Thread by @BardHarstad

Just when COP27 wraps up in Sharm el-Sheikh, I wrap up my PhD class in environmental economics @HarvardEcon.
Here are some thoughts on how research can contribute to better agreements on climate and conservation:

Spoiler: The needs for climate compensation from the North, and conservation in the South, must be united ;

Concern I is that COP27 is mostly about money: Whether developed countries should compensate less-developed countries for loss and damages following climate change, for adaptation, or for the green transition...
ft.com/content/f4a586…

Concern II is that natural-resource-rich developing countries remind us that we developed by exploiting our resources.
Thus, Congo plans to auction off new oil fields; fields that are currently covered by some of the most biodiverse forests:
ft.com/content/5ea6f8…

The two concerns should be connected:
The North’s climate compensation to the South should be forthcoming, but they should be conditional on forest conservation in the South.
The rationales for this combination are multidisciplinary (and even stronger than you might think):

1) BENEFIT-COST RATIOS are enormous when it comes to forest conservation – because of biodiversity as well as the carbon in and under the trees:
papers.ssrn.com/sol3/papers.cf…

2) THE COASE THEOREM explains how such problems are solved when the party benefiting from conservation compensates the South in return for conservation.
(Of course, we cannot expect resource-rich countries to conserve their richness without compensation.)
law.uchicago.edu/lawecon/coasei…

3) THE “ISSUE LINKAGE” LITERATURE explains why the South’s demand for climate compensation, and the North’s preference for forest conservation, can be fruitfully combined to the benefit of all parties.

4) BEHAVIORAL ECONOMICS points out that “fairness” is subjective measure, so voters in the North are reluctant to accept payments to other countries unless they see what’s in it, for them. With ties to conservation, payments will be easier to accept.

5) ECONOMIC GROWTH is, in any case, rarely sustained by the exploitation of natural resources (which often leads to resource curse or the Dutch disease)
sciencedirect.com/science/articl…

6) POLITICAL ECONOMICS explains that governments are reluctant to conserve if they fear that future governments will exploit anyway.
When the North’s conservation compensation is trustworthy, the South becomes willing to conserve, also because later governments will then conserve

7) GAME THEORY explains why a credible promise to compensate conservation in the future have an immediate effect on the incentive to conserve, even if the compensation is not yet ready to occur:
elsevier.com/connect/the-pa…

=> The North needs to pay, and the South needs to conserve. It can be enormously beneficial to combine the two needs – and potentially disastrous if we don’t.

At COP27, the South asks for payments because of damages, needed adaptation, and requested green transition. By conditioning the payments on conservation we can obtain a quadruple win and avoid ecological disasters.

As a start, the North must win the auction in Congo. We win the auction by placing the highest bid:
ft.com/content/b10a31…