Our leaders' recent confession that a legally binding climate agreement is not feasible this year may be no bad thing. The hope is that the new goal for December – to reach a broader “political agreement” – will establish a better foundation for a future climate deal than we currently have.
This is important, since a climate agreement currently faces three major obstacles. To overcome these, there might be no solution other than to link any deal to new and existing trade agreements.
The first challenge is to encourage participation in a climate agreement. The problem is that while participating countries bear the costs of reducing their own emissions, countries that chose to opt out can nevertheless benefit from these reductions and, in addition, from a lower fossil fuel price when the participating countries reduce their demand.