Reporting the World Over

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The G20: principles for meeting the global challenge of climate change

Courtesy of the author, Andrew Elek, a Research Associate of the Crawford School of Economics and Government at the Australian National University, Reporting the World Over is happy to re-publish this interesting post about the future of environmental negotiations.

To read the original post on the East Asia Forum website, please go here.

The intense climate change negotiations in Copenhagen are over. The outcome is a useful step forward, but many difficult issues still need to be agreed upon among global governments, with no international framework for enforcing any binding agreement on who will bear the many, unknown costs of adjustment.

The messy UN process, involving over 190 governments, is not likely to agree on what needs to be done. Eyes are turning to the G20, with some expecting G20 leaders to negotiate the next steps.

The G20 can contribute to the task of limiting global warming. But G20 leaders should look before they leap into negotiation over climate change or anything else. They might well pause to think of the future of the new forum – and the many other issues to address in the years immediately ahead.

Giving early attention to its principles and setting out its objectives, the nature of cooperation and relations with other forums or institutions would help the G20 establish the legitimacy and credibility it needs in order to evolve into a valuable and durable international public good.

The G20 is a self-created experiment in international cooperation, whose survival is necessarily not assured. The G20 has proved useful in dealing with the global financial crisis, the urgent first item on its agenda, but gaps between intentions and action have already appeared. And, whatever the G20 can achieve, those left out are bound to question its legitimacy.

The G20 must avoid being perceived as a self-selected group which tries to force its solutions on the rest of the world. A recent article by Anders Aslund, Senior Fellow at the Petersen Institute for International Economics, warns of this risk. Nothing that has been done so far warrants his paranoid interpretation of the G20 process. However, if the G20 became a forum to negotiate international treaties to which other were expected to accede, then the G20 could transform itself into the monster Aslund portrays. In that event, the new forum would be short-lived.

Perhaps by coincidence, rather than intent, the G20 has begun to operate in a manner similar to the APEC process, which as noted by Prime Minister Rudd, has adopted a voluntary approach to cooperation pioneered by ASEAN.

To succeed, the G20 will need to adopt sound principles for coordinated, voluntary decision-making on significant international issues. Decisions like this would define agreed strategies which, in many cases, would be implemented by exercising collective leadership in existing multilateral institutions, such as the IMF or the WTO.

To avoid falling into traps, guiding principles for the G20 should draw on the experience of other voluntary forums, including the OECD and APEC.

For example, the OECD’s attempt to create a Multilateral Agreement on Investment showed the danger of some economies defining proposals in too much detail before consulting others.

APEC has been able to promote quite a lot of policy convergence, but has exposed some of the limits of voluntary cooperation. Concerted unilateral decisions have led to significantly lower trade barriers, but the APEC process is widely seen to have failed due to creating even greater expectations.

The Information Technology Agreement (ITA), for example, could have been followed up in a strategic way. APEC leaders could have agreed on how to select areas where further progress could be realistically expected. That could have avoided the ‘Early Voluntary Sectoral Liberalisation’ debacle caused by an attempt to negotiate contentious issues in a voluntary process.

These examples suggest that the G20 should not attempt to negotiate the fine print of international agreements among themselves. Nor should they presume to impose a detailed interpretation of what might be acceptable to the nations who are not at the G20 table.

G20 cooperation, to be successful, will need to accept that voluntary cooperation can only expect to promote policy convergence after checking that national interests are reasonably well aligned and that there are incentives to abide by voluntary commitments. In more technical terms, voluntary cooperation can expect to be effective if, and only if, the desired policy convergence is perceived to be a positive-sum game with benefits to all.

Many global issues, such as sharing the costs of limiting climate change are certainly not seen to be positive-sum games. The long-term challenge for the G20 is to change perceptions of issues as fast as possible to widen the potential for dealing with issues by consensus-building. In the short-term, where solutions are not (or not yet) seen as positive-sum games, the G20 can facilitate negotiated solutions in existing forums.

A viable approach is to recommend principles and/or modalities to be followed up in already existing and accepted international organisations.

Such an approach could help limit global warming.

Two years ago, dealing with climate change was perceived as a ‘prisoners’ dilemma’ international game, where each government had an incentive to do nothing. Interactions among governments have succeeded in transforming the problem into one where a critical mass of governments realise that their interests require them to act. The international problem is now seen as a cost-sharing game which, while difficult, is soluble. This transformation of perceptions could have been accelerated by the G20 if it had been around earlier.

There is still an incentive for each government to do as little as possible, combined with an incentive to avoid implement promises. The task of negotiating how to share the costs of adjustment lies ahead.

The G20 should not risk its legitimacy and credibility by becoming an exclusive negotiating group. A more effective approach would be to follow up the agreement to limit temperature rise to 2 degrees celsius by building consensus on further principles and modalities. Some ingredients could be to:

* – Reaffirm the emerging consensus that governments should adopt policies, such as emissions trading or a carbon tax, giving credible market-friendly incentives to producers and consumers to adopt less carbon-intensive habits;

* – Agree on convergence towards equal emissions per head by an agreed date, such as 2050;

* – Estimate the global carbon budgets consistent with this objective and limiting temperature rise;

* – Adopt some general principles for allocating carbon budgets among economies, but leave detailed negotiations to a more inclusive process; and

* – Agree that, at least for the time being, each government will implement commitments to be negotiated by enacting, and making public, suitable domestic legislation.

Principles will also be needed for compensation by developed economies for emissions to date, including for:

* – Sharing the cost of compensation; and

* – How to use compensation to provide economic incentives to governments to demonstrate their best efforts to meet commitments.

The latter is vital in order to avoid relying on unacceptably intrusive monitoring and/or undesirable threats of trade sanctions to force compliance.

These suggestions, which draw on the Garnaut Report, are not put forward as an optimal strategy for dealing with climate change, but to illustrate the principles whereby the G20 might develop an approach to a vital issue.

This kind of approach can also be applied to other challenges, such as defending and strengthening the WTO-based system after the Doha Round.

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