Even at the best of times the UNFCCC process is a challenge for business and civil society. After all, it is an intergovernmental negotiation and there is no formal role for anybody else other than governments. But we all head to the negotiations anyway, in part to try and follow the process but also to talk to the various participants. The UN oversees all this and on a regular basis, this time being no exception, the UNFCCC Executive Secretary Yvo de Boer encourages non-government parties at the conference to “contribute to the process” or “explain what is needed” or even “offer negotiating text”. Of course it isn’t just business trying to get thinking across, there are also a vast array of environmental, political, religious and civil society representatives there all trying to share their perspectives with the delegations. But the process itself isn’t really designed for such interaction.
At each UNFCCC meeting one or two major business organisations are given an opportunity to address the plenary and on every occasion this seems to get reduced to one or two minutes as the time approaches – so the carefully worded business statement that didn’t say a whole lot anyway suddenly gets trimmed from a couple of pages to a few bullet points and that is it. But the process roles on and through painstaking repetition and endless hallway discussions the messages on levels of investment needed to achieve the needed emission goals, the capital flows, technology, intellectual property, competitiveness, carbon markets and so on sink in. We all know that many people aren’t happy with even this level of influence in the process, but the reality is that business is an important part of the way our economies function and that any new constraints placed on the economy, such as emissions limitations, need to be able to work and deliver within the system that we have.
The new reality, at least for this week, is that this is a now closed shop. Whereas last week anybody that turned up with accreditation could enter the Bella Centre, on Tuesday just 7000 non-government people were allowed in. By Friday it will be literally a handful of NGOs allowed in the centre as over 100 heads of government and many more ministers arrive for the final showdown. After many years of participating in this process it’s a pity to miss the last hurrah, but given how it is all going, there will be plenty more opportunity in 2010 (and beyond I suspect). So it is time to leave Copenhagen to the government and media and watch it all on CNN at home .
Wednesday, December 16, 2009
Wednesday, December 9, 2009
Copenhagen, a Political Drama!
As the world turns its attention to Copenhagen, the most asked question is “What do you think will be agreed?”. The reality is nobody knows what will happen but given the political announcements of recent weeks expectations are dropping. We have all been told that a “legally binding” agreement will not be completed in Copenhagen, but rather to expect a major step forward or a “political agreement”.
When all is said and done, Copenhagen will almost certainly represent a landmark in the progressive shift to a global low carbon economy. Whether the final agreement is reached there or 6-12 months later is of little consequence, provided clear direction comes in December. We shouldn’t forget that the signing of the Kyoto Protocol led to many years of discussion and that the agreement itself was not finally ratified until 2005, some eight years later. Although we cannot wait eight years this time around, a delay into 2010 to allow a more substantive agreement to be reached is acceptable, perhaps even desirable given the current state of deliberations in the US Senate on the cap-and-trade bill.
But much still needs to be achieved in Copenhagen.
First, the delegations must reach agreement on overall structure. This is really an essential part of the process, but gets very little coverage in the media. The Kyoto Protocol has no formal end so the discussion regarding future commitment periods continues to roll on, but of course without the USA. In parallel, the AWG-LCA (Ad-Hoc Working Group on Long-Term Cooperative Action) is negotiating a text which could be adopted as a new international agreement – but what of the Kyoto Protocol if that were to happen. Many developing countries have reacted negatively to its demise, but equally it is unsustainable in its current form given the small number of countries with specific targets. This may have seemed appropriate when discussions commenced in 1992, but it is not an appropriate fit for the reality of today.
But the Kyoto Protocol shouldn’t just be discarded. The key elements that lay the foundation for a market based approach need to be extracted and adopted into the new structure. Without this infrastructure the broader premise that carbon markets will be a key component of a future agreement will have no foundation. Nor is it likely that these will be recast from scratch – it will just take too long.
By the end of the Copenhagen meeting we may well have some sort of announcement regarding international action, but if it doesn’t include something about the Kyoto Protocol, it’s future and the framework within which a new agreement will sit, it is hard to see how that new agreement will emerge at future meetings. Hard though it may be, Copenhagen is the time and place to deal with this issue.
Second, there must be clear recognition that the end-game requires all parties to adopt absolute targets, which means the focus must be on the transition for developing countries from their current status to a future one bound by emissions limits. For some countries such a move can come in the near future, for others it could be some decades away. Transitionary financial and capacity building measures will be critical.
