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This paper proposes an alternative approach to addressing the complex problems of climate change caused by greenhouse gas emissions. The author, who won the 2009 Nobel Prize in Economic Sciences, argues that single policies adopted only at a global scale are unlikely to generate sufficient trust among citizens and firms so that collective action can take place in a comprehensive and transparent manner that will effectively reduce global warming. Furthermore, simply recommending a single governmental unit to solve global collective action problems is inherently weak because of free-rider problems. For example, the Carbon Development Mechanism (CDM) can be 'gamed' in ways that hike up prices of natural resources and in some cases can lead to further natural resource exploitation. Some flaws are also noticeable in the Reducing Emissions from Deforestation and Forest Degradation in Developing Countries (REDD) program. Both the CDM and REDD are vulnerable to the free-rider problem. As an alternative, the paper proposes a polycentric approach at various levels with active oversight of local, regional, and national stakeholders. Efforts to reduce global greenhouse gas emissions are a classic collective action problem that is best addressed at multiple scales and levels. Given the slowness and conflict involved in achieving a global solution to climate change, recognizing the potential for building a more effective way of reducing green house gas emissions at multiple levels is an important step forward. A polycentric approach has the main advantage of encouraging experimental efforts at multiple levels, leading to the development of methods for assessing the benefits and costs of particular strategies adopted in one type of ecosystem and compared to results obtained in other ecosystems. Building a strong commitment to find ways of reducing individual emissions is an important element for coping with this problem, and having others also take responsibility can be more effectively undertaken in small- to medium-scale governance units that are linked together through information networks and monitoring at all levels. This paper was prepared as a background paper for the 2010 World Development Report on Climate Change.

Atmosphere --- Carbon --- Carbon dioxide --- Climate --- Climate Change --- Climate Change Economics --- Climate Change Mitigation and Green House Gases --- CO2 --- Ecosystem --- Emissions from Deforestation --- Environment --- Environment and Energy Efficiency --- Environmental Economics and Policies --- Forest --- Forest Degradation --- Framework Convention on Climate Change --- Glaciers --- Global climate change --- Global greenhouse gas --- Global greenhouse gas emissions --- Global warming --- Green house gas --- Greenhouse --- Greenhouse gas --- Greenhouse gas emissions --- Macroeconomics and Economic Growth --- Transport Economics, Policy and Planning

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June 2000 - Most proposals for joint implementation of energy projects emphasize installing more technically efficient capital equipment to allow reduced energy use for any given mix of input and output. But increases in energy efficiency are likely to have second-round effects. Reducing energy demand, for example, will reduce the market price of energy and stimulate energy use, partially offsetting the initial reduction in demand. These effects are likely to be substantially larger in the long run, reducing the magnitude of these offsets. Efficient reduction of carbon dioxide emissions requires coordination of international efforts. Approaches proposed include carbon taxes, emission quotas, and jointly implemented energy projects. To reduce emissions efficiently requires equalizing the marginal costs of reduction between countries. The apparently large differentials between the costs of reducing emissions in industrial and developing countries implies a great potential for lowering the costs of reducing emissions by focusing on projects in developing countries. Most proposals for joint implementation of energy projects emphasize installing more technically efficient capital equipment, to allow reductions in energy use for any given mix of input and output. But such increases in efficiency are likely to have potentially important second-round impacts: Lowering the relative effective price of specific energy products; Lowering the price of energy relative to other inputs; Lowering the price of energy-intensive products relative to other products. Martin explores the consequences of these second-round impacts and suggests ways to deal with them in practical joint-implementation projects. For example, the direct impact of reducing the effective price of a fuel is to increase consumption of that fuel. Generally, substitution effects also reduce the use of other fuels, and the emissions generated from them. If the fuel whose efficiency is being improved is already the least emission-intensive, the combined impact of these price effects is most likely to be favorable. If the fuel whose efficiency is being improved is initially the most emission-intensive, the combined impact of these price changes is less likely to be favorable and may even increase emissions. In the example Martin uses, increase in coal use efficiency was completely ineffective in reducing emissions because it resulted in emission-intensive coal being substituted for less polluting oil and gas. This paper - a product of Trade, Development Research Group - is part of a larger effort in the group to understand key links between trade and the environment. The author may be contacted at wmartin1@worldbank.org.

Abatement Options --- Activities --- Approach --- Carbon Dioxide --- Carbon Dioxide Emissions --- Carbon Emissions --- Carbon Policy and Trading --- Certified Project Activity --- Emission --- Emission Reduction --- Energy --- Energy and Environment --- Energy Production and Transportation --- Energy Products --- Energy Sources --- Energy Use --- Environment --- Environment and Energy Efficiency --- Fuel --- Fuels --- Global Greenhouse Gas --- Global Greenhouse Gas Emissions --- Greenhouse Gases --- Macroeconomics and Economic Growth --- Markets and Market Access --- Price --- Prices --- Public Sector Development --- Transport --- Transport and Environment

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Accelerating development in Sub-Saharan Africa will require massive expansion of access to electricity - currently reaching only about one-third of households. This paper explores how essential economic development might be reconciled with the need to keep carbon emissions in check. The authors develop a geographically explicit framework and use spatial modeling and cost estimates from recent engineering studies to determine where stand-alone renewable energy generation is a cost effective alternative to centralized grid supply. The results suggest that decentralized renewable energy will likely play an important role in expanding rural energy access. But it will be the lowest cost option for a minority of households in Africa, even when likely cost reductions over the next 20 years are considered. Decentralized renewables are competitive mostly in remote and rural areas, while grid connected supply dominates denser areas where the majority of households reside. These findings underscore the need to de-carbonize the fuel mix for centralized power generation as it expands in Africa.

Access to electricity --- Carbon emissions --- Carbon Policy and Trading --- Carbon taxes --- Cleaner --- Cleaner energy --- Climate Change Mitigation and Green House Gases --- Energy --- Energy consumption --- Energy Production and Transportation --- Energy sources --- Environment --- Fossil --- Fossil fuels --- Fuel --- Global greenhouse gas --- Global greenhouse gas emissions --- Options --- Power --- Power & Energy Conversion --- Power generation --- Renewable energy --- Renewable energy generation --- Renewable energy potential --- Rural energy --- Transport --- Transport Economics Policy & Planning --- Wind