.
44 Grant and Keohane 2005, 29.
45 Franck 1990, 52.
20
low-emission infrastructures, determinacy is a virtue on issues such as climate
change that require long-term investment.
5) Sustainability. A climate change regime could contain a set of elemental
regimes that each represents a coherent equilibrium point for the relevant set
of issues. Such a regime is likely to be politically sustainable in that it would
require large shocks to destroy or fundamentally alter it. Sustainable regimes
are superior since they reduce uncertainty, in this case about future rules.
6) Epistemic quality. Like comprehensive regimes, regime complexes can vary
in epistemic quality: that is, in the consistency between their rules and
scientific knowledge; the accountability of their managers; and their capacity
to revise both their rules and their terms of accountability.46
The climate change regime complex of 1997-2008, dominated by the institutions
established by the Kyoto Protocol, does not get high rankings on any of these six criteria.
The division of countries under Kyoto into industrialized (“Annex I”) and developing
(“non-Annex I”) countries implied a regime of low coherence and accountability in
which the absence of binding rules for some economically competitive units reduced
incentives for others to accept such rules and made it impossible to hold many states
accountable for their actions. The Kyoto treaty and its parent, the United National
Framework Convention on Climate Change, contain no credible compliance mechanisms
and, unlike WTO, no mandatory dispute-settlement institutions, which reduce their
effectiveness and determinacy. The dissatisfaction of the United States, and potentially
of other developed countries, threatened its sustainability. Finally, modest impact of the
rules on total world emissions along with the difficulty of changing the rules and the
highly political process limited the epistemic quality of the regime complex. In light of
these defects, it is not surprising that while most countries joined the Kyoto regime
because membership required little effort, overall the treaty did not command widespread
support, particularly in many of the wealthy Annex I countries. Nor was Kyoto an
attractive model for the rapidly developing countries that would be expected to undertake
emission controls in the periods after the Kyoto treaty expired.
These six dimensions can offer guidance not only for those who attempt to design
a comprehensive post-Kyoto regime, but also for policy makers who understand that
climate institutions will include a complex of loosely coupled elements rather than a
single, integrated scheme. For these policy makers, the task is to invest in initiatives that
score well on these dimensions.
46 Buchanan and Keohane 2006, 424-433.
21
Specific Implications for Policy
Finally, we draw several implications for policy. We focus on actions that
leading governments, NGOs and firms could pursue in efforts to make a regime complex
more effective.
First, a regime complex could favor more effective use of international emission
trading. Trading has become the policy instrument of choice for nearly all governments
that are implementing the most demanding policies. Well-designed trading systems could
be very important because they leverage large amounts of capital and because some of
that capital could flow to developing countries through “offsets” such as the CDM. The
CDM, for all its flaws, has already generated emission credits worth perhaps ten times the
value of classic government-to-government funding.
At present, the attempts to create an integrated UNFCCC/Kyoto regime have
yielded only one set of accounting procedures and offsets rules to govern which kinds of
international trades get formal credit. A more competitive system, with a multitude of
rules, would be more effective. Governments in industrialized countries that are most
interested in controlling emissions could set their own offset rules—tighter than the
CDM—and open trading windows to any other country with equally strict (or stricter)
offset policies. Rules requiring buyers to be liable for the quality of the credits they
purchase would create additional incentives for quality as well as new pricing
mechanisms so that markets could assess and reward the highest quality trading. In turn,
a diversity of offsets rules would yield a much wider array of real experience that could
inform future efforts to create common rules and common “floor” standards. Within a
regime complex there would be many different trading systems with different prices,
trading rules, and transaction volumes.47 International offsets could become the arbitrage
points that link those trading systems.
Second, a loosely coupled system could create special opportunities for
innovation around offsets for land use and forestry. Land use is a large source of
warming emissions and also potentially a very low cost way to absorb extra emissions
from the atmosphere. However, in Kyoto these issues were so controversial that
governments could not agree to allow much investment in land use and forestry
projects—the forested nations, especially, feared intrusion on their national policies.
