Accommodating prosperity

Feb. 26, 2007
A global-warming response that accommodates prosperity should have more appeal than one that promises stagnation.

A global-warming response that accommodates prosperity should have more appeal than one that promises stagnation. So why doesn’t the Asia Pacific Partnership on Development and Climate receive more attention?

Signed in 2005 by India, China, South Korea, Japan, Australia, and the US, the partnership emphasizes markets and technology in pursuit of economic growth and environmental improvement for developing countries. Because it relies on voluntary action and innovation instead of mandates, backers of the rival Kyoto Protocol have dismissed it as unsubstantial. Yet their own approach is foundering as one ratifying country after another falls behind in its efforts to meet targets for emissions of greenhouse gases.

Agenda forming

Where Kyoto puts emission targets ahead of economic consequences, the Asia Pacific Partnership looks for ways to integrate environmental, technical, and economic progress. That it did not lead with a political agenda is in fact a sign of seriousness. And now an agenda is coming into view.

A paper written for the International Council for Capital Formation (ICCF) points to basic economic reform in developing countries as essential to climate-change response. “Institutional reform is a critical issue for the partnership because the lack of a market-oriented investment climate is a principal obstacle to reducing greenhouse-gas emissions in China, India, and other Asian economies,” write W. David Montgomery, vice-president, and Sugandha D. Tuladhar, associate principal, in the Washington, DC, office of CRA International. The ICCF has been a prominent voice warning of the heavy costs of Kyoto compliance.

“The same institutional factors that are prerequisites for sustained economic growth-laws protecting property and contracts, fair and efficient administration of justice, reduction of the government’s role in the economy, minimization of regulatory burdens and corruption, and openness to foreign investment-are closely associated with efficient use of energy and low greenhouse-gas emissions per unit of output,” Montgomery and Tuladhar write. Compared with other members of the partnership, they say, China and India have far higher energy use and greenhouse-gas emissions per dollar of output-rates called energy and emission intensities. The countries also have relatively low economic freedom. An analysis by the authors of 91 countries shows a strong relationship between economic freedom and the improvement in energy intensity that accompanies growth.

Montgomery and Tuladhar see opportunity in the high-emissions energy technology of developing countries. While China’s emissions intensity is improving, its installed capital equipment produces greenhouse gases at about four times the rate of US equipment. India’s emissions intensity isn’t improving, and its new investments involve technology with twice the emissions intensity of new US investments.

“Our calculations show that emission reductions can be achieved by closing the technology gap,” the authors write. “The potential from bringing the emissions intensity of developing countries up to that currently associated with new investment in the United States is comparable to what could be achieved by the Kyoto Protocol.”

Montgomery and Tuladhar urge Australia, South Korea, Japan, and the US to fund research into topics such as the investment climates and energy patterns of China and India. They recommend negotiations, through a system of task forces that the partnership already has in place, to identify institutional reforms and investments with the potential for lowering emissions. They say the consequent investments could reward India and China for institutional reform.

Hazy recommendations

These recommendations remain hazy-no doubt too hazy for the noisy crowd that demands immediate action, even if it’s wrong, on global warming. But they have a chance to develop into negotiated, voluntary measures that can work. This can’t be said for the act-now, mandatory approach that produced the Kyoto treaty.

Kyoto relies on a futile political proposition: certain sacrifice for uncertain benefit. Real progress on the mitigation of climate change depends on reduced emission rates accomplished along with, rather than at the expense of, economic growth. As the Montgomery and Tuladhar paper implies, in fact, growth-and the access it provides to efficient technology-can be a precursor to emission cuts. The study, like the Asia Pacific Partnership, deserves more attention than it so far has received.