International Economics

Do the Rich Owe the Poor Climate Change Reparations?

First dispatch from the U.N. Climate Change Conference in Bali

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Nusa Dua, Bali — The second week of the U.N.'s annual Climate Change conference, also known as the 13th Conference of the Parties to the U.N. Framework Convention on Climate Change (COP-13), took off on Monday. I have covered four previous meetings—Milan, Montreal, Buenos Aires, Nairobi—and I must say that the 10,000 or so U.N. bureaucrats, diplomats, and environmental lobbyists have outdone themselves this time. The conference center facilities at the Nusa Dua beach resort on Bali are spectacular. If it were up to me, I would make Bali the permanent climate meeting site. (I, on the other hand, am ensconced in a perfectly serviceable business hotel about 7 miles from the resort area. In the spirit of multiculturalism, the lobby features a large artificial Christmas tree and an elaborate Santa figure on the reception desk.)

At COP-13 the 192 countries that are signatories to the U.N. Framework Convention on Climate Change (UNFCCC) are supposed to hammer out a "roadmap" for negotiations leading up to a new agreement by 2009 to replace the Kyoto Protocol. Under the Kyoto Protocol, 36 industrialized nations pledged to lower their greenhouse gas emissions (GHG) to 5 percent below the level they emitted in 1990. That treaty expires in 2012. Negotiators are now aiming to mandate a further cut of 25 to 40 percent below 1990 levels by industrialized countries by 2020. Of course, most countries have yet to make the cuts they agreed to under the Kyoto Protocol. But why wait until 2009 to cut a deal? Because that's when George W. Bush—an opponent of the Kyoto Protocol—will no longer be president of the United States. Among other things, the new roadmap aims for an agreement that will corral the United States into making steep cuts in its greenhouse gas emissions after 2012.

Last year at the Nairobi conference, I detected a bit of frustration and anger among the self-styled civil society climate campaigners. Here in Indonesia, the atmosphere is almost triumphal. The Intergovernmental Panel on Climate Change's (IPCC) Fourth Assessment Report (4AR) issued earlier this has further confirmed the "climate crisis" and, of course, everyone's spirits are buoyed by Al Gore's Nobel Peace Prize. Gore is scheduled to visit the COP-13 for an adulatory victory lap on Thursday. Another notable, and welcome, shift in activist rhetoric is the increased expression of concern for the economic development of the world's poor.

The week started off with a cornucopia of "side events." These are sessions in which various climate lobbying organizations tout their proposals for solving the "climate crisis." As my first foray into the climate change meeting, I attended a session sponsored by the World Council of Churches on "The Greenhouse Development Rights Framework," a report supported by the Heinrich Boll Foundation and Christian Aid.

The report outlines an "emergency climate program" that aims to keep the earth's average temperate from rising more than 2 degrees Celsius above pre-industrial levels. Keep in mind that average temperatures have already risen by as much as 0.8 degrees Celsius over the past century. In addition, some scientists believe that the amount of GHG already in the atmosphere will lead to an average temperature increased of 1.5 degrees Celsius even if there were no more emissions. So what allegedly must be done?

According to the study, global GHG emissions must peak by 2015 (seven years from now) and then begin to drop by 6 percent per year until 2050 to reach a level that is 80 percent below 1990 levels. The rich developed countries must cut their emissions by 90 percent by 2050. Even poor countries must cut their emission by 30 percent between 2020 and 2030. Note that these cuts are dramatically deeper than what is actually on the table here at the COP. Martin Khor, head of the international left-wing activist group the Third World Network said during the panel discussion that the latter cuts would come as a "shock" to developing nations such as India, China, and Brazil.

The study's authors argued that there is not only a climate crisis, but also a "development crisis." As evidence, they pointed out that 2 billion people lack clean cooking fuels, 1.5 billion are without electricity, 1 billion have no access to fresh water, and 2 million children die each year of diarrhea. Clearly, the first priority of people living in these conditions must be development. Interestingly, while environmental lobbyists tend to avoid saying words like "wealth" and "growth," "development" means that the world's poor need more wealth generated by economic growth.

Without going into the details, the Greenhouse Development Rights Framework (GDR) proposal foresees levying the equivalent of a climate "consumption luxury tax" on every person who earns over a "development threshold" of $9,000 per year. The idea is that rich people got rich in part by dumping carbon dioxide (CO2) from fossil fuels into the atmosphere, leaving less space for poor people to dump their emissions. In one scenario, Americans would pay the equivalent of a $780 per person luxury tax annually, which amounts to sending $212 billion per year in climate reparations to poor countries to aid their development and help them adapt to climate change. In this scenario, the total climate reparations that the rich must transfer annually is over $600 billion. This contrasts with a new report commissioned by the U.N. Development Program that only demands $86 billion per year to avoid "adaptation apartheid."

