Rare earths mine, Xianjing, China, 2010. (Source: Peter Liu)

Recent news of German rare earths agreements with Kazakhstan and Mongolia, as well as slow progress on an Australian rare earths refinery in Malaysia, indicate that the West may finally be starting to break China’s hold on the industry.

Since the early 1990s, China has been the world leader in rare earth metals mining. With 57 percent of the world’s supply, it expanded massively in the industry due to its vast resources, increasing technological development since the 1980s, and lessening interest in the United States and elsewhere. Today, China controls 97 percent of the industry.

This gives China a powerful strategic advantage when it comes to the clean-energy, high-tech economy. Rare earth metals, a set of 17 elements composed of scandium, yttrium, and the lanthanides, are essential to a variety of “green” products, including hybrid electric cars, wind turbines, and energy efficient light bulbs, as well as standard high-tech products such as cell phones and laptops.

In recent years, China has imposed strict limits on its rare earths exports, leading to growing concern over higher global prices, more expensive supply chains, and growing international dependency on China for both raw materials and finished goods.

Intending to challenge China’s rare earths dominance, Germany recently signed agreements with Kazakhstan and Mongolia that will allow German companies to mine rare earths, and gain access to other resources, in the central Asian countries in exchange for technological investment.

Rare earths are not actually rare.  In fact, they exist all over the world. The challenge with mining rare earths is that they exist in low concentrations and are generally found together with radioactive elements, such as thorium or uranium, making extracting and refining them a difficult, time-consuming and expensive process.

In addition to being expensive, both the mining and refining of rare earths can lead to radioactive pollution without the proper disposal of tailings that contain thorium.

In the United States, strict controls govern tailings disposal. In China, no controls for rare earths exist (and pollution standards are difficult to enforce even where they do). Decades of massive scale and unregulated rare earths mining have caused widespread environmental damage, with some areas, such as the city of Baotou in Inner Mongolia, becoming toxic wastelands.

Malaysia is also familiar with the effects of radiation from the refining of rare earths. It was once home to a Japanese refinery, but the plant closed in 1992 and is now one of Asia’s largest radioactive waste clean-up sites.

Today, Australian mining company Lynas Corp. is set to build a $230 million rare earths refinery plant, the world’s largest and the first rare earths plant outside China in almost 30 years.

Lynas received permission to build the plant several years ago from the Malaysian government, which is eager for the investment. Economic output from the refinery is estimated at almost one percent of Malaysia’s total.

The eruption of angry public protests last year has not to date halted the project, but it has caused delays and increased scrutiny for Lynas Corp. The Malaysia’s Atomic Energy Licensing Board is now telling Lynas it must meet certain key conditions before it can begin the refining process – most notably, a plan for permanent waste disposal.

Permanent waste disposal poses a significant but necessary challenge for rare earths mining. There is little other way to square the problematic tradeoffs between radioactive pollution and development of products for a healthier environment.

As for China’s dominance, it is likely to continue for some time, even with the new Malaysian plant and German agreements. A recent World Trade Organization (WTO) ruling decided that China has violated international trade law by restricting exports on nine industrial metals. Some experts believe that although rare earths were not included in this ruling, the precedent can form the basis of a new case to compel China to lift export limits on rare earths. Other experts, however, point out that even if China were to end export limits, it would not lift limits on domestic production that are designed to prevent further environmental damage – and keep profits high.

Of particular concern to the international community is China’s use of its competitive advantage as a lever in unrelated disputes.  In 2010, for example, China restricted exports to Japan following a dispute over Japan’s arrest of a Chinese fishing captain in the East China Sea.

There is, however, some potentially good news. As China’s central government gains more control over domestic production, it likely will result in stricter environmental regulations, and perhaps increased enforcement. It is also likely to become the leader in safer rare earths mining, given the considerable funding they have put into rare earths research since the 1980s and the vested interest they have in reducing toxic waste.

As for Japan, it is seeking ways to make hybrid and electric cars with either recycled rare earths, or none at all.

Water Pollution in China (Photo by Bert van Dijk)

It has taken a long time in China, but official policies finally aim to achieve a sustainable balance between environmental protection and economic growth in significant ways. Developments over the last several weeks and months include a draft proposal for new rules on fines for pollution, discussions of an environmental tax and increased environmental spending, new environmental standards on copper scrap imports, and the release last March of China’s 12^th Five-Year-Plan, which puts environmental concerns front and center, and seeks to slow down the astronomic growth so damaging to the country in the last two decades.

The question, however, is whether these policies will achieve that balance. Together, they present a mixed view: on one hand, the 12^th Five-Year-Plan clearly shows environmental protection and renewable technology development have become high strategic goals, which will attract more funding and attention. At the same time, they remain couched within China’s myriad institutional challenges – most of which these policies are unlikely to solve.

New Environmental Standards and the Challenge of Legal Enforcement

Many rules on environmental standards currently exist in China, but not nearly as many are adequately enforced. The copper rules require certificates to indicate they are not hazardous. Since they were established in August, they have been piling up in ports as Chinese customs cracks down. Imports at specific locations, however, are much easier to address than widespread environmental non-compliance.

Enforcement of pollution in China is challenging for a variety of reasons, most of them institutional: data and monitoring challenges, budget constraints, weaknesses in the legal system, and endemic corruption at the local level. Wide geographical disparities, including differences in funding between urban and rural areas, present additional challenges.

