Political Economy of Climate Change International Conflict for Post-Kyoto: Which countries will benefit and lose national interests from the regulation of CO2?

Over the last several years, the issue of CO2 emissions has been increasingly brought to the forefront. This is because a number of studies are continuing to show how the release of these gases from cars, factories, refineries, power plants and homes are contributing to global warming. To prevent this different conventions and agreements have been signed (such as: the Kyoto Protocol). This was the first concentrated effort in directly controlling CO2 emissions through a cap and trade system. The way it worked is different nations could trade pollution credits with each other in order to remain in compliance with the treaty. The basic idea was to create a marketplace where these caps can be exchanged (in a transparent format). (United Nations Environmental Program, 2008) (Anzar, 2005)

This created contention between developing and developed nations. As the developed countries felt that these guidelines were too restrictive and could hurt future economic growth. While, many developing countries believed that the wealthier nations should carry their share of the burden for contributing to the problem originally (during the Industrial Revolution). This resulted in the United States withdrawing from Kyoto. Over the course of time, their non-participation made enforcing these standards nearly impossible. (United Nations Environmental Program, 2008) (Anzar, 2005)

This has led to many countries abandoning the Kyoto Agreement. However, there is consensus that something needs to be done to address CO2 emissions. To fully understand how this can be accomplished requires examining the benefits and drawbacks for different nations. Together, these elements will highlight the areas of potential conflict and how they can be addressed in the post Kyoto environment. (United Nations Environmental Program, 2008) (Anzar, 2005)

Kyoto and its Impact on the Environment

The Kyoto Protocol was designed to deal with the challenges of CO2 emission by creating binding standards for all nations to follow. This meant that countries such as the U.S. agreed to reduce their CO2 production by 5.2% a year between 2008 and 2012. While the developing countries, were provided with greater amounts of flexibility in setting their emissions rates. Those countries that must reduce their CO2 emissions could purchase credits from the developing nations in an international marketplace. These credits can help the developed countries to reduce their total amounts of pollution. At the same time, this is providing added financial incentives for developing nations. As these extra funds could be used to create clean technology and invest in projects that are environmentally friendly. This would refocus everyone's thinking on finding ways to build sustainable lifestyle practices. (United Nations Environmental Program, 2008) (Anzar, 2005)

These provisions led to tremendous amounts of contention about the standards and how they are applied. This forced countries such as the United States to withdraw from the treaty after it had not been ratified by the Senate and there were concerns about its impact on future economic growth. This weakened these provisions by allowing the world's largest economy to be exempt from CO2 regulation. When this happened, a number of countries only partially complied with these guidelines. (United Nations Environmental Program, 2008) (Anzar, 2005)

For example, in the case of Canada, they withdrew from the treaty in 2011 (citing the inability to address environmental challenges). This follows Russia and Japan who said they will not abide by new provisions of the agreement. These factors are showing how Kyoto and its restriction of CO2 emissions created an atmosphere of divisiveness. As a result, the post Kyoto world must focus on establishing regulations in a format that is acceptable to all countries. This means understanding which nations will benefit and those that will face challenges from the implementation of new guidelines. (Giles, 2011)

Those Countries that will benefit from the Regulation of CO2

Like what was stated previously, the developing countries are the primary benefactors in the regulation of CO2 over the short to medium term. This is because they have lower standards for limiting the output of CO2. The reason why is: they are less dependent upon fossil fuels and are not as industrialized. This automatically will cause them to be under these guidelines. (Chen, 2009)

However, as they continue to grow, these amounts will increase. This is because the standards are so low and there was a lack of regulation inside many...

Over the course of time, these challenges can make the environmental situation worse in different parts of the world. (Chen, 2009)
A good example of this can be seen with Beijing, China. In the past, China has been a strong supporter of these credits. However, they are now the world's largest consumer of fossil fuels and they have a lack of environmental regulations. These issues have become so severe that many cities (such as: Beijing) have high amounts of pollution. This is despite the fact that they are supposed to emitting less CO2 into the atmosphere. Yet, their air quality is so poor that it is having an adverse impact on people. (Chen, 2009)

This is troubling, as it is showing how CO2 regulations will have a short to medium term effect on developing nations. However, it is also having a negative impact on these countries by reducing standards for enforcing environmental guidelines. As these nations grow, this will lead to higher levels of pollution from not having any kind of responsible practices in place. This is illustrating how developing countries will receive some benefits from CO2 regulation. But, they could face challenges from the lack of regulations and standards. (Chen, 2009)

While many of the developing countries will receive long-term benefits from implementing effective CO2 regulations. The way that this will occur is through changing the mindset of regulators and government officials in controlling pollution. As a set of universal standards will helps businesses, households and other entities to change the way they are consuming energy. When this happens, these economies will become more efficient and will use less energy. This will result in an increase in productivity and a reduction in household costs.

Evidence of this can be seen with the findings from a report titled the Breaking the Climate Deadlock. It says, "Results show it would take a carbon price of $65/tCO2 for the EU to cut its energy related CO2 emissions by 30% by 2020, operating alone. This falls to $28/tCO2 when the U.S. joins in an agreement, and potentially to very low levels (about $4/tCO2) in the case of a global agreement. The very low carbon prices, however, are only valid if strong, coordinated, international regulations are in place so that key technologies are rapidly developed to decarbonise vehicles, electricity generation and buildings, in areas where low-carbon 'no regrets' options have been identified as available. This dramatic fall in the required carbon price suggests that levels of ambition are achievable with global collaboration that would be prohibitive if countries acted alone. The modeling shows world GDP increasing slightly, compared to the 'no action' baseline scenario under all the climate mitigation scenarios considered. Under a global climate agreement, global GDP could increase by 0.8% by 2020 relative to projected GDP with no climate action." This is demonstrating how increased CO2 regulations will have a positive impact on developed countries. ("Breaking the Climate Deadlock," 2011)

However, in the short to medium term, there are worries that this will hurt growth. This is because these standards are over regulating businesses and other organizations. Once this takes place, is when the economy could slow from the enforcement of strict guidelines (which are impacting costs). A good example of this can be seen with observations from Beach (2009) who said, "When the government-set caps on energy use that damages the economy and hobbles growth. This hurts investment and innovation. Analysis of the economic impact show that CO2 regulations would:

Reduce aggregate gross domestic product (GDP) by $7.4 trillion.

Destroy 844,000 jobs on average, with peak years seeing unemployment rise by over 1,900,000 jobs.

Raise electricity rates 90% after adjusting for inflation.

Increase inflation-adjusted gasoline prices by 74%.

Raise residential natural gas prices by 55%.

Raise an average family's annual energy bill by $1,500.

Increase inflation-adjusted federal debt by 29%, or $33,400 additional federal debt per person, again after adjusting for inflation." (Beach, 2009)

These factors are showing how CO2 regulations will have a short to medium term negative impact on the economy. This is because implementing these kinds of standards will affect every sector. During the process of adjustment, this will cause economic growth to decelerate.

If enough lead time is provided, these changes could be made gradually. This will lessen the impact on the economy. When this happens, everyone will have time in adapting with and making shifts to their energy usage. This is the key for controlling greenhouse gas emissions and transforming perceptions. (Anzar, 2005)

However, in order for any kind of transformations to be effective, there needs to be greater amounts of cooperation. This means that flexibility must be applied as to how and when these kinds of guidelines are enforced. Once this happens, there will be an…