Breaking the logjam

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: The global negotiations on climate change seem to be in a logjam. The heated and even tear-inducing debates in Bali Conference in December 2007 produced no real agreement on a programme of managing climate change but only a road map for further discussion leading up to Copenhagen Meeting in 2009 and agreement for consideration of various issues on mitigation, adaptation, technology development and transfer of resources.

The summit meetings of G8 and G5 countries (Brazil, China, India, Mexico and South Africa) in Hokkaido, Japan in July 2008 indicated how little was the progress made in moving towards a consensus on climate change programmes between December 2007 and July 2008. The G8 declaration calls for adoption of the goal for achieving at least 50% reduction of global emissions by 2050. It also asserted that all major economies will need to commit to meaningful mitigation actions to be bound in the international agreement. On the other hand, G5 declaration stated that a shared vision on climate change must be based on an equitable burden sharing paradigm that ensures equal sustainable development potential for all citizens of the world and takes into account historical responsibility and respective capabilities as a fair and just approach. The G5 leaders do not mention a global target for mitigation but call for quantified emission targets for the developed countries under Kyoto Protocol of at least 25-40% below 1990 levels by 2020 and by 2050, by between 80 and 95% below those levels. Clearly, the developed and developing countries are not on the same page for managing climate change. The recent meetings in Poznan, Poland confirm the picture of stalemate in climate negotiations.

In order to make some real progress towards an agreement in Copenhagen in 2009 the developed countries must face up to some more “inconvenient truths” on climate change. What matters for climate change is not the flow of greenhouse gases (GHG) but the stock of GHG and according to most calculations, developed countries are responsible for nearly 70% of the current stocks of GHGs. The concept of carbon debt and the debt servicing responsibility for that debt must be fully accepted. Some rough calculations suggest that the current value of carbon debt could be over $12 trillion and any reasonable figure on debt service obligations would indicate payments of hundreds of billions of dollars (70% of which should come from the developed countries) that should be paid to compensate the present and future generations (more than 70% of which will be in developing countries). International agreement of climate change must define a clear mechanism for such resource transfer.

Also, the developed countries must accept that there cannot be an international apartheid in lifestyles. If the western lifestyle is not replicable for the world as a whole, it must be modified in both the developed and developing countries. On a long-term basis, for equivalence in lifestyles, the principle of per capita equality in emission rights must be accepted. If per capita emissions are to be equalised by 2050, and total emissions are to be reduced by 50% from present levels, the developed countries will have to reduce their per capita emissions by 90% from the level in 2003, while the developing countries will have to reduce theirs by 40% from their already low levels. Such targets do not seem to be realistic. G8 should stop parading these unrealistic targets.

An alternative target is stabilisation of CO2 emissions at 2003 level by 2050, with a possible target of 50% reduction by 2100. This will mean reduction in per capita emission of developed countries by about 80% by 2050 and this will allow the developing countries an increase in per capita emission by about 20% and GDP growth rates of about 6% per year which is essential for meeting their goals of poverty reduction. For countries like India, whose per capita emission in 2003 was only 1.20 ton, this will allow an increase in emission rights by more than 100%. In aggregative terms, the approach suggests the following targets:

Between 2003 and 2050, developed countries will reduce CO2 emissions by no less than 73% and developing countries will increase CO2 emissions by no more than 73%. For developed countries this target will be mandatory because they can achieve them on the basis of national effort. For developing countries, these targets will be conditional on receiving transfers of funds and technology from the developed countries, in recognition of their limited capabilities and the ecological debt owed by the developed countries for their past emissions.

For achieving these targets, there will be a need for massive resource transfer (of more than $100 billion per year) from the developed to the developing countries. Where will these resources come from? The current financial crisis may have created an opportunity for an attractive source of funding. In order to contain the financial meltdown, the US authorities have already committed a financial and fiscal bail-out programme of nearly $7 trillion dollars and there is widespread talk of another fiscal stimulus of about $1 trillion in the near term. With this level of dollar injection there is serious risk of loss of confidence in dollar which was already under stress before the 2008. There are now influential voices in the US and abroad calling for revival of the idea of Special Drawing Rights (SDRs) as the principal international reserve currency. If SDR becomes the principal international reserve asset and IMF issues SDR on an annual basis to meet the currency needs of international trade and capital movements, the seigniorage that has been accruing to the US will accrue to the international community. If these SDRs are then used for funding provision of global public goods such as climate change management, they can take care of the issue of resources for funding climate change programmes. This will be a text book example of global seigniorage being used for provision of truly global public good.