The role of collateral in global environmental action.

Lets think constructively about the environment and lets try to think 10 years ahead in global environmental debates. There are many global environmental problems, and these are likely to get worse. The best known one is of course global warming likely due to greenhouse gas emissions, but there are other, I would say more important, problems. The UN Millenium report from 2005 lists them nicely (the Millenium Goals are conspicuous by how much we clapped for them when agreeing to them and how stealthfully the world has ignored them since). There is soil erosion, natural habitat destruction, and the plundering of shared environmental resources, in particular the oceans. If you believe even a trace of the Footprint literature, then our eco(n)systems cannot support the current weight of people at current levels of consumption.

Its increasingly clear that for the next 10 years at least, were going to do nothing of significance. Even a child can calculate that the Kyoto agreement is not going to do anything significant about greenhouse emissions. Weve known this for quite a while now. Supporters, such as Nicholas Stern, frankly admit its basically a symbolic agreement whose feeble targets are unlikely to be adhered to by those that signed up to it. The dummy that is Kyoto may feel like a good suck to small infants, but anyone serious about climate change knows its meaningless because it cant enforce anything. Another fundamental flaw is that it fails to recognise that some countries stand to benefit from global warming and will hence never really voluntarily cooperate, such as Russia (which has signed up but doesnt exactly seem like taking much notice), whilst others will refuse to pay for averting it whilst theyre not as rich as other countries (China, India).

Like anything else in life, if you want to get people with different interests to abide by a common set of restraints, youre going to have to create communal measurement and enforcement mechanisms. This is why each community has a local police station in stead of merely a joint statement by its citizens promising theyll be nice to each other. The same goes for global problems and goes as much for emissions as it does for ocean fishing or cross-border water management. In the long run, we need a common environmental measurement body and a common environmental police. We already have several international enforcement agencies, such as NATO and Interpol, and perhaps these could be linked to the environmental agencies of the UN.

The big question will be how to get started with creating common enforcement mechanisms to back up common measurement agencies. The tough bit is that it effectively means handing over sovereignty which is not something nation states do in a hurry and even in 10 years time I cant see the important countries agreeing to use NATO as the worlds environment police. Is there then some way we can start to build enforcement without an army, preferably in some way as to create a rich and powerful international body that will be able to afford its own army as time goes by?

The problem of enforcement without being militarily strong has been seen many times in history. Perhaps the most valid analogy I can think of was the situation of bankers who lend money to overseas monarchs when there was no international enforcement of any kind and monarchs didnt care much about their reputation. What did the Rothchilds and other rich banking families ask for in medieval Europe when sovereigns wanted to borrow money but the Rothchilds had no army and the sovereigns did? They asked for collateral. They asked for pieces of land, castles in other countries, or monopoly rights over the trade in certain goods. Quite often they never got the money back they lend the warlording monarchs, but they did get to keep the collateral. At least sometimes.

Handing over international collateral when engaging in global environmental treaties is something that is not as emotive as handing over sovereignty and furthermore can be spread out over time. Collateral gives countries an incentive to actually meet the targets they promise to meet. What kind of collateral can we envisage? One obvious thought is the IMF drawing rights. All rich countries have a couple billion stored at the IMF in terms of drawing rights. A country serious about meeting its environmental obligations could agree to hand over its IMF reserves, which it will only get back if it meets its obligations after a certain number of years. This is something that could already be done now. Australia could, if it wanted to, hand over ownership of its IMF drawing rights within the context of being able to get it back if it meets the Kyoto targets in 2010. Then, Kyoto would start to have bite and would start to make sense to support.
What other collateral could we think of? We could think of countries handing over, say, 1% of GDP for a period of, say, 20 years, to an international environmental agency. That accumulates to a serious amount of money which would then be invested in the global markets. One could return this collateral to the country if, say, countries have indeed adhered to their fishing quotas and their water quotas within a 50 year time span. This collateral would then effectively be like a large futures fund. One can build in additional compliance incentives by having rules about what to do with the collateral in case a country does not meet its obligations. Should a country not meet its obligations, then one can for instance divide the funds over those countries that do meet their obligations. This would give an incentive for other countries to join in, especially poor and developing countries. Alternatively, one could use forfeited funds to buy pieces of precious environment, such as the Amazon rainforest. Slowly, the environmental agency would then become a rich land holder capable of supporting an international army.
In the olden days, kings would send their sons to live in the courts of the enemy as a form of collateral. That would be a little extreme within today’s moral code but it brings a smile to my heart to imagine Rudd sending his wife and family to live in Washington as collateral to a promise to meet the Kyoto targets.
Even more radical, but cheaper to the countries involved in the short-term, would be to ask for pieces of territory as collateral. This is not uncommon historically. For arguments sake, the US could offer Alaska as collateral. Australia could offer Tasmania or the Barrier Reef, though I suppose some would argue we would miss the Reef if we couldnt keep to our targets.

