Commentary on things. From me, from others whose thoughts are worth more than a penny, even in non-inflationary times!
China in a Bull Shop?
For some, the fact that so many states and municipalities have vowed to support the Paris Agreement (“Agreement”) despite Trump’s notice of withdrawal, is good grass-roots politics. Yet, adhering to reduction guidelines established by each country/Party, with no stiff penalties for failure to demonstrate some measurable result, belies the dire consequences of inaction those Party to the Agreement suggest. But most importantly, this grass-roots effort will only produce tangible results if becoming Party to the Agreement comes with green currency as the Agreement requires.
To establish just what a promise of support means, if you have not already done so, I would urge reading the text of the Paris Agreement (see link above). It is only 16 pages long! In what follows, I will focus on Article 9.1, regarding Funding, and Article 20.2 regarding responsibilities (including funding) of any entity which becomes a Party to the agreement.
Article 9.1 is one of the few sections in the Agreement that uses “shall” instead of should with real consequences, specifically: “Developed country Parties shall provide financial resources to assist developing country Parties with respect to both mitigation and adaptation in continuation of their existing obligations under the Convention.” That mechanism is the Green Climate Fund (see recent statement link above) administered through the UN. While many other sections of the Agreement, including Party targets for emission reductions are mere guidelines, this most certainly is not.
Using the United Nations Development Program (UNDP) site to determine which country is developed seems to be reasonably straightforward, at least in terms of most Parties which have either pledged money or pledged and partially funded their country obligation as of May 12, 2017: For the most part, the EU and European Nations, the United States, and Japan have pledged and at least partially funded those pledges. But when Indonesia (UNDP rank #113) has pledged and funded $300k and $200k respectively, while China (UNDP rank #90) has pledged nothing, one can only wonder how funding will shake out in an equitable and meaningful way.
Then there are the EU countries. With respect to the “shall” requiring developed Parties to contribute, the Agreement has at least done one better than NATO. The 2% of GDP defense expenditures that NATO members are encouraged to spend annually is, after all, just a guideline with few NATO signatories meeting it. But Article 9.1 funding is not a guideline but compulsory. So, while France, Germany and Italy have failed to meet the NATO funding guideline, can anyone seriously expect them to make their mandatory contributions to the Green Climate Fund? For the sake of China and India, let us hope so.
Also, Article 9.2 of the Agreement encourages other parties to continue their voluntary contributions which may explain Indonesia’s “tribute” however small but no less fungible than the statutory contributions of developed Parties. Still, the Agreement does not sufficiently address why a lower ranked developing country (Indonesia) contributed–even voluntarily–while a more highly ranked developing country with the second largest global economy in GDP terms (China) has not.
It seems China, with a higher developed ranking than either Indonesia or Vietnam (UNDP rank #115) the latter of which has pledged a small contribution, stands to substantially benefit from the Agreement with little justification. There are seven other developing countries which have also pledged contributions as of May, 2017. While such countries should be lauded for their good faith efforts, it makes little sense why they have done so and countries like China and India with far larger GDPs and emissions, have not.
Judging from all of this, it is easy to understand why China (and India) have every interest in remaining in the Agreement. Pushing China to the forefront in the wake of Trump’s decision is amusing in its naivete. It benefits them economically with little consequence as their reduced emission goals are “guidelines” without consequence if not achieved. While they may spend billions more to curb their country emissions, not making even a good faith contribution suggests this is not a serious endeavor for them unless free money is involved. In fact, it is more like a “China First” policy than one of shared, global commitment.
With a total pledge of $100 billion to the Green Climate Fund and only $10.13 billion funded through May, 2017, there is a long way to full funding. The United States has, through May, 2017, pledged $3 billion and contributed $1 billion. Whether Trump’s exit will require completing the pledge and funding another $2 billion, remains to be seen.
Which brings me to the states and municipalities who wish to join the Agreement, and it will undoubtedly be good news for China, India, and others. If states and municipalities wish to participate fully in the Agreement, Article 20.2 seems to provide that opportunity to make up the $2 billion shortfall (Only $1.85 billion if you include Michael Bloomberg’s pledge). However, 20.2 states: “Any regional economic integration organization that becomes a Party to this Agreement without any of its member States being a Party shall be bound by all the obligations under this Agreement.” So it seems the United States can be replaced by governmental subsets and if so, they “shall” contribute. That is, if those subsets are really serious about becoming a Party to the Agreement.
Unless the governmental subsets of the U.S. who wish to be Party to the Agreement can claim and persuade other Parties of their “developing” status they shall contribute. So, taxpayers in each state and municipality that wishes to become a Partner to the Agreement should know that they will be paying some of their taxes toward the funding of greenhouse reduction limits in China and India while those two countries contribute nothing.
Time will tell whether the U.S. exit was the action of a “bull in the China shop”, or just a case of “China in the bull shop”.
