Stiglitz Calls Climate Talks a 'Charade,' Pushes Plan C

The liberal economist says voluntary agreements don't work and cap-and-trade is 'doomed to failure'

Joseph Stiglitz: What the world needs now is a global carbon price

Joseph Stiglitz: What the world needs now is a global carbon price

Photographer: Simon Dawson/Bloomberg

Joseph Stiglitz, the Nobel laureate economist, is trying to persuade global-warming negotiators that they're marching up a blind alley. He says it's probably too late to achieve anything substantial at the long-awaited United Nations Climate Change Conference in Paris in December, so real progress will have to come afterward.

That's not a message the negotiators want to hear, but Stiglitz doesn't care. "I’m saying we ought to be facing reality. We have to learn from our failures," he said in a phone interview this week.

Stiglitz gave Bloomberg reporters a preview of remarks he was scheduled to deliver today in Paris at the International Scientific Conference, one of the last big conclaves leading up to the December summit. Stiglitz, a professor at Columbia University in New York, may be the favorite American economist of the developing world, because he often takes its side against the rich countries, particularly the U.S.

Plan A for climate change was a cap-and-trade system: Set caps on the amount of greenhouse gases that countries could spew into the air, then let those countries trade their emission rights with each other. Emitters that can cut cheaply make the biggest reductions, so cap-and-trade achieves any given amount of emission reductions at the lowest possible cost.

But cap-and-trade won't work without enforceable caps, and countries haven't been able to agree on what those caps should be. Stiglitz says that's inevitable. Giving big allowances to big emitters inadvertently rewards them for having caused a lot of global warming in the past and is "clearly morally and politically unacceptable," Stiglitz says. On the other hand, giving allowances to countries on a per-capita basis would be attractive to poor ones with large populations, but "I don’t see any hope of getting the United States to agree to an equal sharing of carbon space." His bottom line: "Cap-and-trade is doomed to failure."

He isn't impressed with Plan B, either, which is the voluntary commitments that countries have been announcing leading up to the Paris summit. "In the absence of more forceful actions, voluntary actions simply don’t solve problems of global public goods," he says. In other words, countries won't do enough if there's no compulsion involved.

Stiglitz's plan is to set a single, global price for carbon dioxide, the most important greenhouse gas. The idea is to make it so expensive to use carbon that consumers and businesses voluntarily use less of it. Countries could raise the price of carbon either with a tax or with a domestic cap-and-trade system, Stiglitz says. In his vision, if a country didn't set its carbon price high enough, hoping to gain a pricing advantage, other countries would be allowed to charge tariffs on its exports. He would throw in a green fund to compensate hard-hit poor countries.

Six big non-U.S. oil companies—BG Group, BP, Eni, Royal Dutch Shell, Statoil, and Total—came out in favor of a global carbon price in a letter released by one of its recipients, the United Nations, on June 1.

This isn't the first time Stiglitz has come out for a carbon tax; it's been on his agenda for several years. And some other economists still think cap-and-trade is a better solution. Jean Tirole, a fellow Nobel laureate in economics, co-wrote a piece for the Economist's Free Exchange blog last month saying that "enforcement of a carbon tax is also problematic, because governments have strong incentives to turn a blind eye toward certain polluters."

As for the conference in Paris in December, Stiglitz told Bloomberg simply: "It's a charade."

—With assistance from Eric Roston and Tom Randall

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