As the crisis in financial markets started to bite, a rebellious group of member–states in October 2008 pressed for a deferment of the date at which the EU’s plans for emissions targets were supposed to be accepted as binding. Eight countries led the insurrection, including Italy and a cluster of ex-East European nations. The Italian Prime Minister, Silvio Berlusconi, commented that the targets would devastate Italian industry. He and his Polish counterpart, Donald Tusk, both used the argument that they didn’t have to stick to a deal that had been struck while they were not in office. Besides Italy and Poland, the governments of Bulgaria, Hungary, Latvia, Lithuania, Romania and Slovakia all said they would resist attempts to railroad the targets through.
At the point at which agreement needed to be reached, late in 2008, France held the presidency of the European Council. Reversing his previous stance, Sarkozy pulled out all the stops to gain a consensus, and was successful. A summit of European leaders held in September 2008 agreed to the Commission’s plan. A substantial price was paid, however. The EU is pinning much of its hopes for reaching its targets on the success of its emissions trading schemes. To gain an agreement, the terms of the scheme were weakened. Most companies in the processing industries, such as steel and cement, were for a period exempted from paying for carbon permits, while coal-fired power stations were allocated large discounts on the price of carbon.
As a result of the recession, the carbon output of the EU fell substantially, by more than 9 per cent in 2008–9. Consequently, the target of achieving a 20 per cent reduction in emissions by 2020 looks considerably more achievable. At the time of writing, the leaders of several EU states were pushing for the target to be elevated unconditionally to 30 per cent.
Carbon markets
The case for carbon markets was established at Kyoto, but, like all other aspects of climate change policy, was and is heavily influenced by political considerations. The European Commission originally wanted to impose an EU-wide carbon tax as part of its climate change agenda. It was unable to do so because it lacks the capability to override the wishes of member–states concerning fiscal issues. Several member–states – most notably the UK – were fiercely resistant to any measures that implied tax harmonization. However, environmental issues within the Union can be dealt with by majority vote. Carbon trading, in the shape of the ETS, could be introduced without such battles.
Designing markets to limit pollution had its origins in the US, where they were originally used with some success to control emissions of sulphur dioxide.13 Such emissions, coming from coal-fired power stations, were the main cause of ‘acid rain’. Instead of directly regulating the amount of sulphur dioxide, a market in emissions credits was created. The original proposal of Robert Stavins, the scheme’s principal architect, to auction credits to the emitters, thereby establishing a market price, was blocked in Congress. It would have meant that the utility companies would have to pay large sums of money for the permits, money which would have gone to the federal government.14 Permits were in fact issued free to virtually all companies, with a maximum total that could be issued in any one year of 8.9 million tonnes.
In spite of its limitations, the scheme produced significant cuts in emissions and at a much lower overall cost than the industry lobbyists who had opposed it had claimed it would incur. They had argued it would cost the industry $10 billion or more annually. The actual yearly sum turned out to be about $1 billion. The market forces generated helped produce quick and effective technological innovations in key parts of the industry. The scheme thus achieved a fair degree of success, sufficient to inspire some environmentalists, including Vice-President Al Gore. The Clinton administration commissioned a detailed economic modelling exercise on how it could be extended to cover carbon.
The outline of a possible international carbon market was also drawn up at Kyoto. It was agreed that the industrial countries could sell ‘emissions reductions units’ to one another, and could also trade them with developing countries to count towards their reduction targets. In spite of the fact that the US did not sign up to the Kyoto agreements, the idea of carbon trading did not go away. It was taken up first by business. BP set up an internal trading scheme committing the company to reduce its greenhouse gas emissions by one-tenth by 2010 as compared to 2000. It achieved this target very rapidly, in fact within a single year. The ETS started operation early in 2005. It covered about half of the EU’s CO2 emissions – those coming from fixed sources of power production, especially electricity, and from certain energy-intensive industries. It did not extend to other greenhouse gases.
The European Commission initially proposed to auction the emissions credits. As in the US, lobbying from industry sank the proposal. A hybrid creature arose from the negotiations between the Commission and member–states. An auction would have established an open market with a single price for carbon. The system that was introduced in its place allowed member–states the right to set up their own national allocation plans. These were supposed to be developed on the basis of criteria established at Kyoto, but they were vague; moreover, some states had no precise measures of their emissions in place. The result was an over-generous allocation of allowances, since it was in every member–state’s interest to get the most favourable conditions it could, or at a minimum get a certain amount of wriggle room. A market was created, but one that produced very mixed consequences.
A lot of money has changed hands within the ETS, but thus far the scheme has been ineffective for the purposes for which it was set up. Early on in its history, the carbon price reached as much as 31 euros per tonne. Later it dropped so dramatically that it was worth .001 per cent of that sum. It lost its value completely as it became clear that there was a large surplus of allowances because of the slack built into the national allocation plans. In addition, some power-generating companies had made windfall profits by passing on to consumers the price of carbon credits, even though they were allocated free of charge.
