Bhagwati on climate change negotiations

Jagdish Bhagwati argues in the Financial Times (subscription encouraged) that developed countries should be subject to a strict tort liability for damages done because of cumulative past greenhouse gas emissions. I disagree with most of his views but cite them (see below) given his pre-eminence as a trade theorist, development economist  and trade policy analyst.

Bhagwati argues that a global climate agreement  should be based on “principles in actual, practise, not utopian ideas”. He argues, however, that a tort liability arises from past high ccumulative emissions even if it was not known in the past that these were hazardous – this sounds decidely utopian and impractical.   In addition, according to Bhagwati, flow constraints on current emissions should be delayed for developing countries because these would otherwise damage growth.  New technologies should be provided free to developing countries to encourage them to mitigate without damaging growth.

Damages should not be attributed to developing countries on the basis of cumulative past emissions of others.  It is not only that the damages were not recognised in the past as damaging but, for the most part, citizens in developed countries were not even born when such damages occurred.  Strict tort liability suggests (to me) that damages occur regardless of intention but I assume that a pre-existing international law needs to be broken – it is in the current context the legal responsibility of developed countries for environmental damages to developing countries even if the developed countries who were found to be strictly liable were not at fault or negligent.  (Clarifications from those with legal training welcome here!)

Similarly, to clarify things, it is not the fault of developed countries that countries like India failed to develop modern industrialised societies that could have enjoyed similar rights to pollute the atmosphere.

Compensations should be paid to developing countries to compensate them for costs to them of mitigating emissions they have low willingness-to-pay to control.  Such compensations mean that inefficiencies addressed by climate change policies leave all countries better-off.  It is these compensations that reflect the needs of those currently alive in developing countries not arbitrary compensations based on the cumulative, unrecognised guilt of developed countries.  Of course such compensations can be paid in cash, in hefty free carbon quota entitlements or as (Bhagwati suggests)  free technology provision.  The latter means that developed countries purchase technologies from firms that develop them and subsequently provide these free – not that firms are given negative incentives to innovate by being told in advance that markets for their innovations will be limited by global legislation.

The delay in making cuts in developing country absolute mitigation cuts will be achieved as a byproduct of providing generous initial emission quotas.

Bhagwati’s views.

The resignation last week of Yvo de Boer, the Dutch diplomat, as executive secretary of the United Nations Framework Convention on Climate Change, reflected his frustration over the Copenhagen meeting and problems in climate change treaty design.

In fact, the soon-to-expire Kyoto protocol before it was also flawed. Nearly all of the 36 industrialised rich countries in annex 1 (which excluded the developing countries) failed to fulfil the emission-reduction targets they had signed on to. The US (along with Australia) had not even ratified the protocol. The Senate, in a bipartisan 99-1 demonstration of defiance, had also rejected the protocol under the administration of Bill Clinton.

The failure of Copenhagen lay in the fact that creativity was required to bridge differences between rich and poor countries. It was badly missing. Building international institutions requires that we seek their principles in actual practice, not utopian ideas. We need to build the new protocol on principles in existing international institutions, such as the World Trade Organisation. How can this be done?

First, while the Kyoto protocol had obfuscated the distinction, it is now customary for negotiators to distinguish between commitments arising from the “stock” and “flow” aspects of climate change. The former relates to commitments arising from historical carbon emissions; the latter to current emissions. But, though the language of “legally binding” commitments is routinely used, there is no process by which anyone’s feet can be held to the fire if the delivery falls short.

With the new protocol we need to draw on the example of the WTO. There, failure to deliver on accepted trade-openness obligations can be challenged and a dispute settlement process exists where an adverse finding leads to penalties. A climate change protocol where the commitments on stock or flow aspects are mere declarations with no consequences would lead to a charade and breed cynicism, not produce action.

Second, the pledge by rich countries at Copenhagen to spend $100bn (€73.5bn, £64.5bn) on mitigation and local adaptation may be seen as a response to the “stock” issue of past damage. But the sum has been explained as funds to be given to the poorest countries and that it can come at the expense of normal aid. This reflects faulty thinking.

The US in addressing domestic pollution created the superfund after the Love Canal incident, where a successful tort action was filed against Pacific Gas & Electric in 1996 for leaking toxic chromium into the ground water. Under the superfund legislation, hazardous waste has to be eliminated by the offending company. This tort liability is also “strict”, such that it exists even if the material discharged was not known at the time to be hazardous (as carbon emissions were until recently). In addition, the people hurt can make their own tort claims.

Rejecting this legal tradition in US domestic pollution, Todd Stern, the principal US negotiator, refused to concede any liability for past emissions. This stand is even more astonishing given that Barack Obama, the US president, belongs to a party that thrives on contributions from tort lawyers.

Evidently, the US needs to reverse this stand. Each of the rich countries needs to accept a tort liability which can be pro rata to the Intergovernmental Panel on Climate Change-estimated share of historic world carbon emissions. Since the payment would be on the tort principle, the idea that the funds would substitute for normal aid would be outrageous: you do not take away the pension of a person who has won a tort settlement.

Third, on “flow” liability for current emissions, the WTO principle of a “single undertaking”, where each member state accepts obligations, is a better model than one where the world is divided into annex 1 countries and the rest. But, as with the WTO, special treatment can be accorded to developing countries in the shape of suitably extended grace periods before the obligations kick in.

Finally, in determining these obligations for developing countries such as India, it is clear that cutting emissions can damage growth. New technologies can help, provided they can be accessed at negligible cost. However, no one will subsidise the sale of technologies to India and China. But, why not take a sizeable fraction of the tort funds in each country and use them to create the technologies by open tenders and make them freely accessible to India or China – just as we did when the US used its public funds to develop new seeds in the 1960s and made them freely accessible by India et al. Those seeds created the Green Revolution in agriculture. The same strategy could create a revolution in climate change.

The writer is a professor at Columbia University and senior fellow in international economics at the Council on Foreign Relations. He is chair of the Independent India-US Task Force on Copenhagen at Columbia Law School (115)