Industry Today: The World of Manufacturing

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 Date:6/5/2009

 

News & Views
Smog and Mirrors
William R. Hawkins cautions on “the green trap in Bonn” and China’s reluctance to sacrifice growth for green.

The 30th session of the UN Framework Convention on Climate Change (UNFCCC), the sixth session of the Ad hoc Working Group on Long-term Cooperative Action (AWG-LCA), and the eighth session of the Ad hoc Working Group on further commitments under the Kyoto Protocol (AWG-KP) are meeting in Bonn, Germany June 1-12. This gathering is the key event leading to the grand Climate Change Conference scheduled Dec. 6-18 in Copenhagen, Denmark. There, the draft of a new treaty to replace the 1997 Kyoto Protocol is to be drawn up. The Kyoto Protocol, which the United States refused to ratify, will expire in 2012.

The Copenhagen meeting will be the 15th Conference of Parties (COP) session of the UNFCCC. The international politics of these meetings are as convoluted as the bureaucratic nomenclature. The UNFCCC was established in 1992 with “the goal of preventing dangerous human interference with the climate system” but what really matters is not “interference” but competition among human national communities to gain economic advantages, shift costs to others, and control their own fates.

The last comparable UNFCCC meeting was held in Bali, Indonesia in December, 2007. That gathering adopted the “roadmap” for future negotiations. The document treated developed and developing parties differently. While developed lands like the United States are to have “quantified emission limitation and reduction objectives,” the developing states are allowed to temper any such actions within “the context of sustainable development, supported and enabled by technology, financing and capacity-building, in a measurable, reportable and verifiable manner.” The double standard allows China (and others) to continue to provide safe havens for high emission industries that will need to relocate from those developed countries which enact uneconomical regulations to meet UN targets or to satisfy domestic Green constituents.

China plays a central role in the diplomatic process, jockeying for leadership of the developing world against the developed nations. China released a climate change plan in June 2007, ahead of the UNFCCC meeting, which identified as priority areas advanced coal technologies, energy efficient buildings, clean vehicles, and advanced industrial technologies. The 1st National Climate Change Strategy stressed that the country's top priority remains “sustainable development and poverty eradication.” Ma Kai, chairman of China's National Development and Reform Commission, told the international press at the time, “The international community should respect the developing countries' right to develop.” India, Brazil and the other rising countries feel the same way, as they should.

The diplomatic term of art is “the principle of shared and differentiated responsibilities.” The U.S. Senate preemptively rejected this concept by a vote of 95-0 in July 1997 in an attempt to head off the Kyoto Protocol. Beijing, however, could accept Kyoto precisely because it required no action on its part. The final statement from the July, 2008 G-8 summit in Tokyo on climate change adopted the same double standard, using the phrase “differentiated responsibilities and respective capabilities.”

Even so, the developing countries objected to the G-8 goal of halving world carbon dioxide emissions by 2050. China, India, Brazil, Mexico, and South Africa (known as the Group of 5) issued a statement declaring their split with the G-8 (United States, Japan, Russia, Canada, Italy, Germany, France, and United Kingdom). They rejected the notion that all should share in the 50-percent target, asserting that the wealthier countries have created most of the alleged environmental damage. “It is essential that developed countries take the lead in achieving ambitious and absolute greenhouse gas emissions reductions,” said the G-5 statement.

Chinese President Hu Jintao went further in separate remarks, saying, “China's central task now is to develop the economy and make life better for the people,” Beijing has launched a $586 billion domestic stimulus package with special provisions to aid its emerging auto industry and world’s largest steel industry. It is also commissioning new coal-fired power plants at a rapid pace.

During a trip to Washington this March, Li Gao, Director of Climate Change at the National Development and Reform Commission, insisted that China’s export sector be exempt from carbon emissions reductions in any post-Kyoto agreement. Yet, according to research at the Center for International Climate and Environmental Research–Oslo published in the Feb. 28 issue of Geophysical Research Letters, China’s export industries accounted for half or more of the country’s surge in carbon dioxide emissions since 2002. China is now the world’s number one emitter of CO2 gases. Chinese manufacturing produces a carbon footprint two to five times the size of American-based industries.