The ETS has probably had some effect on emissions. Studies indicate that emissions in 2005 were around 7 per cent lower than they would have been had the scheme not been in place.15 Yet some of that gain came from member–states’ tactical exaggerations of their emissions in the build-up to the scheme. The Clean Development Mechanism is up and running, which would not have been possible without the ETS. Moreover, the ETS prompted the emergence of carbon trading markets elsewhere in the world, and these can in principle learn from the problems that emerged in the European experience.
The Commission has stated that Phase 1 of the ETS was a ‘learning phase’, and that ways will be found to apply a tighter cap to the market as it evolves. In January 2008 the Commission proposed a more rigorous version of the ETS, designed to overcome its earlier limitations. Allocation of allowances was to be done centrally rather than left to member nations. National allocation plans were to be scrutinized much more intensively than before. More than 60 per cent of allowances would be auctioned and other greenhouse gases included besides CO2. From 2012 the ETS is to be extended to cover the airline industry. Ultimately, the Commission wants shipping and forestry to be included too.
Several projects for establishing carbon markets exist in the US, the most advanced being that being developed by the state of California. Governor Arnold Schwarzenegger signed bill AB32 towards the end of 2006. California has committed itself to a 25 per cent reduction in greenhouse gases by 2020 and 80 per cent by 2050, although only part is slated to be achieved through the carbon market. As of 2011, obstacles are still being encountered in instituting the legislation. Much of the opposition has come from groups that are otherwise sympathetic to attempts to reduce emissions: labour unions and environmental NGOs. Their objections do not all centre upon the use of carbon markets, but some groups are unhappy with their prominence. Of course, the bill also faces opposition from those in any case suspicious of or hostile to climate change policy.
The Chicago Climate Exchange market, a voluntary scheme, was in
existence for some while. Unlike most other voluntary carbon markets, it was allowance-based rather than project-based – in other words, there was an agreed-upon market cap.16 It was successful in the sense that a lot of money flowed through it. Its impact on emissions is harder to assess, but at best was limited.
In December 2010, the Exchange was wound up, in the sense that no new cycle was set up for companies to sign up. The allowances the system generated will continue to be traded, but only in a residual way. Its closure seemed to many ‘to confirm the death of the very concept of cap and trade itself’.17 However, the continued attempt to pass AB32 in California plus state-driven initiatives in the north-east of the US to set up carbon markets are sustaining interest in trading. The same is true of some provinces in Canada. As with Phase I of the ETS, supporters of the Exchange argue that it has been a valuable learning experience, ahead of the possible introduction of mandatory carbon markets in states or groups of states.
Carbon markets of various kinds have been established in other countries too. According to the Carbon Finance Unit of the World Bank, 337 metric tonnes of carbon dioxide equivalent were exchanged through projects in 2008, more than twice as much as the previous year, which itself saw trading rise by 40 per cent over the preceding one. The Bank estimated the size of the world carbon market at $64 billion in 2007.
Whether these figures will be maintained in a more adverse world economic situation, and where faith in markets has diminished, is a matter of conjecture. Carbon emissions trading markets are certainly here to stay, although at the moment it is an open question how well the ETS – by far the largest – will even function in revised form. Large amounts of money are flowing through such markets. Yet their capability to deliver significant emissions reductions remains uncertain. We should guard against the possibility that they take on a life of their own and are therefore seen as ‘successful’ simply because a lot of trading goes on. As has been shown by the experience of the ETS so far, it will not be easy to assess the impact they have on limiting emissions, even though this is their sole rationale. Although many pin high hopes on them, at the moment they are in an experimental stage. We do not know how well they will work, or how far they can be introduced on an international, let alone a global, level.
9
THE GEOPOLITICS OF
CLIMATE CHANGE
Discussions of international relations and climate change tend to be of two kinds. On the one hand, there are many works about the mechanics of reaching international agreements to contain emissions. On the other, a growing number of studies seek to analyse the implications of climate change for geopolitics. I argue in this chapter that we have to bring these two sets of concerns much closer together than they are at the moment. Once more, energy – especially oil and struggles centred upon it – supplies one of the main points of connection.
It might seem that responding to climate change will intrinsically contribute to international collaboration. Yet the processes and interests promoting division are strong.1 The melting of the Arctic ice provides a good example. When the area was just an ice field, there was considerable international cooperation over the activities carried out there, which were mainly of a scientific nature. The fact that navigation across the Arctic is becoming increasingly possible, and that major new oil, gas and mineral resources might become available, has led to divisions of interest and to international friction, fortunately so far of a confined nature.
For a long time the Arctic was considered as international territory, but this presumption is now under some threat. Some of the nations bordering the Arctic regions – the US, Russia, Norway, Finland, Canada and Denmark – have claimed areas of the Arctic as their own. Notoriously, in August 2007 members of Russia’s parliament, the Duma, travelled in a mini-submarine to plant the Russian flag at a depth of two and a half miles under the North Pole. The objective was to symbolize Russia’s claim to the mineral wealth of the Arctic, but also to establish whether a section of the sea-bed underneath the Pole, the Lomonosov Ridge, is an extension of the landmass of Russia. If it were so, the whole area could be said to be ‘part of’ Russia. The US government of the time responded that ‘the best available evidence suggests the ridges in question are oceanic in nature, and thus not part of any country’s continental shelf’.2
Denmark is looking at submitting a territorial claim over part of the Arctic. In 2009 the country released an all-party defence paper that proposed the creation of an Arctic military contingent, with ship-based helicopters able to drop troops anywhere. There are plans to develop a new Arctic Command. Russia has announced that it will set up an Arctic special forces unit and institute a new ice-breaker programme.
