The World Bank

Note that there's a very substantial difference between the World Bank and the IMF. The World Bank has a lot to do with development, whereas the IMF is a bunch of economics PhDs.

Is the World Bank part of the problem or part of the solution? (Or both?)

Joel's note: When I started thinking about getting a post-graduation job, I talked to some professors and started reflecting on my options. One of my epiphanies was that, even though these multinational agencies and NGOs and such have global scope and deal with issues all over the world, they all have offices. If you work for one, you'll probably work in one of its offices. And those officies are in specific cities. If you want to work for one, you'll probably need to live in its city. Like these, in Washington D.C:

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In 2006 the World Bank approved US$23.6 billion in loans. Global FDI was US$1.3 trillion, and total capitol flow was $6 trillion. (The US economy was $13 trillion that year.)

The World Bank IDA offers 40-year plus interest-free loans, in theory funded by repayments from older loans but in fact always short of funds. Accounted for $9.5 billion of the World Bank's total 2006 lending. "In contrast to previous studies we find that the US exerted a significant influence on IDA lending during the period 1993 - 2000. We demonstrate that the influence was both statistically as well as economically significant." (University of Copenhagen study)

You can't talk about the World Bank without mentioning the Washington Consensus. And here's a useful-looking Stiglitz interview:

Multinational Monitor: What was the "Washington Consensus?"
Joseph Stiglitz: It was a consensus formulated between 15th Street and 19th Street in Washington among members of the International Monetary Fund (IMF), the U.S. Treasury Department, and the World Bank. It argued that the keys to success in developing countries were three things: macro-stability, liberalization (lowering tariff barriers and market deregulation) and privatization. It was largely formulated out of experience with Latin America.

MM: Does it still exist as a consensus?
Stiglitz: No. There is a consensus that those precepts, while important, are neither necessary nor sufficient for successful development.

Institutional Economics is a large part of the post-Washington Consensus thinking.

Sunil Sharma from the IMF-Singapore Regional Training Institute (speaking only for himself, not the IMF). Provides training for 1000 to 1500 officials per year from 38 regional countries. Patterned after a similar office in Vienna. About 60 PhDs on staff providing training in macroeconomic and financial management, statistics, and legal issues.

The IFA, the International Financial Architecture.

Accumulating questions:

• Has there ever been a period of time in which we had both a degree of global capital mobility and some economic stability?
• According to the chart (Obstfeld and Taylor 2002), the only events to reduce global capital mobility have been the world wars. Even the Asian financial crisis didn't dent mobility growth. Are we therefore, assuming a new world war doesn't start, safe from drops in mobility?
• Is there a correlation between global capital mobility and greater human welfare? Is there a causal relationship? (A: studies do show that greater mobility does correlate with indirect benefits. Without some minimal institutional competence, you won't benefit from foreign capital.)
• From other classes, we here that institutional capability is the current hot topic in international development. What's going to be the fad after that?

Financial systems have been liberalized only recently. Italy had interest rate limits into the 1980s. Greece has a primitive system into the 1990s. Regulation Q limited interest rates US banks could pay.

Bretton Woods: currencies locked to US dollar, US dollar related (but not locked) to gold. (Joel's note: An interesting bit of trivia is that the US still values its gold deposits at $42.222/ounce. That's a multi-billion (but not multi-tens-of-billions) dollar bit of trivia. Ran across it reading somebody's review of the US FY2009 budget.)

IMF current statistics: 185 member countries, 2600 staff (with 400 to be fired in the next six months (Joel's note: talk about burying the lede; this is a talk about challenges for the IMF and it's now 40 minutes into the talk)), US$338 billion in quotas, which is smaller than Citibank's subprime losses.

Eight countries have direct membership (the UN Security Council permament members plus Germany, Japan, Saudi Arabia) in the Executive Board; the other 177 members are represented by 16 other directors. 30% women, although there is a shortage of female economics PhDs to hire. The biggest concentration of economics PhDs in the world. (I wonder who's in second place?)

The word corruption is no longer taboo. Q: What's still taboo? A: I would not be able to write what I really think about the exchange rate regime of a particular country.

Notional purpose of the IMF is to serve as a revolving pool of money that member countries could borrow from during balance of payment crises and thus avoid destructive trade policies. The IMF is funded by the difference between receipt and payment interest rates.

Top IMF borrowers in last 60 years: Brazil, Turkey, Argentina, Mexico, Korea.

Ten years ago, reserves of a central bank were guarded secret. Now most banks put them on their website.

What's going on now: deeper financial markets in developing countries; relaxation of capital controls; more international financial market integration and private capital flows.

Bankruptcy laws are important because they allow you to clear the decks quickly. The US recovers quickly because of its bankruptcy laws.

If you peg your currency to a foreign currency (e.g. the dollar), you can no longer change your domestic interest rate to meet domestic conditions. For example, Middle Eastern countries peg to the dollar, and now they have interest rates far too low for their domestic economics. Which exchange regime is better is not generally agreed; it depends on local institutions. Fixed but adjustable is bad because the infrequent adjustments are shocks, preceded by tension.

Canada: has floating exchange rate, and retains control of domestic money supply.

Banks: do a "maturity transformation": borrow short-term, lend long-term. By design, they thus have liquidity risk. By design, the banking system is leveraged. The investment banks in the security markets do not do maturity transformation; they manage liquidity. They are not key to the running of the payment system. They are more lightly regulated. But with the changes in the capital market, the investment banks have a more critical role in the monetary system, and should be held more accountable.

This is one of those classes where everything happens at once. Along with two other classmates I was assigned to do the student presentation for the week; we decided to have all of the other students each do two-minute presentations, followed by two of our own members doing presentations, and then a carbon cap and trade game. Plus the usual break, discussion, and professor announcements. And then we have three guest speakers, two of which are surprise guests. Urp.

Guest speakers

(I didn't catch all the names). Speaker #1, from World Resource Institute:

I apologize for the acronym SD-PAM. It's a mathematical fact that some emerging economies must limit their emissions if the Earth is to mitigate global climate change. Kyoto has a single solution for Annex 1 countries, and insubstantial, qualitative activities for the rest. For an overall solution, some of that distinction must change, and the changes must be acceptable. Maybe not all of these initiatives will be measured in terms of GHG, but they all have to have something concrete, e.g., going to x% of renewable energy.

Many developing countries are taking substantial activities that stack up well to developed country activities. New plans due by 2009, under the Bali framework: new program, which looks very different from Kyoto Protocol. Countries have to figure out how to make credible commitments of their domestic climate change programs.

Q: Will post-Kyoto agreement have sanctions? A: nothing like the sanctions in WTO, which is backed by "mutually assured destruction" concept. There will be some connections between financing and policy (Joel's note: so the enforcement plan consists of getting serious about not bribing countries that don't do what they're supposed to)

Q: Canada has reneged on its commitments. Will Annex I countries use the new framework to renegotiate. A: In Washington, we tell lawmakers about China's progress, and they say, is it legally binding? and we say, well, with Canada as an example, so not so much. The number one priority for the US team at Bali was to eliminate the difference between Annex I and other groups.

It's important to remember with ETS: it's not fundamentally using the market to reduce emissions. Countries agreeing to ETS agree to meet caps, and then use the market to allocate emissions. Emissions trading is not the way to go; it will be a big part of the policy mix. Caps have a political advantage over taxes: Carbon traders are asking for more caps, because that increases the size of the market they can play in. That wouldn't happen with taxes.

Dubach: Actually, there's not much debate with economists. Carbon taxes are better economically.

Are emission trading markets sending the correct signal? Are they sending the signal that it's morally okay to (? to buy the right to pollute?). There are people who believe that carbon trading is unjust. Many Southern civil society groups are very antagonistic to carbon trading. Other issues: getting credit for things that would have happened anyway. Projects financed by emission trading may not be good projects.

Should SD-PAMS get ETS credit? That is, if the Indian government runs a program to distribute efficient lightbulbs, should they get carbon trading credit for the calculated benefit? The challenge is to promote new behavior. If China does fuel efficiency standards, they probably would have done that anyway because of concerns about oil dependency. People are generating a lot of potential credits, but who will buy them? There's no carbon market, only a market for compliance. That market must be generated by a country accepting a tight cap and forcing its companies to buy credits. The Lieberman-Warner bill, the most advanced bill in the US, does not allow purchase of overseas credits. Countries prefer to do expensive things at home instead of cheap things overseas.

Navroz Dubach: CDM is interesting. It's a market, but a market without property rights. It has huge transaction costs and is not easily verified. The Indian government just loves it, it's just a cash cow for Indian industry. There's supposed to be a technology transfer, but most projects are from one Indian company to another. Land-based projects are even more political.

30 years ago, power companies were all owned by governments, except in the US where they were heavily regulated. A large percentage of GHG comes from electricity generation.

Renewable energy does have environmental benefits, but it costs more. Access rates to electricity are as low as 3% in some countries. 50% in India. We've been looking at electricity and regulatory institutions.

