Joergen Oerstroem Moeller, Today Online 4 Dec 07;
IT could be one of the most pitiless brawls about global burden-sharing since the advent of globalisation in the late '40s.
At its heart is the question of who is going to fund the reduction of greenhouse gas emissions — a topic now on the agenda for a host of meetings to find a replacement or amended extension to the Kyoto Protocol, which expires in 2012.
The Kyoto protocol was forged in the mould of yesterday's world — one dominated by the nation-state. Quotas were specified for countries, accompanied by a mechanism that allowed them to trade certificates. In principle, this should have led to higher efficiency, as those who were able to pay could buy quotas from countries that did not require them.
The reality was that rich countries had capital, while poor and newly industrialised countries did not. The result — established producers purchased certificates to 'monopolise' production, crowding out potential competitors in less-developed countries.
This is probably why countries such as China argue that rich nation-states, having enjoyed a free ride in their industrialisation process many years ago, should now bear the burden of halting and hopefully reversing climate change.
Many industrialised nation-states may not necessarily reject that argument, but are cool towards the second proposition — that they assume the lion's share of the burden in addressing climate change. They maintain that while they may have been polluting in their rise to power, the environment was not the problem it is today.
The current dispute seems to overlook an analogous debate when environmental policies took off in some industrialised countries in the '60s and '70s.
Then, consumers and industry were at each other's throats, trying to pass the burden around in the hopes it would lead to a stalemate, so everybody could be let off cheaply in the short term.
The Gordian knot was cut — more or less — by the Polluter Pays Principle, which stated that the ultimate polluter was the consumer. The result was a number of taxes and levies designed to be passed to the ultimate polluter. Many industrialised countries have water levies, taxes on solid waste and petrol taxes.
And apparently, it has worked.
A dramatic improvement in environmental standards and energy efficiency has occurred in countries such as Japan and many European countries. This improvement can only be ascribed to the change in price structure — one that penalises polluters and rewards more environmentally friendly goods or production processes, mainly by way of levies and subsidies.
This hard-won experience teaches that one can only go some way with declarations and regulation. In the final analysis, what matters is to make the ultimate polluter feel the pinch.
As long as the discussion revolves around quotas or regulations allocated to nation-states, the chance for an effective agreement is remote. The circus of accusations and counter-accusations is likely to continue. Having committed themselves so clearly to incompatible policies, it is almost inconceivable that many countries will have a change of heart on how to engender positive climate change.
A seismic policy shift is needed before the impending environmental crisis can be addressed. Negotiations have to target the ultimate polluter: The consumer. This will make it clear that it is not the producer in China, the United States, Europe or Singapore that is ultimately responsible, but the consumer, wherever he or she is.
Such a policy would also be consistent with globalisation. Outsourcing from the US or Europe to China would cause Chinese emission levels to rise. With a system based on national quotas, China would have to "pay" more. But this makes no sense.
A national quota model places newly industrialising countries between the devil and the deep blue sea. Either they absorb the cost, they risk that rich countries will move towards a "coalition of the willing" ready to impose levies. And if newly industralising countries try to pass on the cost to the consumer by increasing prices, they might undermine their own competitiveness.
All three options appear problematic — hence the call to develop an agreement that allows costs to be passed to the ultimate polluter/emitter, in such a way that does not distort competitive advantages and influence relative production costs.
If such a road is not found, two rather unpalatable outcomes may haunt the global economy.
The first is a complete breakdown, leaving an international agreement on climate change hanging. The second is a mix of political compromises that will probably force a cost increase on rising nation-states, introducing global inflation as those states increase their export prices. That would be the last thing the world needs now, what with high oil prices, a sub-prime crisis and falling growth in the US.
We should not forget that cheap production from countries like China has kept global inflation low for the last 15 years. If global inflation starts to rise now, the world economy is likely to jump from the frying pan into the fire.
The writer is a Visiting Senior Research Fellow at the Institute of Southeast Asian Studies, and an Adjunct Professor at the Copenhagen Business School. The full version of this commentary is at www.opinionasia.com.
