Chapter

International Financial Instability

Charles Wyplosz

in Global Public Goods

Published in print July 1999 | ISBN: 9780195130522
Published online November 2003 | e-ISBN: 9780199867363 | DOI: http://dx.doi.org/10.1093/0195130529.003.0009
 International Financial Instability

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If the Montreal Protocol has been so successful in reducing the production and use of ozone‐depleting substances, why cannot an effective treaty to control greenhouse gas emissions be put into place? Barrett's examination of this issue reveals two findings. First, the underlying economics of addressing climate change and ozone depletion are different. A study that guided policymakers at an early stage of ozone negotiations found that the costs of reducing ozone‐depleting substances were small relative to the benefits. In contrast, the best studies available today suggest that the costs of reducing greenhouse gas emissions by a substantial amount match or exceed the benefits only slightly. Second, Barrett argues that in the absence of a central global authority, international treaties must be self‐enforcing or must include credible incentives for compliance and disincentives to discourage noncompliance. Thus, the Montreal Protocol, while effective, cannot simply be redrafted to address the climate change problem. Rather, reducing greenhouse gases poses new challenges for burden‐sharing and effective implementation.

Keywords: climate change; climate stability; compliance with treaties; global public goods; greenhouse gases; incentives; international cooperation; Kyoto Protocol; Montreal Protocol; ozone layer; self‐enforcing treaties

Chapter.  14354 words.  Illustrated.

Subjects: Public Economics

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