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Climate change and the problem of social cost [1]

['William K. Jaeger', 'Department Of Applied Economics', 'Oregon State University', 'Corvallis', 'Oregon', 'United States Of America']

Date: 2023-10

Abstract This paper assesses the prospects for climate stabilization from both positive and normative economic perspectives, and with an eye to the conditions necessary for collective action across the three domains: domestic, international, and intergenerational. While it is well-established that international freeriding and transaction costs pose major impediments to successful environmental agreements, this analysis identifies the intergenerational domain as the source of intractability due to long delays between bearing the mitigation costs and enjoying their eventual climate benefits. This lag causes the net benefits for median-aged voters’ to be negative over their expected remaining lifespans. Drawing from several Integrated Assessment Models of the benefits and costs of climate stabilization actions, the analysis concludes that programs of domestic and international climate actions will be hopelessly stymied by the failure of the actions to pass individual and collective rationality tests. However, these dire findings leave the door open to the possibility that some other change in circumstances might undercut this conclusion. In particular, the assignment of rights has that potential. Indeed, these circumstances echo the canonical insights from Ron Coase’s observation in The Problem of Social Cost (1960) that the arrangement of rights can have large effects on welfare when transaction costs for an externality are high. Current climate rights amount to a de facto open access right to pollute the atmosphere. Were a right to a stable climate for both for current and future generations recognized, added weight or leverage would add potency to support for climate stabilization policies and international agreements. These legal changes could represent a counterweight to offset the inadequacy of support from the current self-interested generation. Indeed, some recent climate litigation argues that many nations’ constitutions already encompass an affirmative right to a stable climate, a proposition that could represent a powerful means to break the climate impasse.

Citation: Jaeger WK (2023) Climate change and the problem of social cost. PLOS Clim 2(9): e0000287. https://doi.org/10.1371/journal.pclm.0000287 Editor: Pedro Fidelman, University of Queensland, AUSTRALIA Published: September 20, 2023 Copyright: © 2023 William K. Jaeger. This is an open access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. Data Availability: Data and models deposited at Dryad repository: DOI https://doi.org/10.5061/dryad.18931zd21. Funding: The author received no specific funding for this work. Competing interests: The author has declared that no competing interests exist.

1. Introduction The climate change problem is an externality problem, one where the success of a corrective intervention will depend on the benefits and costs of collective action and their distribution among groups. We must consider a) the benefits of a climate agreement net of their mitigation costs, and b) the transaction costs necessary to implement and maintain a climate agreement. Success depends on how net benefits compare to transaction costs. Our assessment, however, should not stop there. We also know from economics that an externality problem is a “Coasian” problem, one where the magnitude of transaction costs can elevate the importance of the assignment of rights. As Coase emphasized in The Problem of Social Cost (1960), absent the possibility of successful agreement due to high transaction costs, welfare outcomes will depend on existing or de facto entitlements or rights. Greenhouse gas emissions generate spatial and temporal externalities at a scale and timeframe posing unprecedented challenges for negotiating agreements. If the coordination obstacles and transaction costs are insurmountable, then the assignment of rights will determine the level of damages, and this can have large welfare implications [1]. This point has vital relevance for our current climate predicament. Assessing the prospects for climate stabilization therefore calls for a broad legal-economic approach, one encompassing a multiplicity of institutional structures that may advance or hinder those prospects–in part because of the way they affect transaction costs The first key concept, the net benefits from a climate agreement, informs policymakers and the public about the merits of alternative actions. Understanding when and where costs and benefits will occur is critical because the impediments to climate change policy vary greatly across national, international and intergenerational domains. The second key concept, transaction costs, includes the costs of negotiating an agreement, including designing, informing, and bargaining over the details [2]. Transaction costs also include the costs of implementing, administering, maintaining, monitoring, and enforcing an agreement. The challenges to negotiating a climate agreement are many. They include high uncertainty about the nature and magnitudes of the impacts: greenhouse gas emissions are uniformly mixed in the atmosphere whereas damages are highly location specific across 195 sovereign jurisdictions. Moreover, there are very long lags between emissions and their eventual impacts. Collective action for climate stabilization will therefore require nearly all nations to limit emissions continuously over