From Climate Change to Cap-and-trade: Something Rotten in Denmark?

Earlier this year, everyone in the environmental punditocracy had an opinion on what domestic policy moves the leading economies and emerging nations might make to position themselves in advance of December’s climate change conference in Copenhagen.

The US? President Obama would arrive wearing a badge of victory: the world’s first-ever all-auction cap-and-trade system. China and India? The world’s fastest growing economies would put domestic Potemkin policies in place to demonstrate good faith. Western Europe? With a carbon cap in place and a bona fide legacy of environmental leadership, the Old West would continue to carry the mantle by pushing for significant advancement beyond Kyoto standards.

The global economic meltdown has rendered impossible any determination of how accurate those predictions might have been. Although things are looking up economically, there is no telling what history will be written in Denmark this winter.  The signs are not promising.

Instead of his campaign-promised 100% auction-based carbon cap, the Yanks will pull into Scandinavia bearing whatever shell of Waxman-Markey can make it through the Senate…if one can. The US may be left to tout the very flawed and not very original Cash For Clunkers program as its most progressive recent climate change legislation.

Things are not much better Down Under, where a Senate climate change vote last week not only saw the defeat of cap-and-trade, but may result in a call for early elections by the country’s center-left Labor Party. Labor had better be careful, with public opinion going the way it is on the economy-environment trade-off, their attempts to ouster the coalition opposing climate action could result in their own numbers dwindling.

At least someone has stayed true-to-form. Even as India continues its comfortable flight pattern — right down below the radar — the country announced plans to take steps that would allow them to eventually take steps to protect their natural resources and regulate climate changing activity. Their plans are very preliminary and include the creation of a US-modeled environmental protection agency that would begin to create and enforce environmental standards on development. For a global population leader and burgeoning economic giant, the Indians draw far less attention than China; and, they seem to draw little of the scrutiny to which other nuclear powers are subject. This policy announcement fits neatly into what seems a rather comfortable coyness.

The capstone? The WSJ interviewed the godparents of cap-and-trade, two US economists, and both felt that carbon trading would not be up to the task of managing today’s global carbon problem, especially without a credible international enforcement mechanism.

Diplomacy is unpredictable, and maybe something progressive and surprising will emerge from Copenhagen. Economists, scientists and observers all seem to agree that what the world really needs now is a hard carbon cap or carbon taxing regime. If the developed world can offer the Indians, Chinese, Southeast Asians and Africans enough of a delay in implementation or a sufficiently discounted carbon rate, maybe a cap is feasible. In a global diplomatic setting, US and other leaders may be isolated enough from domestic political pressure to do something aggressive.

Then again, when they close up shop in Denmark and head home for the holidays, whatever agreements have been made will become subject to ratification by the same domestic legislatures that have been reluctant to act or inept at doing so. And, if they wouldn’t approve Kyoto…well, perish the thought.

The outcome seems as irresistible as the analogy, chances are that the dawn of 2010 sees the world standing over a Danish grave, their once jovial hopes turning to dust: “Alas, poor Yorick! I knew him…”

[photo credit: Flickr]