What to Do About Climate Change

THE HEAT IS ON

In the years ahead, climate change will have a significant impact on every aspect of the daily lives of all human beings -- possibly greater even than war. Shifting precipitation patterns and ocean currents could change where and how food crops grow. If icecaps melt and low-lying areas are flooded, as is predicted, entire populations could be forced to move to higher ground. The tsunami of 2004 and Hurricane Katrina, in 2005, provided vivid examples of what large-scale climactic catastrophes entail.

And yet climate change remains low on the list of most countries' foreign policy concerns and has yet to be treated as a subject for serious, sustained action. Part of the problem is that the threat still feels abstract. Despite accumulating evidence, the full impact of climate change has not yet been felt; for now, it can only be modeled and forecast. Much of the current planning for meeting this challenge has also had a somewhat abstract feeling. The most prominent action plan devised so far is based on a lot of economic theory and only a bit of empirical evidence, derived from U.S. efforts to deal with acid rain.

Mobilizing public attention around problems that have not fully manifested themselves has historically been difficult. This was true of the threat of terrorism before the attacks of September 11, 2001, and it will likely be even truer of climate change. Most climactic models now predict continued deterioration, but the signs that are currently visible, such as the thawing of the permafrost, lack the drama of two airplanes piercing the World Trade Center. Like the frog in the pan of heating water that does not notice the temperature rising until it is too late, human beings have been lulled into believing that they have many years to deal with climate change. When dramatic changes finally do occur, it will be too late for remedial action.

Pessimistic experts who believe the world has already reached the point of no return advise that society adapt to the new conditions rather than try to correct them. Many politicians are more optimistic. In July 2005, leaders of the group of eight highly industrialized states (G-8) pledged to put themselves "on a path to slow and, as the science justifies, stop and then reverse the growth of greenhouse gases." Assuming there still is time to act, the question is, how?

Curbing greenhouse gas emissions, a problem that took many years to develop, will be a prolonged and messy process. But two actions are called for now. The first is to revise the assumptions behind currently proposed fixes, namely emissions-trading regimes, which by themselves actually do too little to cap pollution. The second is to devise strategies customized to the needs and means of the governments that must implement them, distinguishing developed countries from developing ones. In the former, where the necessary legal and regulatory structures, if not always the actual laws, are already in place, the enforcement of environmental standards is largely a matter of political will. In the developing world, limiting greenhouse gas emissions is a more complicated job that requires empowering environment ministers, making an economic case for environmental protection, developing regulatory skills that currently do not exist, and enlisting the help of both civil society and the public sector.

THE GAS ON EMISSIONS

Current proposals for curbing carbon dioxide emissions start with the reasonable assumption that the first step toward fighting climate change is to make the issue a priority. And so over the past three decades, the standard response to global environmental threats has been to draft international agreements. There are now some 900 environmental treaties on the books. Unfortunately, few have achieved any genuine reductions in pollution. Under the UN Framework Convention on Climate Change, which entered into force in 1994, and its controversial Kyoto Protocol, which entered into force after Russia ratified it in 2005, some industrialized nations agreed to reduce greenhouse gas emissions between 2008 and 2012 to levels below those of 1990. It has yet to be seen whether these commitments will yield any significant results. Optimists point to the success of the Montreal Protocol. But that treaty governs the release of a discrete number of chlorofluorocarbons and other chemicals by a few identifiable manufacturers; in other words, it may be a special case. Climate change is a considerably deeper and broader problem.

Worse, current policies aimed at stemming climate change may be inadequate. The generally accepted plan takes an approach with essentially two drivers -- one based on economic incentives, the other on technological ones. The first driver, now enshrined in the Kyoto Protocol, is a sophisticated global system for trading greenhouse gas emissions modeled on the successful U.S. "cap-and-trade" system designed to control the release of sulfur dioxide (which produces acid rain). Relying on a trading system assumes that the opportunity to profit from reducing greenhouse gas emissions will motivate industrial emitters, wherever they are located, to change the way they operate power plants and factories. Implicit in this assumption is the belief that advanced technology will help emitters change their ways, because technology can always help solve complex problems. The Kyoto Protocol thus created two flexible mechanisms: the Clean Development Mechanism (CDM), which facilitates trading with the developing world, and Joint Implementation, which allows "donor" countries to invest in pollution-abatement measures in "host" countries in return for "credits" they can use to meet their own pollution-abatement targets. (The European Union recently launched its own trading system, and there are some purely domestic arrangements in Europe.)

The problem with this setup is that it is anyone's guess whether such trading can work on a global scale. Trading emissions of sulfur dioxide, which is legislated in the 1990 amendments to the U.S. Clean Air Act, allows power plants in the United States that have an easier time controlling their emissions to sell credits to those experiencing greater difficulty or higher costs; the rationale is that such trading will help all U.S. companies meet the overall regulatory limit. The U.S. model does work, but not entirely because of the power of markets. The sulfur dioxide market is not remotely laissez-faire. Regulators demand that emissions steadily decrease over time, and they apply very tough penalties against violators. Transactions for trading polluted air are regulated down to the smallest details. Traders use rather elaborate, mandated accounting measures and work in such complete transparency that transactions are tracked on the Web site of the Environmental Protection Agency. The model U.S. program is no more than a technique to increase the economic efficiency of a classic command-and-control regulatory program, in this case one that puts a firm lid on emissions of sulfur dioxide.

