Shadow Government

Calibrating Credulity for Copenhagen

By Phil Levy

Amidst the dire warnings and the pledges and the general cacophony coming out of the global climate talks in Denmark, how can we separate real progress from -- forgive me -- hot air?

It can help to set up our own scorecard. Let's set aside qualms about the way scientists have handled questions of global warming and stipulate that the goal is to reduce worldwide emissions of greenhouse gasses. Because these gasses float across national boundaries, this is a global problem.

We can ask the question dear to the hearts of secular economists: WOOPS -- What would an Omnipotent and Omniscient Planner Support? In this case, a wise and benevolent social planner would balance the costs and the benefits of global emissions reductions, set global targets, then allocate the reductions across countries so as to minimize the total costs. If the resulting burdens fell more heavily on China than on the United States, the U.S. Treasury would just cut Beijing a check to ensure an equitable outcome.

This does not seem terribly far removed from what the Copenhagen conference is trying to achieve, nor Kyoto before that. The problems lie not in the grand concept but in some familiar and gnarly political and international relations hurdles. Here are four.

1. Two-level games. Robert Putnam introduced the idea that any agreement must win over both international negotiators and their domestic constituencies. Senator Jim Webb (D-VA) just helpfully reminded President Obama of this in the climate context, warning in a letter that emissions reductions were not to be set through presidential promise, that "only specific legislation agreed upon in the Congress, or a treaty ratified by the Senate, could actually create such a commitment on behalf of our country." Bon voyage, Mr. President. As it happens, the Senate has expressed little enthusiasm for pending cap-and-trade legislation. If it is any comfort, our Australian friends are having similar issues.

2. Observability and Verifiability. If the United States and Europe restrict their emissions, but China and India do not, then global emissions might not fall, and could even increase. In any scenario, every nation would have a strong incentive to free-ride on an agreement, forgoing the costs of abatement while enjoying a cooler global clime. Yet verification is a particularly difficult issue. First, these emissions can be widely dispersed and difficult to measure. Much of the discussion has focused on the more manageable task of verifying specific emission reduction projects, but these will do little good if the emissions reemerge elsewhere in the country. Second, there is strong reluctance among developing nations to accept even a limited verification program. According to a New York Times report today from Copenhagen:

[A] document was said to be framed by Brazil, South Africa, India and China. It made no mention of specific commitments on their part and rejected outside auditing of projects to reduce emissions financed by those countries on their own.

In other words, no checking up on overall emissions, no checking up on home-financed schemes, just oversight on foreign-funded projects.

3. Intertemporal Commitment. Much of the climate discussion involves long-range targets, such as the promise that U.S. emissions in 2050 will be 83 percent below 2005 levels. In 2050, Barack Obama will turn 89 years old and even Robert Byrd may no longer be in the U.S. Senate. It is notoriously difficult to make such commitments across time. The United States Congress annually undoes its past promises to cut Medicare spending and to apply the alternative minimum tax more broadly. One way to make painful emissions reduction promises credible would be to front-load the pain, but that seems highly unlikely in the midst of the current recession.

4. International Payments. In the study of international trade, it is taken as given that countries will not just hand over money to each other. They may tweak tariffs, quibble about quotas, or rejigger regulations, but they will not just hand over cash. We assume this because such payments are relatively rare. There is aid, U.N. dues, and the occasional instance of reparations, but overall very few instances where large credits and debits are settled between governments. More specifically on the minds of developing negotiators is the observation that "past commitments under earlier climate pacts have largely gone unpaid."

Our benevolent social planner would likely find cutting developing country emissions more globally efficient than cutting in the developed world.  But that then brings demand for high-stakes compensation, which can be politically challenging. From the Wall Street Journal:

U.S. climate envoy Todd Stern has called a developing-country suggestion that industrialized countries contribute as much as 1% of their gross domestic products "untethered from reality."


The U.S. and the European Union have said they are willing to provide their "fair share" of a total global figure of $10 billion a year from 2010 to 2012.

That amount "would not buy developing countries' citizens enough coffins," said Lumumba Stanislaus Di-Aping, Sudan's U.N. ambassador, who represents the Group of 77, a body that includes China, India and Brazil.

The challenge for Copenhagen is to overcome not one but all of these major political obstacles. My favorite expression of skepticism was in the Financial Times:

When questioned, most Danes expressed enthusiasm for the conference even if some are cynical about the likely outcome. "They will do just enough to make it look like they're doing something," said Christian Jensen, a student.


Shadow Government

Honduras: Winners and Losers

By José R. Cárdenas

The walls may be closing in on former Honduran President Manuel Zelaya's tin foil-lined bunker in the Brazilian embassy in Tegucigalpa, but until his status is determined the Honduran people cannot begin to move beyond the crisis that has roiled their country for the past six months. (Full disclosure: I helped a Honduran business delegation travel to Washington in July 2009 to brief U.S. policymakers on the crisis there.)