The draft rules, if implemented, would end a longstanding weakness in Chinese environmental legislation regarding pollution time limits by introducing daily fines. Currently, time limits on pollution are undefined (or arbitrarily chosen by the central government), and the fine remains at a fixed rate rather than marginally increasing, as it does under the U.S. Clean Air Act, where fines can be issued of up to $25,000 per day for a maximum of 30 days. This can result in massive overall fines, a significant pollution deterrent.

The draft rules also seeks to address two other weaknesses in Chinese environmental law: a lack of transparency, and a lack of public participation and public interest litigation. Without the ability for the public to litigate against pollution, there is no incentive for state-owned enterprises to comply with the law, and without procedural rights, the text of a law – no matter how strong – has little meaning. Currently in China, with lawsuits rarely accepted and with environmental law a relatively new field, only a handful of all cases in the country are environmentally related. Without a strong legal system, however, even an official endorsement can only go so far.

These rules, combined with increased environmental spending, including increases in annual budgets, might be significant, depending on precisely what China plans to spend the money on. While what those plans are is not yet clear, the 12^th Five-Year Plan offers some guidance in this respect.

The 12^th Five-Year-Plan Emphasizes the Environment, but Implementation is Uncertain

China’s 12^th Five-Year-Plan contains much more emphasis on environmental policies than previous plans. It promises to invest massively in plug-in hybrid electric and pure electric vehicles; develop increased wind, hydro, nuclear, solar, biomass and geothermal energy, to the point where alternative energies reach 11.4% of total energy consumption by 2015, up from 8.3% in 2010; decrease water consumption by 30%; and increase forest cover by 1.3%. Many of these indicators, including its plan to reduce energy consumption and emissions per unit of GDP, it views as binding (as opposed to merely expected). Also notable is its plan to implement  cap and trade pilot programs, as well as its attention to the implementation of the 2008 Circular Economy Promotion Law, which defines the “circular economy” as “a generic term for the reducing, reusing and recycling activities conducted in the process of production, circulation and consumption.” Its goals are ambitious: to promote recycling at all levels, including the recycling of industrial waste, as well as to encourage low carbon and even zero emissions models.

Some of these policies, particularly in the investments into renewable energies, would be global game-changers if implemented successfully. Some researchers, however, note that even if China succeeds only halfway, the changes to global clean energy technology would be significant, with the country becoming  a price setter.

Implementation, however, remains uncertain. Research since March indicates significant challenges to both its lofty environmental and general policy goals, with one researcher pointing out that pollution targets are not enough without more emphasis on data collection. As is generally the case with China’s five year plans, implementation details are not addressed. Rather, those are found in more detailed policy documents drafted in between these plans, and are left to a large degree for local authorities. Yet local environmental protection bureaus face many challenges, not least being surrounded by (and often involved in) corruption within local enterprises and governments. For this and other reasons that are too lengthy to describe here, vague intentions to “strengthen the supervisions of law enforcement,” and other similar statements, remain an open question.

In addition, China’s central government has historically treated environmental policy with as much of a heavy hand as it treats its economy: for example, by its use of short-term campaigns that may close thousands of local polluting companies, but ultimately fail to address systemic institutional challenges; or by its clampdowns on protesters and arrests of high profile environmental activists. Most recently, it imposed electricity brown-outs in late 2010 in its push to meet energy intensity targets.

Without a doubt, China is clearly focused on a sustainable direction. It may well be that that focus will lead the world, as in the case of renewable energy. Without addressing structural challenges, however, sustainability is not guaranteed.

Republican presidential candidates at the Iowa GOP/Fox News Debate in Ames, Iowa, Aug. 11, 2011. Tim Pawlenty appearing here is no longer in the race. Rick Perry entered soon after. (AP Photo/Charlie Neibergall, Pool)

Among the Republican Party candidates vying to contest Obama in the 2012 presidential election, there is a recurring theme: the idea that environmental regulation prevents job creation. While only one candidate attacked the Environmental Protection Agency (EPA) in Monday’s Tea Party Express debate, Herman Cain’s comment that the agency has “run wild” drew enthusiastic applause. The notion that there is a tradeoff between jobs and the environment is not new, but it is a powerful argument when job growth has been painfully slow, and when immediate economic concerns understandably outweigh long-term and complex environmental ones. It draws political points easily as it taps into voters’ struggles and fears.

As a political tactic, then, the idea is compelling. As an actual policy prescription, however, is it accurate?

Several recent articles and many past research studies have examined the question. While uncertainties and nuances exist, two main points of consensus are clear. The first is, environmental regulations do increase costs and can prompt job loss in certain industries, though projected losses are often significantly overstated, and lost jobs are generally offset by job creation in other industries and wider societal benefits.

The second is, job creation is in fact tangential to environmental regulation. The purpose of these regulations is not to increase job growth, nor is their termination meant to solve persistent unemployment (President Obama’s ozone decision was political, not economic). Rather, their purpose is to reduce the market inefficiencies of pollution. In other words, Republican candidate Newt Gingrich was correct when he said Monday night, “Governments don’t create jobs. The American people create jobs.” This time, the enthusiastic applause made sense.

The evidence explains why the jobs versus environmental regulation argument is misleading, and does not form the basis for carefully thought-out policies.

