The inconvenient truth about climate change

Carl Mortished: World business briefing

Forget what you have been told: Copenhagen was a great success, a triumph of diplomacy, a game-changing event on which the world must now build. This is the view in Delhi and in Beijing, where Premier Wen Jiabao has been puffing China’s “important and constructive” role at the Climate Change talks. Jairam Ramesh, the Indian Environment Minister, boasted that he had thwarted attempts to impose binding targets for carbon reduction on India.
If this seems to make no sense (and that’s the view of Ed Miliband, the Energy Secretary, who squarely blamed China for wrecking the final agreement), it is because we are deluding ourselves over what Copenhagen was about.
Mr Miliband did not attend the same conference as his counterpart, Mr Ramesh. Nor did Gordon Brown or President Obama. They came to Copenhagen to assert the moral authority of the West. The leaders of the Free World came to Copenhagen as the self-appointed guardians of the planet, guarantors of the Earth’s environmental integrity.
The Chinese snubbed Mr Obama. The President thought he was at Copenhagen to talk about Al Gore’s “inconvenient truth”, the subject of the former vice-president’s film about global warming. But the Chinese and the Indians attended a different conference, the same conference that failed in Cancún in 2003, in Hong Kong in 2005 and in Geneva last year. Those world trade talks were “scuppered” by the intransigence of developing nations in the face of attempts by America to assert political power. Such talks, whether about trade or climate, war or peace, will continue to fail until we recognise a second inconvenient truth: China is now in charge.

China leads the global economy. Without its huge pump-primed domestic demand, there would not even be hints of economic recovery in Europe and the United States. Every substantial industrial manufacturer in the West is looking to China for salvation. While car sales this year collapsed in the West, they doubled in China. Daimler says that China will be the second-largest market for Mercedes-Benz by 2012, overtaking the US.
The cheek of the Obama roadshow must baffle and irritate China’s political leaders. China didn’t threaten the world financial system with junk bonds; its army has not invaded other countries (although it has suppressed internal uprisings), but Mr Wen was not fêted in Stockholm. No Nobel for the Chinese Premier.
However, China has lots of trump cards. If Mr Obama can still sanction a military surge in Afghanistan, it is because China has lent him the money. China is the biggest holder of US Treasury bills, some $800 billion, and America’s emergence from its financial black hole is contingent on continuing Chinese willingness to underwrite spendthrift America. China cannot easily stop lending, but, like any creditor, it can ask Uncle Sam for more collateral; in this case political collateral.
China is not an environmental philistine. It has huge conventional pollution problems that require immediate attention: poisoned water, acidic rainfall and soil erosion. Its leaders know that eventually they must deal with climate change. If they hesitate, it is because they don’t know how to reduce carbon emissions while maintaining economic growth rates of 8 to 9 per cent.
In the selfish world inhabited by the NGOs who cavorted in Copenhagen, growth is a problem, but China and India did the low-growth thing. It was a world of disease, hunger and early death. Prosperity requires energy. China has offered a middle route, reducing not growth but energy intensity. It will become more efficient, cutting emissions per dollar of GDP. That is something it knows how to do.
There is a third and final inconvenient truth: the Communist Party. Removing carbon from the global economy is a fundamental upheaval, both an industrial and a cultural revolution. Carrots are not enough and, if savage cuts in emissions are needed, it will require sticks: the forced closure of old industries, high energy bills and intense regulation. There is an emerging rift between libertarians, who resent encroaching green government, and those on the Left, who fear that rampaging capitalism is destroying the planet.
What form of government is best-suited to deliver emission reductions at the speed and scale required? In the US, climate change Bills trundle through Senate and House. In Europe, the Commission fights the Council. There is a monolithic, single-party political system that could deliver, untroubled by elections, low-carbon infrastructure by decree and get us a long way to a carbonless nirvana. It has not yet chosen to do so.
carl.mortished@thetimes.co.uk