In 2010 Norway bought 48 Lockheed F-35 fighter jets, in some part because they are suitable for Arctic patrols. The Norwegians launched an Arctic military manoeuvre in March of that year, in which a fictional country, Northland, seized Norway’s offshore oil rigs. The Russians lodged a formal protest. Sweden and Canada have also been bolstering their Arctic military presence. NATO and the EU have both been considering what the implications are of such initiatives. Finland and Sweden, neither of which belongs to NATO, have discussed forming a northern security alliance of their own, along with NATO members Denmark, Iceland and Norway. All the nations with interests in the Arctic are talking the language of cooperation and are signatories to the UN Convention on the Law of the Sea. Yet the worrying signs are plain to see.
Climate change issues – especially in conjunction with developing scarcities of energy – could become both militarized and dominated by security risks. The result could be a progressive deterioration of international cooperation, where security is increasingly seen as divisible. What should be an overriding goal of reducing emissions could fall prey to a competitive struggle for resources, exacerbating already existing tensions and divisions. The leaders of states, or groups of states, could exploit climate change to their own sectional ends. Several different paths to violent conflict are imaginable. For instance, political leaders might use climate change-induced strains to gain or retain power in internal struggles – for example, migrants might be used as scapegoats in such power bids. In volatile areas of the world, a country weakened by the consequences of climate change might be attacked by its neighbours seeking to gain advantage from the country’s problems.
A further possibility is that armed conflicts could occur as states try to gain a hold over resources where demand is outstripping supply – the most likely path if worst-case scenarios of climate change were to prevail. This could happen if the world economy becomes ‘renationalized’ with a widespread return to protectionism. Yet another possibility is that ‘subsistence conflicts’ – of the sort that has devastated Darfur – might become commonplace. Groups living on a level close to bare subsistence could clash as their means of livelihood start to evaporate, drawing in military ‘protectors’ of one sort or another. Each of the above paths could overlap or intertwine.3
Although the sources of the bloodshed, starvation and homelessness provoked by the conflict in Darfur are complex, the situation there has been called the ‘first climate change war’, since the drying up of Lake Chad is one of the factors that contributed to the migration which led to it.4 Given this influence, we see again a situation in which climate change intersects with energy resources. China is actively involved in Sudan because of the oil and minerals the country possesses. The Chinese have supplied arms and training to the government forces and for some while refused to join the UN and other major nations in condemning the role of the Sudanese government in the sorry events.
It has become commonplace to point out that most conflicts today, in contrast to the struggles of the twentieth century, derive from weak rather than strong states. However, much will also depend on how robust the links, connections and mutual interests of core regional states and groups of states prove to be. ‘Pivotal states’ are nations which have a significant influence on a region as a whole. If the
y are stable and economically successful, they tend to have a mollifying effect on that region. Conversely, if they run into difficulties, these might spill over to affect the whole surrounding area. Such countries include Brazil and Mexico, South Africa and Nigeria, Egypt, Pakistan and South Korea. Of course, if major setbacks were to occur in very large countries such as China or India, the reverberations would be that much more disruptive.
Figure 9.1 The Arctic: the interaction between climate change and geopolitics
Source: Sunday Times, 29 June 2008, p. 17
The Pentagon is already starting to see the world through the prism of a struggle for energy resources against the backdrop of damage inflicted by climate change. The main focus of US strategic and military planning, according to a recent official report, will henceforth be on a competition for resources, a competition seen as already under way. The global reach that China is seeking to establish, it argues, is driven by the demands of its economy for raw materials rather than by any specific ideological outlook. China’s growing influence in the Middle East and Africa is a matter of particular concern.5 Russia’s return to geopolitical prominence has been driven almost entirely by the rising prices of oil, gas and industrial minerals. The attention now devoted to resource scarcity, Michael Klare has observed, ‘represents a qualitative shift in US thinking’, prompted ‘not by an optimistic faith in America’s capacity to dominate the world economy but by a largely pessimistic outlook regarding the future availability of vital resources’.6
This concern has impelled a return to investment in sea-power. The US Defense Department emphasizes that it must be able to patrol the main sea routes of the world in order to ensure its national security.7 Overall, 75 per cent of the world’s oil and 90 per cent of traded manufactured goods are transported by sea. In its budget proposal for 2009, the US government outlined a comprehensive new programme for investment in nuclear-powered aircraft carriers, destroyers carrying heavy anti-missile capability, submarines and other combat ships. The existing fleet is to be redeployed with greater emphasis on the prime routes through which most raw materials pass.
The Politics of Climate Change Page 23