Regulation Does Increase Costs – But They Are Overestimated

On the first point of consensus, regulation increases costs, yet the data show that industry regularly overestimates projected job losses. The New York Times cites an example from the late 1980s, when the EPA proposed amendments to the Clean Air Act to reduce acid rain from power plant emissions. A 1997 study by Resources for the Future shows the electric utilities industry argued that amendments would cost more than $7 billion and thousands of jobs, but actual industry costs were closer to $1 billion, and ultimately there was a small increase in jobs rather than a decrease. A study by the World Resources Institute agrees that on balance, job creation is larger than job loss because jobs move from pollution-based industries toward pollution-control industries.

While the fact that only some industries may be harmed by environmental regulation is no consolation to a person who loses their job, the wider societal context must be considered. Economists agree that such regulations do not take place in a vacuum. Environmental rules interact with pre-existing policies, such as taxes, and therefore will increase efficiency in areas outside the targeted market. For example, real estate and tourism benefit from less pollution, and society as a whole benefits from increased efficiencies, technological or otherwise. That is the essence of environmental regulation: the rules may constrain individual firms as they adapt, but the objective is to promote the greater good.

The same idea applies to the public health benefits of environmental regulation. While these numbers contain uncertainties and are not precisely comparable to costs (for example, investments in non-polluting technologies versus a decline in asthma cases), many economists find that society-wide benefits nevertheless significantly outweigh costs and are ultimately beneficial to those regulated. With regard to acid rain, the EPA estimated the public health benefits at more than $120 billion by 2010, and found a 64 percent reduction in sulfur dioxide emissions compared with 1990 levels by 2009. A study on the 1972 Clean Air Act amendments by Michael Greenstone found that between 1972 and 1987, polluting industries lost 590,000 jobs, $37 billion in capital stock and $75 billion in output – a substantial number for these industries, yet small compared to the entire manufacturing sector, and small compared to monetary benefits to homeowners and reduced infant mortality rates.

There is no Large-Scale Trade-off Between Environmental Regulations and Jobs

On the second point of consensus, jobs are not a critical issue when it comes to environmental regulation. Economic analysis is not jobs analysis. Whereas regulations are designed to prevent the market inefficiency of pollution, unemployment is a macroeconomic issue limited by monetary policy. As Eban Goodstein points out, even jobs that are created by environmental regulation do not have a significant impact on the unemployment rate.  Where it does occur, job loss is too small to create a tradeoff between unemployment and the wider economy.

Instead, the tradeoff is between regulation and output of goods and services. According to Peter Dorman, the three possible sources of unemployment in an economy are the level of aggregate demand, the trade balance and structural matters. Today’s economy is struggling because a lack of demand, not because of the existence of or increase in environmental regulations. The cement industry may currently be warning that proposed stricter standards for sulfur dioxide and nitrogen oxide emissions will cause a loss of approximately 13,000 jobs, but the real source of its problems is a troubled housing market and a lack of demand for cement.

The Trick is to Balance the Long and Short Term, Not Dismantle EPA Regulations

Regulations are blamed for many things, and in a bad economy, environmental regulations are an easy target. Removing them, however, does not help the overall economy recover anymore than putting them into place hurts it. The group Republicans for Environmental Protection points out that if the EPA were dismantled, as so many Republican candidates would like to do, the budget savings would be two-tenths of one percent of the federal budget. This number does not reflect industry’s costs of implementing EPA regulations, but it shows the minimal cost of government protection. While the timing of imposing new regulations is important to weigh in the short term, removing protections runs counter to the long-term reality that environmental health is the foundation of human health, productivity, innovation and well-being.

Debates are underway in the United States as contenders seek the Republican party nomination to challenge Barack Obama in the 2012 U.S. presidential election. Last week’s debate was the first for Texas Governor Rick Perry, whose front-runner status appeared to take a slip to former Massachusetts Governor Mitt Romney following controversial remarks on social security. All eyes will be on the two rivals again as the candidates face off tonight at the “Tea Party Republican Debate” in Tampa. While the media have focused on the candidates’ positions on social security, job creation and the economy, environmental policy has featured prominently as well, with most of the candidates attacking the Environmental Protection Agency’s (EPA) role as the country’s environmental regulator.

Most prominent is the view that environmental protection and regulation prevents job creation, as articulated by House Majority Leader Eric Cantor in a letter to Republican Party members calling to fight 10 “job-destroying regulations.” Seven out of those 10 are EPA rules. U.S. Representative Michele Bachmann and Perry have both referred to the EPA as a “job killer,” while Romney has said that regulation is holding the economy back. Former U.S. Ambassador to China Jon Huntsman and businessman Herman Cain, as well as Perry, say no new regulations should be passed in this economy because they will hurt job creation.

In time for tonight’s debate, we briefly summarize each candidate’s current positions and past records on the environment.

Rick Perry
Rick Perry has a record of controversial statements. He has compared himself to Galileo because he feels “out-voted” for his belief that climate science is not yet “settled,” and has defended his comment that the 2010 BP oil spill was an “act of God.” His record, however, is consistent with his views: he has fought the EPA for years from Texas, and is currently leading a lawsuit against its greenhouse gas emissions regulations.

Michele Bachmann
Michele Bachmann may have not featured as prominently in the last Republican debate as did Perry or Romney, but has made many headlines with her controversial views. She has said she would repeal some environmental regulations and close down the EPA except for conservation, a statement which fits with her view that climate change is a “hoax” but does not make sense given that other departments are designed to deal with conservation, such as the Department of the Interior. A believer in small government, her record indicates she is against public investment in renewable energy.

