Will Global Trade, Not Talks, Solve Climate Change?

Will the competition for the almighty dollar—and yuan, yen, rupee, and euro—counteract climate change more effectively and efficiently than the most altruistic negotiations among nations? In the wake of the nearly fortnight-long U.N. climate talks in Durban this year, which produced a face-saving deal, a Green Climate Fund, and little else, this is a valid concern.

Indeed, according to Canada’s Vancouver Sun, the frustrated European Parliament Environment Committee Chairman, Jo Leinen, commented in the waning days of Durban that, “For the third time …this U.N. conference is being hijacked by a Ping-Pong game between the United States and China”—neither of which would concede to an emissions cap without the other, to protect their international trade prospects.

Leinen suggested that the negotiations move on without the world’s two largest carbon emitters and trading partners. "The Washington political class is in turmoil and they are more and more . . . regressing instead of progressing," he said. "We have not won enough under 2 1/2 years of [President Barack] Obama. So if the next [Administration] would be a Tea Party president and Congress, the world cannot wait. We have to somehow find a way out of being blocked by the United States."

As an alternative to global talks, Leinen pointed to global clean technology market growth as a more likely path to purging carbon emissions. "There is an informal green technology race, led by China, that may in the end be even more successful than that formal deal," he said

China invested $54 billion in low carbon energy technology in 2010, compared to the United States' $34 billion, according to the nonprofit U.S. Pew Environment Group. Why is China taking the lead? According to 2GreenEnergy.com, there are five compelling reasons on each side for why China is leaving the United States—and the rest of the world—literally in the dust (or smog).

In the United States:

• Lawmakers are essentially “owned” by powerful corporate interests from the oil, coal, and gas industries.
• The recession keeps private money sitting on the sidelines. People are reluctant to invest in anything—and certainly not in a nascent industry with an uncertain future.
• In terms of public funding, the nation essentially is “broke.” The nation couldn’t invest in renewable, even if it had the political backing. Medicare, Social Security, and overseas wars have drained the coffers.
• The government made an honest attempt to promote renewable with a set of incentives. However, these have largely been taken advantage of by smart, profit-minded people—for example, there are wind farms being built in high-traffic, high-curtailment zones just for the incentives.
• The political right wing has done a magnificent job of convincing voters that clean energy isn’t important;

Conversely, in China:

• With a command economy, the nation can simply make a decision and carry it out; democracies don’t work that way.
• The low cost of labor makes the development of renewable relatively cost-effective and easy.
• They are building out capacity to meet demand, while America is building out capacity to replace existing capacity. One of these things is much easier to authorize the money for than the other.
• The country’s lack of infrastructure in remote locations initially started the ball rolling for its renewables industry, but now leadership sees it mostly as a way to gain world dominance in the energy sector.
• Cultures like China strive for self-reliance and independence, wanting to provide for themselves, therefore appreciating the value of providing their own energies even where they are more expensive than imports or other options.

Indeed, the study’s author, Craig Shields, points out that, with a pressing need to provide food, fuel, and water for the world's biggest population, China more than most can see the value of energy forms that limit the global warming that has already turned tracts of its land to desert. India, the world's third biggest carbon emitter behind China and the United States, already has also begun moving toward green development.

Last year, before the COP-16 U.N. conference, Bruce Bueno de Mesquita, a New York University professor and partner in a Manhattan consultancy, told Scientific Americanmagazinethat governments probably won't conclude a major international treaty to reduce atmospheric concentrations of carbon dioxide and other greenhouse gases—ever. And even if they do, any such treaty won't actually work."Universal treaties have one of two qualities," de Mesquita said. "They don't ask people to change what they're doing, and so they're happy to sign on ... or it asks for fundamental changes in behavior and it lacks monitoring and sanctioning provisions that are credible."

He pointed out that, “Leaders will, by and large, act on what keeps them in power or helps them to get re-elected, and promising their constituents light economic pain now for vaguely understood benefits years into the future isn't a winning formula.”Peter Wood, a mathematician and fellow at the Australian National University who studies how game theory applies in climate negotiations, said, “"One way that this could work is to link cooperation on climate change with cooperation on other issues, such as trade. If a country introduces a carbon price, it may also want to introduce a 'border tax adjustment' that levies a carbon price on emissions-intensive imported goods."

Meanwhile, in related news, the European Union has opted not to wait for a globally ratified emissions trading scheme. On December 21, the European Court of Justice (ECJ) ruled in favor of a directive under which, beginning January 1, nearly 4,000 airlines and other aircraft operators flying to and from European Union airports will have to buy permits, if they exceed their carbon allowances under the EU emissions trading scheme (ETS).