These frameworks have to filter down into actual actions. How does that happen? Nominally, governments implement the frameworks they agree to. But that implementation is political, with winners and losers. So the policies are often vague, and the regulator has to balance pressures. Many regulators in developing countries were set up as part of donor-funded adjustment lending programs. So regulators are poorly integrated with governments.

Carbon Trading Game

It needs more work. We got through three years out of the planned 8 (trimmed from 12). Brief notes: We need more training and examples before the game starts. The auction mechanism doesn't work. The market isn't clearing even though the companies are set up to have a market. The printed tokens and housekeeping are a big pain and the whole thing should be electronic.

Student Presentations

My group asked all students, in groups of 2, to prepare four-minute presentations with topics we handed out, all based on the assigned reading. we discouraged Powerpoint and forbade bullet points. We also asked all seven groups to perform their presentations once before class, in full dress rehearsal in a classroom in front of one of us. (Three and half groups actually did.)

Logistics

Ten page double-spaced policy memo. First draft due April 1. Final due date: April 22.

Prime minister's office (that's me—I'm the PMO for China for this class) initial memo: overview of policy. Planning memo and overall negotiating position. Final memo is country's negotiating position. China and India teams are discouraged from presenting solutions including a hard cap, since that's almost completely unrealistic.

Next week: guest speaker from IMF.

Schedule group presentation Monday, April 14.

Student presentation

International trade and the environment.

Brief description of the WTO.

The case for open trade. Comparative advantage.

Simulation exercise

WTO tries to mediate a dispute between Rich Country and Poor Country. Poor Country is complaining that Rich Country is imposing illegal tariffs on raw cotton. Rich Country says that poor country

Comparative advantage

Assumes that land, labor and capital don't move, and that there are constant returns to scale. These call into question the validity of comparative advantage (the notion that if everybody does what they do best, they all benefit, rich and poor alike) and the fairness of the likely distribution of those benefits.

Trade is mostly between developed countries, which suggests that increasing returns to scale is more realistic than constant return. That is, the rich countries have big factories and trade with each other, and the poor countries don't have anything to contribute.

Christopher McCrudden and Stuart G. Gross, “WTO Government Procurement Rules and the Local Dynamics of Procurement Policies: A Malaysian Case Study,” The European Journal of International Law 17, 1 (2006), pp. 151-185

I continue to be amazed, this semester, at how well all of my classes fit together. This article, about the status of "global administrative law" in procurement, brings together a lot of threads. You might think that "WTO Government Procurement Rules and the Local Dynamics of Procurement Policies" would be fairly boring, but in fact, if Douglass North and his co-authors are correct, these are exactly the kinds of things that make the difference between this:

and this:

North argues that the transition from "limited access order" to "open access order" is the key to being a rich country. In limited access orders, the ruling elite use their monopoly on power to monopolize economic opportunity, and use the profit to sustain the monopoly on power. The path to national prosperity, therefore, lies in breaking open the monopolies on both political and economic power. Global procurement rules, in negotiation as part of GATT and then WTO, aim to do precisely that for government spending, which can be easily amount to half of all spending. Obviously, enshrining open access in procurement laws and practices would go a long way towards an open access order, on both political and economic fronts.

The paper is specifically a case study in Malaysia, which has several interesting dynamics going on. The first is a "market-dominant minority", as defined in Amy Chua's "World on Fire", a book which I bought and skimmed a few years ago but regret never getting around to reading through. But I think I got at least the thesis: that a common pattern in economies is for an ethnic/racial/religious minority to have a wildly disproportionate role in the economy. (Which leads to a good question for Douglass North: what does his theory have to say about market-dominant minorities, which on the surface seem to violate one of his premises.) In Malaysia, the Chinese are "a quarter of the population but hold 40% of the economy", while Malays are "60% of the population" but "own just 19% of the economy". The Malaysian state after independence was founded on "the Compromise", which was essentially that the Chinese and Indian minorities would accept second-class status in exchange for not being ethnically cleansed right out of the country. But after decades, the Malay majority remains at an economic disadvantage, and over time a number of government policies have formally enshrined discrimination in favor of Malays. These policies are at odds with emerging international norms of open procurement.

Note that the United States also opposes complete open procurement access, because US government procurement uses discrimination to support minority and woman-owned businesses. Only a small fraction of WTO members are part of General Procurement Agreement (GPA); the US is a member but has negotiated big exceptions.

We can also tie in a bit of current news:

The controversy over the Pentagon decision to award a $35bn refuelling tanker contract to EADS ... Nancy Pelosi, the Democratic House speaker, said Boeing had been on course to supply the US Air Force with tankers until Mr McCain "intervened". "Senator McCain intervened, and now we have a situation where the contract may be - this work may be outsourced." ...

The air force originally chose Boeing to supply it with 100 tankers. But Congress canceled the deal after it emerged that Darleen Druyun, a former top air force acquisitions official, had held illegal job discussions with Boeing while still negotiating the deal. ... The tanker scandal claimed the career of former Boeing chief executive Phil Condit. Ms Druyun and Mike Sears, Boeing's former chief financial officer, were sent to jail.

I'm not a reporter so I'm not going to do the work, but surely there must be quotes in which Pelosi and others who have complained about the EADS award are, in turn, complaining that US companies are denied access to foreign markets because of preferential treatment of foreign domestic companies?

The article goes on to describe negotiations in the last few decades to bring Malaysia and other developing countries into the GPA subset of WTO, negotiations which have to date failed. North would argue that the developing countries are shooting themselves in the foot; they are refusing membership in a group which would help them move to open access orders. I think this has be understood in the context of what I'll call the "Washington Consensus Debate", which is roughly this: Developed countries: "If you agree to play by all of these rules which work well for rich countries, you'll be rich." Developing countries circa 1980s: "Okay" Time passes. Developing countries do not become rich. Developing countries: "Hey, wait a minute! These rules just let you keep exploiting us. You yourselves didn't follow these rules to get rich."

The actual, original Washington Consensus rules are probably not to blame; most of them should help everybody. But the other cruft and ideology that accumulated around the term probably does include a lot of rules with very unequal results, not the least of which TRIPS. (The article quotes a paper alleging that some developing countries have had to spend an entire year's development budget to set up the regulations TRIPS requires, regulations which protect the creators of intellectual property, not the consumers. Guess how many developing countries are major creators of intellectual property (pharmaceuticals and software each bring in hundreds of billions of dollars per year globally; movies bring in far less, and music less still)? Guess who benefits.) So the big question is, are open procurement rules and other steps to reach an open access order really different from exploitative "Washington Consensus" prescriptions like open capital flows (which some economists now view with much skepticism)?

Ann Florini, The Coming Democracy: New Rules for Running a New World, Chapter 7, Brookings, 2003

The Wonderful Wizard of Oz was an allegory about the gold standard? Well. Who knows about that, but any piece of art which supports interpretations and reinterpretations as diverse as the movies The Wizard of Oz and The Wiz, the book Wicked, and the musical Wicked, the Dark Side of the Moon soundtrack, and the possibility of being an allegory for bimetallic fiscal policy is something special, verging on Shakespeare territory as an ur-text. None of which has anything to do with the chapter, which is about global economics.

The global poverty level is US$1/day. Out of curiosity, if you had to survive in the US on $1/day, you would do well to buy M&M jumbo packs, apparently, at 36 calories per penny. Probably all of the best buys will be in candy, since it's almost purely reprocessed, heavily subsidized corn. You could afford 3600 calories, which is roughly double the daily calories you need. Of course the malnutrition would probably cripple or kill you, and you wouldn't have anywhere to live or clothes to wear or medical care, and we're ignoring food kitchens and govenment programs etc etc. But still, Bulk M&Ms, and probably clip some coupons. Food economics is always fascinating; see here.

Christine Loh, et al., “Climate Change Negotiations: An Asian Stir Fry of Options,” Civic Exchange and Singapore Institute of International Affairs

We have a student presentation on the readings. This week the overlap between my two classes from this professor is large and disorienting. In 5263, this Tuesday afternoon class, we read a lot about corporations and climate change, and had homework on what corporations in our own countries are doing about climate change. In 5262, Wednesday afternoons, we read a lot about public-private partnerships and NGO/corporation partnerships. I ended up handing in my 5263 homework in the right place at the right time but with 5262 in the heading.

Presentation

Corporate participation: too little too late. Joel's note: Was Y2K an example of too much too late? I wonder if there's an authoritative analysis of the Y2K effort which answers the question of, was it mostly a bunch of wasted effort or was a big disaster really averted?

Class activity: simulation of WBCSD meeting.

Joel's note: if you would like to bend your mind, read this article. It's in CRO magazine (yes, there's a title Corporate Responsibility Officer, and yes, there's a magazine for that). It's about giving awards to the best PR firms in Corporate Responsibility. 'nuff said.

The Wikipedia page on the WBCSD provides another good laugh. Remember that this is an industry group built on the ashes of the GCC, a greenwashing group whose swan song ended with "Carbon dioxide: they call it pollution; we call it life.". Here's what Wikipedia says about the new group:

Membership of the WBCSD is by invitation of the Executive Committee to companies committed to sustainable development. Among its members[9] are well-known companies such as General Motors, DuPont, 3M, Deutsche Bank, Coca-Cola, Sony, Oracle Corporation, BP and Royal Dutch Shell.

