Localized is beautiful OR how I learned to love the UNFCCC after Cop15

I was at a panel of experts Thursday night given by FIELD entitled "Road to Mexico." (Cop16)

The consensus isn't good: for a legally binding, comprehensive, international agreement on climate change isn't likely at Cop16 in Mexico this year. And next year, Cop17 in South Africa, well... that's not looking too likely either.

But this is actually good news (and not just because it means I’m right;) ! Here's how:

I've been toying with the idea that a larger international agreement -- a fully comprehensive one-- isn't necessary, practical, or prudent.

While panelists stressed the need to get going immediately, Jan Hyvarinen (Director, FIELD) said, “concrete stuff on the ground is important this year. This year in a way needs to be a year of implementation and that will help bring the trust.” Panelist and LDC group Chair Bruno Sekilo from Ghana said that trust had gone from the process after Cop15. He sited the circus surrounding Obama’s appearance as a key undermining factor, saying “later it’s said he’s not coming to the end because it’s the outcome that is more acceptable to him. You have a group of negotiators here and they hear that the outcome is already known in the first place so that Obama can come. That was really demoralizing and it’s the timing of everything.”

Trust, the panel explained, will be built by countries doing individual adaptation and mitigation actions on their own to show, ostensibly, how committed they are to combatting climate change.

The audience, full of environmentalists, NGOs, and other professionals all echoed the itchiness to get going with climate change and not wait for certain countries that might never come a long.

Andy from Oxfam asked: “Is it not time to actually plow ahead and forge alliances between European Union, progressive countries and G77 and go ahead and start mapping out those norms and principles and rules that a majority of the world does agree are actually needed to start tackling this problem? And let the United States and other countries come along later, as and if they will.”

An audience member from ICE and a barrister both asked if perhaps now would be the best time for countries like certain small island states to bring proceedings in international courts against developed countries who have fallen short of their Kyoto emissions cuts or aren’t willing to cut emissions according to what’s dictated by the science.

Damian Morris from Sandbag asked about the possibility of global energy sector emissions cap, saying that power is the single largest sector and represents ⅓ of world wide carbon emissions, it’s capable of deeper cuts than whole economies, the global power sector could cut 60% by 2030, power cuts by biggest electricity emitters could widen Kyoto cuts 40%.

Panelist Camilla Toulmin (Director, IIED) said that it was perhaps best for countries to do what needed to be done, and that other countries’ efforts might goad those lagging behind on climate action into progress.

The undercurrent running through all of this is rather obvious: ultimately, what will matter most is localized solutions to combat climate change.

At a sociological level, we related better to each other face to face. If we think about that and extend it to policy, the discourse in international development policy has stopped being about finding a model for development but involving individual stakeholders to find solutions that work for them based on culture and geographical location (habitat) (i.e. what works in Guatemala won’t in Guyana). The success or lack thereof in combating climate change will come at a local level.

According to the OECD report on cities, “Local governments in OECD countries are already responsible for 70% of public investment and 50% of public spending in environment.” The report also says that local level policies are excellent incubators to “fine-tune national enabling frameworks.” Hint: keywords used; the words framework and enabling both imply broad policy measures, specificity is to left to the local level to figure out what works best in a given environment.

It’s worth noting that the most successful reforms whether it be in environment or development or governance work when national governments allow for autonomy in local governance to experiment. The largest examples of this are China’s democracy experiments (varying provinces and towns to varying degrees) and Kerala in India, not to mention 10:10 in the UK.

The same must be for an international climate agreement. Certain issues will be necessary to flush out at an international level, and others must be left up to individual countries to flush out for themselves and perhaps compete with each other on (in a good natured sort of way-- not the sort that leads to trade protectionism and sanctions).

At the international level, it is clear that there will need to be unified metrics for carbon emissions and tracking. This is the most important. There will also need to be clear regulatory framework that can be used at national levels to govern carbon offsets as well as some sort of international clearing house for carbon offsets that will also allow seamless carbon trading across borders.