unprecedented time scales. The challenges are exacerbated by heterogeneity across countries in terms of incomes, demographics, vulnerability, etc. Despite attempts over the past 25 years, there is scant evidence of effective policies, declining emissions, or a credible commitment to a pathway toward climate stabilization. Current levels of climate ambition are not on track to meet Paris Agreement goals [3], and existing national pledges would be insufficient to achieve the goal of keeping global temperature rise below 2° C [4]. Indeed, stabilizing the climate will require rapid adjustments that go significantly beyond the Paris Agreement. This situation has triggered urgent warnings that the window of opportunity for limiting the extent of climate change will be closing over the next two decades [5]. To assess the prospects for successful climate policy, the current analysis draws on the body of pertinent theoretical literature, empirical studies, and integrated assessment models on the costs, benefits, and transaction costs for climate change policies across three domains: domestic, international, and intergenerational. The analysis finds that while domestic transaction costs appear generally manageable for purposes of adopting climate policies, international agreements face major obstacles (and dubious prospects) due to high transaction costs and augmented freeriding incentives that create major obstacles for international environmental agreements. However, it is the intergenerational domain that is most problematic. Due to the long lags between CO 2 emissions reductions and their mitigation benefits, the present value of net benefits for climate action is negative for a majority of adult individuals over their remaining expected lifespans. Specifically, based on leading global integrated assessment models, the net benefits of climate stabilization policies for most adults over their remaining lifespan are negative, so that majorities cannot be expected to agree to actions which makes them worse off. Because negotiating with future generations is impossible, this undermines support for domestic action, which in turn undermines the already questionable prospects for international agreements. This stark conclusion, however, reflects the existing underlying foundation of rights, and other institutional structures. A different set of institutions and entitlements could give rise to quite different outcomes and opportunities: So, how would alternative entitlements affect climate stabilization prospects? That question is central to Nobel Laureate Ronald Coase’s seminal paper, The Problem of Social Cost (1960) [1], a paper that not only secured his Nobel Prize in Economics but also marked the start of the modern school of law and economics [6]. Coase observed that when transaction costs associated with an externality are so high that successful bargaining and transacting is not possible between polluter and pollutee, the preexisting assignment of these reciprocal rights (to one party or the other) is decisive and can have large adverse consequences on welfare. In such situations, what Coase means by the “problem of social cost” involves choosing the property right assignment “to avoid the more serious harm” [4, p.2]. Some readers may be puzzled by this characterization of Coase’ main idea. The commonly recounted and mistaken description of the “so-called Coase Theorem” [7] stems from focusing on preliminary proposition Coase states with little real world relevance; it is the exception that proves the rule. Coase himself was frustrated by the pervasive misreading of his central insight [8, 9]. In the case of climate change, the absence of recognized rights to a stable climate implies de facto open access to polluting the atmosphere, allowing unfettered disposal of greenhouse gases. If, by contrast, current and future generations had the right to a stable climate (as asserted in some climate litigation cases), this would likely strengthen governments’ abilities with added justification and obligations to act and overcome the limited support among the current generation. Recent climate litigation is consistent with this Coasian framing; arguing that nations’ constitutions and statutes already assert or imply the right to a stable climate, for example on grounds of fundamental rights or public trusts [10]. Some courts have responded by rulings that climate change is a political question, and thus not appropriate for the judiciary. Such myopic rulings fail to recognize the stark reality imposed by the intergenerational nature of the climate externality problem, one which thwarts current policy efforts’ chances of success. Short of a suspension of the laws of rational human behavior, successful policies and treaties to stabilize the climate under the existing arrangement of rights are unattainable–as thirty years of trying has demonstrated. The totality of the evidence, however, suggests that were a right to a stable climate sustained, the added leverage could significantly raise prospects for collective action–and “avoid the more serious harm.” To provide some benchmarks and add structure to the methodology, a series of arguments, premises, and conclusions are stated at appropriate junctures throughout. The paper is organized as follows. Sections 2–4 describes and evaluate the challenges to collective action negotiation and agreements in international, domestic, and intertemporal domains, respectively. Section 5 examines evidence of progress to date. Section 6 turns to the question of rights, namely climate rights and related litigation. Section 7 concludes.

