How The Climate Crisis Killed Globalisation

Bart Shteinman - Politics and Economics

Barring another global pandemic, next year the world’s governments will meet in Glasgow for the UN’s 26th Climate Change Conference. The meeting - pitched as the most pivotal since the Paris Agreement in 2015 - will bring together 30,000 delegates to hammer out how national governments will meet the ambitious goal of limiting temperature rises to ‘well below 2 degrees’ above pre-industrial levels. If it results in failure, as with most of the 25 ‘COPs’ (or Conference of Parties) that have preceded it, an overlooked ‘externality’ will be the unexpected death of globalisation.

 

Faith-based targets

Global cooperation seemed to have reached its zenith in the soaring self-congratulation that ended COP21 in Paris. Yet while the spirit of the Paris Agreement was based on science, its text was based on faith. Faith, namely, that national governments would have the wisdom and determination to voluntarily set targets that – collectively – would suffice to protect their own citizens. Indeed, the agreement that came out of Cop21 was less the unqualified ‘breakthrough’ from the prior failures of Copenhagen in 2009. Rather, it was a collective resignation to aim lower – and blithely call it a success.

 

At COP21, negotiating parties made the compromise of setting what its authors called ‘top-down’ and ‘bottom-up’ provisions. The ‘top-down’ provision was for a strong collective target of limiting global warming, held up by a compulsory reporting and review mechanism. Under a ‘bottom-up’ system, individual countries would have the discretion to set their own ‘nationally determined contributions’ (NDCs) to concretize the collective aspirations of the treaty.

 

It is not difficult to predict the pitfalls of this approach. Imagine the globe as a shared flat that is set to have its tenants evicted for long overdue rent. The tenants all agree on the bill to be paid, but decide each will pay whatever they perceive as fair to the landlord. If this, quite obviously, is a recipe for homelessness then Paris is a plan for planetlessness. In the end, COP21 produced no binding regime to ensure countries aim – let alone achieve – targets collectively sufficient to avert catastrophe.

 

Moreover, the promise of Paris was that governments might set admittedly modest NDCs in the short term but the framework would enable them to ‘ratchet up’ commitments by 2020. In other words, a commitment to procrastinate. According to a review of studies by the World Resources Institute, full compliance with NDCs would still “put us on track for a world that warms by 2.7-3.7°C (median chance)”. Moreover, the United Nations Environment Programme has found that half of the world’s 20 largest economies are falling short of even these weak commitments. The notion that simply talking about climate change stimulates and accelerates voluntary action has no basis in data either. Startlingly, the world emitted more industrial emissions in the conference-packed years of 1988-2018 than in the prior 200 years combined. One could be forgiven to think that Glasgow will not be the moment a broken international system suddenly transforms into one of epiphanic cooperation.

Climate Action Tracker’s reporting finds just one country on track to achieving reductions consistent with the Paris Agreement’s 1.5-degree goal.

 

 

Trading Globally and Emitting Locally

As our faith in Paris becomes tested by these realities, so too will our commitment to globalisation’s rules of free trade. A key component of the Paris Agreement’s negotiating structure was that more strongly committed parties would respect the NDC framework, to ‘mind their own carbon’ so to speak. Yet, as the Climate Crisis grows more urgent and leaders and laggards continue to diverge in their response, this passiveness is already becoming untenable.

 

In much the same time as climate negotiators rolled on with their Sisyphean efforts, it was politically correct to wave away globalisation’s role in offshoring emissions to the Global South. Rich developed nations, responsible for most of the carbon in the atmosphere, could congratulate the decarbonisation of their economies only to import the same emissions-intensive products from the likes of China or India – so called ‘carbon leakage’. But far from being a small trickle, this leakage has become a flood of greenhouse gases, with China now responsible for more emissions than the United States, the European Union and Japan combined. Climate denialists are only too correct when they note that decarbonisation is of little import if it simply exports its polluting industries from country to the next.

 

In this, one silver lining of the Trump administration is that it has released us from our illusions of free trade’s ‘golden straitjacket’. Tariff wars and rising protectionism are burying the old orthodoxy against regulating trade according to the national interest. On both sides of the Atlantic, policymakers are questioning the liberal importation of steel and batteries from China when the latter’s ‘comparative advantage’ owes so much to environmental indifference.