But things like sectoral caps on emissions, carbon price floors (and ceilings) should be left to national governments. It will be left to municipal governments (state, city, village level) to come up with the best transport, resource distribution channels (food, water, for example) based on local capabilities and income levels.

I don’t think it’s coincidence that there have been many intercity and inter-region cooperative agreements about climate change adaptation already. The state of California (combined state and city level) may in fact now be more involved with equivalent level governments in China than either national governments are themselves (which offers further support of the notion that California really need to be its own country;). Five cities in the Mediterranean region (Fez, Barcelona, Haifa, Stuttgart, and Nouakchott) signed an agreement in January to agree to collaborate on innovative solutions to climate change. The EU and South Africa will be collaborating on transport reform in the run up to the 2010 World Cup and 2012 Olympics. And more news of small collaborative unions like these hit the news everyday.

As to finance, it’s been clear for some time that financiers are ready to get the money flowing towards profits coming from a low-carbon future. This is everything from increasing supply chain sustainability and efficiency to profiting on carbon trading. Insurers are calling for businesses to factor climate change into risk management. Up until now financiers have insisted they need firm national policy. Let’s see how fast that changes as the UNFCCC process drags on for years.

As a climate agreement is hashed out in however many years (and it will take years), as international and national governments drag their feet on policy it is up to regional and municipal governments to push ahead with what needs to be done. We need to recognize what can realistically be achieved at each level of governance and allow that guide advocacy. This non-sense about pushing for an absolute legal agreement at Cop16 will not help to achieve the desired outcome and instead foster frustration and negativity and cannot be productive.

Localize solutions and the future will be clean and green.

The Yuan and the Chinese Labour Market Shortages

Something funny’s going on in China. There’s a labour market shortage.

David Baille of CamSemi noted in an email interview last month (before the Chinese New Year holiday) that the South Korean firm that manufactures part of his product in China was short on workers because, “so many skilled workers left the coastal manufacturing areas over Chinese New year last February and have not returned.” That trend was expected to repeat this year as well.

Workers, according to Geoffrey Crowthall at China Labour Bureau, must be paid more to endure hazardous working conditions because factory conditions and wages (taken together) currently do not exceed the value working on a farm.

Liu Shinan writes in China Daily that labour shortages are due:

“First, the Chinese government's policy to give top priority to the development of agriculture and annul the agriculture tax has paid off. Rural residents are earning more from farming.
Second, the government's strategy of boosting development in central and western regions has achieved initial success.
The rural surplus labor has more employment opportunities in the manufacturing industries in towns near their home.
Third, China's earlier recovery from the economic recession has significantly increased orders for coastal manufacturing plants, which are eager to retrieve the workers they laid off when the economic crisis struck.”

But he also writes, “The average wage level is 10 times lower than that in the United States. It will take a long time for Chinese labor costs to catch up with developed countries.” Of course, this isn’t the right comparison to make. Recently, companies manufacturing in China have begun opening factories in other developing countries. It’s not developed country wages Chinese have to worry about.

The ease of doing business in China (without looking) probably isn’t very much different from many other developing countries. Not to say that there aren’t other advantages to do with things like geography and finance-- but that these other advantages probably don’t outweigh labour costs too much.

If wages are increased and the price of other inputs is relatively stable, the cost of production has to be bourn somewhere-- either this is in higher final price or reduced profit margins. Let’s also assume that benefits aren’t cut to make up the price cost of wages because working conditions are a problem as well. Depending on the sector, it’s also possible that the number of workers will be cut and that higher production quotas will face workers. In reality, it’s probably a combination of all of the above.

And even if Liu is accurate that “According to authoritative investigations, the money paid to laborers make up only 10 percent of the total operational cost of an enterprise in China; but it is 50 percent in developed nations.” Any way you look at it, the price of China’s exports increase.