The student presentation has included BP, Ford, Toyoto, and now Sinopec presentations. These faithful presentations include some of the same inadvertant self-parody as the GCC ad. Joel's side research: Japan's fuel efficiency standards for cars will rise to 40 mpg in 2015. Given all the complexities and tricks in efficiency standards, you probably can't take that number at face value; however, Japan also plans to extend fuel standards to trucks, which is unprecedented.

Sinopec has dramatically improved its efficiency per RMB of income over the last five years; e.g., much less water consumed, CO₂ emitted, etc. This is good, of course, but should probably be interpreted as an indication of how staggeringly inefficient and destructive Chinese industry has been, just as China's enormous growth numbers reflect in part just how devastated China's economy was under Mao.

Tata. Exxon: the student who was supposed to role-play an Exxon flack at the WBCSD refuses even to pretend to work for Exxon.

Joel's side research: here's a tidbit I wish I'd included in my homework:

The legislation [passed in 2007] thus effectively bars Washington [state] utilities from entering into long term financial commitments for any pulverized coal-fired generation unless they use some form of carbon sequestration.

And lest you think, as I did, that my casual browsing was wandering totally off-topic from the presentation, our presenters just said that two governors in the US have committed to greenhouse emission limits.

A few questions popped up during my reading and thinking, so I went back to the IPCC report again.

1. Q: If the Third Assessment Report was the TAR, what is the Fourth report called? It couldn't be the FAR, because that could be confused with the First Assessment Report. Unless the FAR was like WWI: they didn't know there would be a WWII, so they didn't know to call it WWI. In which case the first FAR was actually just the AR, so the Fourth could be called the FAR, but then the Fifth would have to be the SFAR (Second FAR). A: It's called the AR4.
2. Q: what are current GHG emissions? A: about 50 gigatons of CO₂-equivalent per year as of 2004, coming from energy use (26%), industry, agriculture, forestry, and transport (each between 10 and 20%), and a few smaller sources.
3. Q: How much CO₂ gets absorbed every year? Does any emission level above zero damage the climate? A: Can't find the answer in the IPCC AR4.
4. Q: What's up with that special language like highly likely and exceptionally unlikely? How can I incorporate those terms into my normal speech?

   A: The IPCC defines its terms thusly:

   Term                   Likelihood of the occurrence/ outcome
   Virtually certain      >99% probability of occurrence
   Very likely            90 to 99% probability
   Likely                 66 to 90% probability
   About as likely as not 33 to 66% probability
   Unlikely               10 to 33% probability
   Very unlikely          1 to 10% probability
   Exceptionally unlikely <1% probability

   Take for example this product, a bag of colored rocks that you can tape onto your stereo cables to improve the sound. We can say that it's

   virtually certain that the product is just colored rocks in a plastic bag, and doesn't actually "[reduce] comb filter effects caused by very high sound pressure levels in the corners when music is playing"

   very likely that the author knows this

   about as likely as not that the site makes serious revenue from the same fools that buy hundred-dollar audio cables or thousand-dollar power cords

   unlikely that the site is a hoax

   exceptionally unlikely that most of their revenue comes from skeptics who think the site is likely a hoax but can't resist buying something just see if it really takes your money

Ann Florini, The Coming Democracy: New Rules for Running a New World, Chapter 8, Brookings, 2003

Global warming, etc.

My own summary of my understanding of the problem. First, there's no precedent in human history for any collective action big enough to solve the problem. That notwithstanding, how would we solve global warming?

The theoretical best solution probably looks something like this: total GHG emissions for the planet are capped at some level. Zero or negative would be good, but even in a fantasy land that's unrealistic, so let's say X gigatons/year, where X is a number small enough that we don't radically change the climate. This level of allowable emissions is distributed across countries or smaller units. GHG markets then provide economically efficient distribution of pollution reduction. If a political unit exceeds its allowed emission total, it is sanctioned or subject to military coercion (I keep coming back to the mental image of the (inter)National Guard coming in to shut down a factory in an updated version of Little Rock).

Questions:

• Are we already committed to radical climate change even if we stop emitting today?
• What number is X? Some earlier reading led me to believe it was 7 gigatons/year, but this source suggests current global emission is already 28 gigatons/year in 2005 (ignoring, for the moment, CO₂ vs CO₂-equivalent). Is the difference because the earth absorbs billions of tons per year?
• What are all the non-linear factors that could mess this up, like ice shelves collapsing, permafrost melting and releasing methane, etc etc?
• What's the best political unit over which to distribute emission credits? Countries? Individual humans? What if everybody got a personal carbon emission credit? (logistics aside—assume everybody gets a cell phone with a DNA reader to access their account)
• If all that is sorted out, what's the market price of GHG? The trigger for this whole chain of thought is, the current European price is €20/ton. What would that price be if based on a real, global, meaningful limit? The reason I want to know is that we can then figure out which alternatives to fossil fuels are economical. At the current Euro price, I previously calculated that coal is getting about a 50% subsidy: it costs 4¢ per kilowatt hour, but the GHG emissions would cost another 2¢ if purchased in today's carbon market. But what should that 2¢ really be? 2? 4? 20? If GHG-safe power costs 20¢/kWh, then orbital solar power and other really far-out stuff should move to front and center.
• How would we transition to this economy?
• How would we address the moral hazard and fairness issues that come with caps? Distributing the right to pollute evenly across all humans is better than giving the historical polluters big credits (as Kyoto does, by capping everybody relative to 1990 levels, effectively punishing anybody who wasn't polluting heavily then), but still lets the US and other big historical sources off the hook. If each human has an equal credit, then anybody with a big family is rewarded. What will keep people from having lots of babies immediately just to get more credits? What if parents had no access to their children's credits? What if nobody born after the starting point got credits?

David Vogel, The Market for Virtue: The Potential and Limits of Corporate Social Responsibility (Washington, DC: Brookings Press, 2005), pp. 121-132.

• p 123: BP set up an internal emission reduction plan and internal trading market, and successfully reduced BP's operational emissions by 10 percent between 1990 and 2002. However, they then shut down the market. It's likely that they only implemented the changes that made business sense anyway, like more efficient lightbulbs, or not wasting natural gas by flaring it. Their total investment in solar power was smaller than their investment in rebranding with a green-colored logo; and they ended up writing off some of their solar investment, suggesting it was not a profitable business.
• p 128: Bob Lutz in January 2005: "Right now the drive for more and more power in cars is way larger than the drive for more hybrids." 1) Was that even true in 1Q2005, and is it still true three years later? 2) How much of that was marketing-driven? 3) Will anybody miss GM when it's gone? (Note that Toyota, while less utterly stupid, is also far from perfect.
• On climate change,

  as the Washington Post observed, much of "business is far ahead of Congress and the White House."

  But that's because Congress and especially the White House are far far behind the science and even the popular will. Not to mention that the same businesses spend $20m/yr to keep Congress far behind. Note also that Clinton got more oil and gas money than McCain this election cycle, and Obama was tenth on the oil and gas love list.
• p 131: By January 2004, "only fifty of the thousands of American firms with significant greenhouse gas emissions" had adopted even token reduction commitments, and "only fourteen announced numerical goals."
• p 132: a GAO 2003 study says that voluntary business agreements will reduce emissions in the US by only 2% compared to business as usual. Only legal requirements (the article, not the GAO, argues) will have substantial effects. Most emitting companies in the US "are virtuallly ignoring the financial or environmental risk posed by climate change."

Environmental Defense website on corporate partnerships

Homework

Two page, double-spaced paper on what the business community in your country (or state) are doing about climate change.

• Greenhouse Gas Emissions in Washington State: Sources and Trends
• House OKs climate blueprint to set limits on greenhouse gases

Classmate presentation

• Economic challenges
• existing arrangements (Kyoto, CDM, carbon market)

All of the current thinking about global warming solutions is in either economic terms or technological term. How can we build a market with both carbon trading and carbon tax and make it efficient and effective?

Coal is still the cheapest source of energy, so developing countries will still rely on it for the next 30 years as the main source of energy. Other perspectives on solutions: population control. (Interesting. More generally, how many of different policy issues are positively linked? Improved educational opportunities for women tend to reduce family size. What does the overall web of development policies look like? Improving women's education is win-win-win. Improving medicine and nutrition make people's lives better but do also lead to more people living longer, which is bad in terms of overpopulation and global warming and over?)

Class discussion on these issues: "how can you convince people that if you give birth to more babies, you are degrading the environment?" Our Chinese classmate is taking a more hardline stance on population control, but other classmates are skeptical about means. ... Perhaps there isn't such a direct link between population growth and climate impact; curbing population should be a last resort. (Last resort? What are real last-resort measures, and when do we reach the last resort? ) More skepticism that population growth is a causal factor for global warming. Huh? surely the total footprint of human activity is directly, indisputably linked to the number of people who act and the intensity of their actions?