The Obama administration has placed a great deal of emphasis on environmental cooperation with China, as if the U.S. was trying to create a common enemy in “global warming” so as to form an alliance with Beijing that would overshadow the traditional geopolitical conflicts that divide the two nations. This was the message Secretary of State Hillary Clinton took to Beijing in February. It was also the focus of President Barack Obama’s comments when introducing Utah Gov. Jon Huntsman, Jr. as his choice for U.S. ambassador to Beijing. Gov. Huntsman is a believer in global warming and in a 2006 speech at Shanghai Normal University spoke of the need for China and the U.S. to work together on environmental issues. His family owns chemical plants in China.

Chinese leaders do not believe in the “global warming” hokum embraced by the Obama administration, but they do want to boost energy efficiency in a period of rising costs and reduce urban pollution for health reasons. Anyone who has visited China has experienced the dense cloud of smog that hangs over its cities, unlike anything seen in the U.S. Beijing will not, however, sacrifice growth in pursuit of “green” goals.

On May 22, Beijing issued its vision of what the Copenhagen draft should mandate: “Firstly, set quantified emission reduction targets for developed countries for the second commitment period under the Kyoto Protocol; secondly, establish effective institutional arrangements to ensure that developed countries fulfill their commitments to provide technology, financial and capacity building support to developing countries; thirdly, enable developing countries to, take proper measures suited to their situation to adapt to and mitigate climate changes with the technology, financial and capacity building support from developed countries.” No targets are set for the developing countries, but “by 2020, as a mid-term target, developed countries as a group shall cut their emissions by at least 40 percent from the 1990 level.” Such a requirement would drive a mass migration of industry to China from America and Europe.

Beijing will want to control the process by which “green” technology is introduced into China. President Obama wants to invest $150 billion over the next decade to create renewable energy sources and “green” technologies which can then be exported to create jobs in America and reduce the trade deficit. China, however, does not want to import the products of technology; it wants the technology itself transferred so local firms can manufacture what is needed. China imposes high tariffs (up to 35 percent according to World Trade Organization data) on all but two of the 43 “climate-friendly” technologies identified by the World Bank. To reach the Chinese market, firms will have to locate their factories behind these tariff walls, producing in China to sell to China.

In a New York Times op-ed May 6, Daniel M. Price, a former assistant to President George W. Bush for international economic affairs, urged a “free trade” approach to green technology, arguing that, “Cutting tariffs on clean technologies is a constructive, rather than confrontational, approach to trade and climate change.” But he does not understand Beijing’s strategy. The purpose of “protectionism” is not to keep products out, but to draw capital and technology in.
The Chinese approach has been dominant within the AWG-LCA, where the call has been for, "Effective mechanisms and enhanced means for the removal of obstacles to, and provision of financial and other incentives for, scaling up of the development and transfer of technology to developing country Parties in order to promote access to affordable environmentally sound technologies; and ways to accelerate deployment, diffusion and transfer of affordable environmentally sound technologies.” By “affordable” is meant subsidized, free, or simply stolen as the result of the non-enforcement of intellectual property rights.

American industry thus faces a double danger. First, if unilateral restrictions or “differentiated responsibilities” are imposed on U.S. firms, competitiveness will suffer and more plants will be moved overseas (or replaced by foreign rivals). Second, if the U.S. falls into the “diffusion and transfer” trap at the UNFCCC, it will not be able to exploit any comparative advantage it might gain from investment in “green” technology. The ability to create new export industries to offset those lost in traditional manufacturing will be crippled.

Washington needs to worry less about fanciful notions of global climate change and more about the reality of global economic change if America is to have a secure and prosperous future.