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December 21, 2009

Obama Gives China a Free Pass to Emit CO2

By Howard Richman & Raymond Richman
The U.N. Climate Control Conference in Copenhagen ended in failure in that no binding agreement was reached to reduce CO2 emissions. China nixed the agreement by refusing to compromise on the issue of international verification as noted by a British newspaper called The Independent:

When the [U.S.] President, in an unyielding speech, said that without international verification "any agreement would be empty words on a page", that was too much for [Chinese Premier] Mr Wen. He left the conference in Copenhagen's Bella Centre, returned to his hotel in the city, and responded with a direct snub of his own - he sent low-level delegates to take his place in the talks.

At the end of the conference, President Obama and leaders of India, Brazil, South Africa, and China negotiated a possible framework for the next conference. In order to be seen as effective, Obama caved in to the demands of the developing countries, which produced the "Copenhagen Accord."

India, Brazil, and South Africa got the reparations they wanted. The developed countries (the U.S., Europe, Japan, etc.) would pay $30 billion by 2012, and $100 billion per year starting in 2020 (U.S. share $10 billion by 2012, about $33 billion per year by 2020), into a fund to be distributed to the developing countries based upon need. The accord states:

The collective commitment by developed countries is to provide new and additional resources, including forestry and investments through international institutions, approaching $30 billion for the period 2010-2012 ... In the context of meaningful mitigation actions and transparency on implementation, developed countries support a goal of mobilizing jointly $100 billion dollars a year by 2020 to address the needs of developing countries.

Meanwhile, China, the world's fastest-growing CO2-polluter, got what it wanted. The accord would let China avoid transparency and international verification by opting out of the reparations. China would generate reports every two years, but only those developing nations receiving reparations would be subject to the transparency requirement in the accord:

Nationally appropriate mitigation actions seeking international support ... will be subject to international measurement, reporting and verification in accordance with guidelines adopted by the Conference of the Parties.

President Obama was changing the terms of the original reparations offer, as announced by his Secretary of State Hillary Clinton on December 17 at the conference. She had told the delegates that the $100 billion per year reparations pledge would apply only if there was an agreement involving "all major economies" with "full transparency":

And today I'd like to announce that, in the context of a strong accord in which all major economies stand behind meaningful mitigation actions and provide full transparency as to their implementation, the United States is prepared to work with other countries toward a goal of jointly mobilizing $100 billion a year by 2020 to address the climate change needs of developing countries.

In summary, the "Copenhagen Accord," if negotiated in Germany next year, would mean:

  1. Rising U.S. energy costs. The U.S would reduce CO2 emissions, increasing U.S. energy costs, causing inflation, and worsening the trade deficits.
  2. Substantial reparations. The U.S. would pay reparations of $10 billion by 2012, about $33 billion per year by 2020.
  3. Stable Chinese energy costs. China would be able to increase or, at least, not decrease CO2 emissions, keeping energy costs stable and her economy growing.
The Copenhagen Conference ended in failure. The "Copenhagen Accord," negotiated by a few of the participants at the end, is worth only the paper it will be printed on. It is a possibly disastrous framework for future negotiations to take place in Bonn, Germany in mid-2010. It suggests that the U.S. will once again pay most of the costs and get few of the benefits, if any.

Before the Bonn conference, President Obama will try to unilaterally reduce American CO2 emissions through cap-and-trade or EPA regulation. If he succeeds, the rising U.S. energy costs combined with stable Chinese energy costs will send more manufacturing jobs and more investment to China.

The authors maintain a blog at tradeandtaxes.blogspot.com, and co-authored the 2008 book, Trading Away Our Future: How to Fix Our Government-Driven Trade Deficits and Faulty Tax System Before it's Too Late, published by Ideal Taxes Association.
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