Copenhagen summit starts today

4 Comments

• I hope so too.

  I hope that the people involved are genuinely concerned about the planet’s health and the livelihoods of the people that live therein as well.

  Not their pockets.

• I’m apprehensive and hopeful about Copenhagen at the same time. (The recent poll’s suggestion that Americans are increasingly skeptical about climate change is contributing to the apprehensiveness.) In so many ways, anything agreed upon is already too little, too late, but the potential to still make an important impact is definitely there.

• Impact is limited to sending a global message that climate change is being worked on. I just hope that something good comes up between developing and developed states.

• COPENHAGEN FAILURE FOR GLOBALIZATION

  Andrew McKillop, Senior energy strategist for a Geneva-based alternate and sustainable investing fund (name withheld)

  December 2009

  Exit Global Warming
  “Hockey sticks in the air!” well summarises the Copenhagen Climate summit debacle. This global get-together on global warming essentially delivered nothing except hot air and frivolously exaggerated statements by the hard core defenders of “climate catastrophe”, that is Barack Obama and the European ‘climate triumvirate’ of Brown, Sarkozy and Merkel. The face-saving, non-binding and vague agreement forced by Obama without the Europeans from the wreckage brought China, semi-officially representing all Group of 77 nonOECD countries, together with Brazil, India, South Africa and about 16 other emerging economy leaderships into a nice statement of principle. This cozy statement, from a two-week conference event costing tens of millions of Euro for host country Denmark affirmed that the world community, or those who claim to speak for it, would definitely not like world average temperatures to rise by more than 2°C in a flexibly defined long-term period, stretching to about 2095.
  For a marathon conference bringing together 192 nations and briefly about 110 heads of state, which was sold to the media and public opinion by hardcore environmentalists and the European triumvirate as “the last chance to save the planet”, the net result is a cold taste of realpolitik, the real economy and the real world. Politically, failure of this conference marks the end of current political consensus on climate change and energy transition across the OECD-nonOECD divide.
  More important for the future, COP15 failure may also accelerate the end of economic globalization. This is or was based until the present on a broader political consensus, both driven by economic globalization, and enabling faster globalization.
  Breaking Ranks
  At this conference, the emerging economies led by China, India and Brazil made it clear they have no intention of hunting the Evil Molecule CO2 the way that OECD leaders want. While leaders of the emerging economies want the same Green Growth as OECD “climate catastrophe theory” advocates, they do not want a forced, worldwide cut in fossil energy consumption, and higher energy prices, and new or complex legislative and institutional frameworks to jumpstart the pace of alternate and renewable energy growth.
  Peremptory demands that they immediately start phasing out fossil fuels in their energy mix was quickly interpreted as an attempt by OECD leaderships to thwart or halt emerging economy growth by inventing new reasons for slower growth of the world economy. Following the OECD-caused financial sector blowout and meltdown of 2008-2009, and the OECD’s part-managed, part-spontaneous slump into near recession, real ‘economic decoupling’ is in any case now operating – called ‘Asian decoupling’. Failure of the COP15 conference will on balance tend to increase and accentuate this North/South divide.