2. International agreements Successful collective action to stabilize the climate will require agreements within nations, ones that also match agreements between nations. We begin by looking at the international realm. The literature on international environmental agreements (IEAs) includes studies addressing economic incentives and strategic behavior with game theoretic frameworks. Prisoner’s dilemma-type models evaluate nations’ potential willingness to cooperate. Self-enforcing treaties are taken to be those that satisfy individual rationality (each country is made better off by cooperating) and collective rationality (all countries together are made better off). The central finding in this literature is that freeriding dominates and too little mitigation of adverse environmental effects will occur [11]. For a survey of the IEA literature see Marrouch et al. [12]. These findings holds for global public goods where coalition-building approaches achieve only small and fragile coalitions unlikely to produce substantial gains compared to the non-cooperative outcome; stable climate coalitions tend to have few members [13]. This “small coalition paradox” holds for a wide range of models where the number of signatories, the terms of the agreement, and the actions of non-signatories are endogenously determined. Results show that when the difference in net benefits between cooperation and noncooperation is small, an IEA may sustain a large number of signatories but achieve minimal collective gains; when the net benefits between cooperation and noncooperation are large, full cooperation can only be sustained by two or three countries. Empirical evidence suggests specific national interests can matter, but these can be unclear and unstable in environmental areas where knowledge is uncertain and complex, which can hinder agreements. Global contexts give every participant in negotiation real bargaining leverage and potential veto power [14]. Domestic political pressures can push certain governments toward leadership roles, although such roles usually reflect both those pressures and the nature of the environmental problem [15]. Power differentials can have large influences on negotiations and outcomes. Environmental actions that are ecologically unambitious may face strong opposition if they impose high costs on influential or powerful actors. This can occur both internationally and domestically. More powerful nations or groups of nations can force agreements or make membership more attractive than non-membership [16]. General economic or military power or more issue-specific power may influence outcomes if agreement is not reached [17]. Few observed examples exist where countries took actions greater than the noncooperative levels. While the Montreal Protocol is sometimes raised as a counterexample, estimates suggest that the differences in net benefits between cooperative and unilateral action by the U.S. were not large, implying less was achieved than commonly claimed [11, 18, 19]. Starting from a small IEA coalition, the gains from joining do not increase as the coalition grows, but the incentives to freeride do [20]. The structure of climate change as a global public good makes it particularly susceptible to free-riding even where environmental change threatens catastrophic damages. Only if the threshold that triggers climate catastrophe is known with certainty can treaties be expected to easily coordinate countries’ behavior to avoid the threshold [21]. 2.1 Insights from simulation models The prospects for successful international agreements depend on the magnitudes and distributions of benefits and costs, over time, among nations, and within nations. The main tool for evaluating these impacts has been Integrated Assessment Models (IAMs) which couple economic models of the human system with global general circulation models of the climate system [22]. IAMs produce estimates of climate policy mitigation benefits and abatement costs, and some characterize their distribution over time and by region or country. In this and later sections, three IAMs are employed to address empirical questions with a range scenarios. In this section, the regionally-disaggregated RICE-2010 model [23, 24] is used. RICE-2010 includes regional differences in climate damages and abatement costs based on regional studies and differences in the sectoral composition [25]. The introduction of carbon prices bring about changes in emissions, abatement costs, climate damages, as well as trade adjustments. The optimal path in the RICE-2010 model is produced with a global carbon tax rate rising from $63/tCO 2 in the 2020s to $243/tCO 2 in the 2070s. Both RICE and DICE (Dynamic Integrated Climate-Economy) models have been used investigating the social cost of carbon and to estimate welfare for alternative future trajectories [26, 27], and to estimate welfare for alternative future trajectories [28]. Summaries for the models, scenarios, and data are available from Dryad repository (DOI https://doi.org/10.5061/dryad.18931zd21). In lieu of presenting output for each of 12 regions, results are summarized by combining countries into two groups. The net welfare gains from climate cooperation and non-cooperation are presented in Fig 1. PPT PowerPoint slide

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TIFF original image Download: Fig 1. Net benefits for climate cooperation characterized as a two-player Prisoners’ Dilemma game (present value in $ billions, 2020s - 2100s). Group A includes USA, EU, Japan, Russia, Eurasia, Other High Income, Other Asia; Group B includes China, India, Africa, Latin America. First amount in each box is for Group A. Results are for the optimal policy scenario, RICE-2010 model. https://doi.org/10.1371/journal.pclm.0000287.g001 The results indicate global net benefits from cooperation of about $500 billion through the first decade after 2100 (These estimates rise dramatically, doubling to $1 trillion when including the time through the 2120s). The results also reveal how cooperation increases the incentive to withdraw from the cooperative agreement. The gains from withdrawing from the cooperative agreement (while all others adhere to the climate policy) is more than double the payoff from cooperating. Argument 1: Stabilizing the climate is achievable with a combination of national policies and international agreements under existing legal, institutional, and technological means. Premise 1.a : The welfare gains or net social benefits from global collective actions to stabilize the climate are estimated to be very large, and conversely the costs of inaction may be catastrophic. This establishes that it is strongly in humanity’s collective interest to act to stabilize the climate. Premise 1.b : Nations act in their own self-interest, reflecting individual and collective rationality. Therefore, positive expected net benefits are necessary conditions for implementing binding climate change agreements. (This is not a sufficient condition, however, given the powerful free rider incentives recognized in the literature.) 