The Heat Is Online

Countries Must Cut Emissions In Concert

Penalties of acting alone stall collective effort on climate change

Financial Times, by Fiona Harvey,: Dec. 5 2006

Apopular radio comedy series in 1940s Britain featured a sketch in which two excessively polite gentlemen would find themselves unable to pass through a doorway, paralysed by their own good manners. After you, Claude, one would say. No, after you, Cecil, came the reply. It could go on for quite a long time.

That is exactly what negotiating international action on climate change feels like, according to David Miliband, the UKs environment minister. Its an After you, Claude situation, he says of the discussions on the international Kyoto protocol. No country wants to be first in taking action to cut their greenhouse emissions for fear that other governments will fail to follow. So they find ways to stall, while their greenhouse gas output climbs steadily skywards.

According to some of the worlds leading scientists, climate change poses a bigger threat to future prosperity than wars or terrorism. Yet governments remain reluctant to address this threat because any country acting alone to curb its greenhouse gas emissions, without similar commitments by other governments, risks damaging the competitiveness of its industries.

The result: paralysis. There is a collective action problem internationally, says Mr.Miliband. You have to break this logjam.

Attempts to break the logjam are indeed under way, but the risks are high. Many of the government ministers from around the world, meeting at United Nations talks on climate change in Nairobi last month, were wary of committing their countries to far- reaching emissions reduction programmes unless they could be sure that large emitters such as the US and China were also taking on such commitments.

Japan refused to hurry moves to commit to reductions in emissions beyond 2012, when the current provisions of the Kyoto protocol expire, because of fears that it would hand China a competitive advantage in manufacturing industries. Canada faced a similar dilemma, resisting pressure to push for greater emissions cuts as the US was refusing to take on reduction targets. The US and Australia have already rejected the protocol, which obliges developed countries to cut their emissions by an average of 5 per cent compared with 1990 levels by 2012.

More worrying for proponents of the treaty, however, are rifts on the issue that are beginning to become apparent within Europe. The European Union has long been the most steadfast supporter of the Kyoto protocol, in the face of backsliding from Canada and Japan. The EU was credited with enticing Russia to agree to the protocol two years ago, which was the decisive factor in ensuring the long-delayed agreement finally came into effect. The EUs greenhouse gas emissions trading scheme is the only mandatory scheme in the world to impose constraints on business emissions of carbon dioxide and to allow companies to trade their emissions allowances with one another in order to reduce carbon output at the lowest possible price.

But the dilemma over competitiveness and environmental action has split the European Commission. Günter Verheugen, industry commissioner, late last month warned that our environmental leadership could significantly undermine the international competitiveness of part of Europes energy-intensive industries. In a letter to José Manuel Barroso, president of the Commission, Mr.Verheugen called for special exemptions to state aid rules for energy-intensive sectors and backed the introduction of a levy on imports from developed countries that have yet to implement the Kyoto treaty. He said that going it alone on emissions could worsen global environmental performance by redirecting production to parts of the world with lower environmental standards.

Mr.Barroso, however, subsequently signalled his strong support for the EUs emissions trading scheme, which imposes strict limits on the amount of carbon dioxide that energy-intensive businesses may emit. He said: Europe is determined to lead by example. We should be proud of what we are doing as Europeans. We led the negotiations to create the Kyoto treaty. We are at the cutting edge of new environmental technology. And we have set up the worlds largest scheme for trading in emissions of carbon dioxide, the emissions trading scheme. By doing this, climate change has suddenly been brought into the boardroom of every major company across Europe.

He promised strict limits on emissions would be set by the Commission: The Commission will be tough but fair...we need the market [in emissions] to work, if Europe is to keep leading the fight against climate change. The rest of the world is watching to see if the [emissions trading scheme] works. It has to.

The strong support of Mr.Barroso enabled Stavros Dimas, the EUs environment commissioner, to impose emissions limits under the scheme that were about 7 per cent lower than member states had been calling for.

Time is running out for action on climate change, however. There is as yet nothing to replace the Kyoto treaty in 2012. Arguments over the effect of emissions cuts on a countrys international competitiveness presuppose that there is still time to forge a wide- ranging agreement to solve the climate change problem and to reduce emissions before they reach a dangerous level.