  Calling such a conference in the depths of winter, in a Scandinavian capital and saturating media with scare stories of “runaway global warming” was an interesting reminder of the unlimited self-esteem and bulldozer will to force through pet policies, that inhabits the minds of some OECD politicians, and their allies in government-friendly media. But attempts by Obama and his unsure allies in Europe’s ‘climate triumvirate’ to extend their hot air message to worldwide cuts in CO2 emissions, the possible abandonment of coal fired electric power, the forcing of electric powered car fleets, and reduced wastage or higher recycling of energy intense consumer and industrial wastes within a general crusade for alternate energy, came to naught in the Copenhagen chill.
  The Real World
  Plenty of reasons are advanced for why OECD leaderships wanted this climate conference now, while their economies are still on life support bailouts using massive state loans and expensive, low yielding, state intervention in the economy. Jumpstarting recovery with state-aided alternate energy and ‘green growth’ programs obviously comes high up the wish list of most OECD leaderships. Both in Europe and the USA, the real drivers of forcing the pace on switching to alternate energy are clear: mass unemployment and massive increase in public debt makes the search for all job creating solutions, and all ways to claw back to economic growth a real concern for political leaders wanting to stay in power.
  Getting China, India and Brazil to help pay to open vital new export markets in the low income developing countries, for the fast growing but overlevered, high labour cost renewable energy corporations and companies with recession hit domestic markets, was a very nice strategy on paper. Fending off the near-term impacts of Peak Oil by slowing energy demand growth, while profiting from the coming global bulge in cheap gas supplies, was yet another, of course never admitted, but appealing strand to forcing the pace on global energy transition. Deep in the Herd Memory of today’s oil importing OECD country leaders, lies the spectre of the 1970s Oil Shocks, well hidden by the public message that energy transition will “prevent climate catastrophe”. Both the “non hydro renewables” like solar and wind power, and cheap natural gas supplies offer new ways to obtain energy security and continue increasing energy consumption.
  The so-called climate catastrophe is projected for a very flexible period ahead, ‘maturing’ around 2075 or later, but peak oil and expensive, geopolitically unsure energy supplies are past, present and near term future realities. The spectre of runaway global warming “burning the planet”, much utilised by the European triumvirate, has had little uptake by emerging economy leaders specially due to the present and near-term future challenges facing these economies, and the low income developing countries, formerly called ‘the South’ or ‘the LDC’.
  All are embarked in their real world, real economy urban industrial transition – exactly the same that was called the ‘economic miracle of postwar reconstruction’ in most OECD countries, through the period of 1950-1975. In this period, several G8 countries including Germany, Japan, France and Italy regularly increased their oil burn at 7% a year and achieved 5% a year growth of their economies. Today, China and India, Brazil, Indonesia, Pakistan and others are doing the same thing, or better, in a process named ‘Asian decoupling’.
  This decoupling has an energy price: high and rising fossil energy intensity of economic growth, and fast growth of energy demand and imported fuels. To be sure, oil costs more today than its derisory, giveaway price in the 1950s, 1960s and early 1970s – or in the 1985-2000 cheap oil interval – but no handy alternative yet exists for powering conventional economic growth. As proven through 2004-2008, the emerging economies had considerably less economic problems absorbing the impact of ever rising oil prices, which peaked at around US $ 145 a barrel in 2008, than the much higher income OECD economies – due to the real energy productivity of the lower energy/lower income economies.

