Failure in Copenhagen-Becker

Relative to initial expectations, and given that the heads of almost all leading nations attended, the recently concluded United Nations climate change summit in Copenhagen was an embarrassing failure. The final accord was only a statement of intention, and had no binding pledges on actions to reduce greenhouse gas emissions, although the majority of attending nations did agree to ''take note'' of a vague last-minute compromise document by President, Barack Obama, and the leaders of four major emerging powers: China, India, Brazil and South Africa.

The most important issue on the initial agenda was to reach agreement on major worldwide cuts during the next several decades in greenhouse gas emissions. Yet the final Copenhagen document removed from an earlier draft a proposal to target a 50% cut in world greenhouse gas emissions by the year 2050. The final document does acknowledge the need to limit world temperature rises to less than 2 degrees centigrade above pre-industrial levels, but it does not include any way to enforce achieving this goal.

The second major aim of the US, Europe, and other rich countries was to get agreement from China, Brazil, India, Russia, and other important developing countries to greatly reduce their greenhouse gas emissions during the next couple of decades. China has become the world’s largest producer of carbon dioxide, supplanting the US, now in second place. In return for agreeing to large reductions in emissions, developing countries hoped to receive substantial aid from the rich countries. This effort also failed. The only firm deal on aid in the final accord is for developed countries to provide a paltry $30 billion to help developing nations cope with the effects of climate change from 2010 to 2012, although the rich nations indicate that they will try to jointly provide $100 billion year to developing countries by the year 2020.

It is easy to see why the fundamental difference at the Copenhagen meeting was between the developed and developing world (the second most important difference was within the developed world, where Europe and Japan wanted more aggressive emission cuts from the US). A well documented finding by development economists is that as per capita income grows in the course of economic development, countries become more concerned about both local and global pollution, such as global warming. This is why the BRIC countries-Brazil, Russia, India, and China- and other developing countries feel it is unfair to ask them to take actions that the developed countries themselves did not take when they too were much poorer.

This fundamental conflict is the reason why rich countries were willing to discuss possible aid, or “bribes”, to developing countries if they undertook large cuts in their carbon dioxide emissions (see the proposal along these lines in my post in December 2004 on our old website Becker-Posner-blog.com.) This explains the goal of providing $100 billion of annual aid by 2020.

$100 billion is a lot of money, but it is paltry compared to the GDPs of the most important developing countries, and even to their industrial output base. For example, China, the largest of the developing countries, has a GDP of about $8 trillion, adjusted for purchasing power parity, compared to the $14 trillion of the United States. Since China is the world’s largest exporter of goods, its industrial sector- where carbon emissions are concentrated- accounts for almost half its total output. Even if we suppose, unrealistically, that China receives a full half of the proposed aid, or $50 billion annually, that is only 5/8 of one per cent of its current GDP. So China would be economically much worst off if, in return for this $50 billion, China had to cut emissions enough to reduce its growth rate by only a little. For example, if cuts in its carbon dioxide emissions reduced China’s annual growth rate for the next decade from 8% to 7.37%, the lose in GDP from the lower growth in the first year would just offset the $50 billion in aid. However, in later years, China would lose much more than the aid from rich countries since its GDP base would be much larger due to its rapid economic growth.

The difficulty in reaching agreement on enforcing compliance was a major obstacle to getting rich countries to agree to large amounts of aid. China and other developing countries argued that monitoring of their compliance with their pledges to reduce emissions of greenhouse gases infringed their sovereignty as independent nations. Yet without serious monitoring of compliance, such agreements are of dubious value since developing countries, especially non-democratic ones, may accept aid from rich countries, and then fudge their published records on degree of compliance.

The rich countries of Europe, Japan, and the United States may still implement further steep cuts in their own carbon emissions. But that is likely to have only a modest effect on worldwide carbon emissions if the BRIC countries and the other almost 200 countries are not included. A major reason why the 1997 Kyoto Protocol failed is that it exempted developing countries from any targeted cuts in emissions. Large cuts by rich countries alone would speed up the already rapid shift of economic power to Asian and other developing nations. Some companies in Western countries would transfer much of their most polluting outputs to developing countries, and industrial companies from China and elsewhere would grow at the expense of American, European, and Japanese companies.

So my conclusion is that either rich nations have to pony up a lot more money to get developing countries to agree to large cuts in their greenhouse gas emissions when monitoring of compliance would be limited. Or rich countries have to go it alone in cutting their emissions, and then accept a much smaller impact than they would like from their own cuts on worldwide emission reduction. Even the strongest proponents of immediate sharp cuts in world emissions of greenhouse gases –which I am not- have to recognize the implication from the failure of the Copenhagen meeting that large worldwide reductions in emissions are not achievable in the near future.

 

Comments

[Ted H]

I think your expectations were far too high. We're still trying to figure out trade negotiations (Doha anyone?). We've been working on finally get global free trade for over 70 years and we aren't even there yet. I wouldn't expect the first serious climate summit to accomplish much of anything when even something as seemingly "obvious" as free trade negotiation has so much difficulty. I think this is a positive first step and even to get a nonbinding pact is impressive considering the complexity of the issue they were trying to tackle.

Given the issues and the fact the world leaders have expressed they really do want to tackle this (places like Brazil and India are far more willing to tackle climate change than even free trade), we'll see an agreement within 10 years.