It is highly unlikely that anything approximating the rigor of the U.S. system can be devised to control climate change worldwide. Enforcement has long been the Achilles' heel of international environmental agreements, largely because countries submit to international oversight, which they see as a threat to their sovereignty, only with the greatest reluctance. Although some progress was made on the issue of noncompliance at a recent meeting of the parties to the Kyoto Protocol, the enforcement plan that came out of it assumes that countries will not risk being shut out of participating in the agreement's flexible trading mechanisms. Even if a more rigorous compliance regime could be instituted, obtaining accurate measurements of actual emissions would be difficult.

Much of the discussion, meanwhile, has centered on how to refine the existing trading mechanisms rather than on the most difficult but most important issue: how to set and enforce caps on greenhouse gas emissions. It is the commitment to make steady reductions in harmful emissions that will make or break the overall scheme. Caps have never worked without serious compliance efforts backed up by old-fashioned penalties against laggards and cheaters. But countries that have been slow to control even significant local pollution are now being asked to perform the far more complicated task of managing greenhouse gases so that they can sell reductions in emissions on a global marketplace. Global trading is no magic remedy. Reducing emissions worldwide requires exactly the same attention to conventional regulatory processes as does effective domestic regulation.

Moreover, global trading itself is unusual. U.S.-style emissions trading has never been done on a global scale or even outside the United States. Countries that must be part of the solution, such as China and India, have at best achieved a handful of highly orchestrated domestic trades between carefully selected polluters. Few of these countries can actually cap pollution; many do not have the skills to manage or enforce complex intangible property rights concerning goods such as polluted air escaping from a factory.

So what will motivate industrial plants that are currently free to pollute to clean up their act? This is where technology is supposed to come into play. Under Joint Implementation, outsiders with the economic incentive to control emissions of carbon dioxide are expected to provide the appropriate technology. But even if the lucky manager of a firm being offered, say, free equipment to capture emissions understands that he is being given something of value, he might not have the incentive to pay for running and maintaining the equipment. If anything, experience shows that he is unlikely to turn it on without the watchful eye of disinterested enforcement bodies looking on. Evidence from China demonstrates that even plants equipped with superior pollution equipment do not run those controls when doing so proves inconvenient.

No wonder some observers are now questioning whether trading mechanisms can contribute to a reliable reduction of greenhouse gas emissions. India's Center for Science and the Environment (CSE) recently examined two deals for carbon dioxide pursuant to the CDM that involved Indian companies and European governments, the latter seeking to gain credits to meet their Kyoto targets. The CSE cast serious doubt on these deals' efficacy. It concluded that certain conditions for the transactions had not been met, despite being specified in the deals' design document; that it was impossible to determine whether the transactions met other standards, because their terms were not transparent; and that Indian authorities seemed to have approved the projects not on their merit, but on the basis of the prestige of the consultant who validated them. The CSE questioned whether these transactions could honestly be said to achieve the CDM objectives or India's pollution-reduction goals.

STARTING SMALL

For the developing world and much of the former Soviet bloc, where Westerners will inevitably look for emissions credits, achieving steady reductions in emissions will require fundamental reform. Trading and technology are great policy tools, but they must be part of a larger program whose core objective is the systematic reduction of greenhouse gas emissions.

The first steps toward the effective enforcement of high environmental standards should be to adjust expectations on all sides and encourage developing countries to set goals they can meet, as a preliminary move toward developing a more rigorous regime. Achievable caps would not be very ambitious at first. But setting them could help mobilize governments and get them moving in the right direction, helping them gain real experience in managing greenhouse gas emissions. With some practice and success under their belts, governments would then be in a position to tighten the caps.

For any such effort to succeed, environmental regulation will have to become a priority in the developing world; that means making a serious commitment to achieving whatever caps on greenhouse gas emissions that are deemed appropriate. In a handful of countries, regulation is working; in too many others, it is not. Effective environmental regulation will require close cooperation between those leaders who are concerned about the perils of greenhouse gases and those governments whose cooperation is needed to reduce emissions.

Many laws and ministries have been created in the developing world since the 1972 UN Conference on the Human Environment, in Stockholm. But it is still a challenge to turn current regulations from lifeless words into effective practices -- a goal that can be attained with skilled regulators and support from the highest levels of government. Many of the officials tasked with protecting the environment lack the clout of their counterparts in industry and finance ministries. Heading an environment ministry should no longer be a consolation prize for members of small political parties in coalition governments; environment ministers should be invited to sit at the grownups' table.

