3rd Letter from Madrid

‘COP25’ – the 25th United Nations Climate Change conference in Madrid, ends today, 13 December 2019. Henrique Schneider is on site and represents Switzerland …

Brethren!

No. I am not being condescending. I am just addressing you as I have been addressed today. Ok. The Australian negotiator who used this phrase didn’t actually use it, instead, she put it much more politically correct and gender neutral. She said: Brothers.

This, however, was not the day’s highlight. It was my first time visiting of the Spanish canteen. Dismal, just dismal. A complicated system as one would only expect in Spain. And, as one would expect it here, it invariably leads to no results. Tellingly, a severe discussion broke out whether my broth was a first course or a main dish. At the end, they decided it was neither.

The market negotiations, however, began. We discussed for 10 hours how to adjust correspondingly. The problem is, at the end, simple. A country has a greenhouse-gas inventory. If it reduces, say, one ton of such a gas, it should count -1. But if it reduces and sells that reduction to another country, the reducing country should count +1 (it cannot claim that reduction its own) and the purchasing country can count -1 (it does claim that reduction its own). Good. No?

No! Some countries say, they cannot do it (aka. Pay me for doing it). Others state, they are not willing to do it (aka. Pay me for doing it). And other yet find out miraculous ways of undermining the simple accounting equation of selling and buying.

What does one do? We devised a menu of 5 different methods for adjusting correspondingly. A series of + and – that is a thing of mathematical beauty.

And we also negotiated the market that already exists, the Clean Development Mechanism. It took us just one hour. Some want to prolong its existence. Some want to kill it right away, because it does not fit within the Paris Agreement. Others remain cryptic.
What does one do? We tasked someone with developing a series of scenarios: killing it, sunset, run-out, zombiedom, and continuation. Of course, these scenarios were correspondingly adjusted into negotiation lingo.

Markets ahoi!
Best,
Henri

Henrique Schneider is a professor of economics at the Nordkademie University of Applied Sciences in Elmshorn, Germany and chief economist of the Swiss Federation of Small and Medium Sized Enterprises in Bern, Switzerland.