Political economy of the Kyoto protocol

The Kyoto Protocol, negotiated in December 1997, is the first international treaty to limit emissions of greenhouse gases. But Kyoto does not mark the conclusion to international cooperation on climate change. It is really ju st a beginning. This paper shows that, in the aggregate, the benefits of un dertaking the Kyoto reductions should exceed the corresponding costs-provid ed these are achieved cost-effectively. But, although Kyoto seeks to promot e cost-effectiveness, it may yet prove very costly. Moreover, the agreement may not even achieve the reductions that it promises, either because emiss ions will relocate to the countries that are not required to stay within Ky oto-prescribed ceilings or because "paper' trades will be promoted by the p rotocol's mechanisms. More fundamentally Kyoto does not deter non-complianc e, and it only weakly deters non-participation. These flaws need to be mend ed, bur the nature of the problem makes that art especially difficult task.