Existing arrangements

• UNFCCC (United Nations Framework Convention on Climate Change)
  • Kyoto Protocol to the UNFCCC
    • Joint Implementation: emission trading program within industrialized countries
    • Clean Development Mechanism: emission trading program between industrialized and developing countries.
      • CDM in 2006 accounted for hundreds of millions of tons of CO₂ emissions averted. Remember that we need on the order of ten billion tons/year reduction to really make a dent, and much more to actually reverse global warming.
      • "In early 2007 the CDM was accused of paying €4.6 billion for projects that would have cost only €100 million if funded by development agencies".
      • China lands 60%+ of CDM funds. It seems like, in game theory terms, the rest of the world has a sort of blackmail relationship with China, just as we all do with North Korea. Give us cash or we'll destroy the planet. I don't mean to say that this is a deliberate policy of the Chinese government, but it may be an accurate description of the inevitable, emergent relationship between China as a whole and the rest of the world (in contrast with North Korea, which clearly does intend blackmail)
• G8 Summits, L20

Problems with Kyoto: sanctions only work on governments which are already cooperating. Time horizons are too short. Moral hazards. Looking at the outline I just made, it's clear that Kyoto basically the only game in town, and that even if it's too little too late, it comes with a lot of institutional structure and that's going to be the foundation of future progress.

Shouldn't it be easier for countries to join Kyoto, perhaps partially, instead of all in or all out? Why not have additional agreements, such as between pairs of countries, to have more things in place to catch what slips past Kyoto?

I've been talking with a classmate about fundamentals vs superficials. Climate change efforts keep failing because of fundamentals: countries won't bind themselves to any agreement that has any real cost, because the politicians who make those decisions are controlled by companies, and the companies are driven by profit and controlled only by the marketplace (which to the extent they can control or at least manipulate), which is consumers, and consumers aren't willing to give up anything. So we're screwed, or at least prevented from real climate change mitigation, until several big parts of our economic system change: how companies behave and how consumers behave.

Carbon tax

• Often regressive.
• Should carbon moving over a border be taxed?
• If China has taken on carbon emissions from the US, by building Chinese factories to build stuff to sell to the US, how does the cost of the carbon get put back into the system? Is it as simple as China accepting a cap and trade system?

Joel's note: The carbon market is clearly a good way, probably the best way, to reduce emissions efficiently. But the real challenge is how to get everybody to agree to binding caps. Here's an idea: Countries have strong political reasons to be protectionist: protectionism benefits narrow interests and spreads the damage over everybody else, the classic recipe. And every country wants to export stuff; it's considered the magic recipe for growth. Could we somehow use these forces to get binding caps? What if the WTO allowed countries to apply tariffs to any imports from countries that didn't have caps or were out of compliance? Update: I asked this in class and the prof said it's in upcoming readings. Dammit. We're still on the rails.

Classmate: I'm not worried about the US and warming, because my impression is that the US always waits until the last minute but then does the right thing. Joel's note: so who is Obama's science advisor for climate change, and what would Obama do? If Clinton won, would she appoint Gore to do something? Would McCain? That reminds me that I asked Thomas Mann yesterday what he thought of the notion that looking at candidates' advisors tells you more about their probably policies than listening to their speeches and policy papers. He thought Clinton and Obama did not have substantially different people around them, but come to think of it I don't think he addressed the notion itself.

Alternatives

Many of the alternatives have a greater total lifecycle emission than they save, because constructing and using them uses a lot of carbon.

Some quick math during class. Coal power costs roughly 4 cents per kilowatt hour. Coal power emits about 2 pounds of CO₂, or a thousandth of a ton, per kWh. If carbon emissions currently run at €20/ton, that's an extra 2 cents per kWh, and suddenly alternative sources are quite competitive. Things glossed over in this analysis: difference between US$ and €; lifecycle carbon costs of renewables; what level of global GHG the current Kyoto/ECX price reflects, a 2°C change in 2100 or a 6° change or a 0° change?

Classmate anecdote about solar water heating in Tibet.

Climate change, free riders, and game theory

Climate change denial as a Nash equilibrium. How to change the rules of the game: reciprocity, repeated games. Altruistic leaders (and ways to get them without real altruism, e.g., Russia and Germany meeting their targets by historical accident, but they still met their targets). Play the game more frequently, i.e., negotiate new frameworks more quickly. What if there was an annual treaty signature at midnight on Dec 31, and your country was either in or out (or in some special limbo) each year?

An Economist article on the Prisoner's dilemma and climate change.

[Robert Axelrod] argues that the most successful strategy when the game is repeated has three elements: first, players should start out by co-operating; second, they should deter betrayals by punishing the transgressor in the next round; and third, they should not bear grudges but instead should start co-operating with treacherous players again after meting out the appropriate punishment.

See Thomas Heller's talk about what's wrong with the CDM trading mechanism.

Remember that a cap and trade system, while it unleashes a market mechanism (which is good), requires a serious regulatory mechanism (which is a challenge). So some people are back to preferring the tax solution instead. That may be even more technically complicated, and it may be even less politically feasible. An upstream tax is probably the most economically efficient solution but requires getting legislation that the oil companies oppose, and so is not likely.

Homework

Two page, double-spaced paper on what the business community in your country (or state) are doing about climate change.

S. Pacala and R. Socolow, "Stabilization Wedges: Solving the Climate Problem for the Next 50 Years with Current Technologies," Science, Vol. 305, Issue 5686, pp. 968-972, August 13, 2004.

How to stabilize CO₂ in the atmosphere at 500 parts per million (well above the current 375 and almost double the pre-industrial amount) by technological means? Think of a successful program which by 2054, is reducing output by one gigaton of carbon per year; hence, between 2004 (when the article was published) and 2054, each success forestalls 25 gigatons of carbon emission. In order to keep carbon emissions at their current level through 2054 in the face of growing population etc, we need seven such successes. And all of that work will still leave us at 500 ppm CO₂, which is enough for substantial climate change.

(Note further that the article talks only about CO₂; what about the other gases? Our total GHG level is well over 300 ppm in CO₂ equivalent, if you count the methane and other good stuff.)

Thirteen candidates for success: efficient vehicles; reduced use of vehicles; efficient buildings; efficient coal plants; replace coal with gas power; capture CO₂ at power plants, at hydrogen plants, at coal-to-synfuels plants; replace coal power with nuclear power, wind power, solar power; use wind-derived hydrogen instead of gasoline in hybrid cars; use biomass instead of fossil fuel; reduce deforestation; use conservation tillage.

Each of these is massive: to get the needed 1 gigaton/year of reduction through biomass would take one sixth of total global cropland. To get that amount of reduction by replacing coal power plants with gas plants would require four times more gas plants than currently exist on Earth. To get the gigaton/year from efficient cars requires replacing two billion 30mpg cars with 60mpg cars. And remember that we need seven successes just to freeze the amount of carbon we emit, which still won't be enough to freeze the amount of GHG in the atmosphere, much less start reducing it.

So solving the global climate change problem through technological solutions is utterly possible in technical terms and apparently impossible in political terms.

Fiona Harvey and John Aglionby, “Who bears the load? Bali leaves big concessions needed on climate change,” Financial Times December 17, 2007.

What happened at the Bali climate conference? Papua New Guinea shamed the US: "We ask for your leadership, we seek your leadership ... If you can't give us what we want, please get out of the way." The US was only mostly intransigent, and did not completely block all progress. The "Bali roadmap" sets up two years of talks aimed at producing a successor to Kyoto by 2009. Various symbolic (in a good way) things happened but no hard decisions were made.

Also, a nice graph in this article shows that anyone who says that the US has no obligation to do anything until China and India also agree is an oaf. The US is responsible for almost 30% of all CO₂ emissions since 1840; Russia, China, Germany, and the UK are each responsible for between five and ten percent.

Nicholas Stern, The Stern Review on the Economics of Climate Change, Chapters 21 - 23

