Section V Policy and Economic Issues © 2005 by Taylor & Francis Group, LLC 641 26 Policy and Economic Issues Dealing with Global Warming G. EDWARD SCHUH CONTENTS 26.1 Global Warming as an International Policy Issue 642 26.2 An Optimal Degree of Global Warming? 644 26.3 Toward International Cooperation 645 26.3.1 The Kyoto Treaty as a Starting Point 645 26.3.2 The Broader Policy Perspective 646 26.3.3 Food Security 647 26.3.4 Geographic Variability 649 26.4 A New Policy Perspective 650 26.4.1 Strengthening the Knowledge Base 650 26.4.2 Strengthening Global Institutional Arrangements 651 26.4.3 Devising an Effective Incentive System 652 26.5 The Potential for Disciplinary Synergism 653 26.6 Concluding Comments 654 © 2005 by Taylor & Francis Group, LLC 642 Schuh Acknowledgments 655 References 655 Debates about global warming have tended to be rather intense. The contributions to this volume have, however, moved beyond the rather frustrating debates about causes of global warming, and have sought instead to improve our understanding of such issues as the consequences of any warming for agricultural and terrestrial productivity, the potential contributions of carbon sequestration to reducing global warming, and the effects of mitigation efforts expected at the farm level. We are offered a cornucopia of scientific analyses and evidence on these issues, together with some constructive debate. It is important to address the policy and economic dimen- sions of this subject. Both aspects have received too little attention in the discussions of global warming. It is true that some of the economic costs and implications have received attention in recent years (see, e.g., Nordhaus, 1994), but eco- nomic policy issues have still received only limited attention. Technological solutions to the problem have also received some attention, as evidenced in the contributions to this vol- ume, but even then, the range of alternatives considered has been rather limited. This chapter has three main focuses: (1) global warming as an international policy issue, with important implications; (2) some optimal degree of warming or temperature change as a matter for policy analysis; and (3) international cooper- ation in a world of uneven scientific capability, uneven insti- tutional development, and uneven impacts from projected global changes. This discussion will lead to certain conclusions for policy consideration. 26.1 GLOBAL WARMING AS AN INTERNATIONAL POLICY ISSUE We should begin by noting that global warming is, by defini- tion, a global problem. Because it extends beyond national © 2005 by Taylor & Francis Group, LLC Policy and Economic Issues Dealing with Global Warming 643 boundaries, it must be addressed by global policy measures. The fashioning and implementation of global policy measures is a novel challenge in that it implies the need for creating international public goods. Public goods are in general pro- vided by governments, yet at the international level there is no government. This is a long-standing problem in foreign affairs and international relations. When addressing this issue some years ago, Kindleberger (1986) proposed that in general, the problem can be solved by two means. The first is for the reigning hegemonic power to provide the appropriate public good. The United Kingdom did this for the international econ- omy during much of the 19th century. Similarly, in the second half of the 20th century the United States provided monetary stability for the global economy by serving as central banker for the world, and sustaining an effective dollar standard for the international trade and financial system. An alternative approach is what Kindleberger referred to as the “realist” solution, where groups of countries agree to come together to form institutional arrangements that pro- vide the needed public good or goods. There are currently a number of such arrangements on the international scene, perhaps the most significant at this point being the World Trade Organization (WTO). The origins of the WTO are to be found in the General Agreement on Tariffs and Trade (GATT), a rather modest framework of rules governing international economic rela- tions established in 1947 after the U.S. Senate failed to ratify the treaty creating the more ambitious International Trade Organization. There are many lessons derivable from the GATT and its evolution into the WTO. In the first place, membership is strictly voluntary. Neither the GATT nor the WTO had (have) an army, navy, or air force. The successive organizations have negotiated the rules for international trade, and member states have agreed to follow them. More- over, from a modest group of industrialized countries that agreed to negotiate reductions in tariffs on manufactured products, the scope of trade issues subject to negotiation by © 2005 by Taylor & Francis Group, LLC 644 Schuh the WTO has increased significantly, and membership has grown to over 180 countries. The Kyoto Treaty was a “realist” attempt to find a work- able solution to the global warming problem. (The Montreal Treaty for dealing with the problem of atmospheric ozone change was a predecessor.) The withdrawal of the United States from the Kyoto Treaty may have delivered it a fatal blow, especially if Russia follows the U.S. lead in withdrawing its support. It may be that the drafters of the Kyoto Treaty were too ambitious. A more modest beginning might have made success more likely. The modest initial beginnings of the GATT may provide some important lessons. I will return to this issue later. 