Column: At least we have a start on climate

Column: At least we have a start on climate
The Financial Express, December 23, 2009, Page 8

Michael Walton

Was Copenhagen a failure? The Copenhagen Accord has fine aspirations but no firm commitments, no clear plan and no governance mechanism. One activist group called it a disaster. Blame was being laid at all doors: President Obama for failing to deliver stronger US commitments; the Chinese for obduracy over emissions verification; the Europeans for not coming through; the group of African and poorer countries for holding out for even more money. Presidents Chavez and Morales blamed capitalism.

So how come the major global powers could save the world from financial catastrophe last year, but not save the globe from a potentially much larger catastrophe from global warming?

The comparison is revealing. In the case of the financial crisis, the threat was immediate, domestic action made sense on purely national grounds, redistributions were largely within countries and the interests of the big economic players—the financial institutions—were aligned with action, often controversially so.

Climate change couldn’t be more different. The threat is distant. Coordination is not an add-on, but of the essence: one nation’s action only makes sense at home if others act too—a classic problem of managing the commons. Even harder, the desirable redistributions are between countries, and intricately linked both to the management of the rise of emerging economic powers, and the need to extract resources from fiscally pressed rich countries to support adaptation in poor countries. Many established economic interests are resistant to change, including major parts of the energy lobby.

Given the sheer difficulty of the problem, the Copenhagen Accord looks better. Getting agreement in principle from the US, China and India is a big step forward. The Accord includes an important new proposal to protect forests. There is a commitment to deliver $30 billion over the next three years and $100 billion from 2020 onward to poor countries. There are surely credibility problems here, but the numbers are there to fight over.

Also valuable were new signs of coordination in the chaos. Most important was the group of Brazil, China, India and South Africa—with whom the final deal was cut with Obama, to the procedural fury of the G-77 and Europe. Also noteworthy was greater African coordination, led by Ethiopian Prime Minister Zenawi. There was an intriguing sign of China-African relations when the Africans threatened to keep their mineral resources if the Chinese did not support their case.

But better coordination is likely to be insufficient, given the sheer difficulty of the challenge. The lesson from the financial crisis is relevant: real action will come on the basis of politically salient, national self-interest. A future international agreement can be overlaid on this, but is not a substitute.

Political salience means two things: citizen support, including willingness to accept higher carbon-related prices, and alignment of domestic economic interests. Among rich countries, European citizens are essentially there, Japan is moving, and the US belatedly moving. But will business come round? There is a telling experience from the negotiation of the Montreal Protocol, the international agreement to phase out emission of chlorofluorocarbons (CFCs) that were destroying the ozone layer. The global leader in production of goods emitting CFCs was the US company Dupont. There was a point in the negotiation process in which Dupont shifted from resisting to favouring the deal. Once a deal became sufficiently likely, it was in its interests to innovate and become the market leader and standard-setter in CFC-free products.

There are signs of this occurring in carbon-saving innovation, and not just in rich countries. In the December New Yorker, Evan Osnos documents how China has been pouring resources into green, carbon-saving technology in the power sector—in some areas overtaking the US—and backing this with rises in coal prices. In future decades, innovation will be increasingly a joint activity between firms in rich countries and emerging markets, with a mutual interest in the sharing of technology. India needs to get serious on this act.

The Montreal Protocol had seven revisions in the decade after it came into force in 1989, which steadily strengthened its force and reach. Climate change is tougher, Copenhagen only delivered an Accord, and time matters. The major leaders, importantly, recognised the inadequacy of the deal. With rising citizen pressure, increasing alignment of economic interests and emerging international coordination among major players, there is real hope that Copenhagen was a genuine step to effective action on this truly momentous challenge of our times.

The author is at the Harvard Kennedy School, Institute of Social & Economic Research and the Centre for Policy Research