  The Tilted Playfield
  At the Copenhagen summit, for the emerging economies, the playfield was more than normally tilted against them by OECD leadership demands that they immediately comply with the suspiciously new ‘ecological’ message streaming out of OECD media and political speechmaking. As Chinese and Indian delegates, and African and Latin American delegates to the COP15 conference many times said in public, this was yet another example of ‘Do as I say, but dont copy what I do’. Statements by emerging economy leaderships at COP15 underlined their rising concern and anger that the OECD, waving the spectre of climate catastrophe, was preaching energy saving to countries using less than one-quarter, and sometimes one-tenth or one-twentieth of the average per capita energy used in the OECD.
  This is a basic challenge to their present and near-term economic development. Emerging and developing countries have no option but to use more energy. As several of their leaders remarked in public at the Copenhagen summit, the OECD countries have a marge to manoeuvre and fat to trim. They could cut their energy use without necessarily negative economic or social impacts.
  A myriad of new legislative, corporate reporting, energy sector monitoring and other CO2-linked interventions in the economic affairs of global business is however now on the books, or predicated by OECD climate change policies. Companies operating in China, India or elsewhere outside the OECD will be expected, or forced to comply. The European ‘climate triumvirate’ has gone further, pushing forward a host of new ways to defend the Green Economy, in Europe, including shutting out over competitive exports from China, through “CO2 linked import tariff” proposals. Buy local is of course a homely, sustainable development and ecological message, with a new and strong appeal for politicians faced by huge trade deficits with China, growing deficits with India, and no sure way to prevent the emerging economies destroying the OECD’s new green industries through straight competition in a ‘level playfield’ globalized economy.
  The next stage will concern the WTO, but this is an OECD-heavy institution, and the likelihood of CO2 protectionism to wall out Chinese, Indian and other ‘high CO2’ exports from outside the OECD is now a serious and possible threat to the globalized economy. One of the biggest ironies of a new ‘Buy local’ policy strand for world economic and trade relations is that buying from wherever the product or service is cheapest – Ricardo’s famous comparative advantage – is the basic raison d’etre of the New Economy. Globalization means producing at the lowest price, for anything, anywhere. While oil and other fossil fuels are still cheap in real terms, and environmental diseconomies are discounted or ignored, transport across the world is still today a minor part of the full chain cost of the delivered and consumed good or service. To be sure, shipping and handling some 6 billion tons of physical traded goods each year demands energy and emits CO2, and creates massive marine pollution, but until the very recent past these concerns were far down the list of soundbytes on the teleprompters of OECD leaderships at the microphone, preaching free trade and globalization.
  Changing the Rules
  Suddenly changing the rules of the game, minutely measuring CO2 emissions for any and all goods and services, and forcing new and special change of the global economy can at this time only penalize the emerging economies, who are simply copying what the OECD group did for the last 40 or 50 years. Following the failure of COP15, but due to climate change business being Too Big To Fail, OECD leaderships will however continue their thrust to tilt the playfield against new entrants, under the guise of, or due to a belated ‘concern for the planet’. As the emerging economy leaderships will soon spell out to them, however, the past 25 years of economic globalization and outplacement has made all actors and players co-responsible but not equal winners. Globalization however means that all parties will lose if cutting CO2 emissions becomes the be-all and end-all of world trade and commerce.
  Measuring the CO2 balance of world trade will firstly underline the extreme high per capita emissions of average OECD consumers. Accounting for CO2 embodied in imported goods and raw materials of the 20% of the world’s population inhabiting the OECD , and CO2 emissions generated by outplacement and delocalisation will quickly show that OECD countries also outplace their carbon emissions. This globalized economy CO2 accounting will further trim the already low per capita CO2 output per person in China, India and other emerging countries, and further raise real per capita emissions in the OECD.
  The OECD’s dependence on cheap industrial goods, and cheap raw materials and bioresources imported from outside the OECD increases the OECD’s real per capita emissions, setting yet more challenges for the airily promoted long-term goals of Obama and the European climate triumvirate – extending from 30% reduction by 2020 to 80% reduction by 2050.
  Attempting to block the ’embodied energy’ imports from outside the OECD, which emit CO2 in their production and transport will raise CO2 per capita emissions in the OECD for years ahead – in the absence of deep and permanent economic recession. To be sure, this reasoning is a little ‘complex’ for average OECD leaderships and their government-friendly media, and all discussion of it is hidden by politically correct media, but this does not prevent it being true.
  The Struggle for Africa
  Long before today’s economic globalization, a kind of outrunner political globalization took place with the 19thC struggle for Africa. The struggle for access to bioresources, land, water, mineral resources and energy is is back on the 21stC wish list of ‘climate conscious’ political leaders – but this time both in the OECD group and in the big emerging economies. For the OECD countries, precious little in the way of Three Gorges or Himalayan and Mekong potential hydropower remains to be exploited at home. Inside the OECD countries, the “non hydro renewables”, or solar, wind and biofuels area is the best available for cobbling supply-side, domestic resource based alternate energy scenarios in the OECD countries.
