What the collapse of the Doha talks means for agreement on climate

Ignor­ing the WTO jar­gon, the col­lapse of the talks is a sto­ry about how the world has changed in the past half cen­tu­ry or so since the WTO rules were cre­at­ed. Unlike the post-war world, the largest and most suc­cess­ful trad­ing economies today are still, by any aver­age mea­sure, poor. Their exports are dri­ving down world prices for our imports and their imports are under­writ­ing a boom in the Aus­tralian econ­o­my. But their eco­nom­ic suc­cess does not mean that they are glob­al­iz­ers at any price.

Gov­ern­ments in India and China—or Rus­sia for that mat­ter, or Indone­sia or Vietnam—are balk­ing at mul­ti­lat­er­al attempts to lock-in fur­ther trade lib­er­al­iza­tion because they are reluc­tant to allow world mar­kets to set prices at home for labor or land or oth­er pro­duc­tive assets like their dirty pow­er sta­tions and pol­lut­ing fac­to­ries. This means that there are strict lim­its to how much they’ll open their mar­kets to trade and how much they’ll agree to re-price car­bon to achieve glob­al green-house tar­gets.

To have any chance of man­ag­ing the cli­mate change prob­lem, let alone world mar­kets, we’ve got to face this prob­lem and find a way to deal with it.

It’s impos­si­ble to meet the cli­mate chal­lenge one-coun­try-at-time. The atmos­phere is a glob­al prop­er­ty that needs glob­al man­age­ment. In the past the Unit­ed Nations pro­posed glob­al tar­gets, like those in the Kyoto Pro­to­col, to dis­trib­ute the bur­den of man­ag­ing cli­mate change. But tar­gets for high-income coun­tries alone — omit­ting Chi­na and India — nev­er made much sense and even those coun­tries that signed-on paid them only lip-ser­vice.

Prime Min­is­ter Howard, under the pres­sure of an approach­ing elec­tion, says he’ll set tar­gets for Aus­tralia, before any glob­al deal is done. But after the elec­tion it may turn out to be too hard to jus­ti­fy going-it-alone to fix a glob­al prob­lem. Its like decid­ing how big a buck­et we need to bail the ocean.

One thing is clear; glob­al emis­sion tar­gets are not an answer. The sad his­to­ry of inter­na­tion­al col­lab­o­ra­tion on tar­gets for peace, human rights, health and shared pros­per­i­ty warns us that future green­house gas tar­gets are like­ly to fail, too. In fact, it’s often said that if tar­gets worked, the Sovi­et Union would have been a suc­cess.

In a world where the largest trad­ing economies don’t want to open mar­kets for more trade because they are wor­ried about the price impacts at home, we will nev­er be able to nego­ti­ate a glob­al tar­get for green­house gasses that takes account of mat­ters such as pros­per­i­ty, fair­ness, effi­cien­cy and so on, in all the diverse economies of the world at the same time.

It can’t be done.

It’s time to see the world as it is and do some­thing dif­fer­ent to bring about glob­al con­sen­sus. Some­thing quite unlike the mul­ti­lat­er­al trad­ing sys­tem of WTO. Some­thing that gen­er­ates more than the luke-warm sup­port giv­en to glob­al tar­gets like the UN’s ‘mil­len­ni­um goals’.

There is a hint in the Aus­tralian Prime Minister’s Emis­sions Trad­ing report that his advi­sors rec­og­nized this prob­lem. They talk about ‘mul­ti­ple over­lap­ping regimes’, which is pret­ty much where glob­al trade seems to be head­ed. It may answer the prob­lem of eco­nom­ic ‘dif­fer­en­ti­a­tion’ among rich and poor and it could, with luck and self­less acts on the part of some eco­nom­ic regions (don’t hold your breath), add up to a suf­fi­cient rein on the growth of green­house gasses. It may even turn out to be what Pres­i­dent Bush meant by his sur­pris­ing but vague pro­pos­al before the G-8 sum­mit ear­li­er this month.

But ‘mul­ti­ple over­lap­ping regimes’ to con­trol emis­sions won’t deliv­er some cru­cial objec­tives for Aus­tralia as a coun­try unique­ly vul­ner­a­ble to cut­backs in the use of car­bon fuels. There has to be some­thing else, too, that con­tains what we could call ‘com­pe­ti­tion rules’ to ensure that the dif­fer­ences in regimes don’t turn out to be dis­guised sub­si­dies to emit­ters or bar­ri­ers to trade and invest­ment (I con­sid­er what these might be in my sub­mis­sion to the Emis­sions Trad­ing Task­force, see below).

And if you don’t want to ‘hold your breath’ about emis­sion lev­els in these dif­fer­ent region­al regimes?

The most effec­tive alter­na­tive would be a glob­al tax on increas­es in car­bon emis­sions. Despite the prob­lem of eco­nom­ic diver­gence that plagues WTO a mar­gin­al emis­sions tax could turn out to be sur­pris­ing­ly easy to nego­ti­ate. First, as ANU Pro­fes­sor War­wick McK­ib­bin has shown, a uni­form tax on mar­gin­al emis­sions doesn’t need to be big to bring emis­sions down; size isn’t crit­i­cal, so it could start out quite small. Sec­ond, a tax that they can col­lect while blam­ing the UN is an idea no gov­ern­ment would reject out of hand.

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