Mitt Romney
Mitt Romney’s statements on the environment tend to be more moderate than the other candidates. For example, he supports some regulation for safety reasons while allowing for more domestic production of all energy sources, from oil to nuclear (he also supports drilling in the Arctic National Wildlife Refuge). Romney is the only candidate other than Huntsman who has consistently accepted climate change. He does not, however, believe that greenhouse gas should be regulated by the EPA, as was decided in the landmark 2007 Supreme Court case, Massachusetts vs. EPA.  In 2004, he supported an emissions reduction plan for Massachusetts, but in 2006, decided not to support a similar plan because of high costs.

Jon Huntsman
Jon Huntsman is the strongest environmental advocate in the group. He famously tweeted that he believes in the scientists on climate change, he signed Utah into the Western Climate Initiative as the state’s former governor, and he is the only candidate who supported cap-and-trade policies to limit carbon emissions. These actions, however, as well as his moderate positions on other issues, have not helped his candidacy, which may be dying. He now says cap-and-trade has not worked and that he would wait until the economy improves before supporting it again.

Herman Cain
Herman Cain supports a mix of energy sources, from fossil-fuel based to renewables such as wind. He also, however, supports expanded offshore drilling areas, including in the ANWR. Like Bachmann and Ron Paul, he doesn’t believe in climate change and did not support the Lieberman-Warner bill on cap-and-trade legislation.  He wants to give regulatory powers to independent groups that include oil company leaders.

Ron Paul
Ron Paul supports all kinds of energy production, including offshore drilling and renewables, but prefers tax incentives over subsidies. He believes in measures to reduce pollution, such as energy efficient vehicles, but he is against federal government regulation of the oil industry. Paul voted against cap and trade, both because he is against regulation and also because he believes it would cause jobs to move away from America.  Like Bachmann and Gingrich, he would dismantle the EPA, preferring that environmental protection and solutions occur through private property rights, the courts, and private enterprise.

Rick Santorum
Former U.S. Senator Rick Santorum dismisses climate change as “junk science.” He has consistently voted against an increase in renewable energy and regulations for cleaner air, and has supported a limit increase on mercury emissions from power plants.

Newt Gingrich
The environmental views of former speaker Newt Gingrich are mixed. While he spoke out against the Waxman-Markey climate bill and currently opposes EPA regulation of carbon, he has also supported programs that reduce carbon emissions, including providing incentives for carbon sequestration technology development. His latest statements include his desire to shut down the EPA and rename it the Environmental Solutions Agency.

Is the opposition to the EPA by most of these candidates genuine or part of the Tea Party script designed to appeal to voters and distinguish them from their peers, as some speculate?

Whether a political or economic calculation, or a combination thereof, some experts believe that such controversial statements will not win the nomination, especially following the Tea Party’s heavily criticized, stringent views during the debt ceiling debate. If that is so, a candidate such as Romney may have a stronger chance of winning the leadership than Perry, despite criticisms from Tea Party loyalists or others – unless, that is, Perry’s job-killing statements grow in popularity. As a follow up to this question, I will look more in depth at the link between environmental regulation and job creation in my next article.

While Ontario’s ambitious feed-in-tariff (FIT) policy is being put to the test by domestic and international opposition, including a challenge from Japan, Japan has just achieved a major breakthrough for its own FIT policy as it continues to recover from the tsunami and nuclear disaster this past March. Both examples will have implications for renewable energy policies and trade worldwide.

Currently in place in more than 40 countries – most notably in Germany, whose early leadership made it the world’s leading solar power – FIT policies boost initial development in renewable technologies by providing developers with above-market rates guaranteed over a long-term contract, usually 15-20 years. When designed well, they deliver long-term emissions reductions while providing a stable rate of return for clean-tech developers and reasonable costs for the consumer. When costs are not controlled over time, however, an FIT can be doomed to follow the example of Spain, whose program created a rush of solar development that ultimately led to a bust.

Ontario’s FIT Program Faces Many Challenges

The Green Energy Act (GEA) was passed in 2009 in Ontario, Canada, by the Liberal Party as a way to position the province as a long-term renewable energy leader while phasing out coal, spurring clean-tech investment and boosting the economy by creating jobs through domestic content requirements. The Act’s FIT program covers biomass, biogas, landfill gas, on-shore wind, solar photovoltaics (PV) and waterpower. So far, it has created 13,000 jobs and attracted $20 billion in private-sector investment.

Two years later, however, it is facing three international challenges. First, in a dispute initiated under the World Trade Organization (WTO) last year, Japan is calling the Act’s domestic content requirements a prohibited subsidy that discriminates against imported products and violates key elements of international trade law. Europe likewise objects to the domestic requirements in its own complaint it initiated in the WTO last month. The third challenge comes from Mesa Power Group, owned by T. Boone Pickens, who filed a compaint in July under the North American Free Trade Agreement (NAFTA), alleging that Ontario made last-minute, discriminatory changes to its FIT rules, preventing the company from winning contracts for two wind projects it was hoping to build in the province.

The Act also faces significant domestic opposition in Ontario. Some of the opposition comes from communities fighting the construction of wind turbines in their neighborhoods. Some of it comes from a $7 billion deal made in 2010 between the Ontario government and South Korean-owned Samsung, which has sparked anger and which oddly dismisses Ontario’s own goal of promoting local over foreign companies.

Much opposition comes from the Act’s purported role in rising household energy bills. Conservative Leader Tim Hudak, in advance of a provincial election in October, has promised to cancel the FIT program and the Samsung contract, hoping he can oust the Liberals on the perception that the Act’s rising costs hurt the economy. Yet as Pembina Institute shows, the rising prices are due to such factors as the introduction of smart metering and the much-needed replacement of aging infrastructure – and prices would rise even without renewable investment. Others note that prices are expected to fall in the long-term.

