Regional Economic Groupings and the Provision of Global

Regional Economic Groupings and the Provision of Global Public Goods: The Case of Climate Change Erasmus Mundus Alumni Association Climate Change Conference Budapest, Hungary February 28, 2009 | Brad Steiner London School of Economics and Political Science

Global Studies and Climate Change The study of globalization(s) and their history by revisiting issues previously defined within specific disciplines. To begin a process of integration for knowledge, issue areas and solutions. Globalization is: • not a phenomenon limited to the Global North – story of structural development • nothing new – discourse of ‘newness’ • has a spatial dimension – global to local Contrasting the discipline with IR: 1 • unit of analysis - informal and formal networks of groups of individuals and organizations • theoretical basis – social, political, and ethical dimensions of increasing interconnection • nature of the discipline - multi-disciplinary, interdisciplinary, transdisciplinary • geographic scope – shift from ‘states and power’ to ‘issues and impact’ EMGS Programme - Leipzig - Vienna - Wroclaw- LSE Pomerantz (2008) “International Relations and Global Studies: The Past of the Future”

Provision of Public Goods The two essential features of a public good are that they are non-rivaled, meaning one person’s use of the good does not keep another from using it, and non-excludable, meaning that it is not possible to keep any group or individual from using the good. The primary economic challenge of public goods is the free rider problem. Individuals have very little incentive to pay for shared goods which they could benefit from for free. The result is a type of market failure that when production or provision of the good is left to market forces it will always be under-produced. 1 The ‘Three Ps’ of providing public goods: 2 (a) preference revelation, or what people want • political bargaining, or deciding what is included and how it should be done • production, or actually getting the goods to the people. (1) Samuelson (1954) “The Pure Theory of Public Expenditure. ” (2) Desai (2003) “Public Goods: A Historical Perspective. ”

Types of Public Goods Public goods are found at all levels of governance: 1 • A local public good benefits all the members of a community, possibly more than one country. • A national public good benefits all the citizens of a state. • A domestic public good benefits all the members of a community situated within a single state. • A regional public good benefits countries belonging to a geographic territory. • An international public good benefits more than one country • A global public good benefits all countries and, therefore, all persons. Global and regional public goods are both international public goods. However, some international public goods may be neither regional nor global. The public good of collective defense under NATO, for example, applies to North America and Europe. (1) International Task Force on Global Public Goods (2006)

Global Public Goods What, then, are global public goods (GPGs)? 1 • Peace and Security • Control and Prevention of Infectious Diseases • International Financial Stability • Global Trade and Transit Systems • Environmental Protection and Climate Change Mitigation • Knowledge (1) International Task Force on Global Public Goods (2006)

Levels of Governance the ‘cascade model’ of governance: 1 International Agreements National Policies Local Implementation Elements of a ‘constructivist model’ of governance: • civil society now playing a role in forming international norms • bi-directional influence, each actor influences the level above it • transition from government to governance at both national and local levels • focus of power on actors, both public and private, who can coordinate resources Thus, the traditional role of the nation-state as setting norms and standards is being shifted both upwards to inter- or trans-national bodies, and downwards to regional, local and municipal government and civil society. In the area of climate change, this has the effect of forcing national governments to coordinate their policies with those above and below. (1) Bulkeley and Betsill (2003) Cities and climate change: urban sustainability and global environmental governance

Regulatory Environments Is global regulation captured to the public good to benefit stability for all, or is it captured to benefit a few, to either capture rents or etc. Designing systems of governance to counter-balance the very powerful interest states and private actors have in undermining regulation. 1 Disaggregate the Regulatory environment into 5 areas 1) Rulemaking – capturing costs for all economies 2) Implementation – differing institutional capacity 3) Monitoring – are guidelines enough? 4) Arbitration – who settles disputes? 5) Enforcement – agreements will be pushed, what to do? (1) Ngaire Woods, Global Economic Governance Programme, Oxford

Level of Regulatory / Implementation Regimes Whats the record at the global level? • UN • Air traffic control, postal services, law of the sea, decolonization • Bretton Woods • IMF – 35% completion, majority of programs a net loss in the mid-term • World Bank – positive effects on growth, but only in good policy environ. • Questions of scale At the individual nation-state level a problem or coordination and monitoring Can regional groupings serve as an optimal scale? (1) International Task Force on Global Public Goods (2006)

Regional Groupings Three general trends in global group formation since 1944/45: • geo-strategic alliance • (NATO, Warsaw Pact, NAM, ASEAN, US nuclear shield in Asia) • gains from market integration 1 • (ASEAN post 1990, SAARC, NAFTA, EEC, APEC, Mercosur) • public goods provision (financial stability and climate change) • (EU, ASEAN post 2005, some African regional cooperation) The relative power vacuum since 1990 is an incentive for regional groups to take on a political role and become a global player. The focus of these groups has become, then, developing coordinated policies to a degree that will allow them to act as a single entity in as many areas as possible. (1) Baldwin (1997) “The Causes of Regionalism”

Climate Change The context: 1 • ‘Stock’ pollutants – 120 year life of CO 2 in the atmosphere • early action not as important as previously thought? • only long-term solutions matter • weighing the importance of speed and depth • Costs and Benefits – ambiguous and uneven • If there really is uncertainty, tendency will be to minimize costs and maximize flexibility • Policies / Institutions – “When the time horizon is in centuries, institutions matter more than any particular policy • Issues of Structural Development • Comparative value of carbon emissions • Can China modernize within the 4 deg ceiling? (Frankel) (1) Reimund Schwarze, Helmholtz-Zentrum für Umweltforschung

Mitigation Strategies Five key strategies for dealing with climate change: • Clean energy technologies – R&D plus diffusion • Power generation and power usage • Adaptation – local urban policies; aid aimed at ag sector • Capacity building – aid aimed at institutions and governance • Emissions caps and trade • Able to specify outcomes ex ante • Allows for political negotiation (horse-trading) internationally • Risk of abuse by rich economies in the short-term • Carbon tax • Simplicity and impartiality – set price on carbon • Politically difficult domestically • Income vs. Risk of rent-seeking (1) International Task Force on Global Public Goods (2006)

Climate Change Mitigation in Europe EU Emission Trading Scheme • Europe • EU Emission Trading Sceme • Asia • ASEAN participation in the Australia plan? • Strong Nation-States • US and China – Is internal redistribution and incentivization enough? (1) International Task Force on Global Public Goods (2006)

Conclusion (1) climate change is a reality. even if we reach targets by 2050, there will be unevenly distributed positive and negative results - there is no prize to be won While we may have scientific and rhetorical consensus today, real costs have not yet been taken on. - what is the resilience of CC mitigation strategies / institutions in the medium term? We may have occasional visionary leaders, but they don't stick around forever - we need incentives to maintain policies in the long term (institutional change)

Conclusion (2) While nation-states, and hence the pursuit of national interests, will continue well into the future, it is perhaps the rise of challenges on the global level which requires a new type of actor – one with sufficient depth and breadth to feel that the world’s problems are similar enough to its own (the reason to act), but also enough regional similarity and solidarity to have political meaning and hence legitimacy (the means to act).