The authors do not go into any specifics about what kinds of institutions—private, public or partnerships—would annually transfer $212 billion to poor countries from the U.S. Considering that the $2.3 trillion spent on foreign aid in the past 50 years has largely failed to generate economic growth or permanent improvements in living standards for most people living in poor countries, the institutional question is not trivial. By some estimates lifting trade barriers could produce benefits of $600 billion annually, reducing the number of people living on $2 per day by 144 million. A woman from Papua New Guinea in the audience warned that such climate aid was likely to disappear into the corrupt pockets of poor country politicians rather than lift poor people out of poverty. But the touching faith of climate campaigners in the efficacy of international and national bureaucracies is immune to such realities.

It is not also clear whether the authors think that rich countries must cut their emissions by lowering their living standards, or by adopting not-yet-invented low-carbon energy technologies, or both. One person in the audience was overheard to ask why we don't just divide up all the wealth equally anyway? Of course, the entire "climate crisis" could have been avoided if today's rich countries had eschewed the industrial revolution in the first place. In any case, while a $780 per person climate luxury tax would be painful, it would not bankrupt the U.S., even if bundles of dollar bills were shipped abroad and burned in bonfires.

To get a somewhat different perspective, I attended the International Energy Agency's (IEA) side event, "Energy Policy in a Greenhouse World." The IEA was created in 1974 by the world's rich countries to advise them on energy supply and demand problems. The IEA issues an annual World Energy Outlook (WEO), which looks at various scenarios for energy supply and demand until 2030. This year's report was quite sobering.

IEA analyst Laura Cozzi noted that the world currently emits 27 gigatons of CO2 to produce energy. In a business-as-usual scenario, in which energy demand increases by 50 percent by 2030, CO2 emissions are projected to rise to 42 gigatons. To achieve CO2 atmospheric stabilization at 450 parts per million by 2050, emissions would have to be cut by 19 gigatons to only 23 gigatons by 2030. Such cuts, according to Cozzi, would mean that every electric power plant built after 2012 would have to emit no CO2. That would require the development of a robust carbon capture and sequestration (CCS) technology to bury CO2 in the ground, building vastly more nuclear power plants, the invention of second-generation biofuels, and improvements in energy efficiency at twice the rate that we've seen in the past 25 years.

Just to lift everybody's spirits, Cozzi told the audience that the IEA is "quite worried" about the oil supply/demand balance for the next 7 years. New oil fields to supply an additional 12 million barrels per day must come online by 2016. "We can't rule out a supply crunch in the oil market," said Cozzi.

Cozzi's IEA colleague, Debra Justus, was even more cheery. Justus is working on an energy technology perspective report for 2008. She began with a baseline case in which CO2 emissions would increase to 62 gigatons, or 137 percent by 2050. She outlined two alternative scenarios, one in which the goal is to keep average temperatures from rising more than three degrees Celsius above pre-industrial levels (ACT scenario) and another which aims to stabilize CO2 in the atmosphere at 450 ppm by 2050 (Blue scenario). Achieving the ACT scenario would require an additional $20 trillion over an above projected energy infrastructure costs for the next 50 years and the Blue scenario would cost $50 trillion more. Justus calculates that first scenario implies a price of $50 per ton of CO2 and in the second, CO2 costs $200 per ton.

At the end of the World Council of Churches' discussion, one panel member, Mohamed Adow from drought-stricken northern Kenya, asked the audience to please "remember the suffering and poverty caused by greenhouse gas emissions." But is climate change really the biggest challenge facing the world's poor? When droughts hit rich countries, people do not starve, and few farmers lose their livelihoods. I do not doubt the suffering that recent weather disasters have inflicted on Adow's people, but even Kenya's share of $600 billion in climate reparations is unlikely to make up for that country's rank of 150th out of 179 countries on Transparency International's global corruption index.

Finally, I mentioned at the beginning that the mood of the climate activists here in Bali was triumphal. I suspect that's because many now really believe that an impending climate crisis will at last endow them with the power to completely remold the world's economy in a more egalitarian direction. And that's what they've always wanted, anyway.

Disclosure: I would like to express my deep appreciation to the Atlas Economic Research Foundation for providing a grant to pay for my travel expenses to cover the COP-13 meeting.

Ronald Bailey is Reason's science correspondent. His most recent book, Liberation Biology: The Scientific and Moral Case for the Biotech Revolution, is available from Prometheus Books.