Article published as Foreword of "The Solar Economy", May 2004
‘Let’s improve the atmosphere’ - that was how the German government greeted delegates to the conference on climate change held in Bonn in July 2001, the eighth such conference since 1992. Yet even before the conference took place, it was abundantly clear that even if the Kyoto Protocol were to be implemented in full through to 2012 without being watered down, the most it could achieve would be to bring emissions back down to the already dangerously high levels of 1990. On the basis of existing agreements, the objective was no longer to improve matters, but merely to prevent them getting any worse. And while the negotiations rumble on, the climate situation remains precarious. A short study undertaken by the Wuppertal Institute predicts that by 2012, global emissions will actually have risen by ten per cent. The Kyoto debate would appear to have run its course.
In reality, it is now time to open the debate up. When reporting to the public, politicians face understandable pressure to present even minimal results as a success. The truth is, however, that holding international conferences has proved to be an inadequate response to the dangers and challenges that climate change presents. Despite the general consensus that we have to stick to the path originally chosen, it is now past time we asked whether these conferences have not in fact done more harm than good. While the delegates have been debating over the past decade, emissions have been rising by an unprecedented 30 per cent. We can no longer afford to measure the success of climate change conferences in terms of agreements reached. In view of the consensus assumption that such conferences represent the international instrument par excellence for tackling climate change, it is fair to ask how much has been neglected, postponed, cut, omitted or mishandled since they began. The roll-call of failure is so long that it would be irresponsible not to look for a better way forward. ‘Let’s improve the policy’ should be the new leitmotiv.
At first glance, the case for global climate change conferences appears convincing. Global problems need global – and thus consensual – solutions. All governments must recognize that they have a direct responsibility to tackle climate change, and their commitment must be binding. The right way to achieve such an outcome is to hold global negotiations to decide on a joint programme of action on which no-one can renege. The apparently common-sense nature of this approach, however, is blinding us to basic questions, questions which the now parlous state of the Kyoto Protocol imbues with new urgency. Why should we expect comprehensive, fast and effective policy responses to emerge from what is the most long-winded political decision process imaginable, namely consensus-orientated negotiations between the parties to an international treaty? What were the reasons for the success or failure of other international treaty negotiations? But above all, is it even possible to achieve international agreement on the technological and structural transformation of the energy sector that a successful climate change strategy would require?
The conference process has given governments a perfect excuse to postpone any environmental overhaul of their respective domestic energy sectors until a global treaty has been agreed and ratified, on the pretext that a global framework is essential to preserve international competitiveness. Governments have thus largely been able to forestall taking swifter action at national level – such as increased taxation on fossil energy – while still protesting innocence on the global stage. The effect of the climate change negotiations has thus been to preserve the status quo. The recent history of the energy industry has seen unprecedented growth in the lobbying power of the energy industry and its ongoing internationalization through forced market liberalization, a process which has received hefty governmental and legislative backing. Movement towards sustainable energy supplies is conspicuous by its absence, and the power of those primarily responsible for global warming is structurally more entrenched than ever. The energy industry’s current environmental rhetoric is the only distracting factor in this regard.
National governments have proved themselves incapable of moving on from their traditional role as the protectors of the energy industry at the national level, and they are unlikely to do any better as delegates to international conferences. It comes as no surprise that the most important topics are not even up for discussion: not global carbon dioxide taxation, nor an end to the tax exemption for aviation fuel (although the rapid growth in air travel represents the greatest single danger to the climate), nor the abolition of conventional energy subsidies, currently amounting to 300 billion dollars a year. And yet this latter at least would fit nicely with the ideal of free-market capitalism trumpeted by the WTO process.
