BRUSSELS - One way to look at the climate
problem is through the lens of the market. If you
do, only one conclusion is possible - the climate
change problem is a massive market failure - a
failure of market mechanisms to factor in future
costs of a change in climate in real-time prices.
Because of that failure the industrialized
countries have changed the atmosphere so
drastically that climate is changing already now.
Because of that failure the world economy, if
unchecked, heads for disaster. This has the
elements of a well-known Greek drama - Icarus
flies up towards the sun, but his success brings
him ever closer to the sun; that melts the wax in
his wings and finally brings him down.
Humanity is like Icarus: it is, finally,
spreading the wealth of its
industrial development based
on fossil fuels over the whole planet, bringing
material wellbeing within reach of a majority of
the world's population. For that reason, it is
changing the planet's atmosphere every day a bit
more, and the best available knowledge tells us
that if the average temperature on earth rises
more than two degrees Celsius, we'll be really in
an Icarusean position: we will lose control over
our trajectory.
The extensive loss of
biodiversity is another example of market failure.
The market cannot by itself price the future costs
of the extinction of this or that organism, and so
we destroy thousands of species each year that
might be very useful to humanity.
These
challenges influence political and economic
thinking. It's increasingly obvious that only
government intervention on the national and
international level can steer the world economy
and its markets - nobody seriously thinks of
eliminating markets - in a more sustainable
direction.
If you observe closely what is
happening in the Kyoto and post-Kyoto processes,
it is clear that governments are influenced by
ecological economists such professor Herman Daly
of the US. That must taste like sweet revenge for
Daly. Once he headed the environmental division of
the World Bank, leaving because he felt that the
basic philosophy of the Bank was incompatible with
his thinking.
Ecological economy argues
primarily that the economy has a sustainable scale
relative to the ecosystems on which it relies.
That is exactly what climate negotiations try to
realize.
Governments try to agree on the
maximum scale of greenhouse gas (GHG) emissions
for the world economy. Climate scientists can more
or less compute how much GHG the world's
atmosphere can accommodate before the temperature
will rise two degrees Celsius. Governments base
themselves on this knowledge to agree on a maximum
of GHG emissions.
The second step is a
fair distribution between countries of the right
to pollute, or of the "sink capacity" for GHG of
the world's ecosystems. This too will be the
result of hard and complex negotiations between
governments. Fair distribution is central to the
ecological economy.
After these two steps
have been taken, governments have to decide how
they can reach their national emission target.
Here too, governments play a pivotal role. They
can stimulate their economy in the right direction
by changing the prices in such a way that they
reflect real costs. A carbon dioxide (CO2) tax per
tonne of CO2 emission would be the best way to
steer the economy in the right direction. If that
proves impossible, total permitted emissions have
to be distributed among polluters. Only if this
happens can market mechanisms do their job.
Governments play a crucial role also in
the development, demonstration and diffusion of
green technologies. They finance fundamental
research that may not lead to profits in the short
run, and they play a role as first users, and in
so doing create a market for eco-technologies.
Thirdly, they can stimulate large-scale use of
green technologies through subsidies. All this
accelerates the process of scaling up the
production of eco-technologies and bringing down
the price per unit.
The European Union
seems to be playing a leading role in multilateral
environmental governance, whether it is in
financing the world's multilateral environmental
agreements (MEAs), or in taking the lead in
negotiating processes leading up to new
agreements. Lately the EU announced it will reduce
its greenhouse gas emissions by 20% by 2020.
This green choice is at odds with another
priority of the EU: stimulating trade, whether
inside the EU or internationally. Traditionally
the EU has been a leading actor within the World
Trade Organization (WTO), asking for more free
trade (except for agricultural products).
The question is how the EU will reconcile
these two priorities. If you stimulate trade, you
stimulate the production of GHG, because goods
have to be transported by lorries, ships, trains
or, worst of all, planes. The EU was also a
staunch supporter and initiator of the
liberalization of air travel inside the EU: this
has democratized prices of airfares, and
enormously driven up the number of flights and
hence pollution.
On the global level there
is an even more fundamental problem. The WTO is a
strong organization: all its members have to
accept almost all of its rules. That is no small
thing: the World Trade Agreement of 1994 ran into
26,000 pages. All these rules are not just words,
because the WTO harbors a kind of court that can
punish (commercially) countries that don't respect
its rules.
World environmental governance
is very different from that. First, there is no
world environment organization, so countries just
ratify the MEAs they like. Second, even if a
country ratifies a MEA, there are no real
sanctions if it doesn't live up to its obligations
under it. "International shaming" is the only
sanction.
The Kyoto protocol is the only
partial exception to this rule: countries that lie
about their emissions will be excluded from
international emission trading and hence have to
realize their emission target on their own
territory.
This difference between hard
WTO rules and soft environmental rules can create
economic tensions: if EU steel becomes more
expensive because EU producers have to pay more
for their emissions than their Chinese or US
competitors, the global system in a way punishes
the good environmental students.
Jose
Manuel Barroso, president of the EU Commission,
the executive arm of the EU, said in a recent
interview that European producers don't have to
fear this; when it comes to climate policy, the EU
will not allow unfair competition and will stifle
imports of steel or other products that are
cheaper because they are climate unfriendly.
This sounds like a quite technical remark,
yet it is like swearing in the neo-liberal church.
Remember, the WTO axiom is that "thou shall not
hinder trade unnecessarily". This axiom has often
put national environmental rules under WTO
pressure. Now we hear the president of the
European Commission say that trade must be
subordinated to ecological objectives. That's new.
It remains to be seen what will happen if
the EU wants to put respect for the climate above
free trade. The US has already signaled it will
fight such EU moves through the WTO. On the other
hand, Barroso's words can also motivate countries
such as the US to agree to a post-Kyoto deal: not
doing so risks putting world trade in stormy
waters.
John Vandaele
is journalist with the Belgian magazine Mo, and
author of several books on globalization, most
recently The Silent Death of Neoliberalism
(2007).
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