Up until now, global climate negotiations between the G20 countries have taken place within a context of economic expansion, although growth rates have varied between countries. But with the financial crisis, the economic realities have changed dramatically. For 2009, the IMF projects that overall global economic growth will contract, with growth in advanced economies going negative, the first time since 1945. While emerging economies will experience less growth, effectively, a recession in the G8 means 100 percent of global growth will happen outside of the US and the Eurozone.

Source: IMF

This dire economic prognosis comes as large emitters in the global south are asking (justifiably so) that developed countries should foot a disproportionate share of the bill. China wants them to devote 0.5 percent of GDP to mitigation and adaptation, India says 1 percent.

Given the lack of progress on show in Poznan (Kevin Watkins calls it a “shambolic display“), all signs suggest that this demand is unlikely to be met. Following costly bank rescues, EU politicians are arguing for a scaled-back or amended climate package. Tightening economic conditions have triggered calls for compensation from emission-intensive industries and coal-dependent EU members. As previously reported by Climatico’s Dafydd Elis, given this impasse, an EU meeting in Brussels 11-12 December may be more important to the future of multilateral negotiations than what happens in Poznan. Progress hinges on leading EU member states pushing on despite economic woes, and finding ways to temporarily accommodate Poland and other emission-intensive countries who face huge adjustment costs to a carbon-constrained EU, without lowering ambitions.

With regards to the US, the big question is; will the US Congress vote in favor of adopting higher mitigation targets (and associated short-term costs) than governments in the soaring economies of China, India, and Brazil, at a time when the US economy is spiraling downwards ? Economic woes and a dense congressional calendar in the US does not bode well for favorable congressional action in time for COP-15 in Copenhagen next November, as highlighted by the Pew Center and Joseph Romm, among others. Indeed, perhaps a more likely scenario is congressional action that seeks protections for American industry similar to the Byrd-Hagel amendment, which passed just prior to Kyoto on a 95-0 vote, at a time when the US economy was soaring, not tanking. Avoiding this seems to rest on Obama using his political capital to successfully garner support for the idea of a green New Deal in Congress by winning over skeptics with the prospect of millions of green jobs.

Overall, the extent to which policy-makers accept Stern’s argument that mitigation makes economic sense is currently being put through a very serious test. Amidst the disturbing signs, some good news though. Multilateral cooperation outside of the limelight is happening, such as UK-China ministerial-level collaboration (as reported by Climatico’s Nyla Sarwar). Moreover, Brazil recently committed to cut deforestation by 70 percent by 2020, which has been hailed by many as a breakthrough. But this commitment may be a very shrewd one, driven by an expectation of economic gains through selling emissions reduction credits as a result of forestry being included in the CDM market.

Update, December 12: Once a vanguard, always a vanguard. California, unlike the EU, seems set on addressing the recession  without watering down its commitment to transitioning to a low-carbon economy.

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