Now that the CDM has demonstrated that capital flows through offsets are credible those
same nations—notably Brazil and Indonesia—have reversed course and favor more
liberal offsets rules. At this writing it is not clear how best to structure, monitor and
enforce international land use and forestry offsets and governments are struggling
through the Copenhagen process to devise a single set of common rules. A more diverse
approach would yield more information and would help avoid the outcome already
evident in the CDM that central rules in the face of uncertainty and strong private
incentives to cheat do not inspire much real investment in emission controls.
47 Victor, House, and Joy 2005.
22
Third, a regime complex would be able to accommodate border tax adjustments
(BTAs). Many analysts are wary of such schemes because they fear that BTAs could
lead to trade discrimination that, in turn, will undermine successful cooperation in other
areas, notably the WTO and other trade liberalization agreements. We share some of that
concern, but we note that border tariffs make it possible to create private goods, thus
increasing incentives for countries to dock into a carbon trading system to avoid
imposition of BTAs. Furthermore, BTAs could be politically important in countries that
were considering establishing and maintaining carbon trading systems, by providing
assurances that regulatory efforts at home will not erode investment and jobs. Hence
from a political perspective – both international and domestic – BTA’s are attractive
instruments. Yet BTA’s are only feasible within a regime complex since opposition to
such policies by developing countries assures that any formal effort to negotiate BTAs as
part of an integrated, comprehensive climate regime would be vetoed.
The likelihood that properly designed border tax adjustments could pass WTO
tests is much enhanced by a recent joint report from the World Trade Organization and
the UN Environment Program.48 This report suggests that BTA’s must meet three
conditions: (1) a close connection between the means employed and essential climate
change policy; and (2) non-discriminatory application, so that the measure does not serve
as “a disguised restriction on international trade”; and 3) respect for administrative due
process, as has been required on other issues by the WTO Appellate Body. That is,
BTAs could be legal by WTO rules if they are properly designed and implemented. We
suggest that policy makers within the most active climate clubs devise rules for BTAs
that are consistent with these guidelines, in an effort to avoid conflict with WTO rules.
Fourth, and finally, a regime complex offers the flexibility for cooperation on
policies that could complement the central task of cutting emissions. Paramount among
those is investment in technology. Under the UNFCCC/Kyoto Process there have been
some halting efforts to promote investment in technology, but these efforts have not had
any practical effect on national technology policies. Smaller clubs of leading
governments could agree to coordinate and amplify their investment in technology—
some of the needed investment is now in place through economic stimulus programs, but
those will be short-lived and remain poorly coordinated. While the incentive to craft and
coordinate technology policies in the UNFCCC/Kyoto system is weak, within a club the
benefits would be more visible as would the potential for private goods such as
intellectual property and revenues from larger markets.
Success in the formation of innovation clubs will, in time, make most aspects of
the climate change problem easier to solve. Successful innovation of inexpensive low-
emission technologies will lower the cost of emission controls. Indeed, the central cause
of success in the ozone layer regime was the appearance of new technologies at very low
(sometimes essentially zero) cost. Difficult CPR problems are made much easier when
low cost technologies blunt the incentives to defect and when new technologies offer
many local benefits (e.g., improved energy security and lower local pollution).
48 WTO-UNEP 2009. See also Hufbauer, Charnovitz, and Kim 2009.
23
Furthermore, the emergence of a belief system around the prospects of “clean tech”
revolutions and green jobs could also help mobilize new interest groups that favor
effective climate policy But this belief system will only be sustainable, and worthwhile
in the long run, if it is seen as realistic and a reliable source of private benefits.49
As a practical matter, keener interest in technology would require the leading
innovators to coordinate much larger national investments in innovation. While new
knowledge is a global public good, systems of innovation are organized at the national
and sectoral levels. The good news is that an innovation club should be relatively easy to
organize since only six countries account for about 85% of all R&D investment.50 The
bad news is that spending on energy technology has not even recovered to the levels seen
in the early 1980s. Spending is rising at present, but some of that new money is linked to
economic stimulus programs that, presumably, will end in the next couple years. A new
technology strategy is needed that would include not only coordination of national
investment levels but also sharing of experiences about the best organization for
innovation. A perennial danger with energy technology programs is poor design; indeed,
so-called “technology pork barrels” plagued the biggest programs of the late 1970s and
early 1980s and efforts will be needed to marry the political requirement of private goods
(including pork) with the public goal of spurring innovation. 51
As we have emphasized, our argument for the advantages of a regime complex for
climate change is conditional on our belief that the first-best possibility – a coherent,
effective, and legitimate comprehensive regime, with sufficient flexibility to
accommodate needed change in response to new situations and information – is
politically unattainable. Even given this assumption, however, the UNFCCC would still
have an important role to play in a climate regime complex. Acceptance of the existence
of a regime complex—and policy efforts to exploit some of the advantages of a more
flexible and adaptable regime complex—does not make the UNFCCC irrelevant.
