Copenhagen Blues

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Below is a response to an email that Stefan Bringezu from the Wupperthal Institute and fellow member of the International Panel for Sustainable Resource Management wrote to all the members of the Panel after the failure of the Copenhagen talks(which hopefully he will agree I can reproduce on this blog).

I agree fully with Stefan and in particular the contrast of how quickly the global response to the economic crisis was engineered versus the cataclysmic mess of Copenhagen. There is, however, an interesting tension in all the talk about new institutional arrangements. On the one hand African countries hang onto the UN system for dear life because it is the only place they have a voice; while on the other Ethiopia and South Africa helped the US spin the final (non-)deal because they were effectively part of that core group that in the final hours hammered out what has disappointed the world. So there is a ‘group of 17’ in practice, but its heading the wrong direction.  (Stefan suggested we need an equivalent of a “G-20” for sustainability – what he called the “G-17”.)

I agree with Stefan that this has got a lot to do with the fact that carbon is delinked from resource scarcity/security which, in turn, is about the global economy. As Ernst von Weiszacher (Chair of the Panel) has so eloquently argued in his recent speeches, oil and food prices preceded the financial crisis (and for me, soil degradation levels are a key driver of declining growth rates of food outputs). We need to make these links in the Resource Panel’s work. But surely this will lead us into the interesting area of macro-economic policy – Stefan hints at this with the nice example of the stone age – changes take place because alternatives are more attractive and not because we ran out of stones.

The financial crisis was really about the futility of investing in fictitious wealth premised on unsubstantiated assumptions about the value of fixed property. What intrigues me is that the vast number of venture capital funds that burnt their fingers are redirecting their investments into “greentech” – they are effectively betting that the next technology revolution (Kondratief cycle) is going to be a sustainability one. But what many of them are anticipating – and waiting for – is for the US congress to pass the climate change-related legislation. And this is what has bogged down. My reading of the US position in Copenhagen is that they wanted the Chinese to play ball to help break the logjam in the US congress and remove resistance to the climate change legislation. But, and here is the link to the financial crisis, what drives so many congressmen and senators really crazy with rage these days is the stubborn refusal of the Chinese to allow its currency to ‘float’ (ie to stop keeping the yuan artificially low). The Chinese refuse because this is their way of keeping the costs of exported goods low so that they can salvage their export-dependent industries. The US says: pay your workers more so that they can buy more goods. The Chinese are slowly doing this, but prefer putting money into collective consumption like health care and infrastructure. So it is highly unlikely that US legislators will agree to anything that enhances the Chinese advantage in the global economy while the US is struggling to find ways of combating unemployment. Only if the prices of Chinese goods go up (if the yuan floats) will the US start to succeed in this regard – or at least this is what many strong senators and congressmen are arguing. The US then spun this by targeting the Chinese determination to resist external monitoring of their rather suspect notion of “energy intensity” reductions as the cause of the failure. The outcome at Copenhage is not what the Chinese wanted, i.e. they did not want to be seen as the deal breakers, even though it is clear that they played a key role in watering down the deal during the all night negotiations on the last night.

So we have a very complex conundrum here – if we start linking carbon and resource scarcity, it will quite quickly have implications for China’s determination to reduce “energy intensity” by relocating its dirty industries elsewhere in Asia and Africa, thus becoming an importer of manufactured products (and hence an importer of resource footprints – or what some call ecological rucksacks). This is effectively a resource decision, with major negative implications for the US who will never be able to compete.At the same time the EU has issued warnings to member states that resource prices are rising and that everything needs to be done to prevent resource exporting nations from raising prices in global markets because this undermines economic recovery. I think these were the underlying dynamics that fed into the failure of Copenhagen, and I agree they are probably best “resolved” in a kind of new “G17” (or whatever number) that Stefan refers to. But somehow this will have to have links to the UN system if, in particular, Africa is to remain part of the process. How China reconciles its new status as a member of Obama’s club of “major economies” and its historical membership of the club of “developing economies” remains to be seen. And how the US secures a deal for climate change legislation in the congress without China cooperating fully also remains to be seen. In this messy interregnum, will South Africa seize the opportunity to chart its way into the new low-carbon world or will it stubbornly refuse to act until someone else pays for it thus giving others the right to determine how we eneter this new low-carbon world.