What other ways can you think of to get enforcement mechanisms into otherwise toothless and hence meaningless international environmental treaties? I predict to you that that question is what the debate will be about in 10 years time when populations and their scientists have become aware that nothing about the global environment on the table at present is going to have noticeable impacts and things like Kyoto are symbolic soothers.

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9 Responses to The role of collateral in global environmental action.

  1. Paul I agree with your statement with the relevant correction.

    (the Millenium Goals are conspicuous by how much we clapped for them when agreeing to them and how stealthfully [brazenly] the world has ignored them since)

  2. JC says:

    Paul

    So let me get this right. You would be quite willing to pledge our assets to the rest of the world? You would expect them not to cheat but we should show a clean pair of hands. You would trust countries that were cheating on the first Kyoto agreement making it essentially a total laughing stock?

    Wood away from the trees (no pun intended) you’re really arguing for a totalitarian world. You think the state of the world is so dire that we actually need that? However unlike the UN you would actually think this new governing body would be better behaved?

    Let’s get real here. I respect the police because I respect the laws of this land and don’t want to break them. However if I had a UN type “cop” coming to my home and thinking he could tell me to turn off my barbecue, one of us would be dead. Sorry, but there is a limit to how much state authority anyone can except before taking the law into your own hands.

    By the way, the moment you pledged our assets in the way you describe you would have to front up to the IMF with a new load. The pledged assets could no longer be used the way the IMF does now, as they would be encumbered

  3. Chris Lloyd says:

    I think I might be missing the point Paul. Good environmental behaviour is current not enforced and unenforceable. So your idea seems to be that countries voluntarily hand over collateral to make it enforceable. Why would anyone do that unilaterally any more than they would simply behave better unilaterally?

    I believe that as/if the greenhouse effect starts to have visible effects then liberal democracies can quickly adjust through democratically imposed regulations of the economy, This will not happen in China where people get their news via Xinhua and Google-light and believe they are destined to dominate the globe anyway.

    If global warming is revealed to be as big a threat as is claimed, then international relations take on the complexion of half a dozen guys in a small life-raft. GWBs presidential son might take the view that there are weapons of mass destruction in China. Thousands of them. They are called coal fired power stations.

    Maybe an international trading scheme is the best/only way to address the problem without bloodshed. Because it is ostensibly fair and China can purchase the carbon emission rights as long as they can crank out the socks more efficient than anyone else.

    Enjoying your posts Paul. They are good conversaton starters.

  4. Yes, I agree with Chris – interesting ideas.

    But I think the analysis of ‘measurement’ is a bit crude. We have broad faith in Western institutions to deliver reasonable outcomes. Denmark or any other country has an incentive to cheat on its emission target – the more so if it’s in an emmissions trading system with other countries. But do we expect the Danes to cheat. Well in a sense we do. They might get their diplomats to argue some outrageous interpretation of a treaty to argue that they have a larger entitlement.

    But we also know that they have a separation of powers in Denmark, and an independent judiciary. It isn’t perfect, but we don’t expect their courts to collude in falsifying the record.

