Economics of climate change

The paper looks at the ineffectiveness of climate protection undertaken by the United Nations Framework Convention on Climate Change (UNFCCC). Despite the emission reduction measures commenced by some countries, the global emission of carbon dioxide has increased more than 40% since the adoption of the UNFCCC. The most important reason of the catastrophe is the so-called Berlin Mandate (1995), which exempts most of the countries in the world – including China that became the largest emitter in 2006 – from taking any binding commitments to reduce emissions. The Paris Agreement (2015) has been the first attempt to overcome the failure. There are a number of economic reasons why the protection process has not been successful so far. ‘Carbon leakage’ caused by the fact that most countries do not have binding commitments implies that emission from economies that impose restrictions moves to where it is not constrained. This calls for a global agreement on emission reduction. Such a global agreement requires recognition of the fact that climate protection is a public good. It is surprising that those UNFCCC signatories, who are likely to be hit by the lack of protection most acutely, hesitate to adopt effective provisions.