  These are totally insufficient to maintain even a cheap ersatz of the lifestyles or aspirations of average OECD consumers. OECD per capita consumption rates for 2008 attest to this, at about 14 barrels of oil per capita each year, 9 barrels equivalent of natural gas, 1.7 tons of hard coal, 650 cubic metres of water, and 750 kilograms of iron and steel, among the vital economic statistics of the OECD group. When or if China and India acceded to these rates of demand and consumption, world demand would more than triple.
  This easy-to-forecast resource limit on a fully globalized world economy consuming at per capita rates near to current OECD per capita rates is focused by ‘ecological footprint’ data, but action on these future limits is not on the public agenda. Simple lack of resources, more intense today than in the imperial 19thC, accelerates the quest to exploit the renewable energy and biomass resources of Africa, as well as its minerals and metals resources. To a lesser extent this also applies in low income Latin America and low income Asia, in fact anywhere outside the OECD, China and India where resources are sufficiently abundant to cheaply produce. Copenhagen’s much touted financial facilities and institutional frameworks for ‘protecting’ the low income countries from harmful climate change in fact focus the new struggle for African and other regional and national resources. Stretching resource supplies, like Saudi Arabia’s quest to ‘stretch the oil age’, are part and parcel of real world economic globalization.
  This new and probably last phase of globalization could have gone ahead at COP15, in an organized and structured framework, with transparent partition of inputs and outputs. However, in another example of arrogance and intransigence, underlain by fear of the future, the OECD leaderships demanded too much, in the wrong way. Seeking large financial support from China, GCC and the few other capital surplus nonOECD countries – while preaching massive cuts in oil and energy consumption, and threatening new limits on exports to the OECD countries – this was an offer the emerging and developing countries could only refuse.
  Breathless media announcements of “$ 100 billion a year” being made available “from 2010” for aiding low income developing countries to fight climate change (rather than accelerating their economic growth and fighting world hunger) soon shrank to modest, one-digit offers from OECD leaders. These are the same leaders who rushed to pour hundreds of billions into their bankrupt, or near bankrupt financial establishments in 2008-2009. The same human rights preaching leaders, as several emerging economy delegations noted in private at COP15, who can spend hundreds of billions of dollars a year on their ‘military adventures’ in Afghanistan and Iraq found themselves unable to increase financial aid for development in poor countries.
  Slowing or Accelerating the Pace of Change?
  Today, both China, India and Brazil are near equals to the OECD countries at the party of using fossil energy to grow their economies. Their current growth rates of fossil energy and electric power consumption attest to this. Their response to demands from Obama and the European climate triumvirate was basically a flat rejection of anything that smacks of slowing their growth. By throwing them peremptory demands which they could only reject, the OECD group has also perhaps hastened the end of globalization as we know it.
  Existing measures and frameworks for energy transition away from fossil fuels (or at least oil and perhaps coal), and effort to cut CO2 emissions, notably as enshrined in the 1997 Kyoto Treaty and supposedly translated to the economy by European ETS (emissions trading) since 2005 have produced absolutely no cut in world CO2 emissions. Conversely, European ETS and similar ‘voluntary frameworks’ in the USA and other OECD countries are already a small but important, and growing financial trading activity. World Bank estimates place the value of emissions and CDM offsets trading at about US $ 126 billion in 2008-2009. Trickle down of this to real world, on the ground alternate energy development has however been tiny, opaque and episodic in reality.
  Proving the extreme importance of exaggerating everything to do with climate change, including Hockey Stick projections of world temperatures, sources close to the UK’s Lord Stern put their estimates of spending needed to fight climate change as “always growing”. Due to extreme urgency, this could possibly attain an annual value, soon after 2010 “of close to US $ 1.2 trillion”. The Davos Forum of 2009 received a report of experts concluding that both in climate change finance, and in the renewable energy and energy saving domains, turnover and spending could, or should reach “a year average of US $ 515 billion” through 2010-2020.
  Exactly as for upping the ante with China and India by demanding impossible actions, and coming away with nothing, continual publication of always bigger “climate change related” spending needs followed by little or no evidence of this on the ground will cut away yet more credibility. Worse however, in the real world of 2009 where real spending in the narrow-defined “non hydro renewable energy” sector, worldwide, is no more than about US $ 60 to 70 billion per year, this erodes yet more credibility for all and any other globalizing economic plans and spending forecasts coming out of the OECD and its institutions.
  Credibility of massive spending needs to “fight” climate change received a major blow at the Copenhagen summit. This OECD rationale or argument for suddenly changing the rules of global economic change which for over 15 years feature the fast growth of China and India and other emerging economies, and relative decline of the OECD countries, has been rejected by more than two-thirds of humanity. Where we go next can easily include an accelerating trend to ‘South-South development and trade’, and domestic-based, semi-autonomous economic growth in the emerging economies. For setting the scene to global change away from globalization, from 2010, the Copenhagen climate meeting will have been a major milestone – but certainly not the easy way to beat new economic challenges that OECD leaders fondly imagined, aloud, in many speeches and statements issued before COP15.

  COPYRIGHT ANDREW MCKILLOP 2009