Dealing with the risk of climate change is politically a very difficult issue. The way we deal with this problem and the outcomes will be affected by the time in which we attack the problem. Some strategies available now will not be available in the future. Heller is not confident that a direct multilateral negotiation to create a climate change treaty is the way to reach the kind of agreement about climate change we want to have. There are, however, indirect routes to get us where we want to go. Such a process will probably include unilateral actions, bilateral agreements, etc., and Heller believes such a process may be a more effective way of achieving our climate change goals than the prospect of bringing some 195 nations into agreement. Private firms can bring substantial resources to bear on the problem of climate change. A privately-based regime has greater potential to bring global warming under control than does a regime based on international regulation.

Joint Implementation (JI) is one of the methods for reaching these goals. JI sets up a market in which a country or company can limit emissions anywhere in the world and receive credit as though they had limited emissions at their own site. JI leaves the actors free to decide how to meet their environmental commitments. Rules and processes for JI are now being developed in several fora.

China is at the core of this issue because of its huge population and its economic growth, which is the fastest in the world. Judgments must be made about growth, and about the relationship between growth and emissions. Also, what is the actual relationship between emissions and climate, both regionally and globally? These are complicated relationships, and there is a great deal of uncertainty that enters into the political process.

With the single substantial correction of accounting for the offsetting effect of sulfate aerosols, climate models are now pretty credible, Heller says. What is the policy response appropriate to the anticipated economic, agricultural, health, and environmental impacts of climate change if indeed we believe it constitutes a serious problem? Political systems have trouble dealing with climate change for three reasons. First, there is great risk in setting policy due to the substantial uncertain ties that exist about climate change. Second, the climate problem will manifest itself in the future, and future generations are notoriously under-represented in the political process. Third, the actors that bear the costs are very spread out and unorganized.

There are two major paths that have evolved as the dominant strategies for dealing with climate change: mitigation and adaptation. Mitigation strategies deal with controlling emissions, while adaptation strategies address investments that help society adapt to a warmer climate. Adaptation strategies can be relatively local, and can be undertaken through existing regimes. Mitigation strategies, on the other hand, must be much more globally coordinated, so there is a "collective goods" problem. Everyone gets the benefits and detriments of anyone's actions. For example, if a utility company in California mitigates emissions in China, the effects are the same globally as if they had mitigated emissions in California.

The standard path suggested in the UN process for a mitigation regime is that each country is assigned a target and then passes internal regulations to reach that goal. The other half of the regime involves some method of transferring funds from rich to poor nations. The alternative model for a mitigation regime favored by Heller is based on economic instruments and places much less emphasis on bureaucratic types of regulation. Instead, it sets up a tax rate for emissions, or some scheme of tradable permits for emissions that are distributed and then traded in the market (just as sulfur dioxide pollution is handled in the U.S.).

Many business people think this is a preferable way of handling this issue for a couple of reasons. First, it is left to the actor to decide what is the least expensive way of dealing with an emissions problem, and many find this decentralized method preferable to a command and control mechanism. Secondly, the transfer payments differ in amount and in who decides on their use. The amount of each transfer will be decided by the market place and by the parties to the transaction. So people who prefer market-based solutions over regulation argue that the market will provide more efficient, lower cost solutions, less political resistance, and better results. Which of these regimes is going to prevail?

Heller thinks the UN climate change negotiation process is deadlocked for a number of reasons. First, in the current treaty, only the developed OECD countries made any commitment to reduce greenhouse gas emissions. Second, very few of these signatories will meet the commitment to return to 1990 carbon dioxide emission levels by the year 2000. Third, no commitments exist at all after the year 2000. So there is nothing remotely like a global commitment to substantive reductions. Joint implementation was buried at the Berlin meeting, Heller says, due to the inability to reach any commitments.

If international operations are shifted from one forum to another, away from a multilateral negotiation and to a less formal process, that can change the dynamics of the regime and provide a decentralized, more effective outcome.

When economists and others simulate climate negotiations, they conclude that it is possible that a bargain could be struck. In order to mitigate greenhouse gas emissions, we can either slow their growth and reduce their emissions now or we can make a massive effort in 30 or 40 years when the science is more certain. This is not really a choice, Heller says. The most people would be willing to pay to mitigate climate change is equal to the cost of adaptation to the change. If China continues on its current trajectory of greenhouse gas emissions, its carbon dioxide production will triple between 1990 and 2020. The most we can expect from the OECD countries is stabilization, or at best a very slight reduction in greenhouse gas emissions. With this being the case, it is probably best to invest in adaptation, since mitigation will not be practical. If we don't have a way to control the enormous growth in China, the world will shift its strategy from mitigation to adaptation, and then will not want to invest in mitigation. Adaptation costs are lumped (for example, once you invest in building a sea wall, it doesn't cost much more to build it a bit higher). This is what Heller calls the "China Trap."

Regarding the notion of joint implementation, Heller offers the following example. The cost of carbon reduction in Japan is about $600-$700 a ton; in China, it is much lower. Perhaps Japanese money can be used to help China develop in such a way that greenhouse gas emissions per person are less than in the developed world. By pursuing such a path, more carbon emissions would be abated at a lower cost and with less resistance. This is the essence of why JI makes sense. In conclusion, Heller says, there are two nations in the world whose participation in a joint implementation regime is absolutely necessary for success: the U.S. (because it is the world's largest emitter) and China (because of its population and economic growth).