As Japan Challenges Ontario’s FIT, it Passes its Own

Meanwhile, as the composition of the Ontario-Japan WTO dispute panel got underway, Japan passed a renewable energy FIT law that will go into effect next July. Some details of the policy remain undecided, but the tariff will cover solar PV, wind, biomass, geothermal and small hydroelectric generation. An overall review will occur every three years, and tariffs and contract terms will be reviewed annually.

Given the long-standing political strength of the nuclear industry in Japan, the measure would not have passed if it weren’t for the Fukushima disaster, as well as the controversies surrounding the government’s handling of it. The powerful but heavily criticized Ministry of Economy, Trade and Industry (METI) will not be responsible for implementing the FIT system; rather, that responsibility will go to a special parliamentary committee.

The law reflects the large shift in public opinion on nuclear energy since the tsunami and disaster at Fukushima, as well as the pressure government officials have been under to phase out atomic power. While it may be considered a victory for long-silenced renewable energy supporters, Prime Minister Yoshihiko Noda is attempting to convince a fearful public that Japan’s precarious position cannot be overcome without any nuclear in the mix.

Implications – and Questions – From Both Cases

The implications of these related examples are likely to be significant. For example, Japan’s new policy could help it recover its leadership in solar PV technology, along with Germany, and place it in competition with China, which last month established its own solar FIT program. (In another parallel example, China’s wind FIT program is currently being challenged by the United States for its support of domestic wind turbine manufacturers, considered also to be an illegal protective subsidy).

It is not certain, however, that Japan’s policy, if successful, will affect other countries’ nuclear policies, given that each country’s nuclear energy needs and capacities are different.  It is also not certain whether Japan will implement its own domestic requirements as part of its FIT policy, but this is unlikely while its own case against Ontario remains open.

With regard to Ontario, it is unclear whether its FIT program is more at risk from the three international challenges or from domestic opposition. Certainly, however, a repeal of the Act would render the WTO and NAFTA challenges moot, leaving the protective subsidy question unanswered.

Traffic on Golden Gate Bridge (Image by: caribb)

U.S. President Barack Obama late last week announced an aggressive agreement to  increase the corporate average fuel economy (CAFE) to 54.5 miles per gallon for cars and light-duty trucks by model year 2025.

The agreement, made with 13 major automakers, including Ford, GM, Chrysler, Honda, Jaguar/Land Rover, Hyundai, BMW, Kia, Mitsubishi, Mazda, Nissan, Toyota and Volvo, is the next phase of the Obama administration’s national vehicle program, building on a 2009 historical agreement that raised fuel efficiency to 35.5 mpg for 2012-2016 vehicles.

The fuel economy programs set forth under the Obama administration mark the first meaningful update of fuel efficiency standards in three decades, and the most significant climate change action made by Obama since he took office. At a time when Washington has been mired deep in divisive debt ceiling talks, this latest agreement contains good news for the environmental policy community, automakers and associated new technologies, and the average American.

The Environmental Protection Agency and the White House estimate that over the life of the program, Americans will save $1.7 trillion in fuel costs and 12 billion barrels of oil. By 2025, they estimate that a new car will save $8,200 in fuel costs, compared to what they would pay at the pump with a similar 2010 model, and that oil consumption will be reduced by 2.2 million barrels a day. Also by 2025, the plan will eliminate six billion metric tons of carbon dioxide pollution. While the 54 mpg stipulated in this agreement is less than the 62 mpg environmentalists initially pushed for, it is still significant, doubling the roughly 27 mpg that the average car gets today. Even when one factors in the 20-percent discount that federal officials use to rate a vehicle in real-world driving conditions, which would place the average 2025 vehicle at roughly 43 mpg rather than 54, the agreement is still ambitious, say automobile executives.

For years, American automobile companies fought the implementation of tougher efficiency standards, most notably in California, which fought the companies in multiple lawsuits. Yet when the lawsuits failed, the EPA allowed California to set its own stringent standards, thus paving the way for this agreement. Also paving the way were the federal automotive industry bailouts in 2008 and 2009 that followed the Wall Street financial crisis. The bailouts not only required greater efficiency in American vehicles, but also gave the Obama administration greater negotiating power in setting national standards, which the companies prefer over a number of changing standards across different states.

Some critics of the agreement argue that the increased cost of efficient vehicles will make them difficult for some people to buy up front, even if they save later on in fuel costs – but the Boston Consulting Group says the costs would be in the area of $2,000, which would easily cover the fuel savings (the Center for Automotive Research puts the number at $6,700). Furthermore, people tend to buy cars using loans, which means the accurate comparison is between monthly car payments and monthly fuel savings, not between up-front and down-the-line costs.

The joint White House and EPA announcement says the EPA and the National Highway Traffic Safety Administration (NHTSA) are also considering incentives for “game-changing” new technologies for emissions improvements, which the Wall Street Journal says could include features that automatically shut off an engine when it’s idling or solar panels on car roofs. Car companies are pleased with the long-term nature of the agreement, because it will allow them to test out new technologies over time. It will also require both car and battery companies to become more innovative and internationally competitive.

The WSJ report adds that the agreement will allow Obama to formally propose the rules by the end of September. It will be a historic and welcome way for the White House to start the fall.

The United Nations Security Council (Photo courtesy of the United Nations).

