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Will free-rider problems sabotage any hope of an international agreement on climate change?

March 2nd, 2014

Back in my Crikey days I wrote several times of my apprehension that despite all the evidence about the damage to come from global warming that the international community would prove incapable of reaching an agreement on what to do about it. The main task of an Australian government should thus, I argued, be about preparing for what we should be doing about it at home rather than wasting all the effort and energy on pretending that we could contribute to a world-wide solution.

My reading today of a paper by Derek Kellenberg, Department Chair & Associate Professor at the Department of Economics, University of Montana and Arik Levinson Professor, Economics Department, Georgetown University has reinforced my pessimism. Their paper “Waste of effort? International environmental agreements” looks at the economic theory predicting that international environmental agreements will fail due to free-rider problems and previous empirical work suggesting that such agreements do not in fact reduce emissions.

The specific subject of the two professors is the Basel Convention and Ban on trade in hazardous waste. The Convention, they note, was adopted to address concerns about so-called ‘toxic trade’ – waste shipments from industrialised countries to parts of the world where disposal is presumably less safe.

Although hazardous waste disposal is a local issue and might not appear to require international cooperation, if some countries cannot appropriately regulate disposal or prevent importation on their own, trade restrictions may be a second-best policy. As a consequence, the Convention’s Ban Amendment prohibits all exports of hazardous waste from countries listed in Annex 7 (all OECD and European Union countries plus Liechtenstein) to all other countries not listed in Annex 7.

Their examination of import and export data reached the sad conclusion that there was “no evidence that Annex-7 countries that ratified the Ban slowed their exports to non-Annex-7 countries as the agreement requires.”


In a concluding summary of their study soon to be published in the forthcoming inaugural issue of the Journal of the Association of Environmental and Resource Economists they write:

Might these results have implications for other international environmental problems, such as climate change? At one level the issues seem quite different. Climate change involves a global pollutant emitted at the place where goods are used or produced, whereas hazardous wastes are local pollutants separated from their place of generation and shipped globally. That difference means that the world’s hazardous waste problems are potentially solvable without international agreements, because the pollution does not typically span international borders. In that respect, the fact that the Basel Convention and Ban appear ineffective is disheartening, and suggests that alternative policy mechanisms and strategies that go beyond voluntary IEAs [International Environmental Agreements] may be needed to solve large global problems like climate change.

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