2.2 Transaction costs Transaction costs reflect whatever necessary actions and institutional arrangements must be employed to give participants assurances that the agreement will make them better off. If the distribution of benefits or costs are uneven, heterogeneous requirements, special arrangements, or transfer payments may be negotiated to redistribute expected net benefits. As a practical enforcement matter, some have stressed the need to combine monitoring and verification of compliance tied to triggering of economic sanctions [29], whereas others have argued for compliance management using diplomacy, norms, and rewards [15]. In general, negotiating assurances for a global public good becomes more challenging with uncertainty about the science, heterogeneity of preferences and perceptions, asymmetric information about resource use and compliance, and uncertainty about violations and new entry; each of these increases transaction costs [19]. To overcome freeriding incentives, side payments or other forms of compensation are possible to spread net benefits so that all signatories gain from participation. In practice, monetary side payments are rarely observed [30], and efforts to spread net benefits among potential signatories does not eliminate the strong incentive to free ride. One approach is “issue linkages” or multi-issue bargaining to achieve joint benefits in multidimensional negotiations [31]. Such arrangements, however, can also increase complexity and create unintended adverse consequences [32, 33]. For climate change agreements, trade sanctions and tariffs on non-adhering countries have been proposed [18, 20, 34]; Nordhaus concludes that some form of external sanction is necessary for effective international agreements, proposing a “climate club” whereby signatories threaten trade sanctions on nonparticipants. Such sanctions are required to induce countries to participate in robust climate agreements, and that such tariff threats could be effective, according to Nordhaus. The transaction costs associated with such schemes are generally omitted from both theoretical and IAM analyses, such as monitoring of cooperation and compliance with established standards of proof, procedures for deliberation, and effective penalties [32]. Indeed, in an IEA, punishing non-compliance is a public good for compliant countries, and this creates a secondary free-rider problem, one where incentives to punish violations are weak, thus creating a need for centralized enforcement [35]. 2.3 Institutions for self-organized cooperation The obstacles facing nations for international cooperation have parallels with resource users at local geographic scales, such as users of fisheries, forests, and aquifers. The literature on self-organized common-pool resource management regimes has found that success is possible when the institutions can generate benefits from cooperation, net of their transaction costs, and that transaction costs will vary depending on the nature of the common-pool resource, the nature of the user groups, and the nature of the institutions designed to achieve a cooperative outcome [36, 37]. This literature has uncovered many insights about resource systems with the ability to successfully self-organize [36, 38, 39], and they are relevant to similar global resource cooperation problems despite differences in scale, diversity in economics and culture, and the sovereignty of nations [40–42]. Key factors affecting the scale of transaction costs and the prospects for success have been investigated by Ostrom [43], and Libecap [19], among others. Ostrom identifies attributes associated with successful self-organization to include: (1) resource systems that covers a small, contained spatial scale, (2) has a small number of users, (3) is relatively stationary or immobile, (4) has predictable dynamics, (5) has recognized and established collective choice rules, (6) users are led by respected, entrepreneurial and educated leaders, (7) users share common moral, ethical standards and beliefs as the basis for trust, (8) the productivity of the system is observable, including stock-productivity relationships, and (9) there is knowledge of the social-ecological system and the impact of their actions on it. Libecap [19] identifies four factors that overlap with one or more of Ostrom’s attributes. He highlights scientific uncertainty (overlaps with Ostrom’s #1, 3, 4, 8, and 9), varying preferences and perceptions across heterogeneous populations (overlaps with Ostrom’s #2, 7, 8, and 9), asymmetric information (overlaps with Ostrom’s # 1, 2, 4, 5, 8, and 9), and the extent of compliance and new entry (overlaps with Ostrom’s #5, 6, 7, and 9). Although Ostrom studied community groups and Libecap studied IAMs, the insights are similar. Libecap concludes that with greenhouse gas emissions all four factors place climate change in the high transaction cost category. Ostrom’s attributes leads to similar conclusions: the first seven of which unambiguously work against self-organized climate management. For the last two involving public awareness, the evidence is mixed. International surveys find a significant fraction of populations see climate change as a “major threat”, whereas 20% see it as a minor threat and 9% say it is not a threat [44]. However, in a survey of 23 large high and middle-income countries, in only 3 countries (Brazil, Mexico, Turkey) did a majority of respondents believe that human activity was “mainly responsible” for climate change (https://yougov.co.uk/topics/yougov-cambridge/survey-results). In the U.S in 2019, less than half of Americans (46%) were “sure” that global warming is happening, and only 44% believe they will be harmed by global warming. Overall, the sum of evidence raises profound doubts that a global climate change agreement can be successfully negotiated and implemented at all, or in a timely manner to stabilize the climate. The number of countries involved and the complex system of side payments and tariff threats that would be necessary, imply extremely high transaction costs. Premise 1.c : The range of institutional mechanisms proposed as solutions to counteract freeriding incentives in international environmental agreements (e.g., transfers, side payments, issue linkages, tariff threats & climate clubs) offer qualified encouragement, but only by implicitly assuming positive net benefits (that premise 1.b is accepted).

