Carbon Matching Commitments

With the United States’ reentry to the Paris Agreement, there is now consensus among the world's largest carbon emitters that emissions must be reduced. But there is still a radical lack of consensus on what regulations should be chosen to reduce carbon. Worse, there is also a radical disagreement about how much each country should reduce its emissions. This Article attempts to solve the first problem and sidestep the second with a new regulatory mechanism: the carbon matching commitment.Regulation of international environmental problems such as climate change presents the now well-studied threats of leakage of emissions and associated industry, cross-border externalities, and the difficulties of designing effective transnational institutions. Game theory has suggested that one possible answer to this form of dilemma is domestic action employing matching commitments: individual countries adopting regulations that automatically grow more stringent in response to regulation in other countries. For example, in the case of climate change, if each individual country first selfishly chose and announced a rate at which they would match unconditional carbon abatements elsewhere, and then selfishly set a level of unconditional abatement to win matching abatements, the equilibrium solution would be regulation that is, by some standards, optimal. This Article considers the pragmatic consequences of this solution, considering the optimal balance between unconditional abatements and matching abatements: how much should a country rely on regulations that do not de-pend on other countries’ action and how much should it rely on matching commitments? It reframes the current uncontroversial practice of country-by-country unconditional regulations to show why it repeatedly fails to encourage broader action because it makes little to no use of matching abatements. It shows why only a small fraction of a country’s carbon reduction policy should be composed of unconditional abatements. The Article shows how to implement matching commitments in practice to overcome pragmatic concerns about conditional regulation. And it explains why matching commitments are a more practical solution to the social dilemma of climate change than other game theoretic approaches such as carbon tariffs. The Article suggests ways to mitigate any practical problems presented by matching commitments that would enable abatements to be set in a more nearly optimal manner