26.2 AN OPTIMAL DEGREE OF GLOBAL WARMING? Global warming issues are hard to resolve, in part because their discussion is so open-ended. Contemporary discussions have concentrated on ways to mitigate or reduce global warm- ing, rather than looking beyond those objectives. In the pre- vailing estimates of the costs and benefits of global warming, there is an implicit assumption that there is some optimal degree of global warming, or some optimal temperature for the Earth, and that there is only one direction to move in attaining it — to mitigate or stop the current trend. However, do we really know what this temperature is? R. Lal has implied that identifying an optimal degree of warming is possible when he noted that average global tem- perature has ranged between −18° C to +15°C. That is quite a wide range, and if there are costs and benefits in going from one average temperature to another, then there must be an optimal temperature for the Earth — something that C. Rosenzweig referred to, when commenting on my proposition, as a stabilization level. Certainly, if one is willing to commit significant public and private resources to affect the global temperature, then why should those resources not be committed to moving the world toward what would be an optimal temperature? In fact, © 2005 by Taylor & Francis Group, LLC Policy and Economic Issues Dealing with Global Warming 645 when establishing quotas and other targets for policies designed to affect global warming, some target temperature would seem to be an imperative. Is it appropriate to expend resources to mitigate or reduce global warming when we have no notion of the ultimate goal? I would argue that it makes no sense to insist on miti- gating policies without having some notion of the ultimate target. The failure to establish such an optimal temperature follows from the tendency in much of the discussions of global warming to ignore people — similar to the approach by many environmentalists. Yet surely, if Nordhaus can estimate the costs and benefits of global warming, we can move beyond those calculations to ascertain some optimal temperature for the Earth. It may be helpful to introduce the concept of an optimal global temperature as we address these problems, even if we currently lack the data to estimate the optimum as a practical matter. First, it would focus our attention on assembling the necessary data and undertaking the appropriate analyses to arrive at such a conclusion, which should give us a better understanding of all the important issues involved. Second, it would help us avoid committing massive resources in what could turn out to be misguided directions. 26.3 TOWARD INTERNATIONAL COOPERATION Consideration of the broader discussion of policy issues related to global climate change and of measures to modify this can usefully begin with a look at the Kyoto Treaty. We also need, however, to adopt a broader policy perspective, to address food security issues, the fact of variation in climatic conditions, and the institutional capability to address global warming problems. A discussion of these issues follows. 26.3.1 The Kyoto Treaty as a Starting Point The United States has a great deal to offer to global society by rejoining the efforts to implement the Kyoto Treaty, and © 2005 by Taylor & Francis Group, LLC 646 Schuh by recommitting to the objectives of that treaty. The United States has substantial scientific, technological, and analytical capability needed to address these issues. We could use these resources to help identify the optimal acceptable degree of global warming. Such a concept should guide the Kyoto Treaty initiative. However, we also might scale down the scope of this initiative, and focus it on a more modest set of objectives that would help mobilize the political support for what is proposed. The beginnings of the GATT/WTO serve as an attractive precedent. Americans are rightly concerned about their national security. That national security is ultimately rooted in our economic security. We can add to our economic security by deploying our considerable economic power to strengthen international institutions. That power should be deployed in support of international cooperation with national and inter- national organizations and institutions. 26.3.2 The Broader Policy Perspective Implementation of the Kyoto Treaty should take place within the context of a broader perspective on the evolution of inter- national policy institutions. Rapid and significant initiatives are taking place in this broader context. Globalization, for example, is causing economic policymaking and implementa- tion to be increasingly beyond the reach of national economic policymakers. The loss of national sovereignty over economic policy is the source of much contemporary concern in this country, as it is elsewhere. When policymaking and implementation move beyond the reach of national economic policy, a process of bifurcation follows. Some part of economic policymaking and implemen- tation shifts up to the international level and becomes embed- ded in international organizations and institutions. Another part shifts down to the state and local level and becomes embedded in organizations and institutions at that level. The policy milieu is currently in a rapid state of flux as shifts occur as to where policymaking and implementation take place. Reform is needed at all levels of the process if we © 2005 by Taylor & Francis Group, LLC Policy and Economic Issues Dealing with Global Warming 647 are to make efficient use of our resources and provide for an equitable distribution of income (Schuh, 2003). This provides an opportunity to do the institutional design needed at each level to address global warming. In addition to the design work that is a policy imperative, there is much analytical work to be done in sorting out the problems unique to the international, national, and state and local levels. That anal- ysis has to be the starting point for the institutional work. 26.3.3 Food Security World food security is a concern in many contributions to this volume, some focused at the local level, and some at the national level. This concern incorporates the “people” dimen- sion into discussion of problems usually framed in biophysical terms. However, I would note that many if not most of these presentations regard the essence of the food security problem as a matter of production. We learned long ago that famine and malnutrition are mainly results of poverty, rather than production shortfalls per se. In fact, Sen’s famous analysis (1981) of the classic famines of China and India showed that during the most dire part of the famines, local food prices actually declined. Demand dropped under desperate circum- stances, so that those with purchasing power could get food more cheaply — but most lacked purchasing power. This observation in no way diminishes the importance of agricultural modernization and its contribution to alleviating poverty. However, it does provide an important perspective on how such modernization contributes to poverty alleviation. The contribution occurs through broad-based increases in con- sumers’ real incomes rather than through an effect on pro- ducers as is commonly assumed. That becomes clear once one takes into consideration the general equilibrium effects of agricultural modernization (Schuh 1999). Understanding the contribution of agricultural modern- ization to poverty alleviation in society directs increased attention to rural development. The modernization of agricul- ture makes it almost inevitable that much rural labor has to leave the agriculture sector if the per capita income of that © 2005 by Taylor & Francis Group, LLC 648 Schuh labor is to keep pace with that in the nonfarm sector. That makes the exit of labor from agriculture a measure of policy success, assuming that such movement results from the “pull” of urban opportunity rather than the “push” of rural immis- eration. Because gainful employment outside of agriculture typ- ically entails migration to alternative employment at long distances, the labor market becomes very imperfect, with wide disparities in wages for quality-equivalent labor. One way of promoting mobility is to promote expansion of nonfarm employment in rural areas, which is understood by the term “rural development.” Ironically, the natural process of selec- tion of migration and most of the policy measures imple- mented to promote economic development operate on the opposite development. The process of migration is highly selective of human capital, and thus drains this most impor- tant resource from the part of the economy where it is much needed. Similarly, policy measures tend to concentrate on subsidies for the expansion of the nonfarm sector in urban areas. This has the effect of imposing negative externalities in both the supplying and receiving region. Our consideration of how different measures can deal most effectively with the challenge of global warming to food security would have benefited from more serious consider- ation of rural development policies. No matter what is done about climate change itself, we need to design more effective institutional arrangements that will not just mobilize the agricultural surplus generated by agricultural modernization, but will use it to generate an expansion of nonfarm activities in rural areas. Much of the discussion of agricultural modernization has appeared misguided, as it has focused on raising the produc- tivity of land — for instance, this perspective underlaid the Green Revolution in Asia. However, raising the productivity of land may contribute little to raising labor productivity, and this is what is critical to increasing the per capita incomes of rural people. Hayami and Ruttan (1985) made the important point long ago that the adoption of new technology follows the © 2005 by Taylor & Francis Group, LLC Policy and Economic Issues Dealing with Global Warming 649 relative resource scarcity prevailing in the agricultural sector. In land-scarce Japan, the beginning of technological progress was built on technological innovations that enhanced land productivity, the most limiting factor. Conversely, in labor- scarce United States, the process was the opposite, with labor productivity-enhancing technological innovations emphasized in the beginning. Moreover, later when the conditions of resource scarcity reversed themselves, the processes of tech- nological innovation reversed themselves in both countries. That analysis, supported by extensive empirical evidence, implies that the subproduction functions underlying the land and labor sides of the basic production functions are separa- ble. What happens on one side of the production function is largely independent of the other. The work of Hayami and Ruttan has provided important guidance to policymakers all around the world. It is sad that both policymakers and policy analysts have ignored this cen- tral part of their analysis. In Sub-Saharan Africa in particu- lar, labor is the relatively scarce resource. Policy needs to be directed to raising labor productivity at this stage of economic development, not primarily to raising land productivity. To conclude this section, I should underscore the need for greater emphasis on rural development and a more rational science and technology policy if the productivity and the per capita incomes of rural people are to be raised and their food security problem addressed. Increases in per capita income are critical to addressing the food security problem, as most of the poverty in the developing countries is found in rural areas. 