Charged meaningless by some and pathetic by others, yesterday’s debate in the United Nations Security Council on the security implications of climate change disappointed the hopes of those in the policy community who, for years, sought action on climate change by the Security Council in absence of any effective multilateral agreement by the United Nations Framework Convention on Climate Change (UNFCCC).

Yesterday’s debate, under the German Security Council presidency, was the second on the topic. The first was held in 2007 under a British presidency, two years before the Pacific Small Island Developing States achieved a hard-won General Assembly Resolution on climate and security in June 2009.

Among the hopes for the debate were, at the least, a Presidential Statement on the matter, and, as Nauru’s President Marcus Stephen wrote in a New York Times op-ed July 19, the appointment of a special representative on climate and security to raise awareness about connections between the two issues and possibly to track ongoing threats. Members of the Pacific small island community such as Nauru have been keen to see the Security Council take a role as their security becomes increasingly compromised by rising sea levels.

Coming to agreement on a Presidential Statement, which in the end simply acknowledged the risks climate change poses to international peace and security, was not easy.  Opposition came from countries such as China and Russia, as well as members from the so-called Non-Aligned Movement, who were mainly concerned about the implications of the powerful Security Council involving itself in matters traditionally reserved for the larger General Assembly. Countries in favor, on the other hand, were said to include the United States, where military leaders and academics alike have examined the intersection of climate change and international and national security issues. Hours after the debate, before any agreement had been reached, the United States Ambassador to the UN, Susan Rice, said the lack of outcome was “pathetic and short-sighted.”

Short-sighted is a fair assessment. The rising sea levels inundating parts of small island states in the Pacific not only affect their own citizens – frightening already as that is – but will affect citizens around the world as islanders search for a safe haven, should the seas continue to rise. Meanwhile, if the increase in extreme weather events affecting food supply, homes and human safety across the world, has not become clear this year, as well as the ongoing mounting evidence that the climate is warming, then it is quite frightening to contemplate what will be enough for policymakers to see that the islands are likely only the beginning of this story.

It is easy to understand skeptics who question what the Security Council, a body more readily able to impose sanctions than to deal with scientific complexities with widespread and uncertain implications, could possibly do for climate change. At the same time, it is precisely the power and small size of the Council that could make it far nimbler, more creative and more effective than the UNFCCC, or even the GA. While an advisor at the Micronesia Mission to the UN, I proposed breaking down the climate change and security issue into more manageable topics, such as territorial sovereignty, for study by working groups or for consultations by expert panels. While neither of these options would result in climate mitigation, they would at least provide the Council with a greater understanding of how climate interacts with issues it is more familiar with (a key distinction, since climate generally does not cause conflict on its own), and give it the ability to step in with greater authority should the need arise.

None of this fully explains precisely what those needs may be in the future – and therein lies another argument for opposition: urgent issues such as a nuclear Iran, for example, must be dealt with before possible future threats in unforeseen locations are examined. Indeed, experts argue a nuclear Iran should be a top priority. Yet another top priority is brewing, as natural resources dwindle due to hotter temperatures and raging wildfires and as the Arctic continues to melt. While tsunamis are not climate-related, one only need look as far as Japan to see the significant policy implications of a massive natural disaster. If an event happens once, it can be seen as an isolated incident. If it becomes commonplace, it can weigh down on a country’s domestic and international obligations, which can have wider ramifications. In the case of atoll nations that will become inundated if sea levels continue to rise, once is all they have.

Policymakers who wished to see the Security Council take up these issues yesterday in their support expressed their  disappointment over the outcome. Nauru’s President Marcus Stephen said, “Let history report that again we have sounded the alarm and the world chose not to act.” Yet he also questioned in his op-ed whether the United Nations is even capable of addressing this issue at all.

Given that the Security did eventually agree on a historical, albeit weak, Presidential Statement, let us hope he is not right.

A Korean vessel investigates possible seabed mineral deposits in Tonga's EEZ, April 2011. (Applied Geoscience and Technology Division of Secretariat of the Pacific Community (SOPAC))

The value of an EEZ is on clear display in the South China Sea dispute and in the Pacific small island states battling the climate change threat. Despite their differences – one carries the weight of changing geopolitics and possible military force; the other, the disappearance of states altogether from the world map – both cases involve high stakes, and both test customary international law in new ways.

The increasingly tense dispute in the South China Sea over sovereignty of the waters and its four main archipelagoes – the Pratas, Macclesfield Bank, the Paracels and the Spratlys – has a long history. Six countries – China, Taiwan, Vietnam, Malaysia, the Phillipines and Brunei – have competing claims that they say go back centuries.  However, things heated up this year, with China showcasing its growing naval strength, clashes between Chinese, Phillipino and Vietnamese vessels, and an increase in live-fire naval exercises. A call by six members of the Association of Southeast Asian Nations (ASEAN) for a peaceful resolution to the dispute during last week’s United Nations Convention on the Law of the Sea (UNCLOS) meeting is seen against the backdrop of Beijing and Hanoi’s growing animosity.

At the heart of the dispute lies a contradiction: an EEZ means everything – and nothing.

An exclusive economic zone, or EEZ, is a 200-nautical-mile sea area measured from the low-water baseline (the level reached by the sea at low tide) of a state’s coast or of an inhabitable island under its sovereignty. An EEZ, as well as its relation, the continental shelf – the seabed and its subsoil up to 350 nautical miles from the coast – is a closely guarded asset. Under UNCLOS, a state has sovereign jurisdiction over the area’s living and non-living marine resources, which can be highly lucrative. When EEZ claims overlap, UNCLOS leaves it to states to sort out their differences, though these rules generally apply.

