After Copenhagen

Well, it's over.  The 2009 United Nations Climate Change Conference ended not with a bang, a whimper or a treaty but rather with something akin to a scream from developing countries--some like Tuvalu that may one day end up under water--whose objections to a plan cobbled together at the last minute prevented the conference from reaching a formal agreement.  Instead, the organizers "took note" of an accord forged by the US, China, India, South Africa and Brazil  that now lacks even the mild imprimateur of formal endorsement by the UN conference. 

And what of the Accord reached by those five countries that other countries may now sign onto?  Given the fear and loathing that broke out earlier in the week between the developed and developing nations that with disastrous logistics threatened to make Copenhagen the Seattle of climate change negotiations, it was as good an outcome as could have been hoped for by the end.  However, the deal struck--to commit to reduce emissions with transparent reporting--was far weaker than what appeared achievable earlier in the week let alone expectations for the conference.  It keeps the idea of a global climate change accord alive but just barely. 

In retrospect, the idea of forging an international agreement requiring the acceptance of every country on earth during the greatest global financial crisis since the Depression to deal with a crisis whose greatest effects may not be felt for decades, may have been overly ambitious.  The promise of a global agreement on climate change that began in Rio made sense for many reasons.  The atmosphere moves across the face of the globe so that gases emitted anywhere impact global weather.  However, the bar for concerted action--a global treaty with billions of zero sum dollars at stake--is clearly high.  It can take the US years to negotiate a tax treaty with a single county.  With the Accord a guide to a more formal agreement,  countries will work over the coming year toward a binding agreement in Mexico.  But in the wake of Copenhagen, action appears no closer than before and perhaps further.  The Accord does give President Obama something to show Congress to encourage action on climate change.  But what form should the action take?  The centerpiece of the House bill is, of course, a US cap and trade system.  Cap and trade has proved effective in lowering NOX emissions .  However, it is a mistake to view action on climate change and cap and trade as synonymous.  Europe has had cap and trade in place for several years and has not succeeded, for the most part in actually reducing emissions.  A cap and trade system like a carbon tax provides an incentive to adopt new technologies or change behavior to produce less carbon.  But it is only a means, not the end.

What is the end?  The end is new low or no carbon technologies that are the necessary and sufficient condition to lower greenhouse gas emissions.  Emissions will go down when electric cars powered by renewable electricity replace gasoline cars and industry, homes and business run not on carbon-intensive fuels but on clean, renewable energy.  While a cap and trade system or carbon tax would make high carbon technologies more expensive, the real long term goal is to lower the price of clean alternatives.  That means breakthrough technologies and disruptive innovation.

Fortunately, breakthrough innovation and transformative technologies are their own reward and do not depend--in the long term--on making carbon more expensive.  There are other ways to accelerate innovation.  In the context of electricity, a key task is to break down barriers blocking the uptake of clean technology.  One such barrier that will remain whatever happens to the price of carbon is the cumbersome process by which utilities, heavily regulated and incented to do the wrong thing, not the right, currently source--or don't source--clean technology and renewable power.

The good news is we still control our destiny since if the US can pioneer new technologies, not only will we reduce our own emissions, we will harvest the economic benefits of selling this technology to others.  Whatever happens in Congress with cap and trade and with international climate negotiations, it is vital that we move forward on accelerating clean innovation now and tear down barriers blocking the free flow of clean technologies and energy to market.