Environmental officials will have a better chance of finding their way into the inner circle if they can overcome the perception that environmental controls are a luxury. (Echoing many finance ministers throughout the world, Russian President Vladimir Putin has said that the order of business should be "first the economy, then the environment.") In addition to making the case for energy efficiency, clean air, and drinkable water, environment ministers must show that what they offer not only is consistent with growth but also will facilitate it, because pollution from factories and power plants represents lost money. In Poland, higher prices for energy alone have helped reduce carbon dioxide emissions. Environment ministers must also spotlight the contribution of pollution to worsening public health, an issue so acute in some countries that it is causing social instability. In China, villagers increasingly stage demonstrations to voice their unhappiness with the government's failure to control pollution. Whoever can produce a plan to respond to legitimate grievances about, say, poor air quality will contribute to stability and thereby boost the work force's productivity.

Equally important is achieving independent oversight, to make sure that existing laws actually do what they claim to do. In the words of Reynato Puno, a judge on the Philippine Supreme Court, environmental regulations can no longer be consigned to their current "graveyard," where they are "at best meaningless ideals and, at worst, mere teasing illusions." The importance of such oversight is starting to be understood. In Asia, for example, a network of environmental enforcers was recently created. Reliable enforcement also makes good business sense, because it signals regularity to investors, who sometimes care less about what the rules are than about whether their enforcement is predictable or arbitrary.

Reform is particularly important in countries such as China, where the government still controls many industries and where emissions of carbon dioxide are increasing so fast that projections have China's emission levels matching those of the United States by 2025. Chinese environmental protection bureaus have hopelessly divided allegiances. They get policy guidance from the Environment Ministry, in Beijing, but local government officials, who are responsible for local economic growth, control what really matters: budgets, staffs, and even office space. If local Chinese environmental enforcers were to gain a measure of independence and use it to show how sound environmental measures boost social and economic goals, they would have a fighting chance of making industry reduce its emissions.

ALL ABOARD

Another important task is to help developing countries gain appropriate regulatory skills by providing them with training and equipment. Countries without strong experience need assistance to build effective monitoring, inspection, and enforcement practices. Sporadic efforts have been made to help some states in the former Soviet bloc develop regulatory capacity. But the help has not been consistent or systematic. Development assistance efforts have often tried, unsuccessfully, to import Western economic practices into the law, traditions, and culture of the developing world.

A better approach would be to devise practices and institute reforms that are customized to each country's particular circumstances. Take the role of law. Western reformers often assume that enacting a law will produce its objective. But in China, for example, where the strength of personal relationships has guided business and other significant interactions for millennia, relying on legal obligations is very new. In addition to helping the Chinese develop a new legal ethic, reformers must also consider enforcing environmental standards in ways more consistent with local culture, such as through the naming and shaming of polluting plants. (Of course, it helps to be alert to other driving motivations, as the Chinese leaders' commitment to cleaning up Beijing for the 2008 Olympics demonstrates.) Enforcement through locally appropriate measures would breed demand for other enforcement tools, and at that point the developing world might turn to North America and western Europe for additional compliance methods and techniques.

Implicit in the hope for such progress is the importance of public opinion. Where the government fails to act or to enforce laws, the public can be a force for reform. Citizen groups were an important factor in jump-starting environmental protection in the United States. Nongovernmental organizations (NGOs) around the world, including in developing countries, are starting to flex their muscles and push governments toward greater compliance. In the new democracies of central and eastern Europe, NGOs are demanding that their governments disclose more data on the environment. In India, NGOs delivered a one-two punch that ultimately won a commitment to improve local air quality: one NGO brought a lawsuit before the Indian Supreme Court; another published information describing how air pollution in New Delhi endangers the city's residents. Their success prompted lawsuits in Pakistan, Bangladesh, and other neighboring countries. In China, a public interest group is seeking damages for pollution victims. Public participation is also critical in countries with strong enforcement bodies, because no government has the resources to stop all noncompliance. The right to bring a suit is particularly useful when governments are inactive. Philippine law, for example, allows citizens to bring polluters to justice when official enforcement agencies do not.

Sometimes the private sector will be motivated to take the initiative. A small number of multinational corporations, General Electric and Shell among them, are putting their own environmental best-practices plans into action at plants worldwide -- a move that could embolden local regulators and pressure local companies to improve their habits.

Building the capacity to deliver verifiable reductions of greenhouse gases is tedious work. But with persistence, political will, and some help, regulatory skills can be improved. Internal pressure can speed the way and supplement governments' scarce enforcement resources. The overall objective should be to develop a culture of strict environmental compliance that will ensure that promises of emissions reductions will be met. Focusing on capping emissions requires steadiness of purpose, imperviousness to the siren song of short-term interests, and the willingness to commit significant resources. But it is a realistic and effective strategy for fighting a problem that reaches deep into every economy. Harnessing the magic of the market and enlisting technology may become significant tools in combating climate change, but they will not work on their own. And like climate change itself, this sobering truth is best faced sooner rather than later.