3. National agreements International agreements are negotiated by authorized representatives from each participating sovereign nation, and agreed to after taking account of a multitude of heterogeneous domestic national interests, each benefiting or being harmed in different ways at different times by an international agreement due to the agreement’s structure, mechanisms, and associated transaction costs [15, 45, 46]. In the case of climate policy, national governments are central actors, taking actions to lower domestic carbon emissions in line with negotiated agreements. However, the prospects for a successful agreement depend on overcoming a number of significant impediments, ones due in part to the nature of climate change but also the nature of domestic and international political processes [15]. Before describing some of these impediment, we set out a model of the median voter rule. 3.1 Median voter rule A common way to investigate domestic decision making is to consider outcomes under majority voting for which the “median-voter rule” is a natural starting point for positive analysis. Intuitively this suggests that policies supported by the median voter would potentially have sufficient support to be adopted (with certain assumptions). In realistic settings the median voter rule is likely to represent a minimum requirement for successful policy. It has nevertheless had some success in explaining a substantial range of policy outcomes [47]. Individuals’ support for a policy is likely to depend on real or perceived social damages from climate change net of expected control costs. We define net benefits for a climate policy j in a given country as the present value of reductions in climate damages net of abatement costs for all n voters (b ij , i = 1-n), denoted as the vector of individual benefits of the policy [1] A socially beneficial climate policy implies B j >0, and with some additional assumptions the median voter’s net benefit will also satisfy . A number of factors, however, likely make it more difficult to enact climate policies even though they pass the median voter test based on experts’ consensus estimates of their expected net benefits. Five factors related to individual preferences and beliefs are described here. Two of these factors involve individuals’ uncertainty: (1) relatively high uncertainty about the magnitude, timing, and incidence of reductions in climate damages, (2) relatively lower uncertainty about the magnitude, timing and incidence of abatement costs on them personally. U.S. polls find less than half of respondents think global warming will harm them, their families or communities [48]. But for climate change mitigation costs, individuals are more familiar with how a carbon tax will affect them immediately in terms of consumer prices, or for individuals whose livelihoods are tied to fossil fuels, such as energy, automotive, fertilizer, and cement [49, 50]. By contrast, individuals who would ultimately gain due to emerging opportunities in renewable energy or other sectors are unlikely to be aware of, or confident in, these future gains for themselves. Two additional factors involve individuals’ uncertainty about actions at the policy level: (1) uncertainty about one’s government’s long-term commitment to a specified abatement and climate stabilization policy trajectory, and (2) uncertainty about other countries governments’ long-term commitment to a specified climate policy trajectory. Climate stabilization will require nearly all nations to implement large emission reductions reliably over many decades. Yet lack of trust in government is ubiquitous [51], which in turn creates negative feedback: low confidence in governments’ commitments will lower voters’ expected net benefits, which in turn weakens support for the government’s policy, reinforcing once again lowered commitments. The fifth factor involves the psychology of evaluating gains versus losses. There is strong evidence from prospect theory that most people react more strongly to a prospect of a loss than to a prospect of a gain [52]. As such, the losers’ (near term) influence over climate change policy will tend to be disproportionately large compared to the winners from mitigation policy (which are also far in the future). This asymmetric weighing of gains and losses will further stack the deck against support for climate policy. We can incorporate these five factors and express an individual’s willingness to pay, for policy j as [2] where b ij reflects the best available science and economics under full implementation. For an individual i, the values of each reflect their subjective markdown or discount of the consensus estimates of net benefit due to each of these five factors, where 0<α<1. Collectively, of course, there may be a normative option value for long-term climate risk and irreversibility that would be reflected in the social optimum [53]. 3.2. Variance from a median voter rule In addition to these individual-level considerations there are other domestic political factors. Governments tend to be more preoccupied with short-term consequences and, in particular, the costs imposed on its primary constituencies. Political outcomes will be influenced by the range and configuration of actor preferences, the distribution of power and influence, and the decision rules for making and implementing policy. The overall effect of these factors can often overtake the process such that the outcomes fall short of delivering what the intended policy goals require [35]. First, realistic outcomes will diverge from the median-voter rule in settings where particular domestic coalitions have significant influence [54]. Special interest groups and those with vested interests from existing policies will seek to maintain the status quo, and more political effort is required to change a policy than to continue one. The more multi-faceted a decision rule is, the more easily it can be blocked [35]. Second, due to the nature and costs of lobbying governments, policy measures most easily adopted are ones where benefits are concentrated but where the costs are widely