Does the World Free Ride on US Pledges to Reduce Greenhouse Gas Emissions? Evidence from the Paris Climate Agreement
This paper provides what we believe is the first empirical evidence of the US Climate Reciprocity Ratio (CRR).
The US is widely believed to play a pivotal role in the development of international agreements to reduce greenhouse gas emissions, but do other countries free ride on US pledges? This paper, published in SSRN, provides what we believe is the first empirical evidence by proposing the US Climate Reciprocity Ratio (CRR); this summary statistic is the ratio of the rest of the world’s pledged reductions to the US’ pledged reductions through international climate negotiations. The analysis begins by quantifying countries’ Nationally Determined Contributions (NDCs) and Net Zero targets under the Paris Agreement by taking the difference between their pledges and leading “business as usual” projections of their emissions at the time of their pledges (e.g., from the International Energy Administration). Using these pledged reductions, there are two main findings: 1) pledged emissions reductions under the Paris Agreement, if successfully achieved, would reduce global net GHG emissions by 12% – 24% in 2030 and by 38% – 54% in 2050; and 2) the estimated CRR ranges from 2.5 to 10.8, with the upper end of the range applying to the middle of the century when the US’ share of global emissions has declined. Although pledges are not the same as reductions, these findings suggest that US climate policy can have indirect benefits by unlocking pledged reductions in other countries that benefit the US.
Introduction
Climate change is the quintessential collective action problem. The benefits of reducing greenhouse gas emissions (GHGs) in the United States has the same effect on the climate of the US as reducing emissions in India, and vice versa. However, the costs of reducing emissions are concentrated in the country where the reductions take place. Thus, in a vacuum, each country would prefer to benefit from others’ emissions reductions and let them disproportionately bear the costs too. This static view of the climate problem can make it seem intractable in the face of the annual release of 50 billion metric tons CO2e of GHGs that come from the world’s nearly 200 countries. Indeed, it is one of the reasons that climate change is referred to by some as “the problem from hell”.
The United Nations and other international organizations try to solve this problem through multilateral agreements where countries in principle agree to cut emissions more than they would do in isolation, but the extent to which this approach has been successful has not been quantitatively tested. Indeed, concern about whether US participation in such agreements would be met with sufficient reciprocal participation by other countries has historically limited US engagement. However, the past decade has seen the advent of two new international climate change agreements with substantially broader emission reduction participation than previous agreements: the 2015 Paris Agreement under the UN Framework Convention on Climate Change (UNFCCC), and the 2016 Kigali Amendment to the Montreal Protocol. At least partially due to the broad participation in both agreements, the US is a party to both.
This paper provides an empirical test of whether international climate agreements facilitate emissions reductions, relative to a world without their adoption, by examining the Paris Agreement where countries collectively agreed to reduce their GHG emissions. It is widely believed that the United States plays a special, or even pivotal, role in the shaping and adoption of these agreements such that they would be much less ambitious or perhaps not even exist without US participation; this role is a function of the US’ broad global influence due to a variety of factors (e.g., its historical role in multilateral institutions and negotiations, GDP, and military strength) and its high share of current and historical emissions. We therefore additionally quantify how many tons of GHG emissions reductions the US committed to under the Paris Agreements and the rest of the world’s committed reductions that will benefit the United States. As part of the analysis, we introduce the “Climate Reciprocity Ratio” (CRR), which is the ratio of the rest of the world’s committed reductions to the US’ committed reduction.
The reductions in emissions due to the Paris Agreement is calculated by comparing projected emissions under countries’ Nationally Determined Contributions (NDCs) to an independent Pre-Paris Agreement emissions projection baseline or counterfactual. We use the International Energy Agency’s (IEA’s) 2014 World Energy Outlook (WEO) report that was released on November 12, 2014 and projects emissions through 2030 at the country-level as the counterfactual for emissions. Importantly, this projection is the most authoritative and widely referenced expectation of future energy trends. At the time of each edition’s publication, it reflects the current state of technology (e.g., the price of wind, solar, natural gas, etc.), a leading expectation of the future path of technology, all adopted policies, and consensus macroeconomic expectations. With respect to the 2014 publication, it did not assume any reductions in GHGs due to the Paris Climate Conference. Importantly, it was coincidentally published on the same day that the US and China announced their NDCs that jumpstarted other countries’ release of their NDCs throughout the remainder of 2014 and through the Paris Conference at the end of 2015. Consequently, we assume that the NDCs are based on the same assumptions about projected emissions that underlie the IEA’s report. In addition to this comparison, we conduct similar exercises for the subsequent UNFCCC actions where countries updated their Paris Agreement NDCs in 2020-21 and made 2050 net zero
pledges.
There are two primary results. First, the Paris Agreement has been very successful in yielding committed emissions reductions, relative to the prevailing projections of emissions trajectories before those commitments were made. Specifically, our analysis suggests that pledged emissions reductions under the Paris Agreement, if successfully achieved, would reduce global net GHG emissions by 12 – 24% in 2030 and by 38 – 54% in 2050. Using the US Government’s proposed updated SCC, the 12% reduction in 2030 would by itself reduce climate damages by roughly $1.5 trillion.
Second, we estimate that the US’ CRR is substantial. For example, the analysis pegs it at 3.9 tons in 2030 under the initial Paris Agreement NDCs and 2.5 to 3.0 tons in 2030 under the updated Paris Agreement NDCs. Further, the US’ CRR grows later in the century such that we estimate it at 7.0 to 10.8 tons in 2050. The increase reflects that the US’ share of global emissions declines throughout the century and the rest of the world made meaningful longer run pledges under the Paris Agreement.
We emphasize that these calculations are based on projected, rather than actual, emissions reductions and that analyzed commitments are voluntary. With respect to the former, we think that examining realized emissions is a less convincing approach to estimate the impacts of multilateral negotiations because it will necessarily confound the pledges with unexpected changes in technology, macroeconomic growth, etc., underscoring the challenges of developing a reliable counterfactual. With respect to the commitments being voluntary, we note that this is common among international agreements of all kinds.
The remainder of this paper is organized as follows. Section 2 provides background on the Paris Agreement. Section 3 provides an overview of the data and Section 4 the methods used to quantify the CRR for the United States under that agreement. Section 5 describes the results of the analysis and Section 6 interprets the results and concludes the paper.