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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