dispersed or indeterminate [55]. Unfortunately, environmental policy generally speaking is configured with concentrated costs and dispersed benefits. This is especially true for climate policy where effective climate mitigation measures impose costs in the short-run to specific industries and activities, while the benefits will be far in the future and distributed widely in less predictable ways. Third, the problem of time inconsistency involves the likelihood that the best policy choice at one point in time may be at odds with the preferred choice by future policy makers at a later date. Deviating from a desired path, or delaying action, at a given time involves contemporaneous tradeoffs that likely give less weight to long-term strategic pathways [35]. Such problems are extreme for climate change policy given the decades over which effective policies must be maintained. Time inconsistencies problems are heightened when governments themselves change through elections, coups, or civil wars, and individuals’ trust in them will depend in part on whether governments can make long-term climate policy commitments over multiple decades. It’s instructive to note that between 1990 and 2015 the median durability of governments globally was estimated to be 12 years based on the “polity index,” a measure of the number of years without a significant change in the index (based on a scale from autocratic to democratic) [56]. Fourth, the nexus of domestic and international negotiation creates strong incentives to freeride internationally, as described in section 2, and sometimes referred to as the “anarchy problem” [35]. Taken together these nine factors affecting individual preferences and domestic political outcomes compound the divergence between the level of net benefits needed to pass the median voter test, and the minimum level sufficient to successfully enact climate policies. However, there is still one additional crucial consideration: that the net benefits accruing to a median voter will be only those benefits that occur during their remaining expected lifetime. Premise 1.d : People act in their own self-interest, reflecting individual rationality. Therefore, an expectation of positive net benefits overall, or for pivotal coalitions, is a necessary condition for nations to agree to implement climate stabilization policies. (This is not a sufficient condition given the many interest groups, political factions, and distributional considerations. However, domestic legislative bargaining could, in principle, negotiate arrangements that gain support across constituencies provided the necessary condition of positive net benefits–a potential Pareto improvement–is satisfied.)

5. Evidence of progress This sobering assessment implies we should see little progress toward slowing climate change. Negotiations for a global climate agreement, begun in 1990, resulted in the UN Framework Convention on Climate Change in 1994, the Kyoto Protocol in 2005, and the Copenhagen Accord in 2009. In 2016 these efforts were supplanted by the Paris Agreement which established a system of nationally self-determined, non-binding commitments (NDCs) as a framework. However, current NDCs will not hold global warming below +2° C as proposed, but would result in warming of +2.6° to +3.1° C by 2100 [4]. Moreover, the Paris Agreement does not require reporting on progress toward meeting these NDCs until 2024. Nevertheless, an increasing number of countries have implemented climate mitigation polices. Carbon pricing began with carbon taxes in Finland (1990), Norway, Sweden (1991), and Denmark (1992). As of 2020 there were 61 carbon pricing initiatives including 31 emissions trading systems and 30 carbon taxes [64]. Yet despite a growing list of countries with market-based policies, the aggregate incentives represented by these policies are insignificant: the share of emissions covered by these policies is typically half or less of the national total; the effective carbon prices are generally quite low (half are below $10/tCO 2 ) [64], and the countries participating are mainly small, low population, high-income countries. From 1990 to 2011, the global average effective carbon price rose gradually to about $0.50/tCO 2 . It then rose to about $1.20/tCO 2 by 2017 based on data from the World Bank and other sources. One estimate calculates that the global average carbon price in 2019 was about $2/tCO 2 [65]. The rate of increase over the past decade has been about $0.10/year (in some cases, initial prices and recent price levels were used to interpolate estimates for intervening years). The trend in global average carbon price is compared in Fig 4 to optimal carbon prices, the social cost of carbon from DICE, RICE and PAGE-ICE models, and other estimates of the preferred carbon price trajectories [22]. The mid-range of these trajectories suggest current global average carbon prices should be $40–60 per ton CO 2 and rising $3/year. The actual effective global average carbon price is 95% below that target. In fact, the gap between the actual and desired levels is growing each year by nearly $3, or by an amount 50% higher than the total level achieved over the past 25 years. PPT PowerPoint slide

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TIFF original image Download: Fig 4. Global effective carbon prices: Actual versus needed trajectories. Note: Global effective carbon price, author’s calculations. https://doi.org/10.1371/journal.pclm.0000287.g004 This evidence excludes regulatory or other policies that may have been implemented. But there is no evidence of a decline in global emissions (prior to the 2020 COVID-19 pandemic), which grew 1.4% in 2017 [66] and 2.4% in 2018. One indicator of climate policy effectiveness would be the carbon intensity of output, the ratio of CO 2 emissions to real GDP. The global trend in CO 2 emissions/GDP has been declining since the 1960s, but with no evidence of an acceleration of the trend since the 1980s and 1990s except in China. When China is excluded, there is no evidence of acceleration since implementation of either the Kyoto or Paris agreements [67].