    In a similar way large companies engage batteries of lawyers to minimise their tax. But they don’t typically evade tax. They don’t lie outright in ways that can be detected, because it won’t work for them. Auditors might catch them out and if they’re paid off or generally over-eager to please the company things can get escalated to courts by governments, NGOs including international NGOs.

    So there are strong constraints without any common enforcement or measurement agency.

  5. observa says:

    “Is there then some way we can start to build enforcement without an army, preferably in some way as to create a rich and powerful international body that will be able to afford its own army as time goes by?

    The problem of enforcement without being militarily strong has been seen many times in history.”

    It’s called moral leadership and it can exist in a tight, like minded club with tight constitutional membership and the power to exclude those who don’t share the members goals/aims. Like all good clubs it should be open to new members wishing to abide by the member rules. The logical international one is the United Liberal Democratic Nations, that would be best suited to give the moral leadership on GW, apart from the many other fields it could be expected to show leadership in. The ULDN meets, decides by democratic majority and its decisions are binding on all members. Naturally you can’t have any moral legitimacy in a democracy of dictators, gangsters and villains like the current UN, which is why it holds little legitimacy or indeed military strength. Leftists are all continually skirting around this issue. Essentially they know the problem but don’t want to be seen ditching moral relativism which is powerless, for the absolute and judgemental value set to really get things done. Of course to do that you have to whittle the club goals down to the basics and not get side tracked on issues as to whether marriage is between more than one man and one woman for membership rights. With no strong moral club, with tight goals, the world continues to muddle on, albeit in the threat of GW, we can all see the need for a powerful leadership group with teeth here. Being a member of the Kyoto club doesn’t cut it I’m afraid. There are simply more benefits in not being a member.

  6. Mike Pepperday says:

    There exists a model for your ULDN – the EU. Countries clamour to join but must first satisfy the rules.

  7. observa says:

    The EU is too tight a club to tackle GW effectively and is too Eurocentric in that respect anyhow. A moral or exemplar leadership group clearly needs more LD countries from the Pacific rim to have real clout and effect change. It needs to stop trying to be all things to all members and focus on important goals, like GW. To do that it would need a completely new structure with no veto power by any one or a few elite members. If we can’t get such a coordinated exemplar group up and running, we can forget cooperation to ameliorate GW.

  8. Justin says:

    The sky is a-falling! The sky is a-falling! I am so important: on my shoulders rests the saving of the planet itself! The winds that blow are not correct: they need me to set them to rights. Other people must understand that my opinion must have priority over their freedom: but they don’t need to understand it, because I am right and if they don’t agree with me, they are wrong. The problem is that there are too many people! Governmental compulsion is necessary to fix the problem. Giving a lot more power, money, and managerial discretion to government will make for a better society. The resources of the planet are finite, and there’s just enough of me, and too much of everybody else! If the natural resources that now go into keeping people alive, well and happy must be sacrificed in order to protect the intrinsic value of nature as determined by my opinion, that is not too high a price to pay.

  9. paul frijters says:

    “What other ways can you think of to get enforcement mechanisms into otherwise toothless and hence meaningless international environmental treaties? I predict to you that that question is what the debate will be about in 10 years time when populations and their scientists have become aware that nothing about the global environment on the table at present is going to have noticeable impacts and things like Kyoto are symbolic soothers.”

    well, I was right about the trajectory we were on then. Nothing of substance has been adhered to that has made much difference to the world CO2 levels, though cheaper solar and wind are making a welcome dent on the growth trajectory.
    Lots of papers in the academic community have now come out on enforcement, with the main (and fairly hopeless) novelty is to take national governments to national court for not delivering on promises made in treaties. This is turning to be a happy little money earner for lawyers, with no change to actual actions, of course.

    In terms of serious thinking at the level of societies, I was too optimistic. 11 years on, and we’re still not talking about serious collateral being asked or put on to enforce climate treaties. Let’s see if we need another 10 years for that to emerge.

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