Hot air from Kyoto

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Hotting up

Climate change is a long-term problem. Politics should not prevent apromising UN treaty from becoming a long-term solution

EXPECT plenty of hot air next week in Bonn. Hundreds of economists, scientists, journalists and politicians are descending on the city for a United Nations climate-change conference that starts on November 2nd. The world’s rich countries agreed to curb emissions of greenhouse gases at a previous gathering in Kyoto, in Japan, in 1997. This meeting is meant to work out the details of that path-breaking accord.

Yet the United States and the European Union have been drifting away from the hard-won consensus built in Kyoto. There are reasonable grouses on both sides, but governments are also pandering to ill-informed opinion at home. This has raised the prospect that the treaty might fall apart or, just as bad, have the flexibility stripped out of it.

Negotiators’ attempts to settle the dozens of niggling details will achieve little unless two issues of principle are sorted out first. One concerns developing countries, which under the current accord have no obligations to reduce their emissions. Though America agreed to make binding cuts at Kyoto, it now insists on “meaningful participation from key developing countries”. If any climate-change treaty is to work, it needs co-operation from all big polluters. That includes America—and, America insists, developing countries, which will within a few decades become the world’s biggest polluters. Yet most of the greenhouse gases in the atmosphere today were put there by rich countries. Poor countries argue that the polluters should therefore be first to cut their emissions.

A compromise is required. Developing countries have a good case, but what counts is not just who put greenhouse gases in the atmosphere but also who is adding to them. From the start developing countries should accept the idea that, if the rich countries can make the Kyoto agreement work, they will eventually have to do their bit. Even before that day, countries such as China and India could voluntarily take steps (such as ending coal subsidies) that would benefit everyone, boosting their economies and their citizens’ health, and also helping win over a hostile American Senate.

The other transatlantic tussle is over the emissions targets set for Russia and Ukraine. These are too large, because they are based on the assumption of a strong economic recovery. As a result, there will be some international emissions-trading in “hot air”: that is, Russia will be paid not to emit gas that it could never plausibly have emitted anyway.

The EU fears that this will reward bogus cuts. Many Europeans believe that market mechanisms are simply a way for countries to break their Kyoto promises without making “genuine” cuts at home; in effect, they believe that emissions-trading is bad in itself. The EU’s latest idea is to oblige countries to make more than half of the cuts promised under the Kyoto deal through domestic action, rather than trading their quotas; they want even stricter limits on how much of their quotas countries can sell. The Europeans want to strike out of the agreement the idea that trading should be unfettered.

True green

Such opposition is a graver threat to the agreement than America’s attitude towards poor countries. For a start, it is unnecessary: even if Russia’s economy doesn’t rebound, future rounds of negotiations can adjust the country’s allowances. It is wrong-headed too. Gradual cuts in emissions driven by targets but reached through market-based initiatives are the best way to cut the cost of limiting climate change. One reason is that it will encourage new science, and better technologies, to emerge. Another is that the cuts can be made where it costs least, whether that is Montana or Mozambique.

The proof that the market can work comes from the market itself. Big business has long been wary of calls for action on climate change; yet, in recent months, leading firms in Europe and America have begun to develop schemes to cut or trade emissions. This momentum needs to be maintained. Firms rushing to cut greenhouse gases are doing so mostly because they believe governments will indeed act; if the treaty stalls, investment could stall too.

If next week’s gathering can reach a compromise, it could breathe life into Kyoto’s market mechanisms. That, in turn, could provide a flexible long-term framework and a springboard for sensible local steps such as liberalising energy markets, carbon taxes and ending fossil-fuel subsidies. But if the meeting turns rancorous, it could turn an imperfect but useful treaty into a bad, insupportably expensive one.