Finally, an emissions reduction pathway must be agreed and devolved to national / regional level. Today there seems to be broad agreement that a two degree target is where the world is going, but this isn’t a compliance based target. At best it is a loose guideline for domestic action, but it is wide open to interpretation. Like it or not, the only thing we can control is the amount we emit and nothing else. With that done comes an adpatation strategy. So an agreement that confirms the two degrees but does little to translate it into a global emissions pathway is of limited value.
The reality is that we know what has to be done, we know the timeline we have to do it in and although there remains much room for innovation we also know we have the necessary technology base to deliver the required reductions.
There is no impediment remaining other than self interest and nationalism. These will have to be set to one side in Copenhagen and beyond.
When all is said and done, Copenhagen will almost certainly represent a landmark in the progressive shift to a global low carbon economy. Whether the final agreement is reached there or 6-12 months later is of little consequence, provided clear direction comes in December. We shouldn’t forget that the signing of the Kyoto Protocol led to many years of discussion and that the agreement itself was not finally ratified until 2005, some eight years later. Although we cannot wait eight years this time around, a delay into 2010 to allow a more substantive agreement to be reached is acceptable, perhaps even desirable given the current state of deliberations in the US Senate on the cap-and-trade bill.
But much still needs to be achieved in Copenhagen.
First, the delegations must reach agreement on overall structure. This is really an essential part of the process, but gets very little coverage in the media. The Kyoto Protocol has no formal end so the discussion regarding future commitment periods continues to roll on, but of course without the USA. In parallel, the AWG-LCA (Ad-Hoc Working Group on Long-Term Cooperative Action) is negotiating a text which could be adopted as a new international agreement – but what of the Kyoto Protocol if that were to happen. Many developing countries have reacted negatively to its demise, but equally it is unsustainable in its current form given the small number of countries with specific targets. This may have seemed appropriate when discussions commenced in 1992, but it is not an appropriate fit for the reality of today.
But the Kyoto Protocol shouldn’t just be discarded. The key elements that lay the foundation for a market based approach need to be extracted and adopted into the new structure. Without this infrastructure the broader premise that carbon markets will be a key component of a future agreement will have no foundation. Nor is it likely that these will be recast from scratch – it will just take too long.
By the end of the Copenhagen meeting we may well have some sort of announcement regarding international action, but if it doesn’t include something about the Kyoto Protocol, it’s future and the framework within which a new agreement will sit, it is hard to see how that new agreement will emerge at future meetings. Hard though it may be, Copenhagen is the time and place to deal with this issue.
Second, there must be clear recognition that the end-game requires all parties to adopt absolute targets, which means the focus must be on the transition for developing countries from their current status to a future one bound by emissions limits. For some countries such a move can come in the near future, for others it could be some decades away. Transitionary financial and capacity building measures will be critical.
Finally, an emissions reduction pathway must be agreed and devolved to national / regional level. Today there seems to be broad agreement that a two degree target is where the world is going, but this isn’t a compliance based target. At best it is a loose guideline for domestic action, but it is wide open to interpretation. Like it or not, the only thing we can control is the amount we emit and nothing else. With that done comes an adpatation strategy. So an agreement that confirms the two degrees but does little to translate it into a global emissions pathway is of limited value.
The reality is that we know what has to be done, we know the timeline we have to do it in and although there remains much room for innovation we also know we have the necessary technology base to deliver the required reductions.
There is no impediment remaining other than self interest and nationalism. These will have to be set to one side in Copenhagen and beyond.
Test your basic skills in economics
Greg Mankiew is one of the best economist world has ever produced. Here are three teasers from his blog.
# 1:
Only one firm produces and sells soccer balls in the country of Wiknam, and as the story begins, international trade in soccer balls is prohibited. The following equations describe the monopolist’s demand, marginal revenue, total cost, and marginal cost:
Demand: P = 10 – Q
Marginal Revenue: MR = 10 – 2Q
Total Cost: TC = 3 + Q + 0.5 Q^2
Marginal Cost: MC = 1 + Q
where Q is quantity and P is the price measured in Wiknamian dollars.
a. How many soccer balls does the monopolist produce? At what price are they sold? What is the monopolist’s profit?
b. One day, the King of Wiknam decrees that henceforth there will be free trade—either imports or exports— of soccer balls at the world price of $6. The firm is now a price taker. What happens to domestic production of soccer balls? To domestic consumption? Does Wiknam export or import soccer balls?
c. In our analysis of international trade in Chapter 9, a country becomes an exporter when the price without trade is below the world price and an importer when the price without trade is above the world price. Does that conclusion hold in your answers to parts (a) and (b)? Explain.
d. Suppose that the world price was not $6 but, instead, happened to be exactly the same as the domestic price without trade as determined in part (a). Would anything have changed when trade was permitted? Explain.
#2.
