Program Lecture 1 The Kyoto Protocol And The Carbon Cycle

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Program on Information and Resources
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The Kyoto Protocol and
The Carbon Cycle
Pegram Lectures
Brookhaven National Laboratories
Graciela Chichilnisky
UNESCO Chair in Mathematics and Economics
Columbia University

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Human beings, or their close genetic relatives, have
lived on Earth for several million years
Yet only recently has human activity reached levels
at which it can affect fundamental natural processes
• the concentration of gases in the
atmosphere (CO2, Ozone)
• the planet’s water mass
• The complex web of species which
constitute life on earth

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Source: Des Marais (2000) “When did Photosysnthesis
emerge on Earth?” Science 289 5485, 1703 – 05.

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Source: Rice, Patricia R. and Norah Moloney (2005) Biological
anthropology and prehistory: exploring our human ancestry,
Pearson Education: Boston

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In 1996, the IPCC reported that
human induced emissions of
carbon have a discernible effect on
climate
•Scientific uncertainty persists
•But the risk of climate change is
real and potentially catastrophic

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Black lines are decadally averaged observations. Blue bands are computer models
with natural forgings only. Pink bands are computer models with human + natural forgings.
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Computer models match observed ΔT on all continents
Source: IPCC Working Group 1: The Physical Science
Basis of Climate Change. IPCC 2007: WG1-AR4

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Source: Arctic Climate Impact Assessment
(ACIA) 2004

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Source: “In Dead Water” UNEP 2008
http://www.unep.org/pdf/InDeadWater_LR.pdf

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Source: “In Dead Water” UNEP 2008
http://www.unep.org/pdf/InDeadWater_LR.pdf

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Sea ice is receding
Source: NASA

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Coastal glaciers are
retreating
Muir Glacier, Alaska, 1941-2004
August 1941 August 2004
Source: NSIDC/WDC for Glaciology,
Boulder, compiler. 2002, updated 2006.
Online glacier photograph database.
Boulder, CO: National Snow and Ice
Data Center

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Harm is already occurring
Total power released by tropical cyclones (green) has increased along with
sea surface temperatures (blue)
Source: Kerry Emanuel. Anthropogenic Effects
on Tropical Cyclone Activity, 2006.
http://wind.mit.edu/~emanuel/anthro2.htm

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Number of flood events by continent and decade since 1950
Source: Millennium Ecosystem Assessment, http://www.millenniumassessment.org/en/index.aspx

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Number of major wild fires by continent and decade since 1950
Source: Millennium Ecosystem Assessment, http://www.millenniumassessment.org/en/index.aspx

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Where we’re headed: temperate-zone agriculture
Corn and wheat yields versus temperature increase in the temperate zone
averaged across 30 crop modeling studies. All studies assumed a positive
change in precipitation. CO2 direct effects were included in all studies.
Source: Easterling W. E., Apps M. Assessing the consequences of climate change for food and
forest resources: A view from the IPCC, Climatic Change 70 (1-2) 2005 : 165-189.

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Source: Millennium Ecosystem Assessment 2005. Ecosystems and Human Well-Being Synthesis.
http://www.millenniumassessment.org/en/index.aspx

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Top panel shows
best estimates of
human & natural
forcings 1880-2005.
Bottom panel shows
that state-of-the-art
climate model, given
these forcings,
reproduces almost
perfectly the last 125
years of observed
temperatures.
The smoking gun
for human
influence
Source: Hansen et al., Science 308, 1431, 2005.

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Source: J. Hansen et al., PNAS 103: 14288-293 (26 Sept 2006)

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Rapidly increasing ozone holes
Source: NASA.
http://science.hq.nasa.gov/missions/satellite_22.thm

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How the greenhouse effect works
Source: Sources: Okanagan University collage in Canada, Department of Geography, University of Oxford, school of geography; United States
Environmental Protection Agency (EPA), Washington; Climate change 1995, The science of climate change, working group 1 to the second assessment
report of the IPCC, UNEP and WMO, Cambridge Univ. Press, 1996.

