Remember last year at this time the world was in frenzy over the upcoming Copenhagen conference on climate change. It was a ‘save the world’ kind of thrill running up the leg of most of the delegates. Expectations were high that the United State under new President Barack Obama would join the party and commit to a giant transfer of wealth and technology from the developed world to the developing world.
“Pay me big time or I will emit again!”
Well, Copenhagen didn’t quite work out that way thankfully. Not for lack of trying or perhaps even the willingness of the United States and the EU to craft some compromise, but because China and other fast growing countries were unwilling to subject themselves to the same constraints they sought to impose on the developed world. Seeing the ruse staring them in the face, the developed countries said no.
But now a year has passed and the hype is not quite the same, but the global warming crowd is again trying to create the same drama surrounding the Cancun conference. China is playing its part:
“Senior Chinese officials said on Tuesday that next week’s climate talks in Cancún, Mexico, would succeed only if the West agreed to transfer technology to developing countries like China and to take the lead in cutting emissions.” New York Times, November 23, 2010
Only this time the world isn’t buying it.
The combination of events that is casting a foul mood over the COP15 party reads like the plot line of a soap opera. But the the actors are actual politicians working overtime to get themselves out of their sticky situation by reducing expectations for COP15 outcomes they can no longer deliver. All except for President Obama whose decision to go to Copenhagen has not wavered—much. He now plans to arrive near the end of the event since Congress failed to give him a cap and trade legislative victory to wave to the crowds as he motorcades past The Mermaid on the way to the adoring world chattering classes.
The CRU email-gate scandal is certainly a juicy plot twist in this soap opera even if it does have inconvenient timing but it seems to have scared off Al Gore (the perfect villain) from attending the event.
The ‘You’ve Got to be Kidding Me’ Effect
But let’s face it, what is really happening is that the combination of forces having the most impact is that the BRIC countries have hung together saying NO! We will not shoot ourselves in the foot for your Euro-American political correctness.
China and India have now offered up goals they are prepared to work toward—and if they do so it would not only be good for the planet and good for their own economy and populations. Americans are also looking at economic reality and have come to the conclusion they we do not want to shoot ourselves in the foot either by imposing huge costs on our economy just as we seek to recover from this Great Recession. These are the realities driving the reduced expectations for Copenhagen.
The CRU-email scandal can have a positive outcome if it takes some of the hot air out of the climate crisis advocates and forces a realistic and balanced look at the true climate science (whatever it is) and the economic impacts of cures that may actually be worse than the disease.
Too bad they canceled the soap opera The Guiding Light after 50 years on TV. This climate crisis stuff offers an entirely new set of plot lines and intrigue. Al Gore could even play himself!
There are plenty of good and sufficient reasons we should be good stewards of our planet and take actions to reduce greenhouse gas emissions. Following our politicians off the cliff for the sake of political correctness or their own political aspirations is not one of them.
We believe in science and technology and have found the inconvenient truth is that real science is trial and error and not all the theories work out. Real science never tells us there is incontrovertible proof of anything because real scientists know better seeing science as a journey of continuous discovery not a mission to a predefined political objective. True science tells all, confesses all, seeks validation in peer review and competing research, admits error and shares the lessons from failure so others learn from its mistakes.
Now if we could only teach the scientific method to our politicians!
The countdown to Copenhagen is ticking away toward the UN climate change conference to be held there in December billed as a ‘must succeed’ event to save the world from the fate of global warming and greenhouse gas emissions.
Do I sound skeptical?
There is a lot at stake in the outcome of this over-hyped Copenhagen conference but the risks are mostly that the assembled politicians will engage in short term political correctness at the expense of long term economic growth. The good news is that there are enough conflicts among the countries participating that the real threat of consensus to do something stupid is fast diminishing as evidenced by the posturing going on to reduce expectations.
Reading the press clippings from the round of consultative meetings is akin to reading the gossip pages or watching coverage of a Hollywood event. As a student of history I am reminded of the infamous quip from Alice Roosevelt who said, “Dear, if you have nothing nice to say about people, please sit next to me.”
So what is being said?
- India Says Get Realistic. Environment Minister of India Jairam Ramesh laments that the Copenhagen delegates need to get realistic or the conference will face the same fate as the Doha Round of trade talks. Interesting that he should make such a linkage because the implications of any agreement on enforceable reductions in greenhouse gas emissions on economic growth is the key issue dividing developed countries and fast growing developing countries.
- Environmentalists Worry No Deal Will Be Reached. You can tell that this conflict is serious when the environmental groups complains about the lack of leadership going into Copenhagen necessary to reach agreement and worried that the talks might fail accuses the developed countries of EU and the US of continuing to “dodge the hard decisions on slashing their emissions and funding the transition to a low carbon economy.”
