Can the Stern Review prove successful as an environmentalist marketing tool?
By Peter Szuppinger and Wojciech Kosc
The job of an insurance agent is to convince a potential client that a policy for sale is vitally important; that the product is, in fact, necessary for guaranteed safety and security. When told in sombre tones to "think about your future...and your family's future" the words tend to sink in.
With the Stern Review concluding in 2006 that "scientific evidence is now overwhelming: climate change is a serious global threat, and it demands an urgent global response," a solid policy seems to have been finally made available to the worldwide public. While world leaders are still trying to convince one another of the necessity for a new round of stricter climate policies, the costs and benefits of climate action remain unclear where the economies of Central and Eastern Europe are concerned.
In June, leaders of the world's eight leading industrialised nations agreed that "strong and early action" from all major emitters (within a UN framework) is needed to prevent dangerous climate change. Global greenhouse gas emissions must stop rising, followed by "substantial" reductions, says the final communique from the G8 summit in Heiligendamm, Germany. Major emitters agreed on a "detailed contribution" for a new global framework by the end of 2008, which would feed into a global agreement under the UN Framework Convention on Climate Change by 2009.
The G8 made no commitment, however, to any of the EU's original goals: i.e. to limit temperature rises to two degrees, to halve emissions by 2050, or to move towards a global emission trading system. A pledge from US President George W. Bush that his country will be actively involved, even play a leading role, in a post-Kyoto framework made everyone who cares about climate sigh with relief.
Boiling inside
But even as the EU appears to lead the global effort against climate change, tensions are at or near the boiling point. The Czech Republic and Poland decided in late May that they would sue the European Commission, challenging its March ruling to slash both countries' respective national allocation plans. Poland's original allocation plan called for an annual CO2 emissions ceiling of 284.6 for the second phase of the EU's emission trading shcme ((2008-12). The EC then further lowered that amount to 208.5 million tonnes. The original Czech proposition was for 101.9 million tonnes annually, but this was reduced to 86.8 million tonnes.
The rationale that Prague and Warsaw used was the same: i.e. a limited number of carbon dioxide emission allowances imposed on Polish and Czech economies will stifle economic growth. This would deny the ultimate goal of the EU membership, which was precisely to lift both countries out of poverty and neglect of nearly five decades of communism.
Indeed, three years after joining the EU, both countries — and all former communist members of the bloc as well — are enjoying rapid growth. Growth is so fast elsewhere in fact, that the growth figure of 6.1 percent is considered too low for Poland, the biggest newcomer to the EU.
The European Commission's decision has brought an ongoing wave of protests from the Czech and Polish governments and the impacted industries. Poland's industrial sector is worried that a tighter cap on emissions will shrink the country's GNP by at least 1 percent. Czech Minister of Industry and Trade Martin Riman has called the EC's ruling "harmful," while Polish Environment Minister Jan Szyszko has argued that Poland will have to cut its industrial production if the reduced cap stands.
Szyszko hinted that a cap of about 250 million tonnes would be "satisfactory" for Poland. The Environment Ministry has even published a revised version of the National Allocation Plan (NAP) in the hope this will pave the way to negotiations with the EC; but there has been no indication from Brussels of a willingness to change its mind.
On the other hand, Szyszko's Czech counterpart, the Green Party's Martin Bursik, welcomed the commission's decision in a statement that clashes with both the Polish view and that of his government peer, Riman.
"The basic motivational aim of [the emission permits] is that it pays off for firms to invest in modern technology with high efficiency and low emissions of carbon dioxide. And that is the aim of not only the Czech Ministry of the Environment, but also of the new joint energy policy of the EU," Bursik said, adding that the commission's decision would not limit the Czech industry in the least.
Reacting to both countries' moves, Barbara Helfferich, spokeswoman for Environment Commissioner Stavros Dimas, said there was virtually no chance that the NAP would undergo any changes, and claimed that the EC would be certain to win in court.
Understanding Stern
Hungary has chosen for now to distance itself from the row and to assess the pros and cons of climate change policies. Citing review estimates that CO2 stabilisation at levels of 500-550 parts per million would cost roughly 1 percent of global GDP by 2050, Tamas Prager, an associate professor at Budapest's Eotvos Lorand University, concludes that "the benefits of strong, early action on climate change will outweigh the costs."
Stern projections show that "business as usual" paths would lead to global GDP losses of 5-20 percent. Hungary's Finance Ministry Secretary Miklos Tatrai helps to put these numbers in national perspective: 1 percent of Hungary's GDP is HUF 250 billion (nearly EUR 100 million), while the total annual budget for Hungary's Environment and Water Ministry is HUF 60 billion. According to the arithmetic, 'business as usual' could cost Hungary anywhere between EUR 500 million to EUR 2 billion.
Tatrai and Prager spoke at an "Economic Aspects of Climate Change" conference, the goal of which was to interpret the Stern Review in a Hungarian and regional context. The event was organised in April by the British Embassy, Hungarian Business Leaders Forum and the Regional Environmental Center.
Other key concerns regarding implementation of Hungary's national climate change strategy by 2025 have to do with which parties will actually bear the costs, and how things will play out for the Hungarian economy. If strategy compliance forces certain industries to pay higher costs in Hungary, production might move elsewhere — Slovakia, for example.
Gergely Toth, secretary of the Hungarian Association for Environmentally Aware Management (KOVET) claimed on one hand that the review will prove an important tool for convincing "sceptics" about the dangers of climate change, but also disputed the document's central conclusion that "the world does not need to choose between averting climate change and promoting growth and development.
All things considered, the Stern Review is a victory of sorts in the effort to tackle climate change, and it should help dispel the media-generated myth that scientists are still 'debating' the existence of climate change, when there is actually a virtual consensus. Indeed, the document just might be the public relations tool needed to get more Europeans interested in 'taking out a policy' on their, and their children's, future.
EU targets off track
Austria : -13.0% (2005 levels: +18,1%)
Belgium: -7.5% (2005 levels: -2,1%)
Bulgaria: -8,0% (2005 levels: -47,2%)
Czech Republic: -8.0% (2005 levels: -25.8%)
Denmark: -21.0% (2005 levels: -7.8%)
Estonia: -8.0% (2005 levels: -52.0%)
Finland: +0.0% (2005 levels: -2,6%)
France : +0.0% (2005 levels: -1,9%)
Germany: -21.0% (2005 levels: -18,7%)
Greece: +25.0% (2005 levels: +25,4%)
Hungary: -6.0% (2005 levels: -34,5%)
Ireland: +13.0% (2005 levels: +25,4%)
Italy: -6.5% (2005 levels: +12.1%)
Latvia: -8.0% (2005 levels: -58.0%)
Lithuania: -8.0% (2005 levels: -53,1%)
Luxembourg: -28.0% (2005 levels: +0.4%)
Malta: no Kyoto target (2005 levels: +54,8%*
Netherlands: -6.0% (2005 levels: -1,1%)
Poland : -6.0% (2005 levels: -32,0%)
Portugal: +27.0% (2005 levels: +40,4%)
Romania: -8% (2005 levels: -45,6%)
Slovakia: -8.0% (2005 levels: -33,6%)
Slovenia: -8.0% (2005 levels: 0,4%)
Spain: +15.0% (2005 levels: +52,3%)
Sweden: +4.0% (2005 levels: -7,4%)
United Kingdom: -12.5% (2005 levels: -15,7%)