Still, with a successful election having taken place on Nov. 29 for Zelaya's duly elected successor as president -- won by Porfirio Lobo of the opposition National Party -- and with the Honduras Congress voting 111-14 to deny Zelaya's temporary return to office, it is not too early to identify political winners and losers as Honduras begins to put its political and economic house back in order.

The Winners:

The Honduran People. Public opinion polls consistently showed that the Honduran people overwhelmingly opposed the return of Manuel Zelaya to office. Facing regional ostracism and sanctions, their stand spoke to the depth of their fears of Zelaya's return and the instability he would bring in his wake. It also said infinitely more than a thousand speeches from foreign capitals lecturing them that they had to restore their rogue president back to office. Still, Honduran elites ought to take the past year as a wake-up call that a sizable portion of the population feels alienated from current political and economic arrangements and wants (and deserves) something better. To pretend it doesn't exist only invites more crises. The Lobo administration must make national reconciliation his first priority.

Latin American Electorates. Finally, somewhere in the region Chavismo was stopped dead in its tracks.  No longer is it inevitable that a neo-populist rides a wave of public disaffection into office and then systematically begins to erode democratic institutions until all national power is vested in him. While the Left is in full-throated dudgeon about the supposed blow to democracy in Honduras, they have the situation exactly backwards. The threat to democracy in Honduras was not the Supreme Court or the legislature, it was Manuel Zelaya, who tried to bend (and break) those institutions to his will.  Consolidation of democratic institutions and the opening up of economies continue to be the region's greatest challenges, but neo-populist snake oil is no remedy. There are alternatives, as the Honduran people demonstrated.

The Losers:

U.S.-Honduran Relations. The historically close relationship has been dealt a serious blow by the Obama administration's zig-zag diplomatic approach to the crisis (see below). Honduras is a signatory to the U.S.-Central America Free Trade Agreement (CAFTA), with two-thirds of its exports going to the U.S, while 50 percent of imports are U.S. goods. In addition, remittances from Hondurans in the U.S. amount to almost $3 billion, or one-fifth of GDP. Many Hondurans were stunned by the Obama Administration's opposition to Zelaya's deposing and failure to appreciate his increasingly erratic and confrontational rule. The historical solidarity wasn't there this time, and mutual trust has been damaged. With good faith on both sides, however, traditional close relations can be restored over the long run, beginning first with the restoration of suspended U.S. assistance.

Hugo Chavez. Who would have thought that Honduras would be a bridge too far for the Venezuelan strongman? Certainly not Chavez. After a succession of easy neo-populist electoral victories in the region, he could be forgiven for truly believing in a Bolivarian reunification of the continent under his enlightened leadership. His Bolivarian project has suffered its first defeat, and the danger is how he will respond. He's got the resources and Fidel Castro the subversive apparatus. Honduras is not out of the woods yet, but Chavismo is suddenly looking vulnerable.

Brazil. Brazil aspires to be a global leader deserving of a permanent seat on the U.N. Security Council. But it stumbled badly on Honduras. It moved quickly to denounce the removal of Zelaya and led the regional charge for Honduras's isolation, but in the end failed to influence the course of events. More egregious, however, was allowing the fugitive Zelaya to re-enter the country and set up shop in its embassy in Tegucigalpa, inflaming an already dangerous situation. Which raises the question, if Brazil can't even responsibly manage a crisis in tiny Honduras, how does it propose to influence Iran's Mahmoud Ahmadinejad?

The Organization of American States. The OAS should have been the appropriate vehicle to mediate the crisis, but Secretary General José Miguel Insulza's rash and intemperate response to Zelaya's removal (he tried to out-Chavez Chavez) quickly sidelined the organization as an honest broker. The Obama administration had to enlist Costa Rican President Arias to fulfill the role.  Career OAS officials were mortified by Insulza's behavior, and it's not likely he's going to recover his credibility anytime soon. It's no wonder the rumors are the administration will not support the Chilean Socialist for a second term.

A Wash:

The Obama Administration. The Obama administration wound up in the right place by accepting the outcome of the Nov. 29 election and allowing Honduran institutions to rule on Zelaya's return, but that only came after it reversed its ill-considered earlier position to align itself with Hugo Chavez in demanding Zelaya's unconditional return to power and threatening to not recognize the election. That flip-flop won the praise of the Washington Post, which performed its own artful back flip by endorsing both policy approaches of the administration -- all the while excoriating Congressional Republicans who, from Day One, maintained Zelaya's illegal conduct forfeited his right to finish his term and supported the November election as a way out of the crisis.

Claudia BARRIENTOS/AFP/Getty Images