6. Climate rights and litigation In the absence of well-defined rights to a stable climate, the de facto or effective right is the right to pollute the atmosphere. Future generations who mainly suffer the consequences of this de facto right cannot negotiate or pay current median-aged voters to reduce carbon emissions. As a result, insufficient incentives exist for today’s society to limit CO 2 emission. National incentives come up short, which eliminates the prospects for international agreements. In such settings Coase suggested that rather than focusing on negotiating policy (“getting prices right”) one might achieve more by focusing on rights (“getting entitlements right”) [1, 7], because the assignment of rights to an externality can have large consequences for social welfare. Were rights to a stable climate assigned to all individuals, current and future, this could alter the calculus for stabilizing the climate. Legislation to create such a right, however, would face opposition similar to that for other climate policies. Legislating rights would still require mechanisms to enforce limits on emissions. To the public, the mitigation costs and future climate benefits of establishing a right would look similar to those for climate policy. There would be no reason to expect greater success under the guise of a new right than for a carbon tax. Suppose, however, that rather than a new right, it was determined that under current law such a right already existed. What if litigation successfully argued that, when properly interpreted, existing constitutions and laws already encompass the right to climate stability? Such claims are in fact not new. Climate litigation has seen over 1,600 cases filed since 2005; with more than two-thirds in the US, and more than three-quarters brought against governments [68]. To be clear about the reasoning we summarize a second argument here: Argument 2: In light of the conclusion to reject Argument 1, stabilizing the climate may become achievable with changes in existing legal, institutional, or technological circumstances. Premise 2.a : The intergenerational distribution of benefits and costs for climate stabilization policies bestow a disproportionate share of costs on current generation and a disproportionate share of benefits on future generations. Support for climate policies is therefore concentrated among future generations (and children). Premise 2.b : Negotiating, bargaining, or transfer payments to redistribute some of those benefits from future generations to the current generation is impossible. A growing body of litigation is aimed at pressuring governments for stronger action [69], and a trend toward cases that include human rights and public trust arguments in climate change litigation, and there is evidence of a growing receptivity of courts to these arguments [10]. Human rights are central in Urgenda Foundation v. Kingdom of the Netherlands, pressing for aggressive national climate change mitigation policies. In a final ruling, the Supreme Court of the Netherlands found that the state is obligated to reduce greenhouse gas emissions from its territories in proportion to its “fair share” of the EU responsibility under the European Convention on Human Rights. The court’s ruling noted two important factors. First, while there may be uncertainty about when and where climate risks will materialize in the Netherlands, without action to reduce emissions in the near term, hundreds of thousands of victims could be at risk in the second half of this century. Second, the court noted that the fact that these risks were uncertain and would only become apparent in the future, does not represent an obstacle for applying the European Convention on Human Rights [68]. The public trust doctrine asserts a duty of the state to act as trustee for the interests of present and future generations by protecting public trust resources. Cases applying this doctrine to climate change have met with some success in Ukraine, Philippines, and Pakistan [69]. Juliana v. United States is a suit brought on behalf of a group of children charging that US government’s policies violated their fundamental constitutional rights to life, liberty, and property, breached the government’s constitutional public trust obligations, violated due process guarantees, and discriminated against them in violation of equal protection principles [70]. The claim of a violation of equal protection before the law is made because, as youths, they are being denied the fundamental rights afforded to prior generations) [69]. The Juliana plaintiffs seek a judicial order requiring the government to “prepare and implement an enforceable national remedial plan” to stabilize the climate system based on the best available science [70]. The case was dismissed in 2020 by the US Ninth Circuit Court of Appeals by a divided three-judge opinion, finding the issue to be unsuitable for judicial determination [68]. In 2021 the plaintiffs filed a motion to amend their complaint. Studies of public interest litigation consistently find that it is an indispensable strategy of social change [71], and this appears to be the case for climate change. Indeed, litigation should be seen as a tool that is broadly complementary to legislative actions: in some cases legal action may be taken to compel governments to implement more ambitious policies; in others to fill enforcement gaps [68]. Both legislative tools and litigation efforts can be strengthened from the leverage created by the other. Indeed, this kind of legal ruling can embody one of the solutions recognized to cope with time inconsistency, namely “tying hands” [72] by requiring current and future decision-makers to abide by a specific legal imperative rather than giving in to short-term political pressures. The court’s institutional legitimacy can carry a larger systemic effect than their enforcement powers might suggest [73]. Successful climate litigation in one judiciary creates the prospect for decisions being influential on courts in other countries [10]. The novel application of the public trust doctrine in the Juliana case has been followed by a groundswell of international cases taking similar approaches [69]. Indeed, national courts are playing an increasingly important role in developing international law aimed at protecting human rights and the global environment; these developments, as well as evidentiary and strategic improvements in climate litigation show progress [74–76]. The low success rate for climate litigation may at first glance appear to resemble the very limited progress on legislation and international agreements. There is a difference, however. First, from rejection of Argument 1 the analysis above concludes there are insurmountable obstacles. By contrast, courts have the capacity, and in many cases the societal responsibility, to look beyond the narrow perspectives reflecting individuals’ uncertainties and lifespans, as explained in the ruling in Urgenda Foundation v. Kingdom of the Netherlands. Second, as the number of successes has increased, there is an ability to draw lessons and identify recipes for success. In one recent analysis three high-profile wins in climate cases (in Australia, Germany, and the Netherlands) were found to show how the cases combined careful, strategic planning, with legal imagination and innovation” to achieve success and have broader impacts. Such cases offer lessons and important guidance for future case design [77]. Elsewhere observers are finding that international courts and the application of human rights frameworks are increasingly being used to hold industry and government officials accountable for greenhouse gas mitigation [78]. Premise 2.c : Were a right to a stable climate for both for current and future generations recognized, added weight or leverage would apply in support of climate stabilization policies and international agreements. These legal changes could represent a counterweight to partially offset the inadequacy of support from the current self-interested generation. Conclusion for Argument 2: By Premise 2.c we conclude that legal recognition of climate rights would increase support for climate actions beyond what is supported by the current generation’s self-interests. The effect of this is uncertain, but with this change a positive prospect for climate stabilization (Argument 1) cannot be rejected.

