Two important meetings were held last week that could significantly affect the design of future public policies against global warming and carbon dioxide emissions.

At the APEC (Asian-Pacific Economic Cooperation) meeting, Barack Obama and Xi Jinping announced that an agreement has been reached between USA and China upon future reductions of CO2 emissions in both countries. Specifically, the U.S. promised to reduce the emissions by 25-28% with respect to 2005 levels before 2025, whereas China announced that its level of emissions will reach a peak in 2030 and will be reduced from then on. In addition, China promised to increase the share of  energy produced from non-fossil sources to 20%.

At the G20, currently held in Brisbane (Australia), Barack Obama expressed the intention of the United States to contribute with 3 billion dollars to the International Fund, which helps underdeveloped countries to face the problems brought by climate change.

Since the United States and China together are responsible for the 43.7% of global emissions, this agreement was not only desirable, but also necessary. This, together with the recent decision of the EU to cut by 40% (with respect to 1990 levels) its level of emissions by 2030, could constitute a starting point for global negotiations in 2015.

In fact, next year the 21st Conference of the Parties on Climate Change (with 190 countries participating) will be held in Paris and will hopefully produce a new global agreement on the issue, properly designed in order to overcome the political obstacles that caused previous meetings to generate poor results. The outcome of negotiations about emissions reduction constitute the actualisation of what game theory calls “The Prisoner’s Dilemma”: when, in a game, costs are privately sustained and benefits are commonly shared, every player has an incentive to free ride.

In order to understand the current state of the problem of CO2 emissions and foresee the main points around which the discussion will be focused, it is useful to summarise the contents of the last IPCC (Intergovernmental Panel on Climate Change) report, which nicely describes current concerns related to global warming.

The report asserts that in the absence of active public policies against climate change, global temperature will increase by 3.7-4.8 degrees by 2100.The process of stabilisation of gas carbon concentrations compatible with a 2-degree increase of temperature by 2100 requires a 40-70% reduction of emissions with respect to 2010 levels by 2050.This objective is ambitious and imposes a substantial shift from fossil energies to renewable or nuclear sources of energy (zero or low carbon). Worryingly, current countries’ commitment to reduce emissions (also called Cancun Pledges) are not consistent with the target of the 2-degree increase of temperature.Finally, experts also argue that postponing reductions to 2030 or later will have the only effect of making the transition more difficult.

As the IPCC report shows, more should be done in order to effectively face the challenges posed by global warming. The agreement between US and China is a first step in the right direction, but some doubts remain over the actual capacity of governments to accomplish the established goals.

For what concerns the U.S., 25-28% reduction of emissions target in the US by 2030 requires forward-looking policies that are often not compatible with the brevity of political mandates. Moreover, the mid-term elections ratified a strong Republican majority both in the House and in the Senate and this is not a trivial factor. In fact, Republicans will be reluctant to support anti-emissions policies with long term perspectives as they would probably cause short term adverse economic effects for the country.

On the other hand, China for the first time in history fixed the maximum level of emission to 2030. The promise to produce the 20% of energy from non-fossil sources by 2020 is another important and ambitious commitment. Some critics have pointed out that several studies already indicated 2030 as the year in which China’s emissions would stop growing. Moreover, the non-binding nature of the agreement between China and US has contributed to mitigate the early enthusiastic reactions to the event.

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