- China Leads Developing Countries in Rejecting Enforceable Targets. In Bangkok at a recent consultative meeting of those going to Copenhagen, frustrations spilled out on the table as China led 131 of the 180 countries at these advance climate talks in accusing the EU and US of “rejecting historical responsibilities” and trying to “fundamentally sabotage” the Kyoto protocol and the international negotiations over what will replace it. Translation: We the developing countries successfully avoided any accountability for our rapidly growing emissions in the Kyoto Protocol and we have no intention of allowing you EU and US “do-gooders” to force us into being accountable at Copenhagen for reducing our emissions especially if it slows our economic growth.
- Sudan has the Audacity to Accuse Others of Not Taking Responsibility. Sudan chairs a group of emerging countries called the G77 at the talks. In Bangkok Sudan’s representative said that the rich countries want to “kill the protocol.” Translation: Leave us alone at Copenhagen like you did in Kyoto Protocol. We will not agree to any enforceable targets imposed on us.
- We Don’t Have the Votes to Pass Waxman-Markey. Carol Browner speaking for the US was forced to concede that there was no way the US Congress was going to pass this controversial bill before the Copenhagen event. This was embarrassing for the Obama Administration which had hoped to have a bill signed by Copenhagen to wave in the face of the developing countries and complete the Obama apology tour for the US failure to sign onto Kyoto.
So the moon walking away from the Copenhagen cliff begins. . .
The Obama Administration says it wants an entirely new strategy to replace a legally binding world agreement with a voluntary one. This would be a big change from the Kyoto approach which set global emissions targets to a Copenhagen strategy of setting national targets. For the EU this is blasphemy, but it likely is music to the ears of China, Brazil and India—-and no one cares what Sudan thinks anyway.
Ironically, after pillorying George Bush over rejection of the Kyoto Protocol, the Obama Administration now is proposing to scrap it completely in favor of what appears to be a self-policing set of national targets. The US risks being accused of undermining the Kyoto framework and its system of defining global emissions reduction targets by the Europeans and the environmental groups. The issue between the US and EU involves how the national targets are set, but this can probably be finessed.
If the worst that emerges from Copenhagen is a set of fiery speeches about the horrors of global warming and emissions levels followed by a set of self defined and self enforced national emissions reduction “targets” that would be a good outcome.
It reflects another practical reality for President Obama—there is probably no way to get any Copenhagen Treaty—even a benign one approved by the US Senate in the run-up to the 2010 Congressional elections, and probably less chance after that.
Here is the San Francisco Bay Area we have a dangerous cultural phenomenon playing out on the streets. It’s called a “side show” where groups of people use Twitter and text messaging to randomly select a location to rapidly assemble in their cars and motorcycles to perform spins, wheelies, and other dangerous stunts and then disperse before the cops arrive. This is the modern version of the drag race, but people can and do get hurt.
We have a similar kind of “side show” playing out in the chatter about the value of the US dollar and its implications for energy prices. Recently that side show has taken the form of press rumors that there is a conspiracy to dump the US dollar as the world’s reserve currency for a basket of others. Separately, but playing on the same theme are the periodic rants from the bad boys of the world from Iran, Venezuela and others blessed with oil but cursed by stupid leaders who urge shifting oil trading into some non-dollar denomination.
There are problems with the value of the US dollar but being dumped as the world’s reserve currency is not likely to be a consequence of its current weakness. Let’s face it, who else in the world would put up with all these other countries, can float as much debt to create a cash pool big enough to park other currencies, or has the underlying maturity and financial strength (even today) to be the market clearinghouse for the global economy?
So what does this have to do with energy?
Commodity markets particularly in oil have been used, and abused, as a way to compensate for the weakness of global equity markets, currency fluxuation, and to increase the liquidity for traders in a time of market uncertainty. But the cure for that is to strengthen economic fundamentals, restore confidence in the markets, and shift focus from a need to CYA near term to growing earnings and valuation long term.
Yes fundamentals matter both for the broad economy of nations and the world—as well as energy. On the energy side, we are engaged in a rather healthy debate right now about our energy future, mix of fuels, sources of power generation and the price we are prepared to pay as consumers to achieve the emissions reduction aspirations of our politicians. The recession is buying us time (how’s that for sick logic?) to have this debate, but reality is setting in sooner than some politicians had hoped.
For the same reasons the US dollar is likely to continue as the world’s reserve currency (there simply is no practicable alternative!) I suspect the world’s energy balance will come through this period of reflection and debate recognizing the realities that the fastest path to a cleaner environment is through healthy, productive, growing economies around the world where investment in new technology is made, energy efficiency in new plant and equipment is built in to expansions, and the social policy is worked out to enable global markets to work efficiently with the least distortion from trade barriers, subsidies, or misguided industrial policy experiments.
Don’t expect that prescription to come from Copenhagen or Washington or Brussels or Beijing. But competitive global markets have a way of enforcing balance, and consumers still look out for their own economic self interest. So the best defense for both nation states and individuals is healthy, competitive, open world markets including energy.