7. Conclusions The absence of the right to a stable climate implies a de facto right to pollute the atmosphere, and as such this international and intergenerational externality creates a unique challenges for collective action. Despite decades of cumulative evidence suggesting enormous societal benefits from abatement policies, including the possibility of avoiding globally catastrophic damages, the long lags between enduring abatement costs before enjoying their consequent mitigation benefits cause the net benefits from climate action to be negative over the expected remaining lifespan of median-aged voters. Being unable to bargain with future generations, the current generation faces climate policy options that make most people worse off, and hence lack sufficient support. These facts undermine the already dubious hope for an international climate agreement–save for some deus ex machina. Internationally the free rider problems with environmental agreements pose severe challenges to the prospects for success, even without these intergenerational considerations. And while some researchers propose mechanisms to overcome the international free rider challenges (such as side payments, issue linkages, or tariff threats by “climate clubs”) [20], all such proposals make the implicit assumption that individuals gain positive net benefits during their lifespans from climate policy (i.e., that individual and collective rationality requirements are satisfied). Because the assumption of positive net benefits during most individuals’ lifespans is rejected, the argument that stabilizing the climate is achievable with a combination of national policies and international agreements under existing conditions is also rejected. This result, however, leaves the door open to the possibility of some modification in existing conditions that might change the conclusion. One condition in particular is the assignment of rights. Were a right to a stable climate for both for current and future generations recognized, added weight or leverage would apply in support of climate stabilization policies and international agreements. These legal changes could represent a counterweight to partially offset the inadequacy of support from the current self-interested generation. This legal leverage may be the only remaining tool at society’s disposal to avoid large welfare costs from a changing climate. For economists, policymakers, and the courts, the message must be that, taken alone, continued effort at treaty negotiations and domestic climate policies cannot be expected to succeed. But policy and law may have complementary strengths. In the Urgenda v. Netherlands case, the Supreme Court of the Netherlands ruled that the timing of climate change risks, no matter how far in the future, did not prevent them from falling within that scope of human rights law. In addition, the court ruled that uncertainty surrounding the how or when specific risks might materialize was not a legitimate obstacle to applying the law. In short, the main obstacles for gaining public support of climate policy–delayed benefits beyond the current generation’s lifespan, as well as high uncertainty–could be turned aside by the courts. It may be especially critical, however, that other courts understand the central pertinence of Coase’s observations and what the analysis here affirms. It is unclear whether many courts will recognize these unique circumstances. In the ruling in Juliana v. United States [79], the court concluded that the plaintiffs’ case “must be made to the political branches or the electorate at large.” The court’s naïve confidence that such matters can be addressed in the political branches overlooks the unique nature of the problem: future generations do not vote and cannot lobby Congress on their own behalf. This represents a unique and potentially powerful opportunity to recognize the public’s right to a stable climate. This recognition of climate rights would increase support (including legal mandates) for climate actions beyond what is reflected in the current generation’s self-interests. The effect of this is uncertain, but with this change a positive prospect for climate stabilization cannot be rejected. Moreover, a growing body of litigation and scholarly legal work offers the encouraging possibility that if a few national judiciaries decide cases affirming a right to a stable climate, their influence in other countries, either by legal precedent or with policies and trade leverage, could further influence the international negotiation landscape. Save for a technological renewable energy breakthrough, it may be up to nations’ high courts and constitutions to provide the clout needed to successfully address the climate crisis.

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[1] Url: https://journals.plos.org/climate/article?id=10.1371/journal.pclm.0000287

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