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Sources of greenhouse gases

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Composition of greenhouse gases
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Source: Sources: Emission Database for Global Atmospheric Research (EDGAR) 3.2 Fast Track 2000. Netherlands Environmental Assessment Agency.
www.mnp.nl/edgan/. Accessed 3/21/07

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Many environmental problems are global in
scope. Solving requires international
cooperation
• The planet’s ozone’s layer and CFC’s
emissions
• Loss of biodiversity
• Greenhouse gases and climate change-CO2
emissions
• Acid rain and international transport of SO2
International dimensions of
environmental policy

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•Most of the destruction of the
earth’s ecosystems is driven by
economic incentives
•Forests, where most known
biodiversity resides, are cleared
for the extraction of natural
resources (oil, wood products) or
to grow cash crops and graze
livestock

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Source: Food and Agriculture
Organization of the United
Nations Global Forest
Resources Assessment 2005:
Progress towards sustainable
forest management

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Population and the global
environment
The regions with the lowest population
growth are the main cause of global
environmental damage:
●biodiversity loss
●carbon emissions
●CFC emissions

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Emissions per capita vs. Population
Source: UN Millennium Report

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Emissions per capita vs. Population
Sources:
UN World Population Prospects: The 2006 Revision;
International Energy Agency 2003
Population vs. Carbon Emissions per Capita
Mexico
Egypt
United Kingdom
India
Germany
Finland
China
Canada
y = -1.2547Ln(x) + 11.724
R
2
= 0.2566
0
2
4
6
8
10
12
14
16
18
20
22
0 200 400 600 800 1000 1200 1400
Population (Billions)
CO2EmissionsperCapita(MetricTonsofCarbon)

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Sources: Earthtrends Database of the World
Resource Institute (WRI) http://earthtrends.wri.org/

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Source: UNEP-Building and Climate Change
Report-2007
GNI per capita vs. Carbon Emissions per capita
Horizontal axis: GNI/capita
Vertical axis: CO2/capita

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TotalCO2Emissions(MillionMetricTons)
GDP (2004 Billion $US)
Source: Earthtrends Database of the World Resource
Institute (WRI) http://earthtrends.wri.org/

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Source: US Energy and Information Administration,
International Energy Annual 2004

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Source: Pimentel, D. et al. (2002). Renewable
energy: Current and potential issues.
BioScience, 52 (12), 1111-1120.

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Source: US Energy and Information
Administration (EIA)

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In the future:
Most emissions could originate in
developing countries as they
industrialize
• Industrialization is resource intensive
• North-South issues

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Cumulative Emissions (1900-2002):
Source: World Resource Institute
Source Where WRI Got Data:
WRI calculates carbon dioxide emissions from 3 sources
EIA. 2004. International Energy Annual 2002. Available online
at: http://www.eia.doe.gov/iea/carbon.html.
IEA. 2004. CO2 Emissions from Fuel Combustion (2004
edition). Available online at:
http://data.iea.org/ieastore/co2_main.asp.
Marland, G., T.A. Boden, and R. J. Andres. 2005. Global,
Regional, and National Fossil Fuel CO2 Emissions. in Trends:
A Compendium of Data on Global Change. Carbon Dioxide
Information Analysis Center, Oak Ridge National Laboratory,
U.S. Department of Energy, Oak Ridge, Tenn., U.S.A.
CO2 Emissions (2002)
Sources Used by World Resource Institute:
EIA. 2004. International Energy Annual 2002. Available
online at: http://www.eia.doe.gov/iea/carbon.html.
Marland, G., T.A. Boden, and R. J. Andres. 2005.
Global, Regional, and National Fossil Fuel CO2
Emissions. in Trends: A Compendium of Data on Global
Change. Carbon Dioxide Information Analysis Center,
Oak Ridge National Laboratory, U.S. Department of
Energy, Oak Ridge, Tenn., U.S.A.
Population (2002)
Source: World Resource Institute.
Sources where WRI Got Data From:
Population Division of the Department of Economic and Social
Affairs of the United Nations Secretariat. 2007. World Population
Prospects: The 2006 Revision.
GDP (2002)
Source WRI Got Data From:
Development Data Group, The World Bank. 2007. 2007
World Development Indicators Online. Washington, DC: The
World Bank

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Climate change:
• The causes of climate changes are
economic
• The effects are physical and
biological

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Since the effects are physical,
economists underestimate them
Since the causes are economic,
physical scientists cannot find
solutions

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Climate change requires
thinking and acting across social
and physical disciplines
A major challenge

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Climate change is global
It therefore requires us to focus on:
• Global socioeconomic issues
• Global equity

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To address these issues we
introduced in 1974 the concept
of development based on the
satisfaction of “basic needs”

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Economic development based on
the satisfaction of basic needs
Basic Needs were introduced to rethink
development patterns, so they would be consistent
with the environmental constraints (Chichilnisky
1974, 1977)
Bariloche Model (1974-76) and sustainability
Bruntland Report, needs and sustainability

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Sustainable development
Development that meets the needs of the
present without compromising the ability of
future generations to meet their own needs
“Our Common Future”, Bruntland Report 1987

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Global Environmental Policy
Requires Equity and Efficiency

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Scientists find that most of the
damage to biodiversity and the
atmosphere has occurred in the
last 50 years
WHY?
What happened 50 years ago?