 

We can see the earliest sproutings of this ‘Green protectionism’ in European Commission President Ursula Von der Leyen’s plan for a “carbon border tax to avoid carbon leakage” for the entire European Union. Technically labelled a ‘border carbon adjustment’, it would require importers in a range of sectors to pay for emissions allowances at the same rate as domestic industries, based on benchmarks for the carbon content of their products. This enables the EU to implement its plans for a net-zero emissions economy by 2050 without exposing it to unfair trade competition from its rivals. It also works to reduce emissions in other countries, penalising those with high emissions and stimulating governments to embrace the transition to clean technologies.

 

In a remarkable sign of movement on these ideas – and the collapse of the free trade consensus – several European countries have signalled their willingness to derail trade talks with the United States and Brazil to enforce these environmental principles. On the other side of the Atlantic, former Republican statesmen have put forth a “conservative climate solution” based on taxing both domestic and imported carbon dioxide emissions. It appears it is quite easy politically to discuss punishing polluters; so long as their emissions are in someone else’s country.

 

 

Environmental Globalism or Eco-Nationalism

Even as globalisation comes ever closer to facing its environmental reckoning, it remains a matter of speculation how the battle lines of green protectionism will emerge. Green ‘leader’ nations will seek to seal any carbon leakage with tariffs while using trade policy to advance global climate action. Fossil-fuel exporters and heavy-emitters, the ‘laggards’, will seek to push back against green protectionism and preserve the old orthodoxy of free trade.

 

In a fragmenting COP regime, it is easier to predict who will shirk than who will lead. Certainly, a large number of recently-industrialised middle-income countries will be loath to forego their sunk investments in a carbon-intensive economy, and thus will be targeted as laggards. In particular, China will be the bête noire of the new generation of climate-minded protectionists, just as it is for the current cohort of economic nationalists.

 

Among the candidates for climate ‘leaders’, the strongest predictor is luck.  Those rich nations so fortunate to have established non-fossil wealth (the EU, Japan, South Korea etc.) will be happy to impose new carbon tariffs that put their high carbon competitors at a disadvantage. Conversely, those so very unfortunate to have neither benefited from the fossil fuel boom and now facing its worst consequences (small island states, or famine-prone countries near the equator) will leapfrog to leadership – so long as justly deserved aid is attached.

 

The most relevant countries on the new era of global trade will be those jostling between resistance and transition. Those with the greatest choice will be the nations that have extracted the most prosperity from the carbon economy, the US, Saudi Arabia, Australia and Canada, but with a wealth of opportunities in the new Green economy. Ironically, it may soon be the United States lambasting its former allies for their new trade restrictions as it continues to resist climate action.

 

If the United States and other members of the middle pack decide to compromise with the climate leaders then it is possible to imagine a new, climate-consistent trading regime emerging. Just as current trade rules allow punitive action for distortive subsidies, the new rules will deter countries from subsidising fossil fuels or freely allowing their pollution. We are likely to see a new ‘Free Trade Consensus’ wherein the IMF, World Bank and World Trade Organisation structure a far stronger climate regime than its UN-led predecessor.

 

While newly-industrialised and remaining laggards will bristle, as export-dependent nations they will find the balance of power to be firmly in the climate leaders’ favour. Without the free ride of unpriced pollution and with renewable energy more evenly distributed than fossil fuels, trade is likely to be smaller and more regionalised. Globalisation will have been reborn, but with a new humility towards the ecological boundaries it failed to flatten.

 

If this restrained vision of compromise offends dogmatic free traders, they should be far more concerned with the alternatives to environmental globalism. Continuing lawlessness of laggards will see more climate-driven disruptions to the global trading system as powerful nations use emissions differences as a license to dominate countries still in industrial adolescence. ‘Eco-nationalist’ governments will seek to use hard power to lower emissions outside their borders, via tariffs, sanctions and perhaps even military action. Like the liberal interventions of the 2000s, there may be ‘environmental interventions’ to protect crucial ecological resources. Fossil Fuels could be the WMDs of an eco-nationalist future.

 

Such eco-nationalism will likely correspond to a general failure of the international order. Extreme weather events will continue to disrupt economies and political systems, as mass displacement and entrenched divides corrode the will for collective action. To be bemoaning the loss of globalisation during such global crises will appear to many a complaint rather quaint.

 

Believers of the old order must confront the fact that free trading cannot coexist with free riding. Barring the most dramatic of reformations, our faith in the gospel of globalisation will not survive the planet’s impending judgement day.

 

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