New report on international institutions and climate change

by | May 10, 2009 | Climate and resource scarcity, Cooperation and coherence, Global Dashboard, Global system

Tomorrow sees the launch of a new Center on International Cooperation report on the subject of international institutions and climate change, co-authored by David and me (see also this story on the report in tomorrow’s Guardian). 

When we were commissioned to do the paper a few months ago by the UK Department for International Development, it quickly struck us that although the world has invested a massive amount of time and money in understanding both the science and the economics of climate change, we’re a long way behind in thinking through the kind of institutions that we’ll need in order to tackle the issue successfully.

It’s a strange oversight, when you think about it: after all, the challenge of climate change is above all one of leadership, of co-ordination and collective action – all of which come straight back to the question of institutions. The report is therefore a intended as a small contribution to the nascent global discussion about the new kinds of institution we need to tackle a new kind of global challenge.

The paper starts by setting out three scenarios for how institutions evolve to manage climate change – with varying degrees of success – between the Copenhagen summit at the end of 2009 and the year 2030.  Subsequent sections turn to the drivers that underpin the scenarios; an assessment of the multilateralism that we have now and its inadequacies for dealing with climate change; an exploration of the multilateralism that we’ll need, in order to tackle climate change successfully; and finally, how we might chart a path towards it.

The report argues that the most important thing that global institutions must deliver in order to stabilise the climate is what we call “signals from the future”. What we mean by this is that the way countries, companies and citizens behave today fundamentally depends on what they expect to happen in the future – so institutions must shape those expectations towards the desired outcome, and create a positive, self-fulfilling prophecy.

For if countries, companies and citizens expect a slow, tortuous transition to a low-carbon world, then it makes sense for them to free-ride on emissions reductions undertaken by others, to hedge their bets, to slow the process down.  If, on the other hand, they expect the low-carbon transition to happen quickly, then the incentives are instead for them to lead the change – in effect, to take part in a race to get out of carbon.  It’s either a virtous spiral or a vicious circle, in short – and institutions are the factor that can make the difference between the two.

signals_from_future2

To be able to send such signals from the future, we argue that radical global institutional change will be needed.  We need a framework that manages climate change over the full term of the challenge, based on a scientifically derived stabilisation target; a transparent, equitable formula – an ‘algorithm’, as we think of it – for sharing the global carbon budget out between the world’s nations; and a far more rigorous compliance and enforcement regime than the one agreed for Kyoto.  As we argue in the report,

It seems inevitable that a long-term climate deal will ultimately require an ‘all or nothing’ approach to international participation. Either countries play a full part in the system (and thus have access to international frameworks on finance, trade, development, energy and other resources, and perhaps even security); or they sit outside the international system and are effectively barred from all forms of international co-operation.

Carbon default, in other words, would be become as weighty an issue as sovereign default, or failure to comply with a Security Council resolution. That this should currently seem inconceivable indicates the extent of the shift in understanding that is still needed.

Should we believe the US Treasury’s stress tests?

by | May 8, 2009 | Economics and development

The results of the US Treasury’s stress tests of America’s 19 biggest banks yesterday were less bad than many were expecting. Nine of the banks, including JPMorgan, American Express and  Goldman Sachs, were given the all-clear by the Treasury – they weren’t likely to need any more state support.

And the other ten banks, including Citigroup,Wells Fargo, Bank of America and GMAC, only needed $75 billion in fresh capital. That’s alot, but it’s alot less than the $480 billion that Nouriel Roubini, or ‘Dr Doom’ as the economist has come to be known, suggested the sector needed in February.

That means that, if the stress tests are correct, the government’s ongoing presence in the banking sector is likely to be limited, and we are unlikely to see the sort of mass nationalisation of the sector that many, including Roubini (and myself) thought we would eventually see.

Geithner declared that the results marked the end of a long period of uncertainty, and ushered in a new stage of transparency in the crisis.Markets, on the whole, seemed inclined to believe him, with equity futures up in the US.

Now, the debate has shifted quickly from a discussion of mass nationalisation to the question of letting banks fail. If only two or three banks need large amounts of capital – Bank of America, Citigroup and GMAC, for example – then perhaps there is less systemic risk in letting them fail, and the government should look to carry out an orderly winding up of these institutions in a way that protects depositors without bailing out private lenders.

That much was suggested by Roubini in the FT yesterday, who was quick to re-position himself after his original apocalyptic estimate was shown to be apparently wrong.

But are the stress tests really a step forward for market transparency, or instead a confidence trick? (more…)

Russia’s government goes street

by | May 7, 2009 | Europe and Central Asia, Influence and networks

medvedev

Russian President Dmitry Medvedev has launched a video blog, in which he appears in shirt and jeans (none of Gordon Brown’s ill-fitting jackets and terrifying grins) and expounds the virtues of the internet to Russia’s yoof.  Apparently, it’s a good tool for governments to interact with their citizens, and for the latter to suggest “interesting ideas,” although Medvedev admits that state provision of online services is weak. Videos so far cover such gripping issues as the World Policy Conference in Evian, his preparations for the Annual Federal Assembly address, and “recreation and the development of popular sports in Russia.”

Perhaps more surprisingly, the blog allows for comments. Young Russians are understandably wary of this – several of those who have left comments so far are worried about being locked up if they say what they really think. According to the Atlantic Monthly, however, some of the suggestions have already been acted on – the president’s staff looked into a complaint about a local children’s hospital and the hospital called a press conference to discuss the problem.

Other comments have been less serious – one asked if the prez is going to an Alice Cooper concert in Moscow in June (no reply yet). Another wondered why he’s filmed sitting in front of a load of ancient monitors when he’s trying to look like a funky netizen. Thousands of people have remarked on various issues, and there are signs that the blog is lightening up – one vid shows Medvedev in a plane on his way back from Latin America, telling viewers his impressions of Peru, Brazil, Venezuela and Cuba.

Update: Actually, I’ve just read the transcript and that clip is not as exciting as it sounds – far from telling us about Havana nightlife, encounters with Rio transssexuals or doing drugs in the Andes, Medvedev limits himself to explaining what an important trading partner South America is and how great Castro was. Oh well, beggars can’t be choosers.