However, it does shift the UNFCCC’s role and makes it only one component of the entire
regime complex.
The Framework Convention would best be used as an umbrella under which
many different efforts proceed. It would supply functions that are best provided on a
universal basis, such as standards for reporting on emissions, providing a forum for
negotiating broad decisions, and perhaps instructing technical bodies (e.g., the IPCC) to
gather and assess information. At present, however, the list of functions for the
49We are mindful that the widespread belief that spending on green technology will yield jobs and
economic growth is still to be proven. For a skeptical view see Kahn 2009. Moreover, while green jobs
will surely appear many of them will occur in the global economy where it is difficult to concentrate in the
jurisdictions that are first movers.
50 This list includes the United States, Japan, China and a few European countries. China is on the list
today and is rising rapidly; a decade ago it was a bit player in innovation.
51 Measuring R&D effort is difficult, and there are no reliable data on the world effort in energy. For total
world spending on all forms of R&D see OECD 2008, which ranks the top spenders at U.S., Japan, China,
Germany, France and the U.K. (If the EU is summed as a whole then it ranks second behind the U.S.). On
the R&D problem in energy see Dooley 1998 among others. For a seminal warning about pork in large
energy demonstration projects see Cohen and Noll 1991.
24
UNFCCC is fairly narrow because the most sensitive functions—for example, assessment
and enforcement of compliance and resolution of disputes—must be integrated into
substantive commitments. Such functions are most important when commitments are
deep, but the UNFCCC is too broad and inflexible to allow for deep commitments.
Over time, the UNFCCC might evolve into a deeper institution and perhaps the
core of an integrated regulatory system. With experience, for example, it is possible that a
wide array of “club” efforts under way presently could be governed by common rules—
akin, perhaps, to most favored nation status and reciprocity in the GATT/WTO system,
which help ensure that particular club deals crafted on trade are generalized to a larger
number of countries. But we caution against policy efforts that would move too quickly
in that direction. Managing common-pool resources is unlike the more reciprocal task of
reducing barriers to trade in good and services. It is harder to internalize the benefits
from CPR action; exclusivity that comes from clubs is thus a particularly important
incentive for first movers to invest in building institutions.
IV. Conclusion
The international rules and institutions that regulate issues related to climate
change are diverse in membership and content. They have been created at different
times, and by different groups of countries. They are not integrated, comprehensive, or
arranged in a clear hierarchy. They form a loosely linked regime complex rather than a
single international regime. In the language of this paper, the regime complex for climate
change consists of a number of loosely coupled specific regimes, as described in Figure
1.
Regime complexes arise for functional, strategic, and organizational reasons, as
discussed in Part II. The functional reasons for regime complexes are closely linked to
strategic ones, since different bargaining dynamics, and political coalitions, arise around
different functional solutions. Even with respect to CPR and public goods problems there
is significant variation in problem type. The perverse incentives inherent in CPR
problems can be altered in a variety of ways: through first-mover advantages, achieving
co-benefits, excluding non-payers from benefits, and small-group reciprocity. Each of
these situations may imply different institutions supported by different political coalitions
and therefore with different membership. Many of these efforts are easier to mobilize in
clubs rather than universal settings. Finally, there are organizational reasons for regime
complexes: Once these clubs have been created, the interests of their memberships may
diverge from each other further than functional arguments alone would suggest.
Changes in regime complexes—like all institutions--take place principally as a
result of changes in material interests, power, information, and beliefs. In regime
complexes these changes affect, in the first instance, the more narrow elemental regimes.
