Monday, 20 July 2009

G8, G17 or G192?

Last week I wrote a column about the G8 summit in L'Aquila, Italy and the climate change discussions that were held there under the Major Economies Forum umbrella (comprising 17 economies). I argued that for the climate negotiations to succeed, much greater levels of trust is needed between developed and developing countries. And in order to build such trust, I suggested that joint activities are needed more than ever - activities to develop and diffuse technologies, to collect and share satellite-based emissions information, or cooperation to reform multilateral financial institutions.

I received a range of comments, some of which focused on the need for sticks and carrots, some of linkages between climate and other regimes, others on domestic politics, and finally on the issue of trust. Let me elaborate a bit on these points.

Carrots and sticks are of course necessary. The main carrot is financing but the U.S. has yet to put something on the table, something that Obama acknowledged in L'Aquila. So, China and
India are playing a wait-and-see game. Another carrot is through access to markets, particularly in environmental goods and services (already a $500bn market). But we're not going to get a deal on that without a comprehensive conclusion of trade talks under the Doha Round.

Meanwhile, the sticks could also be employed through linkage with other regimes, particularly trade sanctions. But that would raise the threat of protectionism, in the least, and make the trade regime ungovernable, at worst. More on this in a future post.
Therefore, in addition to the carrots and sticks approach, there is a need to shift domestic politics in developing countries, a point I have been trying to push via the technology and renewable energy investments route. I am just sceptical (given India's WTO experience) whether the interests in favour of curbing emissions will line up that easily. In the WTO case, the interests that benefited from participation in the trade regime realised it post hoc, not during the Uruguay Round negotiations. Similarly, there will be interests in the new energy sectors that would benefit from a higher carbon price, stronger regulation on emissions, cap & trade, etc. But I do not yet see a strong enough lobby to shift the official position. It has not moved beyond the
North-South posturing.

Trust is not a fluffy term. In international relations, it is the basis for any agreement, no matter how we line up the incentives. The question is how we build trust. I see joint technology development (with public-funded R&D and of course private investments, like GE's investments in China on cleaner coal tech) as one of the ways forward, so that the win-win benefits become more obvious to the actors. Otherwise, the competitiveness concerns of individual economies could overwhelm the public good benefits of responding to climate change.

Ultimately, the G8 or the 'G17' cannot substitute for the G192, namely the full membership of the United Nations for a comprehensive deal on climate change. Smaller negotiating groups might deliver a bargained outcome (although they failed to do so in L'Aquila). But such an outcome will neither enjoy trust nor legitimacy in the wider international community, unless an inclusive process engages with the wide range of governance issues plaguing the climate regime, from negotiations to implementation to monitoring and enforcement.