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Sectoral crediting mechanisms such as sectoral no-lose targets have been proposed as a way to provide incentives for emission reductions in developing countries as part of an international climate agreement, and scale up carbon trading from the project-level Clean Development Mechanism to the sectoral level.

Countries would generate tradable emission credits (offsets) for reducing emissions in a sector below an agreed crediting baseline. However, large uncertainties in the regulator's predictions of the counterfactual business-as-usual baseline are likely to render sectoral no-lose targets an extremely unattractive mechanism in practice, at least for the transportation case study presented here. Given these uncertainties, the regulator faces a tradeoff between efficiency (setting generous crediting baselines to encourage more countries to opt in) and limiting transfer payments for non-additional offsets (which are generated if the crediting baseline is set above business-as-usual).

The first-best outcome is attainable through setting a generous crediting baseline. However, this comes at the cost of either increased environmental damage (if developed country targets are not adjusted to account for non-additional offsets), or transfers from developed to developing countries that are likely to be too high to be politically feasible (if developed country targets are made more stringent in recognition that many offsets are nonadditional). A more stringent crediting baseline still generates a large proportion of non-additional offsets, but renders sectoral no-lose targets virtually irrelevant as few countries opt in.

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Nigeria depends heavily on oil and gas, with hydrocarbon activities providing around 65 percent of total government revenue and 95 percent of export revenues.  While Nigeria supplies some LNG to world markets and is starting to export a small amount of gas to Ghana via pipeline, the great majority of the country's hydrocarbon earnings come from oil.  In 2008, Nigeria was the 5th largest oil exporter and 10th largest holder of proved oil reserves in the world according to the U.S. Energy Information Administration.  The country's national oil company NNPC (Nigerian National Petroleum Corporation) sits at the nexus between the many interests in Nigeria that seek a stake in the country's oil riches, the government, and the private companies that actually operate the vast majority of oil and gas projects.

Through its many divisions and subsidiaries, NNPC serves as an oil sector regulator, a buyer and seller of oil and petroleum products, a technical operator of hydrocarbon activities on a limited basis, and a service provider to the Nigerian oil sector.  With isolated exceptions, NNPC is not very effective at performing its various oil sector jobs.  It is neither a competent oil company nor an efficient regulator for the sector.   Managers of NNPC's constituent units, lacking the ability to reliably fund themselves, are robbed of business autonomy and the chance to develop capability.  There are few incentives for NNPC employees to be entrepreneurial for the company's benefit and many incentives for private action and corruption.  It is no accident that NNPC operations are disproportionately concentrated on oil marketing and downstream functions, which offer the best opportunities for private benefit.  The few parts of NNPC that actually add value, like engineering design subsidiary NETCO, tend to be removed from large financial flows and the patronage opportunities they bring. 

Although NNPC performs poorly as an instrument for maximizing long-term oil revenue for the state, it actually functions well as an instrument of patronage, which helps to explain its durability.  Each additional transaction generated by its profuse bureaucracy provides an opportunity for well-connected individuals to profit by being the gatekeepers whose approval must be secured, especially in contracting processes.  NNPC's role as distributor of licenses for export of crude oil and import of refined products also helps make it a locus for patronage activities.  Corruption, bureaucracy, and non-market pricing regimes for oil sales all reinforce each other in a dysfunctional equilibrium that has proved difficult to dislodge despite repeated efforts at oil sector reform.

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Mark C. Thurber
Ifeyinwa M. Emelife
Patrick R. P. Heller
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Steve Radelet is Senior Advisor for Development in the Office of the Secretary of State. From 2002 to 2010 he was a Senior Fellow at the Center for Global Development, where his work focused on economic growth, poverty reduction, foreign aid, debt, and trade. He served as an economic advisor to the Government of Liberia from 2005-2009, and was founding co-chair of the Modernizing Foreign Assistance Network. He was Deputy Assistant Secretary of the Treasury for Africa, the Middle East, and Asia from 2000 to 2002. From 1990 to 2000, he was on the faculty of Harvard University, where he was a fellow at the Harvard Institute for International Development (HIID) and a lecturer on economics and public policy.  He is the author of Emerging Africa: How 17 Countries are Leading the Way and Challenging Foreign Aid: A Policymaker's Guide to the Millennium Challenge Account, and co-author of Economics of Development, a leading undergraduate textbook. He served as resident advisor to the Ministry of Finance in Indonesia (1991-95) and The Gambia (1986-88), and was a Peace Corps Volunteer in Western Samoa.

