David Victor and Joshua House (“A New Currency: Climate Change and Carbon Credits,” Summer 2004) join a long list of critics who have become disenchanted with the international negotiations that led to the Kyoto Protocol. The Protocol ties its targets to 1990 emission levels of greenhouse gases. This approach has been ridiculed because it creates huge “paper reductions” in countries whose economies have fallen (states of Eastern Europe and the former Soviet Union) and it disproportionately burdens countries whose economies have grown (the United States). The Kyoto Protocol is also incomplete because it only covers the next decade and does not apply to developing countries at all.

From Kyoto’s ashes, Victor and House champion a “new approach” of using carbon credits to control global warming. These two authors are done with grand international schemes. They argue that the world should move to a system of national carbon credits. Every country should voluntarily create these credits as a “bottom-up” strategy. According to Victor and House, adopting national permits for greenhouse gases is like adopting good monetary policy.

Victor and House, however, have forgotten a basic principle of global pollutants. Although the cost of reducing emissions is entirely borne by the country with regulations, the benefits are shared with the world. The country doing the abatement gets only a small share of these benefits. A strong national currency, in contrast, will primarily benefit just the country with the strong currency.

Victor and House argue that the European Union has adopted their policy of national carbon credits. However, a good case can be made that the European Union is actually just implementing the Kyoto Protocol, hoping that their example will shame other countries into adopting the international agreement as well.

Although the concerns Victor and House voice about the limitations of the Kyoto Protocol are well taken, it is not clear whether one can conclude that international agreements are fruitless. There are examples of successful international treaties, such as the Montreal Protocol, which have done an excellent job of limiting emissions of chlorofluorocarbons (CFCs). Such international agreements force countries to see their joint interest in protecting the global commons. There certainly is no incentive for a single country to take up this mantle while all others sit idly by. Countries following their own self-interest cannot solve problems like global warming. The solution to global warming lies in an all-inclusive strategy that encourages every country to protect the global commons. The solution is in “we,” not “I.” It is too early to give up on international negotiations. After all, this is a problem that we expect to be around for hundreds of years. Surely there is still time to hammer out an effective international agreement.