Tag Archives: kyoto

Are the BRICS ready to lead?

BRICS graphic from the FT

Reflecting on the greater influence of the BRICS, recently, in global forums, the always-interesting Alan Beattie asks:

“Is this a pivot point such as the second world war, where the confident, innovative US muscled aside the weakened, debt-laden economies of Europe and remade the global financial architecture? ” Extract from FT.com

His guess? “No, not yet”. He points out the BRICS are dominated by one country, China, that is still dependent on foreign demand for its economic strength rather than on its domestic resources.

“A decade of rapid growth is not enough for the Brics to seize the baton of global economic leadership from the US and western Europe. The grouping, or some of them, may have astonished the world with their progress over the past 10 years. But it will require a qualitative improvement as well as more growth to consolidate that shift of power.”

In an accompanying article he argues:

“…Aside from the long-running debate about giving developing countries more votes in the IMF, it has proved hard to hammer out a substantive set of subjects on which the disparate Bric countries have the same interests.” Extract from FT.com

Beattie points out that for all their capacity jointly to wield influence in global forums, the BRICS do not have much in common in their domestic policy approaches and few common external interests. This has been evident in the Doha negotiations where India and Brazil, especially, have opposing interests in matters such as agricultural trade liberalization, and at Copenhagen where China’s interests were not apparently those of many developing countries; effectivelly sui generis. Beattie concludes that:

“In diplomacy, as in economics, the power wielded by the Bric countries may end up being distinctly weighted towards the wishes of Beijing.”

I think all this is pretty sound. But…in my view we are witnessing, nonetheless, a secular change in global governance, to be marked by confusion, delay and irrelevance for global institutions such as WTO that cling to a mode of “explicit consensus” (as the Doha Declaration puts it) in decision-making. Such presumptive unanimity or compliance is no longer likely except where the decisions concerned are inescapable—like those on the global ‘stimulus’ (or otherwise trivial in a policy sense, such as humanitarian aid). The future seems, for now, to belong rather to plurilateral decision-making and institutions in different forms.

Lamy’s assessment of Copenhagen

It’s called whistling in the wind.

“The outcome of the conference in Copenhagen represents a step forward. The Kyoto Protocol addresses about 30% of global carbon emissions. In contrast, the framework accord hammered out in Copenhagen last week may encompass the majority of world emissions. ” Extract from WTO | 2009 News items – Lamy praises Copenhagen efforts, calls for more to be done

The Director-General of WTO goes on to claim that “…in the end, it is only through a multilateral process that we can achieve results which are legitimate and credible.” But this is an argument seems to stand only when propped-up by jargon. Processes? What are they? Agreements to a coherent single-framework for action? Only a weak one at best, and likely compromised by exceptions, concessions and deals (qv Copenhagen, Doha). Or are ‘processes’ just talk?

Global governance in the aughties

First, bodice-ripping as political theory

“We live in an era in which unprecedented globalization and economic interdependence, liberal-democratic hegemony, nanotechnology, robotic warfare, the ‘infosphere,’ nuclear proliferation and geoengineering solutions to climate change coexist with the return of powerful autocratic-capitalist states, of a new Great Game in Central Asia, of imperialism in the Middle East, of piracy on the high seas, of rivalry in the Indian Ocean, of a 1929-like market crash, of 1914-style hypernationalism and ethnic conflict in the Balkans, of warlords and failed states, of genocides in Bosnia, Rwanda and Darfur, and of a new holy war waged by radical Islamists complete with caliphates and beheadings reminiscent of medieval times.” Extract from The National Interest

(Nanotechnology?)

Here’s a more sober, more plausible, assessment of the likely route for the global governance framework (at least) from the U.S. National Intelligence Council:

The existing international organizations—such as the UN, WTO, IMF, and World Bank—may prove sufficiently responsive and adaptive to accommodate the views of emerging powers, but whether the emerging powers will be given—or will want—additional power and responsibilities is a separate question. Indeed some or all of the rising powers may be content to take advantage of the institutions without assuming leadership burdens commensurate with their status. At the same time, their membership does not necessarily have to involve heavy responsibilities or burden-sharing, allowing them to pursue their goals of economic development.

That veiw from mid-2008 is holding up pretty well, so far…except that ‘accommodating views’ does not mean doing anything. Which explains much about why WTO is stymied and why the Copenhagen conference of the UN Climate Convention was a farce (there are other reasons, too, in each case).

China worries about U.S. carbon tariffs

In a speech in the U.S. yesterday, Tung Chee-hwa, vice-chairman of the Chinese People’s Political Consultative Conference (CPPCC) hit out at plans for carbon tariffs in the Democrats’ bill for emission controls

“A top adviser to the Chinese government on Tuesday warned that a proposed US border tax on carbon sensitive materials ‘smells of protectionism’ and could spark retaliation from developing countries.” Extract from a report in the Financial Times

Tung, the former Chief Executive of Hong Kong, was talking about the Waxman-Markey bill that provides for ‘border adjustments’ should cap-and-trade costs for energy-intensive industries not be fully offset by U.S. government subsidies. China has been campaigning against this draft legislation since it’s introduction.

They are obviously troubled by the apparent decision of the Obama Administration not to oppose the use of carbon tariffs.

India says ‘no’

Even IPCC chairman Rajendra Pachauri considers India is ‘very unlikely’ to change its opposition to emissions targets (for India).

“‘If the question is whether India will take on binding emission reduction commitments, the answer is no. It is morally wrong for us to agree to reduce when 40 percent of Indians do not have access to electricity,’ said a member of the Indian delegation to the recently concluded U.N. conference in Bonn” Extract from The Washington Post

The FT thinks it may be about the money. But I doubt it. We’ve seen sterile dialog like this many times in the multilateral trade system. There isn’t enough money to buy the compliance of countries that have conflicting domestic incentives.

A tangle of carbon taxes

A big storm on the horizon… get ready for it

Border tax adjustments (‘carbon tariffs’) are inevitable once mandatory carbon taxes or emission caps with market value are applied to production. Now, the Obama administration acknowledges that:

“Mr. Chu, speaking before a House science panel, said establishing a carbon tariff would help ‘level the playing field’ if other countries haven’t imposed greenhouse-gas-reduction mandates similar to the one President Barack Obama plans to implement over the next couple of years. It is the first time the Obama administration has made public its view on the issue” Extract from Wall St Journal

The border adjustment of taxes by means of a ‘carbon tariff’ is not a problem in itself. Border adjustments for VAT and consumption taxes are a longstanding GATT/WTO system that has been un-controversial since the 1970s. The biggest problem is a political problem posed by international legal concepts of equity and responsibility that are bound to cause bitter conflict between governments long before any system of ‘carbon tariffs’ is put in place.

What the carbon caps will cost

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The Reserve Bank of Australia’s quarterly Statement on Monetary Policy (6 Feb, 09) contains the latest estimate—using the Treasury model, is my guess:

“Overall, assuming an emissions permit price of $25 per tonne of CO2-e, it is estimated that the net result will be to reduce GDP growth by less than 0.5 percentage points in total, spread over the first couple of years following the introduction of the CPRS, with a reduction of about 0.1 percentage points per year thereafter.4 These effects, however, must be considered against the longer-term costs of not taking steps to ameliorate the negative effects arising from climate change.” extract from Statement on Monetary Policy

That may sound pretty modest…until you express the income loss in dollars and cents and ask yourself what we’re buying with our money (and our childrens’).