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•Emissions of greenhouse gases and
destruction of biodiversity are connected to
the rapid industrialization since World War II

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History
• After World War II, the U.S. became
40% of the world economy following
the destruction of Germany and
Japan
• Today the U.S. is back to 25%, as it
was before World War II

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The U.S. pattern of economic
development became a benchmark
• based on rapid industrialization led
by deep and extensive use of natural
resources
• A frontier approach to economics

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Global institutions were created that
reinforced this vision of resource-intensive
economic development
• The World Bank
• The International Monetary Fund-Bretton Woods
• The United Nations
• The current system of National Accounts
• The American Dream went Global

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Source: World Trade Organization (WTO): World Trade Report.
http://www.wto.org/english/res_e/reser_e/wtr_arc_e.htm
Ratio of merchandise exports to GDP, 1950-2005
(Percentage, real trade and GDP at 1990 prices and exchange rates)
0.0
5.0
10.0
15.0
20.0
25.0
1950 1998 2005
Years
Percent
World Average

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Source: World Trade Organization (WTO): World Trade Report. http://www.wto.org/english/res_e/reser_e/wtr_arc_e.htm
Total
Manufactures
GDP
100
1000
10000
1950 1960 1970 1980 1990 2000
500
2500
5000
250
Average grow th rates,
1950-2005
Total exports 6.2
Manufactures 7.5
GDP 3.8
Semi-log scale
World Exports and GDP, 1950-2005. (Volume indices, 1950=100)

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Growth in the volume of world merchandise trade and GDP, 1996-2006
(Annual percentage change)
-2
0
2
4
6
8
10
12
1996 97 98 99 00 01 02 03 04 05 2006
GDP
Merchandise exports
Average export
growth 1996-06
Average GDP
growth
1996-06

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GDPperCapita(1990InternationalGeary-KhamisDollars)
Year
Source: Angus Maddison, Historical Statistics for the World Economy: 1 – 2006 AD.

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Year

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Sources: US Energy Information Administration. International Energy Annual 2004. Food and
Agriculture Organization of the United Nations, Statistics database, accessed 4/11/07

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GDP(1990InternationalGeary-KhamisDollars)
Year

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Source: US Energy and Information Administration (EIA)

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Year

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Source: World Bank (2002 data)

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Economics drives global change:
• In the North, emission of CO2 is
linked to intensive energy use for
production of goods and services
• In the South, intensive destruction
of ecosystems for agricultural
production and mineral extraction for
export markets

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Sources: Earthtrends Database of the World
Resource Institute (WRI) http://earthtrends.wri.org/

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Source: IPPC

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Cumulative Emissions (1900-2002):
Source Where WRI Got Data:
WRI calculates carbon dioxide emissions from 3 sources
EIA. 2004. International Energy Annual 2002. Available online
at: http://www.eia.doe.gov/iea/carbon.html.
Marland, G., T.A. Boden, and R. J. Andres. 2005. Global,
Regional, and National Fossil Fuel CO2 Emissions. in Trends:
A Compendium of Data on Global Change. Carbon Dioxide
Information Analysis Center, Oak Ridge National Laboratory,
U.S. Department of Energy, Oak Ridge, Tenn., U.S.A.
CO2 Emissions (2002)
Sources Used by World Resource Institute:
EIA. 2004. International Energy Annual 2002. Available
online at: http://www.eia.doe.gov/iea/carbon.html.
Marland, G., T.A. Boden, and R. J. Andres. 2005.
Global, Regional, and National Fossil Fuel CO2
Emissions. in Trends: A Compendium of Data on Global
Change. Carbon Dioxide Information Analysis Center,
Oak Ridge National Laboratory, U.S. Department of
Energy, Oak Ridge, Tenn., U.S.A.
Population (2002)
Sources where WRI Got Data From:
Population Division of the Department of Economic and Social
Affairs of the United Nations Secretariat. 2007. World Population
Prospects: The 2006 Revision.
GDP (2002)
Source WRI Got Data From:
Development Data Group, The World Bank. 2007. 2007
World Development Indicators Online. Washington, DC: The
World Bank

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DISTRIBUTION OF TROPICAL FORESTS
Source: www.marietta.edu
Source: Food and Agricultural Organization of the United Nations

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HOLDRIDGE LIFE ZONE CLASSIFICATION

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The North Produces Most of the Risks
• Most CO2 emissions
• Most CFC emissions
• Most biodiversity destruction