It is also no coincidence that the global conferences have become fixated on policy instruments such as tradable emissions permits and the ‘win-win’ solutions that they claim to offer. Environmental economists who front such proposals hope that they can reconcile the interests of the fossil energy industry with the goal of preventing climate change. The energy industry, however, is betting on being able to maintain its established structures and retain its control over global energy investment. These supposedly realistic proposals take on trust the assertion by the energy industry that its interests are identical with those of the economy as a whole, and thus that the cost for individual companies of preventing climate change is a burden on the economy as a whole. Where all the talk is of costs and burdens, it is easy to lose sight of the economic benefits of tackling climate change.
Negotiating a global agreement probably only has a real chance of success where the subject of the negotiations is manageable and can be clearly defined, and only a few scattered interests are adversely affected – or when the dominant interest groups expect to benefit on a large scale. The subject of climate change negotiations is the supply and consumption of energy, which is neither manageable nor easy to delineate. And if the benefit in terms of climate protection is to be large enough to justify the considerable international effort, then the interests of the energy industry must inevitably suffer. The outlook for a consensus-based intergovernmental process is consequently less than promising.
By contrast, the Montreal Protocol on the protection of the ozone layer did have a manageable and clearly defined object. The task – difficult enough in itself – was to reign in the interests of certain manufacturers of coolants and cooling systems. The Antarctic Treaty was agreed before any vested interests had arisen, and before any significant investments had been made. The WTO treaty, while extremely broad in scope, matches the interests of the most influential states and other global economic agents. International agreements on disarmament and arms control treaties do also have well-defined objects, but go against influential interests in the defence industry. In most cases, unsurprisingly, arms treaties are only ratified if – as in the case of the ban on chemical weapons – the core interests of the defence industry are not significantly affected and the companies concerned, like the chemicals industry, produce primarily for the civilian market. In other cases, the price of ratification was compensation for the affected interests in the form of new defence contracts in areas not controlled by the respective treaties.
The Kyoto Protocol also contains compensatory measures for the energy industry. It is not just emissions trading and the accreditation of energy-efficient investment in developing countries that come into this category, but also the measures agreed in Bonn to compensate the oil-producing countries for lost sales. It is clear in the light of these so-called ‘flexible mechanisms’ that the real compromise lies in the widespread failure to consider structural reform of the energy system. The participating countries are tacitly banking on a more efficient fossil energy system, rather than its replacement with renewable energy. Yet the transition to inexhaustible and emission-free sources of energy must form the core of any sustainable climate and environment strategy.
There is no point in constructing a global strategy for climate change if renewable energy is seen as a secondary issue. Where the aim is to replace fossil with renewable energy, there can be no question of compensation for the fossil energy industry. There can be no environmental revolution in energy supply without creative destruction (à la Schumpeter) of the existing conventional energy industry. Renewable energy, correctly understood, must supplant fossil primary energy and the infrastructure and businesses that supply it. Sunlight and wind are supplied by nature free of charge, and biomass primary energy requires a switch from oil, gas and coal suppliers to an entirely different structure of agricultural and forestry businesses. Having set out with on the wrong premise, the negotiating parties have been swept along by the ever more absurd logic of the discussions. Their only response has been to build in a system of controls to guard against abuse of the ‘flexible mechanisms’. Ever since the decision was taken to pursue climate protection through the instrument of international conferences designed to achieve equitable and binding obligations, it has been inevitable that the goal of climate protection would (at best) be watered down or (more probably) compromised.
It is not just the tangled web of vested interests that makes global climate change negotiations, as they have hitherto been conducted, unlikely to succeed. Even if this web did not exist – albeit it is broader-based and more intense than the links between politics and the defence industry – there are still economic and technological reasons why a negotiation-based approach has little chance of success. An energy supply which protects climate and environment must necessarily be based on renewable, not fossil or nuclear energy, which means replacing the current system with more efficient energy technology using renewable sources. For this reason, and because renewable energy implies a wholly different supply chain, other economic agents and other industrial sectors are implicated than the conventional energy industry – and consequently also other economic interests. Renewable energy requires a highly distributed approach – each energy consumer is potentially also a producer – while also affording wholly new opportunities for agriculture (biomass), the construction materials industry (energy-efficient materials), for engineering professionals and for tradesmen (building to make maximum use of the sun), for manufacturers of industrial plants, machinery and motors (wind turbines, biogas plants, distributed motor generators, fuel cells), for the electrical industry (devices with no need for mains electricity) and many others besides. Properly followed through, this would be an economic revolution of the most far-reaching kind. It is fear of the revolutionizing change that it would bring that motivates the widespread resistance to renewable energy.
