By George P. Shultz
Wednesday, September 5, 2007
We in the United States -- and we as global citizens -- live in what is, in many respects, a golden moment. Economic growth is globally strong, and, if security threats can be contained, this expansion, with some ups and downs, can be sustained.
Strong growth means increased use of energy at a pace that can strain the capacity to supply what is needed at a reasonable price. This highlights two urgent questions: how to use energy without producing excess greenhouse gases that create disruptive conditions on a global scale; and how to reduce the threat to national security from excess dependence on oil.
The greenhouse gas problem is more broadly recognized today than it was during the Kyoto Protocol negotiations. Moreover, the protocol is running its course, so a new treaty is needed. That treaty should have a different structure -- one that ultimately achieves universality.
During the Reagan administration, we faced the problem of depletion of the ozone layer, and negotiations resulted in the Montreal Protocol. To be sure, the problem then was less complex than that of today. However, there are parallels, and lessons from the Montreal Protocol can be useful.
The reductions called for in ozone-depleting substances were aggressive but realistic in that they could be undertaken without severe economic damage, in part because demand triggered the development by private industry of needed chemicals and appliances.
Because we in the United States were ready to take action, we could ask others to act as well.
The protocol also recognized the importance of a little wiggle room, so provision was made for the possibility of special arrangements among countries.
The countries with low per capita incomes were integral to the process and were given special treatment in terms of trading rules and the establishment of a fund that could help them meet their obligations.
What can we learn from this? Here are some guiding principles:
? The process benefited greatly from strong U.S. leadership. We were the science leader, the moral leader and the diplomatic leader. Yes, those of us working for an agreement, notably John Negroponte, now deputy secretary of state, faced internal opposition; there were doubts about the reality of the problem and that reasonable solutions could be identified and implemented. But at all the crunch points, Ronald Reagan was there for us. The president cleared the way, and in the end he called the result a "monumental achievement." The Senate readily gave its consent to ratification.
? Universality of coverage is a necessary goal. The world must be represented at the table. Interests and capabilities vary widely. Patience and flexibility are key. We must focus on the countries that matter most and explore shared interests, identify respective vulnerabilities and adaptive options, and share views on scientific and technological advances. We could explore the possibility of industry-specific solutions within such groups as air transport, automotive, steel and electric utilities. One caution: Holdouts must not be allowed to get special treatment.
? The negotiating structure must involve constituencies because, in the end, they will bear the weight of necessary actions. At all costs, we must avoid what happened at Kyoto, where we signed the protocol after the Senate, by unanimous vote, advised President Bill Clinton not to conclude a treaty that lacked commitments by developing countries. In other words, our negotiator had lost touch with his constituency.
? The use of economic incentives (caps and trading rights, and carbon taxes) is essential to avoid disastrously high costs of control. The cap-and-trade system has been highly successful in reducing sulfur dioxide emissions by electricity utilities in the United States. That system relies on a scientifically valid and accepted emission-measurement system used by a clearly identified and homogeneous set of utilities. Fortunately, such a careful system of measurement exists for a viable greenhouse gas regimen. The product of collaboration between the World Resources Institute and the World Business Council for Sustainable Development, these standards for accounting and reporting greenhouse gases should be duly understood and adopted. Even with clear units of account, however, large problems arise as the coverage and heterogeneity of the system grow. And for trading across borders, the system needs to be accepted among the trading partners. Scams are easy to imagine. No nation should be allowed to trade without a verifiable, transparent system of measuring and monitoring of reductions, and holding emitters accountable. In many respects, a straight-out carbon tax is simpler and likelier to produce the desired result. If the tax were offset by cuts elsewhere to make it revenue-neutral, acceptability would be enhanced.
? Do not expect China, India and other developing countries to accept what amounts to a cap on economic growth. They will not -- and cannot -- do that. We must create market incentives for them to cut emissions while continuing to grow and find actions that are economically feasible in a relatively low-income environment. We may also need to give them extra time, even allowing some short-term emissions growth, before requiring them to reduce their emissions. This is similar to the way we accommodated developing countries under the Montreal Protocol.
? Another imperative, a derivative of the previous point, is the need to deal effectively with issues of intellectual property. The obligation to reward innovators must be reconciled with the needs of low-income societies.
? The negotiations should not conclude until important first steps are identified and agreed upon so that everyone takes some action.
As we consider a new treaty, we must recognize that one size will not fit the world, even though some technologies may have wide, even universal, application. The Montreal Protocol, as a successful environmental treaty, provides a model for establishing a process with wide agreement to take important action.
The writer, a distinguished fellow at the Hoover Institution, was secretary of state from 1982 to 1989.