International Affairs Forum: You have argued that India should say no at Copenhagen (referring to the upcoming United Nations Framework Convention on Climate Change in Copenhagen). What are your reasons?
Dr. Arvind Panagariya: In that op-ed article, I had stated that India should say no to internationally mandated carbon reduction commitments, because such reductions by a poor country such as India would be inequitable.
Given its low per capita income of approximately $1000 and widespread poverty, India needs to maintain its current high growth. Its CO2 emissions at 1.2 tons per capita are one-fourth those of China and less than one-fifteenth those of the United States. Even capping let alone mitigating emissions from this low level would bring down India’s growth rate adversely impacting its battle against poverty.
For example, four in ten homes in India today still do not have electricity. How can India bring electricity to these homes under existing technological conditions if it accepts obligations to reduce its carbon emissions?
This does not mean that India should take no action to voluntarily reduce its carbon emissions. For a while, however, given India’s current development situation, and the fact that India’s contribution to the current carbon stock is relatively low, it should not be subject to mitigation commitments at least until 2030 or maybe as late as 2040.
Any agreement, at Copenhagen, which requires India to actually cut CO2 emissions, whether one takes the 1990 levels or 2005 levels, will be anti-development.
IA-Forum: What should India’s position be regarding climate change? What voluntary actions can it take to reduce greenhouse gas emissions?
Dr. Panagariya: India already has a national plan to combat climate change. The plan has many components including, for example, increased investment in green technologies and putting in place more environment-friendly building codes and automobile fuel efficiency standards. India is also undertaking large-scale reforestation (similar to China). All these efforts are geared toward making India’s development and growth less intensive in terms of its overall carbon footprint.
Politically, it is possible for the government to go farther if commitments are voluntary and under national laws then if they are seen as imposed from outside through an international treaty.
IA-Forum: Developed nations have argued that 2005 should be the base year for greenhouse gas (GHG) emissions in Copenhagen as opposed to the 1990 base year for Kyoto. What do you think of this change?
Dr. Panagariya: Evidently, the shift in base year is being sought to create the illusion of larger mitigation effort than actually undertaken. But most observers are not going to be fooled by such creative arithmetic. They know that a reduction of 17 percent relative to 2005 emission levels by 2020 by the United States would amount to at most a tiny reduction relative to the 1990 emissions.
IA-Forum: Is there an intractable trade-off between reducing GHG emissions (or just CO2 emissions) and securing greater economic growth, for developing countries?
Dr. Panagariya: There is no doubt that mitigation will adversely impact growth. If that were not the case, developing countries would not resist accepting mitigation obligations. Indeed, the key reason why developed countries themselves have done so little by way of mitigation is because it is a very costly activity.
Developing countries realize as much as developed ones that global warming will hurt everyone; in fact, it may hurt developing countries more given their limited resources and geography. Therefore, they are keen to do their bit but they face a serious phasing out issue. For two or three decades to come, they need to be able to grow rapidly and eliminate poverty and then join the mitigation effort in earnest. But even in the meantime, they are keen to make a contribution to fighting global warming through more rapid adoption of green technologies and reforestation. The emphasis on green technology sharing in the Memoranda of Understanding (MoU) Prime Minister Singh signed during his recent visit to the US testifies to India’s keenness for opting for less energy-intensive growth than would have been the case absent global warming problem. India wants to avoid the mistakes China made by adopting a highly energy-intensive path to growth.
Right now, inexpensive mitigation technologies and green sources of energy are unavailable. What we need is massive investments in the discovery of low-cost mitigation technologies and green energy sources. That will make the tradeoff between growth and mitigation more favorable and the poor countries more willing to undertake aggressive action against global warming.
One to accelerate the pace of mitigation is to create a large fund through contributions by developed countries from which R&D can be financed. Columbia university economist Jagdish Bhagwati argues that the creation of such a fund through contributions by developed countries, which are largely responsible for the past emissions, can be justified along the lines of the U.S. Superfund Law. The latter was created to clean up toxic-waste sites created by the dumping of toxic waste by large corporations over several decades in the United States. The Superfund Law, which came into existence in 1980, provided for retroactive enforcement and the companies that had contributed toxic wastes on these sites were subjected to fines that were then used to clean up the sites.