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The South suffers most of the
effects. It is most vulnerable to the
effects of climate change on:
• food production
• living conditions

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The North produces the most risks, but
the South bears them the most

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The origins of today’s environmental
dilemmas involve the historical
coupling of two different worlds
through the international market: the
industrialized and the developing
regions, the North and the South

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•The globalization of the world
economy since World War II has
intensified a pattern of resource use
by which developing nations extract
most natural resources, exporting
them to industrialized nations at
prices that are often below
replacement cost

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Source: World Bank 2004 data

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Source: World Trade Organization (WTO) 2005 data

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Source: Dani Rodrik. “Sea Changes in the World Economy.” Paper prepared for the Techint
conference, Buenos Aires, August 30, 2005

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0.0
5.0
10.0
15.0
20.0
25.0
1950 1998 2005
Years
Percent
World Average

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Total
Manufactures
GDP
100
1000
10000
1950 1960 1970 1980 1990 2000
500
2500
5000
250
1950-2005
Total exports 6.2
Manufactures 7.5
GDP 3.8
Semi-log scale

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-2
0
2
4
6
8
10
12
1996 97 98 99 00 01 02 03 04 05 2006
GDP
Merchandise exports
Average export
growth 1996-06
Average GDP
growth
1996-06

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Through the international market,
industrial nations, housing 20% of
the world population:
• Consume most forest products (pulp,
wood)
• Consume most products produced
through the clearing of forests (cash
crops, livestock)

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The North’s economy represents the
main driving force:
• Has used, and continues to use,
most of the global resources and
environment,
• Produces 60% of all CO2 emissions,
• Consumes most forest and mineral
products,
• Emits most CFCs
Source: WRI

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■The South, with 80% of the world’s
population, extracts and exports most
resources, which are mostly consumed in
the North.
■Resources – such as petroleum and wood
– are traded at prices which are below real
costs, leading to increased dependence on
resource use and to a deepening North-
South divide

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Source: Baker, E, Bournay, E, Harayama, A, & Rekacewicz, P (2004). Vital Waste Graphics. UNEP/DEWA/GRID-Europe,
RetrievedJan. 24, 2009, from http://www.grida.no/_res/site/file/publications/vital-waste/wastereport-full.pdf

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GREENHOUSE INDEX: COUNTRIES WITH HIGHEST
GREENHOUSE GAS EMISSIONS, 2004
Source: CAIT

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Total Exports
Exports of Raw
Materials
Source: World Trade Organization (WTO). World Trade Overview 2005.
http://www.wto.org/english/res_e/statis_e/its2006_e/its06_overview_e.pdf

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• The UN Food and Agriculture
Organization (FAO) has estimated
that direct emissions from meat
production account for about 18% of
the world's total greenhouse gas
emissions

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Year

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The U.S. uses 24.3% of the
world’s oil output yearly, even
though it has 4.6% of the world’s
population
SOURCE: CIA World Factbook, December 2008

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It is not how much you export but what you export
Note: “income content of exports” (EXPY) represents the income level of the typical
country with your export basket. Source: World Trade Organization (WTO). World Trade
Overview 2005.

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The remarkable rise of China
Source: Dani Rodrik. “Sea Changes in the World Economy.” Paper prepared for the Techint
conference, Buenos Aires, August 30, 2005

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The remarkable rise of China
Source: Dani Rodrik, op.cit. 2005

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Source: United Nations Comtrade Database for Oil Export Data. http://comtrade.un.org/pb/CountryPages.aspx?y=2007.
World Bank for GDP data

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Source: United Nations Comtrade Database for Oil Export Data. http://comtrade.un.org/pb/CountryPages.aspx?y=2007.
World Bank for GDP data

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This pattern of trade can be
explained in substantial measure by
a historical difference in property
rights in the developing and
industrial worlds

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Developing countries hold most
resources as common property
while in industrial economies
these are usually private
property

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Natural resources, such as forests and
mineral resources are often held as
common property in developing
countries. They are often used on a
“first come first served” basis in an open
access process

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In a world where agricultural societies
trade with industrial societies,
international markets magnify the
extraction of resources. The result is
that exports and world use of natural
resources exceed what is optimal

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The resulting agricultural output
is mostly sold in international
markets (pulp and wood, cash
crops, livestock, Barbier)

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Differences in property rights
explain:
• The South’s over-extraction of
natural resources for the
international market
• Why the South sells natural
resources below real cost
Chichilnisky, American Economic Review, 1994

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Source: World Trade of IT products by region 2005, Source Comtrade database and WTO. Exports and Imports,
This Chart appears on Page 17, World Trade Report 2007 WTO
http://www.wto.org/english/res_e/booksp_e/anrep_e/world_trade_report07_e.pdf

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Note: The graph corresponds to the regression system in Table 3, column 2 (next slide). The curve shows the partial relation
between the Gini coefficient and the log of per capita GDP, holding fixed the estimated effects of the explanatory variables
other than the log of per capita GDP and its square. Source: Robert Barro. Inequality and Growth Revisted. ADB January
2008. http://aric.adb.org/pdf/workingpaper/WP11_%20Inequality_and_Growth_Revisited.pdf

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Source: Robert Barro.
Op.cit. 2008.