They can lead to tension among these elemental regimes, creating pressure to resolve
conflicts at the joints and often causing further shifts to the fragmented end of the
continuum referred to above. Historical contingency and path-dependence also play a
25
role: certain patterns of behavior can be locked-in because of their couplings with other
patterns of behavior that are hard to change.
In Part III we turned to policy issues, arguing that regime complexes have some
distinctive advantages over the politically feasible set of integrated, comprehensive
regimes. We admit that severe fragmentation – when the elements of a regime complex
conflict with one another – is likely to degrade the long-term performance of the regime
complex overall, and that regime complexes can be dysfunctional. But when compared
with integrated-comprehensive regimes as they actually exist, they have some
advantages. They can be much more flexible and adaptable than integrated-
comprehensive regimes such as the FCCC-Kyoto regime, which in some ways has
hindered constructive policy change. The Clean Development Mechanism and the Kyoto
“docking” rules illustrate the counterproductive rigidities that can be built-into
comprehensive regimes and that become hard to change due to vested interests.
From a normative standpoint, we suggest six criteria for the evaluation of regime
complexes: coherence, accountability, effectiveness, determinacy, sustainability, and
epistemic quality. Different loosely linked regime complexes may score differently on
these criteria. It is therefore not enough to argue that loosely linked regime complexes
may be superior to integrated-comprehensive ones, but it is necessary also to specify
which patterns of loose linkage combine political feasibility with potential for
effectiveness.
Whether loosely linked climate regimes will be more effective than efforts to craft
a single integrated regime depends, in part, on decisions by policy-makers. Although a
comprehensive global trading system is unlikely, much emissions reduction could be
achieved through a linked set of national and regional trading systems, in which offsets
would play an important and positive role. A loosely linked regime complex would
allow for experimental innovation with respect to land use forest offsets, as in present
initiatives to reduce deforestation. It could also enable border tax adjustments to be used
in selected situations, and linked to the WTO dispute settlement regime. Finally,
technology innovation clubs could use private incentives to leverage research and
investments that would make limiting emissions more feasible and less costly.
In such a regime complex, the UNFCCC would continue to play an umbrella role,
and to provide the framework for a number of essential functions, including serving as a
legal setting, providing information, and constituting a forum for negotiations. Over
time, if convergence in policy preferences took place, the UNFCCC could yet evolve into
an integrated and comprehensive policy regime. At the present juncture, however, both
political reality and the need for flexibility and diversity suggest that it is preferable to
work for a loosely linked but effective regime complex for climate change.
26
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... In global governance scholarship, a long-standing debate surrounds the impact of governance architectures on governance outcomes (Barnett et al., 2007;Keohane & Victor, 2011;De Coninck & Bäckstrand, 2011;Young, 2012;Kanie, 2015;Dauvergne, 2018;F. Biermann & Kim, 2020). ...
... • As a policy response to ease this coordination challenge, we recommend encouraging system-wide knowledge sharing on potential approaches to coordination. of governance (Barnett et al., 2007;F. Biermann & Kim, 2020;Dauvergne, 2018;De Coninck & Bäckstrand, 2011;Kanie, 2015;Keohane & Victor, 2011;Young, 2012). One dependent variable in this research has been the degree of coordination between agencies, that is, the mutual adjustment of behaviour (Biermann & Koops, 2017, 20). ...
... One dependent variable in this research has been the degree of coordination between agencies, that is, the mutual adjustment of behaviour (Biermann & Koops, 2017, 20). Evidence suggests that a high degree of governance fragmentation often limits effective coordination among international actors (for an overview see F. Biermann et al., 2020), with numerous undesirable outcomes, from a lack of an overall vision (Barnett et al., 2007) to duplications and inconsistencies (Kanie, 2015), scattering of responsibilities, splintered efforts and limited information sharing (Holzscheiter et al., 2012), limitations in attracting funding (Keohane & Victor, 2011), limited pooling of resources (Nasiritousi et al., 2020), difficulties in assigning accountability (Ivanova & Roy, 2007), and limited governance capacity (Held & Young, 2013). The absence of a dominant actor with a managing role has been argued to result in 'counter-productive politicization of coordination efforts' among agencies competing for leadership (Holzscheiter et al., 2012, p. 71). ...
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