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Steven Radelet Senior Advisor on Development Speaker The office of Secretary of State
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Brian Levy currently is Head of the Bank's Governance and Anti-Corruption Secretariat in the World Bank - from where co-ordinates implementation of the Bank Group's GAC strategy. He is the author of Governance Reform: Bridging Monitoring and Action (World Bank, 2007), which builds on his 2006 work on governance monitoring featured in the 2006 Global Monitoring Report, Mutual Accountability: Aid, Trade and Governance . He worked in the World Bank's Africa Vice Presidency from 1991 to 2003 on the challenges of strengthening the institutional underpinnings of African development, for the last four years as sector manager of the Africa Public Sector Reform and Capacity Building Unit. He was a member of the core team which produced the World Bank's 1997 World Development Report, The State in a Changing World.  He has published numerous books and articles on the interactions between public institutions, the private sector and development in Africa, East Asia, and elsewhere, most recently editing (jointly with Sahr Kpundeh) the volume, Building State Capacity in Africa (World Bank Institute, 2004) Prior to joining the Bank he was assistant professor in development economics at Williams College in Williamstown, Massachusetts. He completed his Ph.D in economics at Harvard University in 1983.

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Brian Levy Adviser, Public Sector Governance Speaker The World Bank
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Richard Goldstone served on South Africa's Transvaal Supreme Court from 1980 to 1989 and the Appellate Division of the Supreme Court from 1990 to 1994. During the transition from apartheid to multiracial democracy, Goldstone headed the Goldstone Commission investigations into political violence in South Africa. He was credited with playing an indispensable role in the transition and became a household name in South Africa, attracting widespread international support and interest. Goldstone's work investigating violence led to him being nominated to serve as the first chief prosecutor of the United Nations International Criminal Tribunal for the former Yugoslavia and for Rwanda. On his return to South Africa he took up a seat on the newly-established Constitutional Court of South Africa. In 2009, Goldstone led an independent fact-finding mission created by the UN Human Rights Council to investigate international human rights and humanitarian law violations related to the Gaza War.

James Campbell's research focuses on African American history and the wider history of the black Atlantic. He is particularly interested in the long history of interconnections and exchange between Africa and America, a history that began in the earliest days of the transatlantic slave trade and continues into our own time.  In recent years, his research has moved in the direction of so-called “public history," the ways in which societies tell stories about their pasts, not only in textbooks and academic monographs but also in historic sites, museums, memorials, movies, and political movements.

Peter Berkowitz is the Tad and Dianne Taube Senior Fellow at the Hoover Institution, Stanford. He is cofounder and director of the Israel Program on Constitutional Government, a member of the Policy Advisory Board at the Ethics and Public Policy Center and served as a senior consultant to the President's Council on Bioethics. His scholarship focuses on the interplay of law, ethics, and politics in modern society. His current research is concerned with the material and moral preconditions of liberal democracy in America and abroad.

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Richard Goldstone Former Justice of the Constitutional Court of South Africa Keynote Speaker
James Campbell Professor of History Panelist Stanford University
Peter Berkowitz Tad and Dianne Taube Senior Fellow Speaker Hoover Institution, Stanford University
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Philip Keefer is a Lead Research Economist in the Development Research Group of the World Bank. Since receiving his PhD in Economics from Washington University at St. Louis, he has worked continuously on the interaction of institutions, political economy and economic development. His research has included investigations of the impact of insecure property rights on economic growth; the effect of political credibility on the policy choices of governments; and the sources of political credibility in democracies and autocracies. It has appeared in journals that span economics and political science, ranging from the Quarterly Journal of Economics to the American Review of Political Science, and has been influenced by his work in a wide range of countries, including Bangladesh, Brazil, the Dominican Republic, Indonesia, México, Perú, Pakistan and the Philippines.

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Philip Keefer Lead Research Economist Speaker World Bank
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Michael Armacost recently gave a talk, examining the “rise” of China, at a gathering of international affairs experts. “How should we think of China,” asked Armacost, saying, “Some portray Beijing as a looming military threat; some regard it as our most promising global partner; some expect it to compete fiercely with us for global economic leadership.” Armacost looked at China’s military, trade, economics, and education in relation to the United States and shared thoughts for preparing the United States to become more competitive for the future.

