Revising plan A

Many observers now expect failure at Copenhagen. Unilateral and bilateral action, based on national self-interest, may now be our only hope to build a real deal to effectively manage climate change, argues Simon Zadek.

It is now clear that Copenhagen risks going down in history as a failure. Beyond recriminations, the real question is whether there is still a chance to forge the first really global deal of the twenty-first century.

The offers currently on the table would only bring emissions down by 9% to 14% from 1990 levels by 2020, even were they to be fully delivered. This is less than half of what is required to keep global temperatures below 2° Celsius and is unlikely to deliver rises much below 3° to 4°C. Such a rise would turn much of southern Europe into a semi-arid area, and overturn the livelihoods and exhaust the water supplies of hundreds of millions of people.

Money, we are told, is the deal-breaker, but the argument does not stand up to scrutiny. There is rough agreement on estimates of “incremental cost”, which would average about US$80 billion to $120 billion per year to 2020, roughly US$1.5 trillion in total. Delivering this would fulfil wealthy countries’ pledges to fund those incremental costs of climate change that are not financed through national budgets, international aid or private investment.

This is not a trivial sum, yet US treasury secretary Timothy Geithner estimates that the recession has cost around US$3 trillion to $4 trillion globally in lost output in just one year. The British prime minister Gordon Brown pronounced at the close of the G20 in London that sovereign states, collectively, would spend more than US$5 trillion to get us out of the global recession. In other words, the total amount needed for climate spending up to 2020 is only about 12% to 15% of what banking malpractice has cost us in just a few months.

If financed through low-cost, perpetual sovereign debt, delivering US$1.5 trillion over a decade might cost around US$15 to $20 billion a year, shared between all rich countries, whose combined national incomes would be about US$50 trillion to $60 trillion annually. This is less than half the US$40 billion we spend annually on pet food.

Short-term economics and the associated politics better explain our failure. There would certainly be losers: dirty industries that do not clean up their mess and nations stuck on dirty energy or unsustainable citizens’ behaviour. But there are many more potential winners from low-carbon growth, and the costs of paying off the losers are trivial.

Short-term losers are, however, out in force. The Environmental Defence Fund estimates that there are over 2,600 registered corporate lobbyists working against a deal in Washington; sustained public campaigns in the United States have lowered the numbers of citizens who believe that climate change is caused by humans, from 72% to 57% during 2009.

In Europe, despite leadership in mitigation commitments, the retrograde attitudes emerging from eastern Europe’s leaders is reducing the continent’s role to that of enlightened bystander. And the “G77+China” grouping – although correct about the west’s historic responsibility – suffers from a toxic combination of short-term imperatives and deeply ingrained distrust in the promises of wealthier nations. Nature’s irreducible bottom line is that development efforts will be shattered if we fail to act collectively and ambitiously now.

Our greatest enemy is our view of the task at hand. Progressive forces are united in believing that our mission is to create a binding international agreement, negotiated and overseen by sovereign states. But the most important lesson about marketing is never to be fooled by one’s own sales pitch. There might be a more effective way to do a deal. Global deals underpinned by sovereign binding commitments have almost always proved disappointing. The forces that have made history, for better and worse, have been less appealing: “Might is Right”, fear of mutual-assured destruction, unilateral actions based on self-interest – and, in rare but extraordinary moments, the direct action of citizens.

A deal in Copenhagen that relies primarily for its success on binding, long-term commitments by sovereign states to reduce emissions and fund mitigation and adaptation in developing countries will fail. It is an unwelcome message that many believe could erode our collective ambition and play into the hands of those who want no deal at all. But the transparent failure of the process so far makes these cautions seem less relevant.

To reach a deal today we need to start from practice, which we can subsequently translate into principles and norms. There are three reasons: first, trying to make complex deals between almost 200 nations is a fool’s errand, as we see from both climate and trade negotiations. Second, binding commitments by sovereign states are not worth the paper they are written on: see how casually legally binding public deficit, competition and subsidy rules within the tightly regulated European Union have been discarded. Third, “globally deduced” deals are too focused on top-down mechanics and associated institutional arrangements. In almost every instance, these generate performance failures because of bureaucracy, political interference, rent-seeking or straightforward corruption – see, for instance, the fate of the US$5 trillion of official development assistance that has flowed over the last half-century.

Unilateral action based on national self-interest, supported where possible through international collaboration, is the only hope we have of effectively managing climate change.

The signs are encouraging. China’s 50 million electric vehicles, and the fact that it is erecting one new wind turbine every few hours, is testimony to such drive, as is Brazil’s unilateral commitments on deforestation and India’s hugely ambitious national solar plan. Europe stands out as a regional unilateralist that has led the way in experimenting with legal commitments and a continent-wide, carbon-trading scheme.

Such actions are not a “substitute” for a global deal: they are the only possible basis for an international game plan that could get us to where we need to be. Focusing on what happens on the ground rather than how to commit and rain funds down from the clouds is not “Plan B”, but the only “Plan A” that makes sense.

What would it mean in practice to focus on catalysing national action? I would highlight three particular components:

* Low-carbon growth and development: AccountAbility will launch in January 2010 a Country Climate Competitiveness Index that tracks and encourages progress along low-carbon pathways: how each nation is going to develop and prosper in a low carbon future. The UNFCCC can catalyse such efforts, not as a bureaucratic hurdle to access largely fictional finances, but as a process of domestic reflection that will build awareness, constituency support and strategies.

* Fast-start clubs: we have to rely more on temporary “clubs” to catalyse ambitious early action, rather than investing in top-down permanent institutions that rapidly become part of the problem. Action in key areas, such as energy efficiency, solar and other renewables and avoiding deforestation can more effectively be done through such clubs of nations and private actors, drawing from the lessons of the Global Fund to Fight AIDS, Tuberculosis and Malaria. A “fast-start fund” supporting such initiatives, enabling immediate actions to be encouraged, seed funded and counted, should be a major feature in Copenhagen, not a side event.

* Global Taxes: as the evidence mounts of the likely weaknesses and fragmentation of carbon markets over the next decade, our only hope for securing early, strong carbon price signals is likely to be through the imposition of carbon border tariffs, at a minimum by the United States and Europe. Knowing that this would be a political bombshell that would rock the global trading system does not dissuade me of its merits, nor do its technical complexity and administrative challenges. Equity and targeted effectiveness can be enhanced through blanket exclusions to all the Least Developed Countries (LDCs) and exclusions linked to sector-level agreements that demonstrate progress against defined commitments.

Nobel prize-winning economist Kenneth Arrow has demonstrated that flawed equilibrium solutions can be less effective than well-designed, disequilibrium options. I would be the first to applaud an effective global deal with commitments and targets. But it is a chimera, and a dangerous one at that. My three suggestions are not new, and may not even be the right or most important, ones. But the important thing is that in twenty-first century deals, practice will lead and induce norms rather than vice-versa. Second-best in theory – but the best way to get where we need to be.

Simon Zadek is managing partner of AccountAbility ([email protected])