The town of Wiknam has 5 residents whose only activity is producing and consuming fish. They produce fish in two ways. Each person who works on a fish farm raises 2 fish per day. Each person who goes fishing in the town lake catches X fish per day. X depends on N, the number of residents fishing in the lake. In particular,
X = 6 – N.
Each resident is attracted to the job that pays more fish.
a. Why do you suppose that X, the productivity of each fisherman, falls as N, the number of fishermen, rises? What economic term would you use to describe the fish in the town lake? Would the same description apply to the fish from the farms? Explain.
b. The town’s Freedom Party thinks every individual should have the right to choose between fishing in the lake and farming without government interference. Under its policy, how many of the residents would fish in the lake and how many would work on fish farms? How many fish are produced?
c. The town’s Efficiency Party thinks Wiknam should produce as many fish as it can. To achieve this goal, how many of the residents should fish in the lake and how many should work on the farms? (Hint: Create a table that shows the number of fish produced—on farms, from the lake, and in total—for each N from 0 to 5.)
d. The Efficiency Party proposes achieving its goal by taxing each person fishing in the lake by an amount equal to T fish per day and distributing the proceeds equally among all Wiknam residents. Calculate the value of T that would yield the outcome you derived in part (c).
e. Compared with the Freedom Party’s hands-off policy, who benefits and who loses from the imposition of the Efficiency Party’s fishing tax?
#3.
# 1:
Only one firm produces and sells soccer balls in the country of Wiknam, and as the story begins, international trade in soccer balls is prohibited. The following equations describe the monopolist’s demand, marginal revenue, total cost, and marginal cost:
Demand: P = 10 – Q
Marginal Revenue: MR = 10 – 2Q
Total Cost: TC = 3 + Q + 0.5 Q^2
Marginal Cost: MC = 1 + Q
where Q is quantity and P is the price measured in Wiknamian dollars.
a. How many soccer balls does the monopolist produce? At what price are they sold? What is the monopolist’s profit?
b. One day, the King of Wiknam decrees that henceforth there will be free trade—either imports or exports— of soccer balls at the world price of $6. The firm is now a price taker. What happens to domestic production of soccer balls? To domestic consumption? Does Wiknam export or import soccer balls?
c. In our analysis of international trade in Chapter 9, a country becomes an exporter when the price without trade is below the world price and an importer when the price without trade is above the world price. Does that conclusion hold in your answers to parts (a) and (b)? Explain.
d. Suppose that the world price was not $6 but, instead, happened to be exactly the same as the domestic price without trade as determined in part (a). Would anything have changed when trade was permitted? Explain.
#2.
The town of Wiknam has 5 residents whose only activity is producing and consuming fish. They produce fish in two ways. Each person who works on a fish farm raises 2 fish per day. Each person who goes fishing in the town lake catches X fish per day. X depends on N, the number of residents fishing in the lake. In particular,
X = 6 – N.
Each resident is attracted to the job that pays more fish.
a. Why do you suppose that X, the productivity of each fisherman, falls as N, the number of fishermen, rises? What economic term would you use to describe the fish in the town lake? Would the same description apply to the fish from the farms? Explain.
b. The town’s Freedom Party thinks every individual should have the right to choose between fishing in the lake and farming without government interference. Under its policy, how many of the residents would fish in the lake and how many would work on fish farms? How many fish are produced?
c. The town’s Efficiency Party thinks Wiknam should produce as many fish as it can. To achieve this goal, how many of the residents should fish in the lake and how many should work on the farms? (Hint: Create a table that shows the number of fish produced—on farms, from the lake, and in total—for each N from 0 to 5.)
d. The Efficiency Party proposes achieving its goal by taxing each person fishing in the lake by an amount equal to T fish per day and distributing the proceeds equally among all Wiknam residents. Calculate the value of T that would yield the outcome you derived in part (c).
e. Compared with the Freedom Party’s hands-off policy, who benefits and who loses from the imposition of the Efficiency Party’s fishing tax?
#3.
A group of athletes are competing in a multi-day triathlon. They have a running race on day one, a swimming race on day two, and a biking race on day three. You know the order in which the eligible contestants finish each of the three components. From this information, you are asked to rank them in the overall competition. You are given the following conditions:
- The ordering of athletes should be transitive: If athlete A is ranked above athlete B, and athlete B is ranked above athlete C, then athlete A must rank above athlete C.
- If athlete A beats athlete B in all three races, athlete A should rank higher than athlete B.
- The rank ordering of any two athletes should not depend on whether a third athlete drops out of the competition just before the final ranking.
Subscribe to:
Posts (Atom)