Michael H. Armacost Shorenstein Distinguished Fellow Speaker
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In 2009 the global coal market witnessed one of the most dramatic realignments it has ever seen - China, long a net exporter of coal, suddenly imported a record-smashing 126 Mt tons (103 Mt net). This inversion of China's role in global coal markets meant that Chinese imports accounted for nearly 15% of all globally traded coal, and China became the focal point of global demand as traditional import markets like Europe and Japan stagnated in the wake of the financial crisis.  The middle kingdom's appetite for imported coal seems insatiable, and the "China Factor" appears to have ushered in a new paradigm for the global coal market.

But China doesn't "need" the coal.  The world's largest coal producer cranked out 2.96 Bt of production in 2009, backed up by 114.5 Bt of reserves.  While the world's other fastest growing importer, India, is plagued by a growing gap between coal supply and power demand that it is unable to fill domestically, this is not the case in China.  The spike in Chinese demand for imported coal is therefore a more complex (and less easily predictable) phenomenon that requires careful examination if the world is to understand what impact China might have on global energy markets in the coming decade.

In this paper Richard Morse and Gang He devise a model that explains Chinese coal import patterns and that can allow the coal market to understand, and to some degree predict, China's coal import behavior.  They argue that the unique structure of the Chinese coal market creates a series of key arbitrage relationships between Chinese domestic coal markets and international coal markets that determine Chinese import patterns.

The implications of this argument are significant for the development of the global coal trade in the coming decade.  The arbitrage relationships that Morse and He describe directly link the domestic price of coal in China to the global price of coal. Developments in China's domestic coal market will be a dominant factor determining global coal prices and trade flows (and by implication power prices in many regions).  This makes understanding the domestic Chinese coal market, which operates according to a unique economic and political logic, crucial for any participant in the global markets.

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Gang He
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SAMUEL BOWLES, (PhD, Economics, Harvard University) is Research Professor at the Santa Fe Institute where he heads the Behavioral Sciences Program. He is also Professor of Economics at the University of Siena. He taught economics at Harvard from 1965 to 1973 and at the University of Massachusetts, where he is now emeritus professor. His recent studies on cultural and genetic evolution have challenged the conventional economic assumption that people are motivated entirely by self-interest. These have included the mathematical modeling and agent-based computer simulations of the evolution of altruistic behaviors and behavioral experiments in 15 hunter-gather and other small-scale societies. Recent papers have also explored how organizations, communities and nations could be better governed in light of the fact that altruistic and ethical motives are common in most populations. Bowles' current research also includes theoretical and empirical studies of political hierarchy and wealth inequality and their evolution over the very long run. 

His scholarly papers have appeared in Science, Nature, American Economic Review,Theoretical Population Biology, Journal of Theoretical Biology, Journal of PoliticalEconomy, Quarterly Journal of Economics, Behavioral and Brain Science, Philosophy and Public Affairs, Journal of Public Economics, Theoretical Primatology, Proceedings of the National Academy (USA), Harvard Business Review, Journal of Economic Literature, Journal of Economic Perspectives, and the Economic Journal. 

His recent books include Microeconomics: Behavior, Institutions and Evolution(Princeton University Press, 2004), Moral Sentiments and Material Interests: the Foundations of Cooperation in Economic Life (MIT Press, 2005), Unequal Chances: Family Background and Economic Success (Princeton 2004), Poverty Traps (Princeton 2006), Inequality, Cooperation and Environmental Sustainability (Princeton 2005), Globalization and Egalitarian Redistribution (Princeton, 2006), Foundations of Human Sociality: Economic Experiments and Ethnographic Evidence in 15 Small-scale Societies. (Oxford University Press. 2004) and Understanding Capitalism: Competition, Command and Change (Oxford 2004). 

He has also served as an economic advisor to the governments of Cuba, South Africaand Greece, to presidential candidates Robert F. Kennedy and Jesse Jackson, to the Congress of South African Trade Unions and to South African President Nelson Mandela.

His next major work, A Cooperative Species: Human reciprocity and its evolution,co-authored with Herbert Gintis, will be published in 2011. Drawing on their recentresearch on cultural and genetic evolution and his empirical studies of behavior in smallscale societies, this work will explain why humans, unlike other animals, engage incooperation among large numbers of people beyond the immediate family. His CastleLectures at Yale University, Machiavelli's Mistake: Why good laws are no substitute forgood citizens, will be published in 2011 by Yale University press.

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Samuel Bowles, PhD. Research Professor Speaker Sante Fe Institute
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