26.3.4 Geographic Variability The impacts of global warming will vary a great deal from one region to another. That means that the policies appropri- ate for one region may not be appropriate for another. Simi- larly, the institutional arrangements available for addressing the problems of global warming will also vary a great deal. This includes the capability of markets to perform efficiently, and thus the efficiency and effectiveness with which markets © 2005 by Taylor & Francis Group, LLC [...]... 3 :57 –66 Schuh, G.E 2003 Globalization, Governance, and Policy Reform Sen, A.K 1981 Poverty and Famines: An Essay on Entitlement and Deprivation Clarendon Press and Oxford University Press, Oxford and New York © 20 05 by Taylor & Francis Group, LLC 27 Confronting the Twin Problems of Global Warming and Food Insecurity LUTHER TWEETEN CONTENTS 27.1 Introduction 658 27.2 Food Security and the Food. .. 2120 254 0 2830 2400 2899 3010 2190 2680 4.4 3.0 9.4 0.0 3.3 5. 5 Source: From Food and Agriculture Organization 2002 The Way Ahead: The State of Food Security in the World, 2001 Food and Agriculture Organization, Rome © 20 05 by Taylor & Francis Group, LLC Confronting the Twin Problems of Global Warming and Food Insecurity 663 Fortunately, food supplies do not depend only on local food production Food. .. priority for food security and development • Sanitation for food security requires attention to water and waste Parasites and bacteria interfere with digestion of food and sap vitality • Health clinics staffed by volunteers and paraprofessionals can provide cost-effective services such as immunization, vitamin supplements, and can educate for HIV/AIDS prevention, family planning, and pre- and post-natal... does not threaten global food availability in the 21st century © 20 05 by Taylor & Francis Group, LLC Confronting the Twin Problems of Global Warming and Food Insecurity 659 Uneven regional impacts are troubling, however With global warming, food production could expand in Canada and Russia, while it falls in Nigeria and Indonesia Lowlands such as in Bangladesh would be inundated, and many people would... nutritious food that meets their dietary needs and food preferences for an active and healthy life.” The World Bank and the U.S Agency for International Development employ similar definitions of food security Defining food security as access to food omits another important dimension of food needs, namely availability Food availability refers to the supply of food from production, imports, or stocks Global food. .. carbon in forests Land Econ., 75: 360–374 Barraclough, S 1991 An End to Hunger? Zed Books, London Food and Agriculture Organization 1996 Food and Agriculture 1996 FAO, Rome Food and Agriculture Organization 1997 Food Security: Some Macroeconomic Dimensions FAO, Rome Food and Agriculture Organization 2002 The Way Ahead: The State of Food Security in the World, 2001 FAO, Rome Frisch, R 1 958 The Strategy... One conclusion is that global warming is especially threatening to food security in tropical and semitropical regions, where chronic undernourishment is and will continue to be concentrated In the following sections, I first outline the food security problem and selected public policies to address it and global warming Of special concern is whether measures to promote global food security promise to be... restrain global warming 27.2 FOOD SECURITY AND THE FOOD SECURITY POLICY SYNTHESIS Chronically undernourished individuals rarely receive dietary energy considered by nutritionists to be necessary for light activity and good health The Food and Agriculture Organization (2002) defines food security as a goal achieved “when all people at all times have physical, social, and economic access to sufficient, safe, and. .. development, infrastructure, family planning, a food safety net, and environmental protection The standard model, outlined later, is applicable to any culture and provides a workable prescription for economic progress that ensures buying power for self-reliance and food security (Food self-reliance emphasizes building agricultural and/ or industrial productivity to produce food at home or the ability to purchase... 669 657 © 20 05 by Taylor & Francis Group, LLC 658 Tweeten 27.3.1.7 Food and Income Safety Net 669 27.3.2 Sequencing Development 670 27.3.3 Economic Growth and the Environment 671 27.4 Agricultural Practices for Food and Environmental Security 672 27 .5 Conclusions 674 References 676 27.1 INTRODUCTION The three components of the conference title, Climate Change, Carbon . Problems of Global Warming and Food Insecurity LUTHER TWEETEN CONTENTS 27.1 Introduction 658 27.2 Food Security and the Food Security Policy Synthesis 659 27.2.1 Setting 660 27.2.2 Food Security. Potential for Disciplinary Synergism 653 26.6 Concluding Comments 654 © 20 05 by Taylor & Francis Group, LLC 642 Schuh Acknowledgments 655 References 655 Debates about global warming have tended to. 21st century. © 20 05 by Taylor & Francis Group, LLC Confronting the Twin Problems of Global Warming and Food Insecurity 659 Uneven regional impacts are troubling, however. With global warming, food production