Thursday, December 17, 2009

Reciprocity in Negotiations

An op-ed piece in the Los Angeles Times this morning, by David Rivkin and Lee Casey, argues that the United States should not agree to reduce its carbon emissions, unless and until developing countries such as China and India and Brazil agree to do the same. They make the valid point that US reductions would do little to reduce the overall problem as long as these rapidly-industrializing nations continue to increase their carbon output as dramatically as they have in recent years. They also argue, using the analogies of trade negotiations and arms reduction negotiations, that unilateralism is a bad negotiating strategy, because unilateral concessions lessen a negotiating party's leverage to obtain similar concessions from others. This latter point seems more debatable, at least as applied to the problem of reducing CO2 in the atmosphere.

First, the developing nations have long argued that it is unfair to demand dramatic concessions from them while the United States continues to emit far more greenhouse gases per capita than other nations.  So our refusal to agree to restrictions actually discourages other nations from agreeing to reduce own their emissions.  These developing countries also have the valid argument that all they are doing is catching up to the countries that industrialized earlier, and that it is unfair to restrict their ability to reduce poverty and modernize their economies while the United States and Europe continue to enjoy the benefits of their earlier industrialization.  Rather than giving us leverage, the US failure to recognize the problem and do something about it has actually impeded efforts to get other nations to do their fair share.

Second, unlike unilaterally reducing trade barriers, which can harm domestic industries by making it easier for imported goods to compete, efforts to reduce carbon emissions actually make our domestic industries more competitive.  Although there are short term costs to improving the energy-efficiency of buildings, to increasing our reliance on solar, wind and nuclear power, and to improving vehicle mileage, in the long run all of these investments actually save money, while they reduce our dependence on foreign oil.  So there is no disadvantage to making unilateral carbon reductions that will improve our country's economic performance.

Far from making it easier to negotiate global reductions in carbon emissions, the obstructionism that Rivkin and Casey advocate would only serve as an excuse for others to do nothing.  Instead of creating leverage for an agreement, we would be playing a game of chicken with our negotiating partners.  With global climate possibly heading off a cliff, we should not be arguing about how much others have to apply the brakes before we assist them.  We need to be applying some brake pressure ourselves while we ask others to do the same.

(beach photo from Redoubt Reporter)
Posted by Joe Markowitz at 10:51 AM
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3 comments:

  1. unlike unilaterally reducing trade barriers, which can harm domestic industries by making it easier for imported goods to compete, efforts to reduce carbon emissions actually make our domestic industries more competitive. Although there are short term costs to improving the energy-efficiency of buildings, to increasing our reliance on solar, wind and nuclear power, and to improving vehicle mileage, in the long run all of these investments Joe's proposal is nice theory with no field validation.

    He says that unilateral reduction of Carbon emission will "actually save money, while they reduce our dependence on foreign oil. So there is no disadvantage to making unilateral carbon reductions that will improve our country's economic performance."

    Save money? Where, on what?

    Reduce dependence of foreign oil? Only if we also produce competitively priced alternative energy and actually reduce total energy consumption.

    "improve our country's economic performance"? By what measures? Certainly giving other countries the economic advantage of being able to produce at lower cost can't give us an economic advantage. Certainly taxing our own businesses and citizens for carbon while others are not taxed, does not convey an advantage.

    If turning to "green" or alternative less carbon producing energy sources conveyed an economic gain, then why wouldn't developing countries gladly jump on board?

    Once we have given them the concession and the advantage, what incentive do they have to jump on board?

    As a mediator, I would ask the question of both sides, what would it take to get you to reduce your carbon emissions?

    I doubt any reality tested answer would be similar to those that Joe proposes.

    History is the only field testing we have of his strategy. When did it work?

    Read more: http://www.hopeandchange.net/2009/12/reciprocity-in-negotiations.html#ixzz0a6wn1KWm
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  2. Thanks for your comment Wallace. You made me realize that I was taking it for granted that people agree that there are a lot of investments we can make in energy efficiency that will pay for themselves eventually. But I'm not saying that every energy conservation measure would improve economic efficiency, only that a lot of them would, which means they are essentially cost-free over the long term. Let me give some examples that might make my point more clearly. To take something small-scale, maybe I should be thinking about installing solar panels on my house. I know that would take a fairly large up-front investment, but the investment will pay for itself eventually because I will save a lot on my electric bills every month. Maybe the solar panels would not pay for themselves for 20 years, though, and maybe I won't live in the house that long and I would have to hope that the resale value of the house would increase enough to justify the investment. So I need to find a way to finance that investment, and I also need to overcome my inertia and my lack of knowledge about solar panels, and my uncertainty that I would get my money back. There is another problem with solar panels, which is that their cost is still fairly high because the market for them is not that large yet. But the per unit cost will presumably come down as mass production of these panels becomes more efficient and demand increases.

    Installing new windows or adding insulation to my house would also probably pay for itself eventually, but again there is a substantial up-front cost and a long time horizon before I would recoup that investment. But the sooner I do it, the better off we would all be eventually, and that is true regardless of what people and businesses in other countries do.
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  3. There are similar problems with transitioning to electric or hydrogen fuel cell vehicles. We have a large investment in a gasoline infrastructure, with thousands of gas stations, refineries, pipelines, trucks, etc., already in place. At some point we need to build an alternative infrastructure because we need to wean ourselves away from oil. (not only because of environmental concerns, but also because oil is getting more scarce). No individual businesses are investing enough in an alternative infrastructure, however, because it would not pay off for them unless everyone else does it too. Which means either the government has to do it, or businesses need to be given more incentives to do it. But the sooner we make this transition to new technology the more competitive we will be. In the meantime, people could just make individual decisions to buy hybrid vehicles, which cost a bit more upfront, but also eventually save money over the life of the vehicle, at the same time as they are reducing carbon emissions.

    A carbon tax, by the way, would not harm our country's efficiency, or put businesses at a competitive disadvantage. First because we would be substituting a tax on carbon for some other kind of tax that we already impose, and second, because the money raised by any kind of tax is still our money. We just decide to spend the taxed part of our money collectively instead of individually. Imposing a carbon tax would have the benefit of reducing consumption of oil, which would lower the price of oil worldwide, which again would increase economic efficiency. We already have a gasoline tax, but it is very low compared to Europe for example. Because of their high taxes on gasoline, Europeans drive smaller cars, and their cities do not sprawl as wastefully as ours do. If we did the same thing, we could make our country more economically efficient, we could reduce income or sales taxes proportionately, and we would emit less pollution. Again, we would not put ourselves at any disadvantage by taking such energy conservation steps, and it wouldn't matter whether other countries did the same thing.

    I'm a believer in negotiated solutions also, and there are a lot of other issues that need to be negotiated in places like Copenhagen, but there are still a lot of things that individuals and businesses and governments can do that would both increase economic efficiency and reduce carbon pollution, and that do not depend on getting other countries to do the same.
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