Draft U.N. climate accord emerges, debate turns ugly

By Jon Herskovitz and Nina Chestney

DURBAN | Sat Dec 10, 2011 6:11pm EST

(Reuters) – The chairwoman of U.N. climate talks urged delegates to approve a compromise deal on fighting global warming in the interests of the planet, but an accord remained elusive on Sunday and rich and poor states traded barbs over the limited scope of the package.

South African Foreign Minister Maite Nkoana-Mashabane said the four separate texts represented a good outcome after two weeks of sometimes angry debates in the port city of Durban.

“I think we all realize they are not perfect. But we should not let the perfect become the enemy of the good and the possible,” she told the conference.

Much of the discussion has focused on an EU plan designed to push major polluters — from developed and fast-growing emerging economies like China and India — to accept legally binding cuts in their greenhouse gas emissions.

EU negotiators had accepted “legal instrument” in one draft as a phrase implying a more binding commitment. But the latest version spoke of a “protocol, another legal instrument or a legal outcome,” the sort of weak phrasing that almost collapsed the talks on Friday.

Asked if the latest language was acceptable, Karl Hood, who represents an alliance of 43 small island states, said: “No it’s not. Never was and never will be. It’s too broad a statement.”

His alliance colleague MJ Mace, added: “You need a legally binding instrument. You have legal outcomes all the time. A decision is an outcome. You need something treaty like.”

“BLACKMAIL”

The discussions took an increasingly bitter turn as they headed into Sunday, a second extra day that made the negotiations the longest in two decades of U.N. climate talks.

Venezuela’s climate envoy Claudia Salerno said she had received threats because of her objections to the draft texts.

“In the corridor, I have received two threats. One, that if Venezuela do not adopt the text, they will not give us the second commitment period,” she said, referring to an extension of the Kyoto Protocol, the only global pact enforcing carbon cuts.

“The most pathetic and the most lowest threat… we are not going to have the Green Climate Fund,” which is designed to help poor nations tackle global warming and nudge them towards a new global effort to fight climate change.

She did not say who had made the threat and delegates heard her allegation in silence.

Among the sticking points holding up a deal were an extension of the Kyoto Protocol. The draft text says the second Kyoto phase should end in 2017, but that clashes with the EU’s own binding goal to cut carbon emissions by 20 percent by 2020.

U.S. VS CHINA AND INDIA

But behind the back and forth over language and technical details, the talks have boiled down to a tussle between the United States, which wants all polluters to be held to the same legal standard on emissions cuts, and China and India who want to ensure their fast growing economies are not shackled.

The fractious late night exchanges punctured the earlier mood of cautious optimism which had suggested agreement on the four separate accord in the package was possible.

Should the talks collapse on Sunday, that would represent a major setback for host South Africa and raise the prospect that the Kyoto Protocol could expire at the end of 2012 with no successor treaty in place.

Scientists warn that time is running out to close the gap between current pledges on cutting greenhouse gases and avoiding a catastrophic rise in average global temperatures.

U.N. reports released in the last month warned delays on a global agreement to cut greenhouse gas emissions will make it harder to keep the average temperature rise to within 2 Celsius over the next century.

A warming planet has already intensified droughts and floods, increased crop failures and sea levels could rise to levels that would submerge several small island nations, who are holding out for more ambitious targets in emissions cuts.

(Reporting by Nina Chestney, Barbara Lewis, Agnieszka Flak, Andrew Allan, Michael Szabo and Stian Reklev; editing by Jon Boyle)

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Economists fiddle with theory as world burns

Andy Mukherjee (The Straits Times)
The Asia News Network
Thu, 10/06/2011 10:46 AM

Civility has been one of the less-mourned casualties of this financial crisis.

Radically different viewpoints on what will put the world economy back on a stable growth path have split the profession of economics into two warring tribes.

You are either with Mr Paul Krugman, the Princeton University professor who won the 2008 Nobel Memorial Prize in economic sciences for his seminal work on trade theory, and a few like-minded economists of deep Keynesian persuasion. Or you are their enemy. There is no middle ground.

Most people equate Keynesian thinking with government control of the economy. The more modern variant of the economics profession that seeks its inspiration in Adam Smith’s invisible hand is equated with private enterprise and free markets.

That is a caricature.