[Jack]

"For example, China, the largest of the developing countries, has a GDP of about $8 trillion, adjusted for purchasing power parity, compared to the $14 trillion of the United States. Since China is the world’s largest exporter of goods, its industrial sector- where carbon emissions are concentrated- accounts for almost half its total output. Even if we suppose, unrealistically, that China receives a full half of the proposed aid, or $50 billion annually, that is only 5/8 of one per cent of its current GDP. So China would be economically much worst off if, in return for this $50 billion, China had to cut emissions enough to reduce its growth rate by only a little. For example, if cuts in its carbon dioxide emissions reduced China’s annual growth rate for the next decade from 8% to 7.37%, the lose in GDP from the lower growth in the first year would just offset the $50 billion in aid. However, in later years, China would lose much more than the aid from rich countries since its GDP base would be much larger due to its rapid economic growth."

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Does this paragraph seem accurate? In US dollars China's GDP was 4.33 in 2008. While adjusting for purchasing power domestically may make it feel like $8 trillion to the Chinese, surely US $50 billion spends like, well, $50 billion US in terms of purchasing power. Or about double the "5/8ths percent?" Still not a windfall but more like 10/8ths?"

Then is it THE case that whatever means China chooses to limit CO2 is necessarily an overall drag on their economy? They're already challenged by pollution, so may HAVE to embark on a program of conservation and pollution reduction. Here in the US we're beginning to think of wind, solar and other alternatives as new business that will replace some of the jobs lost to the "rustbelt" and perhaps add to our exports while conserving the dollars we must export today for oil and NG. Wouldn't China be, at least, equally well placed? With similar potential benefits?

Also, there are costs to continuous 8% growth rates to be considered and we hear talk of those problems in China. Perhaps a clean "7.37% growth rate" is preferable to a dirty 8% rate? Had the US the 60's and 70's to do over might we be a lot better off had we not indulged ourselves so deeply into the trap of "cheap oil?"

As for ponying up more dollars to get compliance, we can never know the future, but if say, China is not only seen as "dirty" atop a perception of taking our jobs, not playing fair with currency, along with a lack of civil rights that partial boycotts similar to those of many chefs and customers of unsustainable fisheries products. It would not take much from the EU and US to lower their growth rate a percent or so.

On the other hand, even as I make energy upgrades to my home and habits, I encounter the "Trump factor" ie. that nothing my whole community could do would offset the energy consumed as Trump and a few friends jet down to Mar A Lago while many others maintain a half dozen or more heated and cooled but mostly unoccupied homes and mansions. How DO we ask $5/day workers in some emerging nation to tighten their belts and delay an economic opportunity while we continue with 5% of the world's population to consume/waste one quarter of the world's fossil fuel production and the few at the top make NO sacrifice in either terms of peak oil or CO2 footprints?

[Luca]

I am not unabashedly endorsing geo-engineering as a panacea, but this is an interesting link:

http://www.techflash.com/seattle/2009/10/video_nathan_myhrvold_explains_how_to_save_the_world.html

The deeper significance of this proposal is that solutions to massive problems such as coal and manure pollution during the Industrial Revolution are often solved not by government efforts that amount to central planning of public goods, but by innovation and entrepreneurship. Perhaps the most basic and fundamentally legitimate role of government is providing public goods such as law and order, national security, and even recycling programs. Governments can increase efficiency by taxing and subsiding (indeed, at a loss) activities which cause negative and positive externalities respectively. My basic point is that we should always allow for the possibility human creativity, or as you might say Dr. Becker, human capital, will create ingeniously simple solutions to seemingly intractable problems. Of course, you understand that better than most, and it's one of the reasons I admire you. I encourage you to ask your Dr. Levitt to learn more about this idea if you have not already.

[Brian Davis, Austin, TX]

Men (Dr. B & Judge P), thank you for preserving my log-in from the old board.

Sure, we could blow stacks of smoke at China (and mainly that's who this about), but China's a rapidly-INDUSTRIALIZING society with high expectations and a lot of mouths to feed. Truth is we're too addicted to the Chinese buying our federal debt and rolling it over & over to threaten them with a trade war. And Americans who like Wal Mart's "Save $, Live Better" jingle wouldn't stand for it. So we send them Dollars for their stuff so they can lend the Dollars back to us to fund our federal govt and our national adventures. At the risk of hyper-cynicism, do we really WANT the Chinese govt to divert domestic wealth to expensive environmental clean-ups and pollution reduction?

[Nelson]

Let China take care of China. If they don't see reducing emissions as beneficial to themselves, then none of our "bribes" will affect their long term behavior.

[ab]

If people want a green world.
then stop buying Chineese products.

China frustrated the COP top,
now people of the world decide themselves.

No more "made by china" unless approved by a green label.
We make china transparent! That should be done anyway.
Digital democracy of the third millennium: how can you expect your
government to take responsibility if you do not even bother about a green
label ?

You don't have to wait tille the next top, start yourselves, start today, start small! If governments want to join, they shloud implement green labels. Imagine a green label, next to "made by china" hi hi

[Niko]

This failure is the best new I've heard all year. I was afraid that our "elected" leaders will reach conclusions that will make our lives harder, but it seams they could not agree who should pay the bill.

You really have to be an economist in order to believe in global warming. Someday, I hope, the XX century will go down as the dark age of this ugly science.

[summer]

Are you joking ? this awful result could not mainly blame on China,Since the" Made in china" phenomenon is actually caused by the developed countries.. in order to reduce the pollution of the environment,these countries the transfer these heavy industry factories into China... in other word ,chinese people are the biggest victims...

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You really have to be an economist in order to believe in global warming. Someday, I hope, the XX century will go down as the dark age of this ugly science.

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