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Rich countries produce “rich country goods”

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Source: Development Data Group, The World Bank. 2008. 2008 World Development Indicators
Online. Washington, DC: The World Bank. Available at: http://go.worldbank.org/U0FSM7AQ40.
And World Trade Organization (WTO). World Trade Overview.

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Source: World Trade Organization (WTO). World Trade Overview.

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Note: GNNP (Green Net National Product) is GNP minus the damage from carbon dioxide emissions, depreciation of produced assets
and depletion of forests and subsoil assets. Source: “When Self Interest is Key to a Better Environment.” Nature. Volume 395.
October 1998. http://www.nature.com/nature/journal/v395/n6701/pdf/395428a0.pdf

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Without computing the “replacement
costs” of extraction, there is a false
impression of resource abundance
and comparative advantage leading
to a global version of the “tragedy of
the commons”

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BarrelsofOil(Billions)
Source: Energy Information Administration. August 27, 2008. http://www.eia.doe.gov/emeu/international/oilreserves.html

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Year

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0.0
5.0
10.0
15.0
20.0
25.0
1950 1998 2005
Years
Percent
World Average

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Total
Manufactures
GDP
100
1000
10000
1950 1960 1970 1980 1990 2000
500
2500
5000
250
1950-2005
Total exports 6.2
Manufactures 7.5
GDP 3.8
Semi-log scale

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-2
0
2
4
6
8
10
12
1996 97 98 99 00 01 02 03 04 05 2006
GDP
Merchandise exports
Average export
growth 1996-06
Average GDP
growth
1996-06

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Source: World Trade Organization (WTO) 2005 data

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Source: Alan Thein Durning. “How Much is Enough?” The Worldwatch Environmental Alert Series. 1992
http://www.ncseonline.org/PopPlanet/ePopulationReports/rest/abstracts/148954.pdf

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Source: Baker, E. et al. (2004). Vital Waste Graphics. UNEP/DEWA/GRID-Europe, Retrieved Jan. 24, 2009,
from http://www.grida.no/_res/site/file/publications/vital-waste/wastereport-full.pdf.

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Source: US Energy and Information Administration (EIA) 2004 Data

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Source: International Monetary Fund (IMF). World Economic Outlook 2008.
http://www.imf.org/external/pubs/ft/weo/2008/01/index.htm#ch1fig

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Year

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Source: Robert Barro.
Op.cit. 2008.

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As a result, the North over-
consumes resources, and the
South over-extracts them
Chichilnisky, American Economic Review, 1994

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As a consequence of these
historical facts, the Earth
Resources are undervalued in
international markets

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Because most resource-
intensive exports come from
developing nations, their own
economies and people are
undervalued in economic terms

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Resource intensive trade leads
to an increasingly divided North-
South world

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Privatizing resources in
developing countries may be
impractical in any reasonable
time scale.
An alternative is to privatize the
global commons.

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Rather than privatizing forest
and mineral deposits “on the
ground”, we can privatize and
trade the rights to use the
atmosphere as a carbon sink,
and the use of biodiversity

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The Kyoto Protocol

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Source: International Monetary Fund (IMF). World Economic Outlook 2008.
http://www.imf.org/external/pubs/ft/weo/2008/01/index.htm#ch1fig

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New Economic Findings
• Efficiency in trading permits requires
more emission rights to developing
countries
• Why?

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Typically efficiency requires that
those with fewer endowments of
private goods should have a
higher allocation of property
rights on the public goods
■Chichilnisky, 1992-3
■Chichilnisky and Heal, 1993
■Chichilnisky, Heal and Starrett, 1993-4

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Kyoto Protocol:
The way ahead
• How to develop incentives for international
cooperation?
• How to obtain support from the private
sector?
• Will the three flexibility mechanisms be
unified
• How to regulate private sector emission
traders?
• How to achieve equitable markets?

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The clean development
mechanism must be worked out
in practice
How to do it?

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The next lecture will address
these issues and the rays of
hope for a solution

Program Lecture 1 The Kyoto Protocol And The Carbon Cycle

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