by Henrique Schneider*
Dear friends. As usual, I was right. The United Nations climate summit in Katowice, that little Polish city created by coal and forged by fire, came to an end marked by:
- There was an agreement to continue negotiations
- A “thin” rulebook has been agreed upon
- The “thin rulebook” contains principles and further workstreams
- The market people are going to meet four times in 2019 in order to advance the operationalization of principles.
Yes, this is the literal quote from my last week’s email. However, and it pains me psychologically and somatically (in means, bodily) to admit that, by having been cut-off, I missed big drama and a potential goldmine for sarcasm. The summit was supposed to end on Friday but it went on until Saturday night … because of carbon markets! The very thing I like(d) to negotiate!
The only way the Polish Presidency found to come to an end was cut markets off the decision text. See the parallelism to my present situation? At the end, the “market” decision is procedural, reading:
“…that draft decision texts on these matters in the proposal by the President were considered, but that Parties could not reach consensus thereon;”
Does this change one of the bullet points above? Not at all. First, there has been some agreement on some technicalities concerning mitigation of climate change, adaptation to climate change and resilience in face of climate change. So, there is a very thin “Paris rulebook”. This thin set of principles has to be deepened in or by further negotiations in work streams. And even the market people have to continue negotiating. The same market-related decision says:
“Requests the Subsidiary Body for Scientific and Technological Advice to continue consideration of the mandates referred to … above, taking into consideration the draft decision texts …, with a view to forwarding a draft decision for consideration and adoption by the Conference of the Parties serving as the meeting of the Parties to the Paris Agreement at its second session (November 2019);”
If you are really interested in the decision texts, check them out here: https://unfccc.int/katowice
So, what happened?
The market negotiations were doing great in earlier 2018. Even during the summit, delegates managed to produce substantive texts. Remember, Article 6 of the Paris Agreement foresees three types of international cooperation:
- 6.8: A transfer of efforts without price that only Mr. Marx would have been proud of. The negotiations on this track went very well, since only such as the Bolivar Venezuelans or the Plurinational Bolivians are interested in this – and Africa, of course, if it brings money.
- 6.4: A transfer of efforts with prices. It is not a full market, rather a market-socialism to the likings of Mr. Lerner or Mr. Lange. There is a price mechanism, but you always pay more than what you get because whatever you buy, you have to share it with others (share of proceeds, net mitigation). Like any economic planning under socialism, this system is extremely complicated, so littler ground was gained in negotiations.
- 6.2: A bi- or multilateral transfer of efforts using prices and markets resembling a Coase’ian market system. As we all know, whatever comes from Mr. Coase disregards its institutional embeddedness (despite of being utterly illogical). In the Paris-thing: even if it resembles a free market, no one really knows what it takes to become one. And here, Mr. Kirzner’s arbitrageur emerges trying to find all the loopholes in the design of the quasi-market system.
Negotiating this plethora of non-free-market-approaches – i.e. forgetting that free markets only develop by spontaneous order where property rights are sufficiently clear –, market negotiators underestimated Brazil’s appetite. That little country wants it all. It wants the market, the aid-money and the ability to claim that any mitigation effort taken there as belonging to them. They want to sell the good while keeping it as their property. This led the negotiations astray.
By the way, I have developed an idea on how to solve some problems – using blockchain. It a paper in progress you can read here:
Apart from markets, there are other things bizarre. Take “Just Transition” as an example. It describes the transition towards a low‐carbon and climate‐resilient economy that maximizes the benefits of climate action while minimizing hardships for workers and their communities. It does not surprise that trade unions and the like appropriated that expression. But our friends in the so-called business sector are increasingly using it, too. The looters and munchers, subsidy-seekers and sycophants like the International Emission Traders Association IETA or the World Business Council for Sustainable Development WBCSD are uniting in the outcry for just transition, too. Why? Because they want money and to be erotically proximous to the state agents.
More optimistically, let this year’s commentary on the climate summit end with a piece of wisdom: “It was not the scarcity of stones nor the stone pricing that ended the Stone Age, but the emergence of a new technology, bronze.”
*Henrique Schneider is a Swiss economist, HoD at the Swiss Trade Association and engaged in adult education.