There is a parallel here that developed industrial countries, with their carbon intensive growth models, have done substantial damage and contributed to climate change. In this case, effective cleanup is not possible, as carbon in the atmosphere cannot be made to go away. The alternative is to create a substantial fund, say $100 billion/year and use it to undertake research on green technologies. The discoveries/inventions made as a result of such research could then be made available free of charge to all countries to achieve maximum mitigation.
IA-Forum: If you were advising developed country leaders – say, President Obama asked you what US policy should be – with regards to developing countries’ concerns on climate change, what would be your advice?
Dr. Panagariya:: I would advise President Obama, or any other developed country leader, to make a distinction between China and other developing countries. China is the largest CO2 emitter now and no other developing country emits anywhere close to it.
This would be in accordance with the common but differentiated responsibility within the UN Framework Convention on Climate Change. By providing a reprieve for developing countries, other than China, you would give them some rope to reach income levels of about $3000 to $5000 per capita. This would better prepare developing-country citizens to handle extreme events such as floods and droughts (which seem to be increasing in frequency because of climate change) and also help them secure better education, health, and nutrition. Within two to three decades, these countries can be required to joint the mitigation effort.
In the case of India, I have argues that it be required to accept mitigation obligations on a date such as 2030 or 2040. For some African countries the year for mitigation commitments may well be as late as 2050. In the meantime, we can still exert moral pressures on these countries to minimize emissions under their national laws.
I would also caution President Obama in particular that I would keep trade sanction issues separate from the climate change issue. In the Waxman-Markey bill there are sanctions triggers to punish countries that do not adopt cap and trade system similar to the one proposed in the bill. Such linkages do not create an atmosphere conducive to productive dialogue, which is much needed at Copenhagen.
IA-Forum: What should the stance toward China be then?
Dr. Panagariya: It has to be political negotiation. China could start mitigating sooner, say around 2015 or 2020, given its large carbon footprint and its development stage. It is important to make the distinction between China and other developing countries, especially India. The US Congress’ refusal to distinguish between India and China, despite differences in per capita CO2 emissions as well as their incomes, just doesn’t make sense.
IA-Forum: Do you know of a particular developed country (/countries) that has a climate change policy agenda, which takes the concerns of developing countries seriously and has effective ways to incorporate these concerns?
Dr. Panagariya: : Broadly speaking, I would say that the European approach is much more sensitive to developing country concerns than the American approach.
Europeans committed to the Kyoto Protocol, and at least some countries – examples that come to mind are Norway, the UK and Germany – have achieved substantial mitigation. We, on the American side, are signatories to the Protocol, but our Senate never ratified it (if I remember correctly the vote in the Senate was 95-0 defeating ratification).
Now, from the American side, we demand quite intensely that developing countries, such as China and India achieve CO2 emissions cuts (when one must remember that under Kyoto they were not required to undertake any cuts). Otherwise, the threat is that America will not commit to any meaningful emissions cuts either.
For Copenhagen, the Europeans are seriously considering a substantial fund that would accelerate research on green technologies and aid developing countries so that they can reduce their carbon footprint. On our side, America has not addressed this issue of providing research and financial capital. This complicates matters, because the European fund is conditional on other developed countries doing their part.
So far, though, the European approach is more sensitive to developing country concerns.
Arvind Panagariya is a Professor of Economics & Jagdish Bhagwati Professor of Indian Political Economy at Columbia University and a Non-resident Senior Fellow at the Brookings Institution. In the past, he has been the Chief Economist of the Asian Development Bank and a Professor of Economics and Co-director, Center for International Economics, University of Maryland at College Park. He has also worked for the World Bank, IMF, WTO, and UNCTAD in various capacities. He holds a Ph.D. degree in Economics from Princeton University.
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