The real difference is that Keynesianism, with its roots in the Great Depression of the 1930s, is concerned with the here-and-now of an economy: When Keynesians see a fire, they want to put it out first and ask questions later.

The non-Keynesians believe that the present is inexorably connected with the future, and unless one can permanently change expectations about the future, tinkering with the present makes no sense. Putting out a flame in one corner of a burning building merely brings the blaze back in another.

It is one thing for physical sciences to live with sharp differences in opinion. Whether light is particle or wave was hotly debated for four centuries. But Mr Thomas Edison’s light bulb did not have to wait for that debate to end.

By contrast, economics is a social science that allocates resources between members of a society and between today’s citizens and future generations. In the absence of a theory that justifies why Peter must be robbed to pay Paul, elected politicians have no basis to enact policy.

Say, United States President Barack Obama, desperate to stimulate the economy, faces a choice. He can spend US$1 million to build a road by taxing Mr Warren Buffett, or he can give Mr Buffett a US$1 million tax break. Mr Obama should select the course of action that gives a bigger boost to the economy. But do tax cuts have a bigger multiplier effect than government spending?

Sadly, economists cannot agree. Indeed, prominent economists like Mr John Taylor, who worked in the George W. Bush administration, did not even buy the claim in 2009 by the Obama economics team that a 1 per cent increase in government spending would increase inflation-adjusted US gross domestic product by 1.6 per cent from what it otherwise would be. The effect would be much smaller, he said.

When Mr Obama recently presented a proposal for cutting payroll taxes, Mr Taylor expressed doubts about Moody’s Analytics chief economist Mark Zandi’s claim that it will create 1.9 million jobs.

“This is the same type of model simulation that predicted the very similar 2009 stimulus package would create millions of jobs, and the same type of simulation that claimed that that package worked,” Mr Taylor noted on his blog last month.

Mr Krugman agrees that the Obama stimulus did not do the job. But in his opinion, it was too small to work.

Nowadays, Mr Krugman, who writes an op-ed column in The New York Times, uses his blog to rain punches on anybody who dares to disagree with Keynesian prescriptions for fighting the economic inferno. As the crisis has deepened, the list of his enemies has grown.

Those at the receiving end of his blows include former Fed chairman Paul Volcker, who recently wrote that the US Federal Reserve was sowing the seeds of future inflation. “Volcker, I am sorry to say, is worrying about refighting the 1970s when we are actually refighting the 1930s,” Mr Krugman responded.

In the 1970s, the US experienced economic stagnation along with galloping prices. Mr Volcker raised interest rates all the way to 20 per cent to kill inflation.

The other side – the non-Keynesians – is not taking Mr Krugman’s assault lying down. “Paul isn’t doing his job. He is supposed to read, explain and criticize things economists write, and preferably real professional writing, not interviews, op-eds and blog posts,” said University of Chicago economist John Cochrane.

The US is hurtling towards another recession, Europe is flirting with a sovereign-debt meltdown, China is slowing and the rest of the world is looking to economists to show the way. And here is what Mr Krugman and Mr Kenneth Rogoff, a former chief economist at the International Monetary Fund, were debating around mid-August on the CNN show Fareed Zakaria GPS:

Mr Krugman: “If we discovered space aliens were planning to attack and we needed a massive build-up to counter the space alien threat, and inflation and budget deficits took secondary place to that, this slump would be over in 18 months.”

Mr Rogoff: “And we need Orson Welles, is what you are saying.”

Mr Krugman: No, there was a Twilight Zone episode like this…”

Now, The War Of The Worlds, the radio drama about an alien threat that Welles directed and narrated, spooked Americans by its realism. Equally startling is this war of words between economists. It is turning sillier by the day. The debate is now so caught up with settling scores that men with practical ideas stand no chance of being heard. That is dangerous for policy.

The global economy is seriously ill, and the doctors are debating whether John Maynard Keynes was right to assume that consumption was a function of current income or whether Milton Friedman’s intuition that consumption depends on a consumer’s sense of her “permanent income” is a better theory.

The society at large has to express its disappointment: The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, which is due to be announced on Monday, must be axed. It will not be, but it should.

Anti-intellectualism is an ugly trait. But with their bloodletting, economists have left us with little choice.

Original Article