The two most coveted archipelagos, the Paracels and the Spratlys, are rich in resources such as minerals, oil and natural gas. Both the Phillipines and Vietnam firmly claim the Spratlys as part of their EEZ; the former calls them the Kalayaan Island Group (KIG) while Vietnam calls them the Truong Sa. China, which claims them as the Nansha Islands in an official map without latitude or longitude points, is more ambiguous. It argues the Nansha Islands are “fully entitled” to an EEZ, yet it also argues that a coastal state’s EEZ comes second to another state’s territorial sovereignty (in this case, its own).

In other words, territorial sovereignty renders this international legal concept meaningless.

This may not be a surprising argument, but it raises some questions: what can be done when inconsistencies exist between a country’s claims and the relevant international treaty, in this case UNCLOS – particularly when the state in question is a rising world and naval power?  To borrow a phrase from the New York Times, if China’s actions are setting the future tone of the region, will this tone and dismissal of the EEZ concept ultimately lead to a new direction for customary international law?

The case of the Pacific small island states and their EEZs also raises questions. Climate change has irrevocably caused sea-levels in the region to rise, leading to the possibility that these atolls nation could become uninhabitable or disappear completely. If this occurred, they could lose their status as sovereign states, and thus, all EEZ claims.

A lesser risk, though more immediate, is the slow shrinking of an EEZ as an island nation’s coastline erodes due to climate change. Since baselines are ambulatory, they retreat along with a coast – and they bring with them the outer limits of the EEZ.

To a tiny state with many atolls, the slow shrinking or entire loss of an EEZ and a continental shelf (or more than one) would mean the loss of its rights to rich, if embattled, marine resources, significant revenues from deep sea mining, access fees from foreign fishing vessels, and to its own fishing industry that lies at the core of its identity.

In short, it would be shattering.

What, then, are the legal options for a small island state to protect its EEZ?

One option is to protect a small island’s statehood status so that its claims remain legitimate. Options were explored in a previous post on a conference last month at the Columbia Law School.

Another option is to look to UNCLOS for guidance, despite that the 1982 convention was negotiated when climate change and its possible threats to state and marine sovereignty were not in the policy lexicon. Some academics think it is unlikely that UNCLOS will be amended to reflect baseline challenges because of the complexity of the treaty and its amendment process. That leaves options such as a separate agreement, or the increased use of straight baselines (while the low-water baseline follows the naturally occurring low-water mark along a coast, a straight baseline follows discrete points along an unstable coast, such as Bangladesh’s delta, allowing for greater legal stability).

Perhaps the most promising and equitable idea is Alfred Soons and David Caron’s suggestion to freeze current baselines, so that they are fixed in perpetuity even if the coast moves. This allows EEZs to remain the same despite climate change. Yet as Rosemary Rayfuse points out, a freeze on baselines is not a freeze on disputes.

Whether the question is regarding the necessity of tying a marine claim to a coastline, as in the South China Sea, or what happens when land disappears altogether, the answers will ultimately have to be found in customary international law, as it changes with a changing world.

Even with the world map turned upside down, the Marshall Islands and other tiny Pacific nations are hard to find. What if climate change alters the map? (Image from MapCenter.com)

Questions of statehood and statelessness are generally laden with controversy and emotion, yet with Pacific islands such as the Republic of the Marshall Islands (RMI) at risk of becoming gradually uninhabitable and entirely submerged under rising seas, along with losing their sovereignty and lucrative marine rights, there is an urgent need for legal solutions. Solutions are available, even if uncertainties surrounding precedents and current options mean they will depend as much on politics as they will on law.

According to customary international law as codified in the 1933 Montevideo Convention, a state must have a permanent population, a defined territory, a government, and the capacity to enter into relations with the other states to be considered sovereign. Nevertheless, even without climate change taken into account, not all recognized states today conform to all these requirements, and some academics have long argued that the definition is inadequate.

With regard to climate change, there is no precedent for a state losing its territory for any reason other than war, annexation or the sale of land. One option for a state threatened with submersion to retain its sovereignty is to purchase new territory if it is available. For example, the Indonesian government has agreed to rent out one of its thousands of uninhabited islands for the Maldives. Another possibility could be the resettlement of the state’s citizens into a receiving state, in which they would retain some autonomy. This option, however, is fraught with political difficulties, and so far, it is mostly unprecedented, as movements tend to be within one country rather than between countries – for example, in Papua New Guinea, the Carteret Islanders have begun relocating to higher ground in Bougainville, an autonomous region 50 miles away.

There are two kinds of state independence: factual, which is the set of four elements above, and legal, a status conferred by the international community and based on fundamental, inviolable jus cogens norms. Even if an uninhabitable island is no longer factually independent, it can still be recognized by other states as legally independent as long as it maintains a “population nucleus” of 50 or more people – or, in the case of complete submersion, if it maintains a functioning government, even one located in another state, that claims continued statehood. Only if the majority of the world’s states decided not to recognize it any longer would the island no longer be legally independent, but that is an unlikely scenario. Morally, other countries have an obligation to support the islands’ continued existence. Politically, many would want to avoid setting dangerous new precedents.