• p 460: developed countries should both take responsibility for huge reductions as well as make physical reductions. That is, they should be willing to pay/invest in a lot of foreign reductions as well as reducing their internal emissions.
• p 460: "The key challenge is to devise an agreement or a set of arrangements that attracts wide participation including all countries with significant sources of emissions, and achieves deep and lasting reductions in emissions from all sectors." So the key challenge in addressing global climate change is to get everybody important to agree to reduce emissions and then stick to their agreements? That's pretty basic but I guess it needs to be said.
• p 460: different countries have different short- and medium-term motivations other than saving the world, for example reducing acid rain, regional development, more jobs; these should be considered and exploited.
• p 461: ethical and selfish motivations should both be used.
• p 462: non-binding agreements aren't worthless because they still lead to pressure to act the right way; countries follow their neighbors' leads; rules at many different levels are harder to circumvent than one rule.
• p 463: transparency is a word that keeps being repeated.
• p 465: A Pew poll says 45% of Nigerians think that climate change matters a great deal. However, a Nigerian classmate's anecdotal evidence suggests this is an overestimate. Ah: it's "based on those who have heard about the "environmental problem of global warming". So most Nigerians who are sufficiently educated to know about global warming think it's serious, but how many is that? Meanwhile, in the US, 47% of those who know about it think it's only a little serious or not at all. Is it better to be more ignorant or more in denial? It's tempting to cite the None so blind ... proverb but certainly global climate change is less certain than other bits of science with heavy denier contingents: that tobacco harms people, that life evolves, etc. On the other hand, the tobacco companies are funding climate science deniers.
• p 468: "As we have established in Chapter 23..." But I'm reading "Chapter 22 Creating a global price for carbon". The PDF title of chapter 22 is Chapter 24a. Waah!
• p 468: "private sector trading schemes are now at the heart of international flows of carbon finance." That would seem to be expectable. Is it a good thing? Are carbon finance and carbon trading the key mechanisms to reduce carbon emissions? Or are they just the mechanisms to ensure that, once a certain amount of resources have been allocated to reduce carbon emissions, we get the most efficient distribution of those resources? Or is the point that the allocation of resources itself will happen piecemeal through the markets, helped along by laws and norms?
• p 469: "A broadly similar global carbon price is an urgent challenge for international collective action. A global carbon price can, in theory, be created through internationally harmonised taxation or intergovernmental emissions trading, but neither is straightforward in practice." The global price is important because carbon emissions from any location are equal, unlike some other forms of pollution, and so the most efficient system tackles the cheapest mitigations anywhere in the world. If it costs a Hungarian factory US$50 (I have no idea what order of magnitude the right number is) to reduce emission by 1 ton, and a Turkish laundry US$60, then there should be a market mechanism that ultimately allows the laundry to pay the factory. But pay the factory what? $10? $50?
• p 470: internationally harmonized tax. Avoids the baseline problem (which is, if we all agree to cut relative to, for example, 1990 levels, then the grossest polluters as of 1990 will find it much easier to cut. I don't know if this is inefficient, but it's certainly unfair).
• p 471: a global quantity constraint. Okay, if the total global budget for emissions is 7 gigatons/yr, how is that allocated? One ton per person per year? But my carbon footprint is between 5 and 11 tons. I guess I better buy some credits. What does that cost? Oil is about US$90/barrel. In a few years will we all know the price of carbon credits as well as we know the price of oil? It looks to be roughly between US$4/ton/yr and $40. Not much of a market if there's that much spread.
• p 473: trading schemes allow maximum efficiency without prejudging the issue of who pays
• p 484: "An SD-PAM would be a voluntary or mandatory commitment to implement a policy or measure that makes the development path of a country more sustainable, with the co-benefit of lowering GHG emissions"
• p 485: emissions from international flights are not currently assigned to any country. So give half to each endpoint.
• p 487: "The most important test for the international community will be to reflect the scale of action required sufficiently within their commitments." How many different ways are there to say "everybody's got to do their part"?
• p 1 (Chapter 23): "The investment that takes place [in the developing world] in the next 10-20 years could lock in very high emissions for the next half-century". There are some successes in cancelling coal plant construction in the US but lots of bad news from China. Meanwhile, someone who stands to make a lot of money if the US builds coal plants warns that the US will be in trouble if it doesn't build more coal plants.
• p 2: "1.6 billion people without access to energy ... and 2.5 billion using traditional biomass for cooking and heating" (see some examples, 1 , 2, of efforts to make more efficient stoves)
• p 3: existing barriers to better energy policy in developing countries: subsidies ($160b/year in the late 1990s), existing infrastructure, lack of funding; "low levels of capacity relative to demand means that it is difficult for operators to take plants off-line to make improvements ... Hence, old and carbon-intensive infrastructure tends to be maintained in operation even where it would be cost-effective to upgrade it."
• p 5: "China has now established a goal to reduce energy intensity by 20% between 2006 and 2010 ..." Actions like these are both economically efficient and ecologically good. But there is even lower-hanging fruit: " As part of this strategy, the Indian Ministry of Power is working to remove market distortions caused by existing subsidies for kerosene in favour of less polluting, low-carbon home cooking systems based on solar and biomass technologies." Stop making things worse is usually the first step in any policy revision.
• p 6: what does "strengthening intellectual property rights" show up in a list of "measures that governments can take to create a suitable investment climate for energy investment and the adoption of new technologies"? Some inventors are sitting around thinking, I've got a great idea for nuclear fusion but unless my country joins TRIPS and extends patents to 50 years, I think I'll just sit on it? p 7: "There is some evidence that fear of competition and concerns relating to intellectual property rights may lead companies to offer older technologies"
• p 10: case study: "CFL [compact fluorescent light] promotion policies – including changes to Ghana’s import tariffs, installation task forces and sales through employers and retail outlets – have led to a dramatic increase in adoption. ... added US$10 million to the Ghana Economy ... reduced electricity consumption by around 6%"
• p 10: "In many cases intellectual property rights are not the key barrier to transfer of technology." (Presumably poverty is a bigger barrier?) Surveys show most companies (other than drug companies and a few others) use means other than patents to protect their IP. OECD study showed that IPR is not limiting technology transfer (does this mean the existing of IPR is not limiting, or the absence of IPR?). "Some of the case studies found that there are many environmental technologies available that are not protected by patents, so IPR were not relevant to much of the volume of clean technology transfer." "IPR protection is just one issue in a complex process for technology transfer, and only a component of the cost of a technology and should not be overplayed."
• p 12: the case for public ownership of IP. (yay! But isn't it kind of roundabout to first create a private right, IP, and then make it public? Why not just skip creating that private right? Meanwhile, note the latest abuse of the US patent system: a Texas company managed to get a patent on "digitally scanning, sending and archiving checks" and survive a challenge, so now they will sue all of the banks in the US. Jeff Sessions' solution? Immunize the banks and compensate the company US$1billion (note that the article seems to suggest that the $1b cost is the effect of some pre-existing compensation rule, not directly part of Sessions' proposal). I thought we didn't negotiate with blackmailers? Maybe he's just keeping them on the line so we can get a trace.
• p 14: the CDM (Clean Development Mechanism) is the first attempt at a pollution market between rich and poor countries. Rich countries can get emission credits at home in exchange for investing in emission-reducing projects in poor countries. So far it's too small and concentrated to have much impact, but it's a start. Need to move closer to full emissions markets to really broaden the effects.
• p 18: China's 1000 Enterprises program. Looking at these details of China's plans, here and elsewhere, it seems inaccurate to say they are doing nothing. The Chinese government is as active as any other in making policy decisions re: emissions, and they seem especially smart about doing the stuff that pays for itself. Collectively all this is nowhere near enough, but neither is anybody else's work.
• p 19: long-term structures are necessary for banks and industries and governments to really take emissions into account in planning.

Architectures for Agreement: Addressing Global Climate Change in the Post-Kyoto World., Introduction

• p 11: weaknesses of Kyoto protocol: no effective limits on the top member polluters, China, Russia, India. Biggest polluter, US, not a member. If a country misses its target, the penalty is that it has to make up the different as extra reduction in the next period. Or it could just withdraw.
• p 12: Argentina tried to join Kyoto in 1999 but nobody wanted to revise the Kyoto agreement to make that possible. Compare that to WTO and EU, two agreements that are planned for growth.

Kyoto Protocol (suggested reading)

United Nations Framework Convention on Climate Change (suggested reading)

Pop quiz. I couldn't remember what the A in TAR stands for (Third Assessment Report). I had trouble listing the concrete evidence for existing impacts of warming because 1) I tried to stick to things that were in the report, but kept drawing a blank, and 2) of the things I could remember, especially increased severity of tropical cyclones, I couldn't remember which ones were definite evidence that possibly pointed to warming and which ones were possible consequences of definite or possible warming.

Carbon Footprint homework

I tried several sites and scored between 5 and 11 tons per year. I was among the lower in the class, because a lot of people fly and I haven't flown since coming from Seattle last year. We also noted the apparent lack of calculators for tropical residents or for Chinese.

IPCC Fourth Report Class discussion

Carbon dioxide accounts for three quarters of greenhouse gases. Methane is second with 14%. (As a pedantic sidebar, note that this is an apples-to-apples comparison. Methane is 21 times more powerful a greenhouse gas, pound for pound, as CO2. So we aren't emitting 14 parts of methane to 75 parts of CO2 by weight or volume or anything. We emitted 37 gigatons of CO2 in 2004 and about a third of a gigaton of methane, but the methane is much worse. If you really wanted to destroy the climate, you'd release lots of 1,1,1,2-Tetrafluoroethane, which is thirteen hundred times worse a greenhouse gas than carbon dioxide. Where, you might ask, would you get 1,1,1,2-Tetrafluoroethane? Ask for it under the name R134a, which is how it's sold as an ozone-safe refrigerant replacement for freon. Oops. The champion greenhouse gas is SF6, which is used to fill those heatproof double-paned windows. I saw this stuff demonstrated outside a hardware store; you can put a pane of it between your hand and a heat lamp and you won't feel anything from the lamp. So put it in your home to cut your heating or A/C bills, but don't ever break a window or you'll probably undo all the good.)

What is the impact of climate change in your country?

• Korea: not so vulnerable compared to other countries
• Mongolia: landlocked, but affected by "zud" weather.
• Alaska: getting nicer by the day. As are Canada and Russia.
• China: Chinese don't tend to link pollution and climate change, and so are nonplussed by foreign accusations of China's contribution to climate change.
• Lebanon: people say, "we're so far behind that it's a privilege just to worry about climate change."