History provides many examples of technological revolutions that have reshaped the world. None have run their course without encountering massive resistance, no change has been brought about in consensus with those on the losing end and none has been the subject of an international treaty, even where its effects were felt on a global scale. Nevertheless, many of these revolutionary changes have needed a political framework or targeted help at their inception in order to develop and showcase the economic and cultural benefits. The list includes railways, electricity grids, the car society, shipping and aviation, nuclear power and telecommunications.
This is the way dynamic processes have developed and continue to develop, to the point where they become self-sustaining (a point which the politically sheltered conventional energy industry has yet to reach). The microelectronic revolution happened because of the productivity gains it brought, despite the almost universal structural upheaval it caused. Countries that promoted microelectronics – for example, through government-sponsored research and development – benefited accordingly. Those who held back in order to forestall economic turmoil subsequently fell behind. The same process can be seen today in the biotech industry.
Demands that these technologies should be introduced on the basis of an international agreement with binding quotas, in order to forestall incalculable economic upheaval, were conspicuous by their absence. Anyone who made such a suggestion would have been derided as an economic illiterate. Countries strove and continue to strive to bolster national competitiveness by being the first to make the next breakthrough. And yet the lessons of the past are comprehensively disregarded in the case of sustainable energy technology, although the range of potential applications is greater than for any other technological innovation.
A dynamic climate change strategy that takes the threat seriously must have at its heart the economic opportunities arising from a revolution in energy supplies. It does not take a global treaty to unlock the benefits of renewable energy. Rather, first one and then ever more states and companies must be prepared to seize new opportunities without pandering to the fossil energy industry. The German Renewable Energy Act leads the way in this respect. To the surprise of international observers, it has resulted in unexpectedly high growth rates and brought forth new industries. Inspired by this example, Egypt, China, India, Brazil, Argentina, France and some US state governments are now developing ambitious wind-power programmes of the order of thousands of megawatts.
The trailblazers who proved the doubters and the ignorant wrong were what was needed to make this happen. Opportunities for such trailblazing are legion, ranging from government research programmes, through agricultural and development policy to profit-driven entrepreneurial product innovation that has no need of political aid. In the latter case, the greatest opportunities lie in combining microelectronics with photovoltaic technology, what one might call solar information technology. If governments are to put substance behind the climate change rhetoric, then they must – finally! – change their policies on research, agriculture, development aid, architecture and market regulation. Simply plodding on with the intractable Kyoto process and negotiating refinements to the questionable emissions trading policy is not an adequate response.
This is not to say that global negotiations have no role to play. Rather, what is needed is a new focus, such as changed priorities for the World Bank, a global renewable energy agency to facilitate technology transfer, reciprocal environmental quality requirements on imports and domestic production, an end to trade restrictions on sustainable energy technology and global standards for the same, a ban on subsidized energy exports or an environmental chamber for the International Court.
The result would be a dynamic, goal-oriented climate change policy, free of bureaucratic impediments, and a step forward from simply prolonging and refining the current series of international conferences. Preventing climate change through consensus-building conferences is fantasy politics – all talk and no action.
‘The Solar Global Economy’ offers an alternative programme to the Kyoto Protocol. It details the links between energy resources and economic structures that have given rise to the fossil energy economy, and maps the dynamic road towards renewable energy that will lead to a new and sustainable global economy.