Yet there is an increasingly loud chorus of concern from scientists who study climate change that suggests we may not have that long. Moreover, the fact that the debate is deadlocked over the Claude and Cecil problem represents enormous progress in certain respects. Only a few years ago, the fundamental impasse was over the facts themselves, not what to do about them.

For more than a decade after large numbers of scientists and policymakers started focusing on climate change in 1988, critics exploited uncertainties in the evidence to cast doubt on the emerging scientific consensus that human actions were leading to climate change by burning fossil fuels. But as the scientific evidence mounted that climate change was being caused by human actions, that argument gradually fell away.

In the past few years, opponents of emissions cuts have shifted their stance, no longer questioning the facts but questioning the wisdom of reducing emissions that would cause economic harm, arguing that the costs of reduction outweighed the risks of climate change.

This view was severely criticised by the recent UK government review, carried out by Sir Nicholas Stern, the former World Bank chief economist, which estimated the cost of reducing emissions at 1 per cent of global gross domestic product and the cost of inaction at 5 per cent to 20 per cent.

Mr.Miliband calls the economic argument the last refuge of the deniers  the idea that its not worth anyone doing anything unless everyone does it.

Nevertheless, debate over those two questions, first of science and then of economics, has delayed action on climate change by over a decade. It took seven years for the Kyoto treaty, negotiated in 1997, to come into effect in 2004. The tortuous history extends back still further: governments agreed the parent treaty to the Kyoto accord, called the UN Framework Convention on Climate Change, in 1992, which itself was four years after the Intergovernmental Panel on Climate Change was set up to report on climate change science.

Solving the collective action problem, also known as the famous prisoners dilemma, has been attempted over the years by game theorists and economists but still plagues environmental policy, not just in climate change but also in the management of all public resources, such as fisheries and forests, where free access leads to over- exploitation.

Mr.Milibands formula for breaking out of the logjam is to show leadership. For the UK, that has meant taking on tougher targets than necessary under the EUs emissions trading scheme, to propose extending the scheme to cover EU-wide aviation, and to extend the scheme within the UK to service-sector businesses such as supermarkets and hotels. Another important test of the leadership Mr.Miliband seeks will come in todays pre-budget report when Gordon Brown, chancellor of the exchequer, is expected to unveil new green taxes on air and road travel.

Within the EU, the new-found support of Mr.Barroso for environmental action will be crucial. Member states, apart from the UK, are currently revising downwards their proposed emissions limits under the trading scheme, but it remains to be seen whether they will toe the line drawn by Mr.Dimas.

Mr.Dimas sees other hopeful signs. He said of the Nairobi gathering: There has been a spirit at this conference, a willingness to go ahead and a sense of urgency. Even in the US, he said, there were growing calls for action. He pointed to the victory of the Democrats in the Congressional elections, saying of George W. Bush: The question I ask is, why does this president not want to do what his successor will almost certainly have to do [in imposing emissions cuts]?

In the wake of the elections, several influential Democratic politicians and the Republican John McCain vowed to bring forward legislation that would bind the US to emissions reduction targets. Arnold Schwarzenegger, governor of California, has already committed his state to emission reduction targets similar to those required by the Kyoto protocol and several north-eastern US states are planning targets along the same lines.

Although the Bush administration looks unlikely to bend its strongly anti-Kyoto stance, the growing pressure for action on climate change in Congress may alter Washingtons position before negotiations on the continuation of Kyoto beyond 2012 reach their crunch point, in 2009.

That would probably not lead to the US adopting Kyoto targets before 2012 but would suggest that the treaty might have a successor of some form after that date.

There are also signs of a rethink elsewhere. In Canada, climate change is expected to be a decisive issue in a general election that could come as early as spring. Stephen Harpers Conservative party has riled many in the electorate by its hostility to the Kyoto treaty. Stéphane Dion, newly elected leader of the opposition Liberal party, was formerly environment minister and is expected to focus on the issue. 

Perhaps most importantly, China has begun taking steps to curb its rapidly increasing emissions. Spurred on by worsening air and water quality in Chinese cities, the government in Beijing has set up several clean coal projects to reduce emissions from power stations.

It has also instigated what is likely to become the biggest build-out in the world of wind power generation and other forms of renewable energy.

But if scientists like Mr.Hansen and economists such as Sir Nicholas are right, arguments over competitiveness will seem as futile a decade or two hence as the spectacle of two elaborately courteous men unable to leave a room  though rather less amusing.

(c) The Financial Times Limited 2006