Anecdote of people from developing countries who move to Canada. Initially no awareness of recycling and similar civic norms, but that changes over time.

Blame for climate change

Smaller countries think, how much difference can I make? Whatever we do, China will make it up in three weeks. Joel's note: Which is apparently the Singapore government's party line. The logical fallacy is, I hope, obvious. If not, think of this argument: Power plants and factories emit lots of dirty smoke that contains all kinds of poisons. Since they're not stopping, there's no reason I shouldn't burn toxic waste in my backyard; it's not much, so it really doesn't make any difference.

The manufacture of cement releases tremendous amounts of carbon dioxide. Joel's note: What if we reversed that? One of the fringe strategies for mitigation is to capture and store carbon dioxide through technological means. What if we had a building material that could replace cement but which absorbed, rather than released, carbon dioxide when manufactured? Which ultimately gets back to the notion/moral question of, can or should we rely on technology to save us again, or is there some moral imperative to try and do the impossible: change the behavior of most human beings. Hmm, altogether cement accounted for less than 1% of US emissions in 2006. The consumption of energy accounted for 84%.

More class discussion. If the US can't build a wall to keep out Mexicans, then when people need to migrate for climate change reasons, what will stop them? It's in America's benefit to help Asia now, to keep this from happening.

The changes from global warming are fairly small and subtle; if people don't have direct evidence, how can they be convinced? The engineer's answer: Isn't that a marketing problem?

Behaviors get entrenched and are hard to change. China and India have the opportunity to leapfrog entrenched patterns in the West But (reordering some other classmate points into a rebuttal) it's also true that norms have changed dramatically in Western countries, e.g., smoking.

Until you address the two gaps, information and channels for action, you won't see any government action.

The facts are straightforward; the dispute over the facts is political.

Bathtub metaphor for climate change: carbon in the atmosphere is the level of water in the tub, and the carbon we add every year is the flow from the tap. This seems like a potentially confusing metaphor, since the real system has three factors: the rate of increase of greenhouse gases, the amount of greenhouse gas, and the impact those gases have on the climate. The bathtub metaphor simplifies by leaving out the third factor and replacing it with the notion that, if the water level in the tub gets too high, we drown—e.g., if the total amount of gases gets too high, climate catastrophe ensues. I don't like metaphors that misalign so readily. Further, the level of water in the tub could be mistaken as representing the level of water in the ocean, which is a big consequence of climate change.

2 degrees C has emerged as a new "red line" beyond which we shouldn't pass because then things will get really bad. In fact, while the reality is quite uncertain, this is probably too optimistic. Slipping the red line from no change to 2 degrees C is not a revisionist Chicken Little act, in which we blow past zero with no effect and so the scientists move the target. Instead, it's putting a brave face on an even worse reality: we're locked in to serious climate change and, on our current track of emissions, will probably hit six degrees (C) of total average warming by 2100.

Should China be charged with the greenhouse gas emissions required to produce the products sold to the US? Should Singapore be charged with the emissions to run the ports that help transport products and refined petroleum to other countries?

Next week: cap and trade vs tax. (Which one reflect's Coase's solution of privatizing the commons?) Regulation or voluntary action?

Inter-governmental Panel on Climate Change: Summary for Policymakers 2007

Despite the title, it's not really accessible to the sort of person I imagine as a policymaker. Here's a translation:

It's been getting warmer. It's hard to be sure about any specific effect, but overall there are a whole lot of things changing, from planting seasons to infectious disease carriers to skiing. Humans have put a lot of CO₂ and other gases in the air, and we're pretty sure that's the main source of the warming. It's going to get worse, both the emissions and the climate change they cause.

If we stop emitting any more CO₂ today, it will still get about 0.1°C warmer every decade for a long time. But we're probably going to keep emitting, and not just emitting but emitting more and more. Based on that, we're guessing it will be about 3°C warmer in 2100, but 6°C wouldn't surprise us.

The world won't heat up evenly, and the effects will be much more complex than just "warmer". It will increase heat waves and heavy rains; shift rainfall towards the poles; probably increase the strength, if not number, of hurricanes and send them further north and south. We're talking more drought in the Mediterranean, the US Western states, southern Africa, and northeast Brazil. If the warming is on the higher side of estimates, we'll kill really lots of coral and many more species, get a lot more sick people, have two or three meters of ocean rise, lose maybe 30% of coastal wetlands, and have less food from cereal crops. Oh, and the ocean's going to get more acidic and the island nations are in a lot of trouble.

On the bright side, heating bills will shrink and fewer people will freeze to death. Also, we don't think that the ice sheets will melt enough to really screw up the coastlines. At least, not in the next hundred years.

What can we do about it? We can't mitigate it all. There are some technologies that help reduce emissions and even pay for themselves. Better building design is a biggie; energy, transport, industry, and agriculture are all tied for second in areas we can reduce emission. Mitigation in the next two or three decades would help buy time, and cost maybe 0.12% of GGP growth. Beyond that, we're just going to have to adapt. Basically, we need to do everything better, from water policies and public health to transportation planning and alternative energy. Otherwise, a lot of peoples' lives are going to get worse and worse.

International Institute for Environment and Development, Up in Smoke? Asia and the Pacific, the Threat from climate change to human development and the environment

It's ninety two pages. Tempting to read just the press release....

• The text on the front page claims that "Tropical cyclones are projected to increase in magnitude and frequency." The IPCC thinks magnitude will increase, but maybe not frequency.
• p 4: "increases of 1°C at night-time during the growing season would reduce global rice yields by 10 per cent"
• p 7: "when the climate push factors, such as lack of fresh water or sea-level rise, become too extreme the international community must ensure that there are no barriers to [peoples'] movement."
• p 8: a one-meter rise in ocean level (on the optimistic side of IPCC's projections) will remove 12% of Vietnam's most fertile land.
• p 10: an implicit rebuttal to US demands that China must match any US reduction: "Much of the historical responsibility for climate change lies with these industrialised nations and their use of fossil fuels over the last 150 years."
• p 12: OECD subsidies to "domestic, fossil-fuel industries stood at US$73 billion per year in the late 1990s."
• p 14: up to 70% of Bangladesh floods in some seasons. "At least 174 disasters affected Bangladesh from 1974 to 2003."
• p 67: A daily activity schedule for Agabag men and women in Kalimantan, Indonesia. Very much worth downloading the whole thing just to see this.

The Week five assignment is to calculate our carbon footprint. Readers keeping score at home can follow along. I calculated my carbon footprint last year, I think. Since I had no car and worked from home, it was relatively low ... until you included my plane trips.

Joel's Q: Why does Messner, and everybody else, take such care to specify that they aren't promoting world government? Is it some kind of third real of political science? Strobe Talbot said it was inevitable in 100 years, which caused him trouble at his confirmation hearing. What would it look like? Classmate: nations don't want to give up their sovereignty. Would require greatly enhanced international law. Classmate: The EU example is interesting—how do you maintain the cultural diversity of the different states?

What are the benefits? What's special about a world government? The property unique to governments is a monopoly on legitimate power. A world government would have coercive power at a global level, which would make some kinds of problem solving possible or easier.

How would it work? Classmate: in Lebanon we all wanted to vote in the US election. Joel's note: why not let anybody who wants to vote in US elections, provided they pay taxes? If you're not a citizen, you get a special category with no rights other than voting—no residency, no court access, etc. Just a federal vote (maybe a global Senate?). Classmate: some kind of federal system like the US, comprising many states.

Did the EU prevent war, or was the EU only possible after a devastating war and the imposition of an American umbrella put an end to war in Western Europe?

Classmate: Asia is growing in importance because of economic growth, so it should have a bigger role. That's Kishore's argument, and he's wrong—the Asian governments haven't yet supported much global governance or developed any expertise in collective action problems.

What would a global government actually look like? Classmate: it's an issue of centralization or decentralization; maybe everybody will give up some kinds of rights. Classmate: there must be some executive powers. Joel's note: that's a good angle to think about it: how many people would work for it, what percentage of GGP would it take, would it have a legislature, judiciary, etc?

Talking about coercive power, which backs the police, which back executive, legislative, and judicial decisions. Do you need military force to have coercive power? If a global warming law is passed and one country doesn't meet its target, do armed guards take over a factory?

If we have a world government, is there still a China? Classmate: there should be two levels. Joel's note: Are we saying anything in this discussion that wasn't old news in 1950? What's new since them? More globalization? The internet?

Richard Faulk: the only way to have a legitimate, representative global government is with a world parliament. But he hasn't addressed the executive/coercion issue.

Joel's note: Why would the US join a body where they are a minority of 300 million, outvoted by any 1/3 of the Chinese or of the Indians?

The crux of the class is, if global coercive power is not an option, how can we solve global problems?

Joel's note: The other science fiction answer to the problem, after the alien invasion that unifies humanity in resistance, is ceding governance to benevolent, omnipotent artificial intelligences.

What examples of global governance backed by genuine coercive power have already happened? The Chemical weapons convention is one example, with actual surprise inspections of factories. There are some reasons for optimism.