Other options include a trusteeship run by the islanders with financing from other countries, a “nation ex situ” that can hold a scattered Pacific island diaspora together and would align well with today’s global, cross-border citizenships and rich online communities. Yet the trustneeship known as the United Nations Trust Territory of the Pacific Islands, administered by the United States between 1947 and 1986, caused significant problems before RMI became independent in 1979. During that time, America conducted 66 nuclear test explosions, leading to the Marshallese peoples’ first exposure to radiation – and relocation. The effects of that radiation and relocation still linger in the form of more than 35 severe medical conditions, such as cancer of the bone, and destroyed homes and property. If a trusteeship were the answer, then, it would have to work entirely differently from how it has in the past. But it also remains unclear how an island diaspora would work without the land and resources that form the basis of its cultural identity.

This one example highlights the difficulty surrounding possible solutions to safeguard the islanders’ statehood if the worst-case scenario becomes a reality – a reality that is extraordinarily challenging for Pacific islanders like the Marshallese to contemplate, not least because today’s generation may be challenged by a statehood they struggled to achieve only 25 years ago. But if discussing legal theories in advance of submersion prepares the world for such changes and smooths inevitable political difficulties, that statehood – while hardly ideal – will at least not be lost.

This piece is based partially on presentations made by Maxine Burkett of the University of Hawaii and Jenny Grote Stoutenburg of the University of California, Berkeley, as well as comments made by RMI Ambassador Phillip Muller, all at the Columbia University’s law school conference, Threatened Island Nations: Legal Implications of Rising Seas and a Changing Climate.

Conference poster for Mixed Migration Roundtables, Tunisia, 2009. Photo courtesy of UNHCR.

As more people worldwide experience increased storm severity, floods and other climate change impacts, policymakers are growing increasingly concerned about climate displacement and searching for legal mechanisms to assist those uprooted from their homes.

Two recent conferences examined the issue of climate displacement and debated possible solutions. The first, the UN Refugee Agency’s Nansen Conference on Climate Change and Displacement in the 21st Century, was held June 6-7 in Oslo. The second, on general climate change issues facing small island developing states, including displacement, was hosted by Columbia University’s Center for Climate Change Law and the Government of the Republic of the Marshall Islands from May 23-25 in New York.

These conferences come at a time when there is more use of problematic terms such as “environmental refugees,” as well as projections of hundreds of millions of climate displaced peoples, than there is rigorous evidence to support those claims.

In order to find appropriate solutions for the real needs of people suffering from climate and environmental change impacts, scholars say, we need to fully understand the problem.

Some policymakers, such as David Hodgkinson, believe that because “environmental refugee” is not a legally recognized term and therefore not covered under the UNCHR Refugee Convention of 1951, or because the UNFCCC’s framework also does not deal with climate displacement, we need a new international treaty specifically for this purpose.

Some policymakers, such as Erik Solheim, Norway’s Minister of the Environment and International Development, believe that existing instruments, such as the UNCHR and the World Bank, are enough to support migrants moving for climate change reasons. Others, such as Michele Klein Solomon of the International Organization for Migration, say that international legal mechanisms such as consular law can also help.

Still others, such as Jane McAdam, Director of the International Refugee and Migration Law Project of the University of New South Wales, say a new international treaty cannot solve the problem, and may obscure more realistic solutions. McAdam argues we need more flexible options and increased empirical research on climate change, migration and displacement.

There are compelling reasons to support the idea that a new treaty is not needed.

Migration and displacement are complex. A large body of evidence from around the world shows that people move for a variety of social, political and natural factors, with most migration occuring for economic, not environmental, reasons. People base their decisions to migrate on assumptions about their destination that are often incorrect. Because of this complexity, it is impossible – and some academics argue, unfair – to isolate climate change as the sole reason people move.

Even if climate change aggravates existing environmental degradation, and becomes the tipping point for an individual or household’s decision to move (or becomes a stronger determining factor in the years ahead), that movement can occur gradually, such as with coastal erosion; temporarily and desparately, such as after a natural disaster; or through a government, moving its citizens away from harm. Since pressures, timing, speed and scale depend on the context, an international approach is unlikely to work. Moreover, while migration and displacement do happen around the world, making them global phenomena, people predominantly move within their own countries (a significant problem in its own right) or to adjoining countries.

It is currently unclear whether climate change will affect the short distance and short-term nature of migration and displacement, even if it increases the frequency of natural disasters. Even those Pacific islanders who have been forced to leave their homes because of climate change impacts have so far not moved outside their own countries. If sea-level rise becomes so severe that entire atoll states do submerge, bilateral, regional or other localized arrangements are far more likely to be flexible than an international mechanism. Human rights approaches, international burden-sharing agreements and guiding principles on external displacement may be other options, but without enforcement, such choices become time-consuming and risky.

Scholars who do not support a new international treaty are not dismissing the real challenges of displacement and climate change. On the contrary; they warn of underestimating the complexities with potentially inappropriate solutions. They also warn of overstating numbers,which can add fuel to xenophobic fears about migration, leading to a closing of borders and an intensifying of prejudice.

Whatever solution policymakers decide on – whether it’s to continue using existing mechanisms or create new ones – one scholar suggests a likelier way of finding them. Brad Blitz of Kingston University, London, points out that climate change and migration experts tend to keep to separate circles, creating a false disconnect and competition between subjects. Perhaps if those gaps are closed there is a better chance for a more optimal solution. As it stands, only one scholar, McAdam, presented at both these conferences.

Blitz suggests that the term “statelessness” – controversial though it is – is a way to bridge the gap between scholars and find solutions for small island nations and others who are displaced from climate change. More on this topic next week.