The G20 has the muscle to fight climate change

East Asia Forum

The time is right to place climate change at centre stage of the 2014 G20 leaders-group meeting in Australia. The G20 has a record of leadership on the international climate change agenda. With the world working toward a critical meeting of the United Nations Framework Convention on Climate Change (UNFCCC) in Paris in December 2015, a firm position articulated by G20 leaders in Brisbane in November would be in time to influence the Lima UNFCCC meeting in December 2014.

The G20 is ideally suited as the main forum for overcoming the ‘free rider’ problem of collective action on climate change. It contains all of the world’s main greenhouse gas emitters and all the countries that are most important to effective global effort on climate change, as well as those that have been most active in in the UNFCCC. While the G20 contains the most influential developed and developing countries, it can stand outside the entrenched and stereotypical divisions that have become barriers to effective action within the UNFCCC, with its huge and unwieldy membership and traditions of symbolic posturing.

Climate change is not a new issue for the G20, nor is influence on formal decisions of the UNFCCC something new. At the 2009 Copenhagen climate convention, the G20 played an important role in establishing the objective of holding the contribution of human-induced climate change to two degrees Celsius. It formulated a strong position on removing fossil fuel subsidies, an important position that has seen some domestic reform worldwide, and one which should be reiterated. The G20 meeting in Russia last year agreed to reduce hydrofluorocarbon emissions, under the Montreal Protocol, as a contribution to climate change mitigation. The G20 in Australia could agree to initiate negotiations at the next meeting of the Montreal Protocol’s Conference of the Parties.

The chances of the G20 playing an important role in accelerating momentum on international climate change action at this time have been improved by shifts in domestic policy in the United States and China. Over the five-year life of the G20, the governments of the world’s two largest economies and greenhouse gas emitters have introduced major domestic programs to implement emissions-reduction targets that embody major changes in established trajectories. The pivotal importance of the Paris UNFCCC meeting in December 2015 makes the Lima meeting crucial to any prospects of the G20 being helpful to a strong outcome.

It must be said that there are also less happy portents for success. The new Australian government, the host of this year’s G20 heads of government meeting, has just repealed legislation on domestic carbon pricing linked to international markets, although it has confirmed the previous government’s target of a 5 per cent unconditional reduction by 2020. It committed itself during the 2013 election campaign to strengthen the Australian target up to a reduction of 25 per cent depending on what other countries were doing.

Overall, though, the G20 is well positioned to lead the development of a new style of collective action on climate change.

A system of international collective action can emerge in one of three ways: through the exercise of power by strong interests; through binding agreement; or through shared acceptance, by individual citizens or states, of constraints on decisions and behaviour. All three approaches have been important in early attempts to find a basis for effective global climate change mitigation. But as it became clear at the Copenhagen meeting that there would be no legally binding agreement on climate change mitigation for the foreseeable future, we are now seeing the gradual emergence of an international system built mainly on the third approach of shared norms. Norms are largely being shaped by emerging implicit agreements on what constitutes reasonable efforts by individual states, and by the recognition that free riding may incur costs in relations with other states, including market access.

The new approach carries some important features over from the early international discussions. Scientific cooperation remains centrally important to the collective effort. The objective of keeping atmospheric temperature increases to two degrees above preindustrial levels, mechanisms to measure and verify emissions, and instruments for international trade in entitlements have been developed or strengthened.

To ensure the effectiveness of this new approach -- which I call concerted unilateral mitigation, with a ‘pledge and review’ system of targets determined by domestic political factors and external review from other countries -- one major gap in the international regime needs to be filled. We require some framework to guide assessments of whether the level of mitigation undertaken in each country amounts to a fair share of an international effort to achieve the agreed global outcome. This would need to include guidance on adjusting targets for 2020, setting appropriate targets for 2030, and also setting long-term targets for low levels of global emissions in 2050.

It would be useful and probably necessary for heads of governments that are committed to strong global mitigation outcomes to appoint an independent expert group to develop a framework of this type to allocate the global effort among countries. Members would be appointed for their international standing in appropriate fields and would not represent individual countries or groups of countries. Their guidance would extend to indicative allocation of emissions reduction targets across countries, in the form of parameters for nationally appropriate mitigation action for developing countries. Within the context of concerted unilateral mitigation, each country would be free to accept or reject the guidance provided by such a framework. The framework would become a focus of international review of each country’s effort and would evolve in response to discussion and experience.

The G20 is well-placed to establish an expert group to develop this guidance. It could also play an important role in the pledge and review process, building on previous G20 mechanisms of peer reporting through expert groups. Alternatively, it could delegate the review and its interaction with the expert groups’ guidance on targets to a body established by the Major Economies Forum.

In some areas, the grouping’s role is less clear. For example, it is not obvious that the G20 will be able to do much to reduce US trade restrictions on natural gas. These restrictions are sometimes supported on the grounds that they are accelerating reductions in greenhouse gas emissions. They are certainly having this effect in the United States. But by elevating natural gas prices in East Asia -- and in Australia and other countries that are supplying gas to East Asia -- they are inhibiting emissions reductions outside the US. It would be more efficient, environmentally and economically, to have global free trade in natural gas. But the protection that export restrictions provide for domestic users has strong support, and despite the hopes of free traders, the G20 may be unable to do much to remove trade barriers in this area.

To take another example, there is only a weak case for G20 intervention to increase investment in the commercialisation of low-emissions technologies. While private firms are bound to underinvest in the research, development and commercialisation of new energy technologies, most countries are now finding their own reasons for investing in innovation in low-emissions technologies, so that it seems that voluntary domestic commitments would be able to manage the free rider problem. It would, however, be productive for the G20 to establish a process for reporting on national efforts to show each country that other nations are making substantial contributions to generate international spillovers from investing in innovation in low-emissions technologies. The G20 could also usefully draw attention to the opportunities for choice of infrastructure investments to reduce the costs of the commercialisation of new low-emissions technologies.   

There is one other important role for the G20: increasing pressure for free trade in goods and services that are important inputs into activities that reduce greenhouse emissions, including such raw materials as uranium and natural gas, as well as in biofuel alternatives to fossil fuels and capital goods that generate renewable energy. This would fit the G20’s established interest in securing open trade on a global basis. There has been considerable discussion and some action within APEC, the WTO, and the Trans-Pacific Partnership of the importance of free trade in goods and services that are important to the global mitigation effort. The G20 heads of government meeting could focus attention on the environmental and the economic advantages of establishing free trade in important inputs, adding momentum to discussions in other forums.

Now is the right time for the G20 to become the centre of a strong international effort. The climate change issue is important enough to the economic and political life of the international community, the prospects and costs of failure of international collective action large enough, and the possibility of successful intervention high enough to make the increase in momentum in global climate change negotiations an important feature of the Brisbane summit.

Ross Garnaut is a Professorial Research Fellow in Economics at The University of Melbourne.

This article appeared on the East Asia Forum on July 21. Republished with permission.