So the answer to the question is, I (the prof) don't focus on world government because it's too far away to be relevant. Governance, without a global government, is a more realistic tool.

Classmate: look at the most basic, strongest human invention: the market. We should rely on market systems that don't require strong enforcement. Prof: Sulfur dioxide (acid rain) cap and trade market in the US is the model for market enforcement, but people forget that it's backed by strong regulations.

Classmate: focus on building shared world culture/identity first. For example, the EU passports promote dual identity, half French and half EU. Prof: Messner says this is already happening. (And Neal Stephenson argues that radical fundamentalism is a reaction to it happening:

The problem is that once you have done away with the ability to make judgments as to right and wrong, true and false, etc., there's no real culture left. All that remains is clog dancing and macramé. The ability to make judgments, to believe things, is the entire point of having a culture. I think this is why guys with machine guns sometimes pop up in places like Luxor, and begin pumping bullets into Westerners. They perfectly understand the lesson of McCoy Air Force Base. When their sons come home wearing Chicago Bulls caps with the bills turned sideways, the dads go out of their minds.

Now that I reread the quote, it's more nuanced than I remember. Better pay attention to class again.)

Epistemic communities: "transnational networks of knowledge-based experts who define for decision-makers what the problems they face are, and what they should do about them." (Wikipedia) The IPCC is the canonical example.

Summits

Joel's Q: What's the point of expanding G8? Now they meet and make promises and don't do anything; how will it be better to have 20 countries break promises instead of 8?

How does G8 work from the perspective of staff? G8 is assembled by "sherpas", typically the #2 in the foreign ministry for the big meetings. What do they want on the agenda? Priority #1: don't embarrass the boss. Priority #2: make things look good. #3: make progress on important issues. On climate change, the G8 has pushed climate change issues even over US objections. The finance ministers started working on a 20-person spinoff. Does this make sense, is it a useful tool to address climate change?

There's currently a meeting in Hawaii with US auspices, under the theory that the top 15 CO2 emitters are the only important factors in global warming, so any deal must include them and any deal without them is pointless. Joel's note: how can we threaten the political leaders with embarrassment and ultimately loss of office unless they take and maintain action?

Note that the G8 may be evolving into the G13 already.

Refresher: stages of collective action:

• Definition
• Negotiation
• Implementation
• Monitoring
• Enforcement

Transparency. (Joel's note: So was my question about threatening leaders with embarrassment that predictable?) Access to information, and the ability to take action based on information. FOIA around the world. India and South Africa now have the most sweeping, enforced FOIA laws. The Indian law was enacted by the Congress Party after regaining power, partly on a platform of transparency, and drafted by FOI advocates. (It's nice to see the "right kind" of special interests draft a law, although I say that with full understanding that the definition of "right" is not a universal given.) The IMF has become much more open.

How does transparency help? Even if the public can't do anything, the corporations themselves may realize (as they did in an anecdote of a pilot project on pollution monitoring) how much they are wasting and cut pollution out of economic reasons. Civil society groups can act on, repackage the information. Fighting corruption.

Third prong of transparency (first two were technology and civil society): Joe Stiglitz new economic theories on information.

Joel's note: The fact that Sweden's FOIA act dates back to a power struggle among the aristocracy in the 18th century, and that India's FOIA came about as part of a change in government, are both examples of how internal conflicts within a class (in these cases, political/economic classes) are often the key to getting information to a broader public. There are other examples in different contexts.)

What about Singapore? The government claims that there are plenty of internal checks and balances and so transparency is not necessary. Another example of how Singapore, as an economically successful authoritarian state, is a convenient example for less successful authoritarian states. Classmate: it (the authoritarianism) can't continue for another 40 years; the cracks are already showing. In China and Singapore, it appears from public activity that bloggers are currently ahead of attempts to control them. Classmate: It's Chinese tradition for the people to want strong political control. Classmate: first countries want to reach a certain economic level, and then democracy becomes an issue: Taiwan, Korea, maybe Singapore. As long as the ruling party can deliver economic success, why should they be concerned about transparency?

Update: we talked about openness and satellite photography in class and in the readings. Today's NYTimes features an article about the inverse: people who observe the spy satellites and share that information openly.

Ann Florini, The Coming Democracy: New Rules for Running a New World, Chapters 2, 9, Brookings, 2003

Chapter 2: transparent society, from satellite pictures to Freedom of Information acts.

Update: Bruce Schneier's rebuttal to David Brin's argument that the only response to privacy-destroying technology is to insist on reciprocal transparency:

When I write and speak about privacy, I am regularly confronted with the mutual disclosure argument. Explained in books like David Brin's The Transparent Society, the argument goes something like this: In a world of ubiquitous surveillance, you'll know all about me, but I will also know all about you. The government will be watching us, but we'll also be watching the government. This is different than before, but it's not automatically worse. And because I know your secrets, you can't use my secrets as a weapon against me.

This might not be everybody's idea of utopia — and it certainly doesn't address the inherent value of privacy — but this theory has a glossy appeal, and could easily be mistaken for a way out of the problem of technology's continuing erosion of privacy. Except it doesn't work, because it ignores the crucial dissimilarity of power.

Chapter 9: a fantasy in which things go right, for no convincing reason, and the world gets better. I wonder to what extent the implausibility of the chapter reflects the skepticism of the writer vs that of the reader.

Colin Bradford and Johannes F. Linn, "Reform of Global Governance: Priorities for Action", Brookings Institution Policy Brief #163, October 2007

This policy brief summarizes the current prospects and priorities for reform in a number of key global institutions. We focus on the IMF, the World Bank, the UN, and the G8 Summit

Institutions must be representative, effective, part of a system, and affording opportunities for leaders to make things happen. Aren't some of these goals contradictory?

IMF and World Bank reform: uncertain. Some small fixes at Singapore 2006 meeting. The US should give up its veto power and its claim on naming the World Bank president. Hah! A list of things it needs to do but no evidence that it can or will do them.

UN: fading. See previous anedocetal reports on this blog that John Bolton was the stake in the heart to any reform effort. More generally, it seems obvious that the US, as the prime mover of "unilateral globalism" after WWII, must resume that role (or be rendered irrelevant) before anything can really happen.

G8: growing momentum for reform. Again blocked by the US.

Johannes F. Linn and Colin I Bradford, Jr., "Pragmatic Reform of Global Governance: Creating an L20 Summit Forum", Brookings Institution Policy Brief #152, April 2006

My paraphrase: What used to be G7 is now a political meeting, G8, and a finance meeting, G20. To reduce confusion, we'll call them L8 (for leaders) and F20 (for Finance). Expanding L8 to L20 would help provide more global leadership. It would be undemocratic, but if it got things done that would give it legitimacy.

Dirk Messner, "World Society – Structures and Trends" in Paul Kennedy et al., eds., Global Trends and Global Governance (London: Pluto Press, 2002), pp. 22-64.

A perfectly good article, but we've been reading so much "globalization" stuff that it blends into blah blah global blah. Exceptions noted below.

• p 30: Different ways in which global structures are formed
  • transnational interaction between actors. Between states (UN), between states and private actors (tourism code of conduct, without states (ISO standards), in the context of regional governance, between regional projects.
  • concatenated global interdependencies: financial crises as a negative example; MNC investment in poor countries leading to development as a positive example.
  • integration processes in the course of globalization, e.g., Greenpeace International
  • Process of interpenetration in the course of globalization, e.g., Chinese kids wearing Yao Ming NBA jerseys.
• p 41: What's wrong with a global state (world government)?
  1. wouldn't solve territory and self-determination problems, would just change them from international to domestic conflicts. Joel's note: Isn't that an improvement? Lack of state boundaries would "lower significant thresholds to warlike conflicts." huh? Would eliminate any chance of flight and exile, would be impossible to exert outside pressure to topple dictators.
  2. Would be a remote, faceless bureaucracy. Without competition between states, there would be no new institutional designs forged in competition.
  3. Would not be able to protect social and cultural diversity
  4. Would not be peaceful transition from current system to global government.
• p 56: New lines of conflict
  • sociopolitical. labor market battles.
  • ecology-related distributional conflicts. water wars.
  • moral-ethical conflicts. cloning.
  • one world, many world-views. human rights vs "Asian Values"

IO, IGO: formal, intergovernmental organizations. A subset of non-state actors.

Our nation-state global system is an accident of history, happening only because Europe happened to have nation-states at the moment that it took over the world. The scope of problems that states try to address has expanded tremendously over time. Open question: what should the responsibility of states be?

Many international agreements form simply because the relevant bureaucrats at several different countries get together and make a deal. Question: are these processes democratic? C.f. A New World Order, Ann-Marie Slaughter.

What's going on in Davos? The core membership is the world's largest 1000 corporationns. Invited guests ("faculty") are artists, professors, intellectuals, etc. Actual activity at Davos is lots of business deals. Lots of panel discussions, which all tend to cover the hot issue of the day. "It makes you understand, viscerally, that nobody is in charge."

Clinton Global Initiative: same people as Davos, but you can only go if you pledge millions of dollars to action.

