As nations argued over global warming policies at the Kyoto Protocol, PERC senior fellow Bruce Yandle was busy bringing new insights to the discussion. In a PERC Policy Series from 1998, “Bootleggers, Baptists, and Global Warming,” he shed light on puzzling features of the international negotiations over climate change.
Yandle applied his “bootleggers and Baptists” theory of regulation to the global warming debate. In the South, laws make it illegal to sell alcohol on Sunday. These laws are maintained by an inadvertent coalition of bootleggers and Baptists. The Baptists (and other religious denominations) provide the public outcry against liquor on Sunday, while the bootleggers (who sell liquor on Sunday) quietly persuade legislatures and town councils to maintain the closing laws.
Yandle explained that something similar was happening with the treaty negotiations over climate change; the Baptists are the environmental groups, and the bootleggers are the companies, trade associations, and nations that are seeking favors through global warming negotiations. Twelve years later, on the heels of the Copenhagen Accord, bootleggers and Baptists continue to embrace Kyoto prospects. The good news is that the collapse in Copenhagen provides the world with a chance to step back and reevaluate the politics and science behind the debate—to find a better way than the Kyoto Protocol process.
On reading my October 1998 PERC Policy Series, several things jumped out at me. First the struggle I described using the bootleggers and Baptists theory of regulation to explain the Kyoto Protocol process has hardly changed one iota in 12 years. Somewhat unexpected coalitions of environmentalists and energy producers still sing together from green hymn books that call for final implementation of the Kyoto-blessed cap-and-trade greenhouse gas controls. However, there is a difference to be observed in how the singers make their music: The interest groups have learned to harmonize better. For example, a U.S. Climate Action Partnership, formed by some leading industrial firms and environmental groups, lobbies strenuously in support of federal cap-and-trade legislation. The industrial players are firms that will gain market share in resulting restructured energy markets. They are green in more ways than one—as in money. Contributions rise for the environmental groups when they sing in harmony. Environmental organizations are also green in more ways than one.
Forecasts Come to Fruition
My forecast regarding politically enhanced gains in market share for non-fossil fuel producers (e.g., ethanol and nuclear) has transpired. Congress gave corn producers a major slug of the auto fuel market, with taxpayer assistance, of course. But the astonishing gains now experienced by nuclear power were not anticipated when I wrote the 1998 piece. It is fascinating that the nuclear generating industry, long despised by environmental groups in spite of the industry’s relatively clean record, is now quietly enjoying environmental support for a resurrection. In the very long run, relative costs still seem to matter.
As suggested in 1998, the fast-growth developing countries, China and India, together form the major sources of greenhouse gas emissions and still refuse to take costly steps to control those emissions. Their refusal to do so leaves much of the developed world, with the exception of the United States, in a position like people in a leaky boat who are busy patching at one end, while folks at the other end are boring larger holes. When observed as a costly process for reducing total emissions, the picture doesn’t make any sense. As was the case in 1998, this last observation suggests there is more to the story than emissions control. The themes of favor-seeking and wealth transfers still seem to explain outcomes.
Cost and Income Differences Matter
My current research project with Jody Lipford on cross-country costs of carbon emission control predicts that the United States will not engage in cap-and-trade regulation any time soon. Our research also predicts that efforts to generate world agreements to meet Kyoto-inspired reductions will fail. This is not about environmental awareness. It is about cost and income differences. Consider the following empirical examination: Estimates made by Kuheli Dutt in Environment, Development and Sustainability show that CO2 emissions begin to fall when per capita income increases. Dutt looked at 124 countries and demonstrated that once per capita income reached approximately $29,600 (in 2000 dollars), CO2 emissions started to drop. Her work suggests that in the developed world carbon dioxide emissions are being reduced without a global agreement. But none of the developing countries of the world are anywhere near that level of income. Per capita income in those countries falls in the range of $2,000 to $9,000. Rich countries such as the United States, France, United Kingdom, Germany, Italy, and Japan are ready to move, but much of the rest of the world is still hungry for food, shelter, and water.
Bootleggers & Baptists Still Singng Together
In the journal Environment and Development, the Lipford-Yandle 2009 estimates of the annual number of tons of CO2 emissions required to increase per capita GDP by one dollar show that China must produce 2,173,000 metric tons. Clean energy producer France must produce just 2,470 metric tons to get a dollar more and the United Kingdom would have to produce 17,300 tons for an additional dollar. The coal-reliant United States must produce 204,034 metric tons.
At the December 2009 United Nations Framework Convention on Climate Change meeting in Copenhagen, China indicated that several steps would be taken to improve the country’s environmental quality but that the country would continue to expand per capita GDP. This means that China will not constrain CO2 growth. The arithmetic is clear. The CO2 output associated with growth in China’s per capita GDP will more than offset any CO2 reductions that might come from the older industrialize world.
Bootleggers and Baptists will continue to have a field day while celebrating Kyoto prospects, but final implementation of any accord will not come until developing world incomes are higher and the cost of CO2 control is lower. In the end, achieving a global accord is about being green, as in money. But it is not just money. It is about more food, shelter, and drinking water in the developing world.