What do the marathon meetings in Brussels to save the Euro and in Durban to extract commitments on green house gas (GHG) emissions have in common? Both are attempting “top down” mandates on local politicians that are doomed to fail.
First to the Euro. On December 9th, after an all night meeting of representatives of the 27 countries in the European Union (EU), an intergovernmental treaty was announced—but only among some of the EU. Only 23 of the 27 EU members committed to much greater fiscal discipline and tougher controls by Brussels: the 17 euro-zone members and six other non-euro countries -- Bulgaria, Denmark, Latvia, Lithuania, Poland and Romania. Notably, Great Britain, Hungary refused to support a change in EU treaties that would authorize stricter budgetary discipline on member countries to address the Euro crisis. Sweden and the Czech Republic will consult their parliaments before deciding if they want to be involved. The agreement was not as a result of popular demand by Europe's people. It came about because European leaders especially, French President Nicolas Sarkozy and German Chancellor Chancellor Angela Merkel believed the Euro was in irreparable danger without gaining control over sovereign country fiscal policies. The agreement requires that in the future, national tax and spending plans must be approved by European officials before they can be implemented by national politicians. There are to be automatic sanctions against those countries that overspend. The notion is that to save a monetary union, there must also be a fiscal union. Where does this leave local politicians and their constituencies? Effectively, bureaucrats in Brussels will decide on how democratically-elected governments are to respond to local constituent demands and any differential crises through fiscal policies. Even in comparatively homogeneous Europe (as compared to the rest of the world’s countries), conditions are so different and ceding authority to a top down supranational organization impedes the kinds of reactions to localized demands within a country that voters expect. Already, the understandable discord is leading to greater tension within the EU, threatening more, not less economic integration. Last night's historic agreement has little to say about debt, about the absence of economic growth and opportunity, or about the European economies that continue to grow apart. British Prime Minister David Cameron sought regulatory exemptions to protect the City of London’s position as the premier European financial services market, but Germany and France would not budge. This is only the beginning however, as politicians—even those in countries that are part of the agreement—attempt to respond to constituent demands. How will this agrement be enforced? The French and the Germans would like to see the European Commission and the European Court of Justice involved in enforcing and overseeing these new rules. This would be a major loss of sovereignty that marginalizes local politicians and their ability to serve voter interests. When they cannot act within the framework of the new rules, there will be sharp reaction from country citizens. They likely will demand a rethinking of their relationship with Europe once they see that their elected politicians have little to say about how tax and expenditure policies are devised. All of this does not bode well for the future of the EU.
Now to the 17th Conference of Parties (COP) to the United Nations Framework Convention on Climate Change meeting in Durban, South Africa from November 28-December 9. As with the Euro Summit, the COP is an international effort to force countries—certain countries actually, to curtail greenhouse gas (GHG) emissions. Perhaps not surprisingly, the EU is the leading critic of the US for not agreeing to a binding treaty. Under the notion of “common, but differentiated responsibilities,” developing countries such as China and India, which are the sources of major new GHG emissions are not required to meet the same restrictions as are developed countries, particularly the US. A major aim of the Durban COP is agreement on a roadmap for action on emissions reduction that would bind the EU and some other countries to a second commitment period under the Kyoto Protocol, which will expire in 2012, while others, including the U.S. that has not ratified the protocol would agree to negotiate a new, broader legally binding agreement. The U.S., however, requires that all major developing countries agree to be bound by emissions targets. Otherwise, in this global problem, cutbacks in the US can be perfectly matched by increases from China and India with no appreciable impact on the stock of GHG in the atmosphere. Further, the costs of reducing emissions significantly are very difficult to determine, but they clearly are not trivial—especially for industrialized countries like the US that rely on low-cost fossil fuels. And most industrialized countries, including the members of the EU, already are gripped by slow economic growth, high unemployment and reduced opportunities for their citizens. Their economies can little afford top down international emission mandates. Developing countries, such as China, which is now the largest emitter, have much more buoyant economies but would have fewer limits. As with the Euro efforts, country politicians would be required to cede authority through an international treaty with no realistic enforcement mechanisms. As struggling industries in the US and elsewhere are saddled with higher energy costs, their competitors in low-labor cost developing regions can surge past with no effective mechanism for ensuring that all parties are operating on the same playing field. Free-riding will be rampant and will be unfair. Local constituencies are not likely to be amused by this situation as their economies differentially suffer. In democracies voters rightfully will respond. If this were not enough, the COP is to finish establishment of a Green Climate Fund provided by developed countries to cover the costs of adaptation to any climate change among developing countries. Supposedly, this fund will be disbursing $100bn a year by 2020, but there are no clear rules on how the funds would be distributed or on how their expenditure be monitored. This Green Climate Fund demand comes at a time when US, Japan, and most of Europe have large government deficits and debt loads, and citizens wary of higher taxes. And in those countries there are constituencies that could use some development funds of their own to offset cuts in education and infrastructure investments.
In the end, both of these international efforts are being thrust upon unwilling populations—witness the collapse of cap and trade at the federal level in the US. Without genuine support of citizens, no national politician can credibly commit to international treaties that restrict their options to respond to local demands. This is why top down does not work. Any agreement that does not reflect widespread popular demand is doomed to fail, regardless of its merits. It cannot be imposed by elites. The political reaction to high treaty-imposed costs could unravel the European Union and prevent any meaningful long-term international climate coordination.
(photo credit: aranjuez1404)