December 26, 2008
The Economist on Poznan: Fiddling with Words
The Economist summarized the December Poznan, Poland meeting as fiddling with words. Economist link Likewise, in 2007, I characterized the G8 summit in these words, "Nero became infamous for fiddling as First Century Rome burned. This month, the parties at the G8 summit followed Nero's insanely frivolous, time-wasting lead. Unfortunately, this time the whole planet is burning." Findlaw: Smith commentary But the Economist captured the situation with a different metaphor.
IMAGINE that some huge rocky projectile, big enough to destroy most forms of life, was hurtling towards the earth, and it seemed that deep international co-operation offered the only hope of deflecting the lethal object. Presumably, the nations of the world would set aside all jealousies and ideological hangups, knowing that failure to act together meant doom for all. At least in theory, most of the world’s governments now accept that climate change, if left unchecked, could become the equivalent of a deadly asteroid. But to judge by the latest, tortuous moves in climate-change diplomacy—at a two-week gathering in western Poland, which ended on December 13th—there is little sign of any mind-concentrating effect. To be fair to the 10,000-odd people (diplomats, UN bureaucrats, NGO types) who assembled in Poznan, a semicolon was removed. At a similar meeting in Bali a year earlier, governments had vowed to consider ways of cutting emissions from “deforestation and forest degradation in developing countries; and the role of conservation [and forest management]”. After much haggling, delegates in Poland decided to upgrade conservation by replacing the offending punctuation mark with a comma. At this pace, it seems to hard to believe that a global deal on emissions targets (reconciling new emitters with older ones) can be reached next December at a meeting in Copenhagen, seen as a make-or-break time for UN efforts to cool the world.
The Economist went on to explain some of the background factors that influenced the events at Poznan and why it was not a totally depressing waste of time:
In the background of the Poznan meeting, there was mild optimism (and a reluctance by others to put fresh cards on the table) ahead of an expected change of stance by an Obama administration in America; resentment (among the poor and green) over the refusal of Japan and Canada to promise deeper cuts; and strong demands from China for the transfer of technology from the rich to others. In the final hours of the conference, the governments of small, sinking island nations were delighted to learn that they, and not some global body, would control a fund to help them adapt to a warming world. Their mood changed when it became known that no extra money had been set aside for this purpose. However hard it looks to put this global jigsaw together, there were some encouraging unilateral moves, especially from Latin America. Mexico vowed to halve greenhouse emissions by 2050; Brazil said it could reverse a recent rise in deforestation and cut the rate of forest loss by 70% over the next decade; Peru said that with help it could reduce deforestation to zero.
But the economist made the case that the key to progress towards an agreement in Copenhagen is the willingness of the EU to continue to provide climate leadership. The EU's attitude seems a bit ambivalent. As the Economist reported,
At a summit on December 11th and 12th, the EU’s leaders eventually decided to keep their targets intact while also allowing opt-outs which may yet undermine their stated goals. President Nicolas Sarkozy, who chaired the summit, boasted of a “terrific fight” which French diplomacy had managed to finesse. Despite many concessions for heavy industry and poor newcomers to the EU, the final deal (perhaps to its credit) left everybody unhappy. European industry felt too much was being asked of it, while green groups thought industry had gained rather too many concessions. In the background of the EU’s wrangling were some goals laid out last year in pre-recession times. By the year 2020, the EU promised three things: to cut overall greenhouse gas emissions by 20% over 1990 levels; to obtain 20% of overall EU energy from renewables like wind, waves and plant waste; and to make efficiency savings of 20% over forecast consumption. The new EU deal kept the targets, but offered sops to countries that fear an emphasis on the “polluter pays” principle may drive up electricity costs, or push heavy industry away to places, like Asia, that in Copenhagen will oppose big emission cuts. Opt-outs were granted from plans to force large polluters to buy allowances to emit carbon at auction. Poorish ex-communist countries that rely on coal for power will be allowed to dish out up to 70% of the carbon allowances needed by power firms, for no payment, for a few years after 2013. Heavy industries that face global competition will also get up to 100% of their allowances free, at least initially, if they use the cleanest available technologies. And EU nations will be allowed to buy in credits for emissions reductions far from Europe, and count them against as much as 90% of their national reduction targets. Eurocrats say a reduced emphasis on auctioning permits won’t undermine the benefits of the package; carbon-cutting discipline still comes from the ceiling on the number of allowances issued. That cap will be cut each year after 2013: this should help to support carbon prices in the EU’s Emissions-Trading Scheme. The concessions risk prolonging some follies. For example, big power firms that now get carbon allowances free have been passing on their nominal cost to customers. Handing out free allowances may also reduce revenues available to governments for investment in greenery. Moreover, some pro-market countries fret that using climate-change policies to redistribute money within the EU will cause trouble in global talks. It will make it harder to resist China and India when they seek transfers of money in the name of “solidarity”.
The ECN had a more optimist view of the EU's action, arguing that the final package passed the political test:
The energy and climate policy package was proposed in January 2008 by the European Commission and, after some adjustments, agreed by the Member States last week during a meeting of EU government leaders. The central objectives remained in place: For the year 2020, (i) to save energy use by 20%, (ii) to increase the share of renewable energy in total energy use to 20% (compared to some 8% in 2005), and (iii) to reduce total EU greenhouse gas emissions by 20% (compared to 1990).
The main instrument to achieve the greenhouse gas reduction target is the EU-wide harmonised Emissions Trading Scheme (ETS). The most contested issue in the package was whether industries would receive their emission allowances for free or whether they would have to buy them in an auction. Currently, the allowances are given out for free, which has led to power companies charging their consumers as if they are paying a carbon price, resulting in billions of windfall profits. Auctioning of the emission allowances would solve this problem, but is politically controversial as it would lead to high costs for greenhouse gas emitting industries.
On auctioning in the ETS the following was decided:
• Starting from 2013, power companies have to buy all their emission allowances at an auction. Contrary to the original EC proposal, however, the EU government leaders agreed that for existing power generators in some (mainly East-European) countries the auctioning rate in 2013 will be at least 30% and will be progressively raised to 100% no later than 2020. This means that for instance existing coal-fired power plants in Poland still get their allowances for free, but that new power plants need to pay. In the Netherlands, all power plants will have to buy their allowances.
• For the industrial sectors under the ETS, the government leaders agreed that the auctioning rate will be set at 20% in 2013, increasing to 70% in 2020, with a view to reaching 100% in 2027. The original EC proposal included 100% auctioning in 2020 rather than 2027. Industries exposed to significant non-EU competition, however, will receive 100% of allowances free of charge up to 2020.
With regard to greenhouse gas reduction in the sectors that are not covered by the ETS, such as households and transport, which cover about 55-60% of EU emissions, the Commission proposal allowed Member States to use offset credits to meet up to two-thirds of the emission reduction and the remaining part by domestic abatement measures. The EU leaders, however, agreed to allow 11 (mainly West-European) countries – including Spain and Italy – to use additional offset credits to meet their non-ETS targets.
My bottom line from all of this is that the U.S. needs to assert serious leadership on climate change -- and the green team Obama has assembled gives every reason for hope that it will do so. In just less than a month!
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