Will China and India Take the Bait in Alternative Climate Change Strategy?

A New Approach

The contours of a new international agreement on global climate change have begun to take shape today. The Guardian has reported on a G8 initiative spearheaded by Germany and the United Kingdom to unite all the world's largest greenhouse gas (GHG) emitters in a common effort to control carbon. According to the preliminary details that have emerged, the strategy involves five major proposals:

• The establishment of a global network of national and regional carbon trading schemes.
• An agreement to stabilise the world temperature rise above pre-industrial levels at no higher than 2 degrees Celsius (°C), or cut global GHG emissions by 50% below 1990 levels by 2050.
• An agreement to give companies and countries new technology "rewards" if they stop cutting down forests.
• A new programme of energy efficiency, modelled on the European Union (EU) scheme to cut carbon dioxide (CO2) emissions by 20% by 2020 using simple techniques, such as energy-efficient light bulbs.
• A new commitment to help poor countries in Africa adapt to the change.

German and U.K. authorities have apparently been pushing its merits aggressively with a view to securing a consensus on these measures ahead of the G8 summit scheduled to take place in Heiligendamm, Germany, in June. It advocates considerable change, and there can be little doubt that as an alternative to the problems that have been encountered in the United Nations (UN)-sponsored process, embodied by the Kyoto Protocol, the proposals hold considerable value. Perhaps most importantly, it allows for difference and avoids the impasse that has followed the absence of alignment across the international community as to the optimal and appropriate steps that should be taken to address climate change.

While there is a clear commitment to the merits of carbon trading, the G8 climate proposal allows for more "home-made" solutions. The design calls for different national, regional or sectoral carbon markets trading amongst one another through a system of weighed exchange rates. Critically, the carbon market proposal does not require China or India, say, to adopt a binding emissions target. On the contrary, it calls for a commitment to national cap-and-trade schemes for the most heavily polluting industries alone. Local authorities could thus decide which sectors to cap, leaving choices like cement manufacturing vs. power production.

The different cap-and-trade programmes would contribute towards a global carbon price: an end-product essential for long-term investments in decarbonisation for which the existing framework has not made adequate provision. Technological incentives for less carbon-intense land use have traditionally been wanting, and these find some purchase in the proposal alongside support for efficiency, the lowest-hanging fruit available for carbon control. Adaptation is fast becoming the focus of many climate change strategies as the impacts of historical GHG emissions take hold and Africa's particular vulnerability rightly assumes a prominent place in this new approach.

Outlook and Implications

For all its innovative value, the question remains: can Germany and the United Kingdom sell this plan? One can see that a great deal of work will have to occur between now and June if a deal is to be brokered, and the movement will have to be across the board. The position of the United States has been described today as fluid, and while there have been encouraging signs at state level and across the private sector, the hopes of getting President George W. Bush to change his thinking about this issue are slim. U.K. Prime Minister Tony Blair is apparently confident he can get some agreement, if only in principle, out of President Bush, but emissions caps are a hindrance to growth in the current U.S. administration's eyes and all the low-cost economic and environmental gains that may be possible through all the trading in the world will not change that fact. The concession offered to developing countries such as China and India, of capping certain sectors while the economy and national emissions profiles as a whole are allowed to grow, might have to be extended to the United States as well.

In respect of the former two, what is on offer does not look enough to turn the established tide. There is a question of capacity here, and one has to ask whether they have the capacity to support the sort of trading implied. At present, national emissions registries are weak and major improvements in GHG emissions data collection and transparency would be required before a clear national or sectoral carbon-price signal would be a viable consideration. Simply put, there is too much government interference for these markets to function as promised. Secondly, there is the established line of "growth first and concern for the climate second". The second proposal's global temperature/emissions target may feel too tight for authorities, and it certainly represents a great deal more carbon than they have been asked to control in the past. The pot will thus have to be sweetened to engender the commitment sought.

The relationship of this strategy to the UN-sponsored process is also questionable at this stage and will need swift clarification. Is the G8 advocating a new way forward outside the UN, or is this initiative a piece of the puzzle that is the post-Kyoto world? That has not been made plain, and will have to be. One would hope than that these five proposals find their way into the negotiations over the next UN-sponsored commitment regime set to take place in Bali (Indonesia) in December, for two reasons. Firstly, the proposals themselves need greater backing than the G8's economic supremacy alone can provide—and indeed, the UN is the only authority with the legitimacy to handle competing claims over national emissions inventory levels, national carbon prices, and the means by which different systems would be weighed. Secondly, the UN process needs new thinking of the very sort these proposals reflect. The established multilateral approach has run aground and this vision represents one possible way out of the mire.