Political theory steals tools from both economics and sociology. Economics has numerical, analytic tools and sociology is more realistic. Joel's notes: What if the real world is so complicated that neither approach is really working?

Principal-agent problem. Are the UN's principals the governments of the member states, or the people of the member states? Accountability chain in the IMF: non-democratic country is represented by (in the case of Africa) one twenty-sixth of the African representative.

Example of a German expert consultant coming to Mongolia and make prescriptions suitable for Mongolia. Joel's note: The problem isn't that the German doesn't know Mongolia, it's that the German only knows Germany. The important thing for the consultant to have experience in more than one environment. As a consultant classmate said, everybody claims their situation is completely unique, and they are usually about half right.

Global Administrative Law Project. Lots of decision-making has moved up to a global level, but the administrative safeguards have lagged behind. Freedom of information, bidding and procurement laws, notice and comment periods for proposed laws, right of judicial recourse, cost-benefit analysis. These rules aren't, and sometimes can't be, translated to a global level—there's not much of a global judiciary and there's no global parliament.

Examples of unappealable, unaccountable global administration: UNHCR has the power to define what "refuge" means. Basel banking capital ratio requirements. Extraordinary rendition.

These include formal international organizations (such as the WTO, the Security Council, World Bank, the Climate Change regime, etc), informal intergovernmental networks of domestic regulatory officials (such as the Basel Committee of national bank regulators), domestic authorities implementing global regulatory law, hybrid public-private and purely private transnational regulatory regimes.—The Emergence of Global Administrative Law

Barnett, Michael N., and Martha Finnemore, "The Politics, Power, and Pathologies of International Organizations," International Organization 53, 4 Autumn 1999, p. 699-732.

• p 699 - 702. International Organizations (meaning here inter-governmental, not NGOs) are, in theory, created to solve some economic problems like incomplete information and transaction costs. But to understand how they do and don't work, we have to examine how they actually function, which isn't always pretty. Neo-realists don't believe anything other than states matter, and neo-liberals give IOs a free pass; we'll use constructivism to bypass them both. "We argue that assumptions drawn from economics that undergird neoliberal and neorealist treatments of IOs do not always reflect the empirical situation..."
• p 702: Two theories of institutions: economistic (Coase et al) and sociological.
• p 703: "Environments can 'select' or favor organizations for reasons other than efficient or responsive behavior." Yeah; organizations that are better at fundraising are presumably selected for, regardless of what they actually do. And organizations tend to self-perpetuate.
• p 704 - 706: pointing out the vacuity of purely economic analyses of IOs.
• p 707: two sources of power for IOs: legitimacy derived from rational-legal authority, and control over technical expertise and information. (Joel's note: I guess ICANN has both and abuses both.)
• p 708: paradoxically (not ironically), IO bureaucracies gain political power by claiming to be politically neutral, rational experts.
• p 710: The UNHCR's expertise "has allowed the UNHCR to make life and death decisions about refugees without consulting the refugees, themselves"
• p 710: Three broad types of IO power: "classify the world ..., fix meanings in the social world; and articulate and diffuse new norms, principles, and actors around the globe ...." In other words, they get to make the rules.
• p 711: another example: the World Bank has rules differentiating farmers from peasants. Only farmers are recognized as having relevant knowledge, so peasants by definition don't have a voice."
• p 712: the fixing of meanings. IOs can extend their sphere of legitimacy by redefining meanings. One example (not from the text) is the awarding of a Nobel Peace Prize to global warming activists. "When security meant safety from invading national armies, it privileged state officials and invested power in military establishments. These alternative definitions ... shift attention ... toward the individuals who are frequently threatened by their own government ... a more immediate and daily danger."
• p 713: Norms. During decolonialization, the UN promoted the norm of sovereign territorial integrity, and in doing so helped maintain political boundaries that did not coincide with ethnic nations.
• p 715: some of this IO work happens despite, rather than at the bidding of, the strong states that according to neorealists and neoliberals are the source of power for IOs.
• p 718: "bureaucracies specialize and compartmentalize. They create a division of labor on the logic that ... specialization will allow the organization to emulate a rational decision-making process." Um, what's the difference between an organization emulating a rational decision-making process and an organization actually performing a rational decision-making process? Paging Dr Searle, red herring on line one.
• I'm a bit confused by how the paper lays out the pathologies. There are two lists. First:
  • Internal and material: bureaucratic politics, e.g. turf wars
  • Internal and cultural: bureaucratic culture
  • external and material: IOs are mere pawns in the real struggle between states
  • external and cultural: "world polity model"
  Then there's a second list, "five mechanisms by which bureaucratic culture can breed pathologies in IOs:"
  • the irrationality of rationalization, e.g. crazy red tape
  • universalism, e.g., what worked in Cambodia will work in Yugoslavio
  • normalization of deviance, e.g., SNAFU
  • organizational insulation, e.g., all of our equations are correct so your recession and rioting must mean you did it wrong
  • cultural contestation, e.g., the diplomats want the refugees sent home as soon as possible so the problem goes away, but the refugee workers think the refugees will just get shot if they go home. The great quote: "It is extremely difficult to make war and peace with the same people on the same territory at the same time."

  Ann Florini, The Coming Democracy: New Rules for Running a New World, Chapter 4, Brookings, 2003

  • p 67: There is a "consensus that the state should be a provider of a limited range of collective goods and services for the country and should not meddle in areas that the private sector can handle better."

    

    Well, that's probably true in a global context, when you include the massive transformations in China and India (and the looting of Russia, which isn't exactly the same thing). But I disagree, not only with the pejorative "meddle," but with the implication that it's even clear what the private sector can handle better. I don't have time to fully research the state of the arguments; a brief look into prison privatization finds that the right-wing think tanks Heritage and Reason cite studies finding that prison privatization is, on balance, good. This is consistent with this survey of prison privatization, which doesn't address the pros and cons of privatization, but instead focuses on the inconsistent trend to privatization. It finds that the "only clear explanatory variable for prison privatization was the rather unremarkable observation of the necessary condition of the election of a 'new right' movement—and even then this was not a sufficient condition." As an aside, this very interesting tidbit popped out for me:

    We also concluded that the case of the United States is in some sense unique, dominated as it is by the South, where the major private prison companies are headquartered and where the political and historical setting seems most conducive to the private exploitation of prison populations. Though we would not want to downplay the importance of race in the other cases we have examined, the scale of the incarceration boom and the degree to which it is a racial phenomenon clearly set the American case apart. To explain the concentration of private prisons in the southern US, and to explain their continued popularity, we must look at a regional dynamic that can be found in none of the other four countries we examine—nor indeed in the rest of the United States.

    Coming back to the consensus in the quote, a quick google search finds the assertion that "The privatization movement appears to have lost some momentum in the United States over the 1990s."

  • p 68: will technology make it impossible to tax? eCommerce in the US is generally un-taxed, although if you buy something from a company that does business in your state, you are required and very often do have to pay state tax (Amazon initially set up their warehouses in less populated states to reduce the scope of this issue). But it's untaxed because of political, not technical reasons. "If taxes get higher, capital may simply flow to jurisdictions with lower, or no, taxes." That's certainly an argument that people who were already ideologically opposed to taxes have adopted, but is it backed up by facts? People still buy an awful lot of physical goods and in-person services, and no amount of internet or capital flight will prevent those from being taxed.
  • p 69: Governments have some capacity to constrain levels of encryption technology, at least for a while..." No they don't. The encryption wars are over, and governments lost."Agreement on international regulation of encryption levels is itself a massive global governance problem." That's news to me, and I keep up on cryptography news. It's something that gets appropriate technical oversight from the same kinds of non-state actors we've been talking about, and it gets perhaps a bit more than its share of government attention, but regulation of encryption is not, or perhaps is no longer, a massive global problem. (Except in South Korea, where the government really screwed up regulating crypto.)

  John Ferejohn, "Accountability in a Global Context," International Law and Justice Working Paper 2007/5, Global Administrative Law Series

  • Legal vs political accountability. Global institutions are so haphazard that any accountability is legal even if political accountability would be better.
  • p 2: "what are the possibilities for establishing something like democratic accountability at the global level? My answer will be more or less optimistic: I think there are ways to improve things from a recognizably democratic perspective, even in the nonideal global context."
  • p 7: "impeachment which, it is claimed, subjects officials to a legal rather than political standard". In some cases impeachment appears to function as a legal mechanism, but in many others it's clearly just an exercise of power. If impeachment were a legal question alone, Bush and Cheney would be long gone simply for crimes they've admitted, much less the full litany of potentially legal complaints. (Allow me to plug my t-shirt on the subject.)
  • pp 7-9: By folk democratic theory, the people are the principal and need not give reasons for their actions. Elected officials are agents, and are subject to political accountability. Administrative agencies are second-tier agents, and are subject to both legal and political accountability. "Finally we reach the courts ... courts seem subject to much more strenuous reason giving requirements".
  • p 11: "Folk theory rests on the presumption that citizens are ... authoritative as to their genuine interests ... But is this actually a plausible guide to what democracy requires? Joseph Schumpeter argued some years ago that it was not. He thoug