China is facing dual pressures related to worker wages: working conditions and a second, less direct external pressure to increase the value of the Renminbi. The usual argument goes that currency devaluation will hurt China’s workers because it will drive the cost of exports up, increase costs of inputs, which will result in decreased demand for Chinese exports, cuts in production and as a result job cuts, and lower wages for workers, higher production quotas for those remaining (and thus a general deterioration of working conditions).

This article says that in the past, when the price of manufacturing products (exported by China to other countries) increases, the cost is passed on to the buyers. It sites a study from the US Fed Bank that says when the Yuan appreciated slightly in the past, consumer and capital goods prices didn’t change much, but industrial products increased quite a bit. Enough of the increased price was passed on to the consumer.

What happens if China does both-- increases wages enough to make a short term difference and values-up the Yuan?

The results will depend largely upon the level and ratio increase in wages and currency value, but the outcome is inescapably the same: China’s rate of employment decreases (relative to previous periods, you understand, but not overall) and the price of its exports increases.

Both Yuan revaluation and increased wages will erode China’s comparative advantage in cheap labour. But Chinese companies are also moving up the value chain in manufacturing, and the lower value manufacturing inputs are moving to Vietnam, North Korea, and Egypt, for example. As China begins to manufacture green products, it will have established ties to cheaper labour markets.

Right now, China is also facing a (increasing in short-run?) skills displacement. There aren’t enough candidates to fill relatively more high skilled services positions in cities (university level skill set being insufficient) and also in unskilled manufacturing jobs that might require as much physical labour as a farming job (the wages and physical exertion being relatively the same, workers won’t bother to leave home).

While it’s clear that Chinese companies are beginning to break into the next value level of development as more and more innovate on their own, there will be more pressure on demand for skilled jobs. Government policy has properly driven higher levels of academic achievement and Chinese universities (though currently no match for Western ones) are catching up.

The question is-- will the government be able to hold annual GDP growth at 8%? Will China have a bumpy few years? Will this delay China’s rise?

And what economic principles have I left out in my inexperienced naiveté (feedback please)?

After thought: another strain of thought to consider, that might have an overall effect on employment levels is that the Chinese government has made agricultural policy that keeps small farms lucrative. Where developed countries are mostly dependent upon imported food (not that China isn’t but) and have driven small, private farming out of business, and where people like Colin Tudge argue that we have to demechanize farming and make it hard labour again so that we value food and time more, presents another interesting tangent to consider. A skill displacement won’t necessarily be fixed by, as the WSJ article suggests, lifting China’s one child policy. In future, where will China’s illegal, unskilled, migrant workers come from? And how long with this pro-small farmer policy continue?

Climate Change Gaming: Please, good people, we'd like some more!

Corporate social responsibility is big these days. As important as it is for companies to act responsibly, they also need to respond to the needs of our society. This is one of the key concepts behind social entrepreneurship-- those who are responding to the surging moral undercurrent in our society that’s tired of governments stalling (or outright failing, ahem, Iceland, Greece) and corporate insincerity (spinning a product as good for you, instead of making a product that actually IS good for you).

The new climate change game from Red Redemption is a product that responds to social needs of a society and will do good at the same time.

From the Guardian:

“Climate Change 2010 is a turn-based affair that gives you control of the earth. The downside is that all the consequences of your actions are accurately modelled over the 200 virtual years of game time.”

Commentators in the US and UK have often marveled about a public’s willingness to sign up to social movements like 350 degrees, 10:10, 38 degrees, Avaaz, memberships that result in declarative support but lack change substance. People more often say they are willing to change their behavior but lack the follow through.

Cultural behavior is something that results from the pervasiveness of ideas, concepts, and values that pervade a society and in order to carry through a true paradigm shift, something modern Western society is only flirting with at the moment, it needs use cultural tools to subversively spread ideas more than it needs overt support for such ideas. A climate change game like this and the earlier Sim City style game from the UK’s DECC, do just that: they subversively support and instill values in a way that no amount of lecturing from Frannie Armstrong and an army of 10:10 volunteers can achieve. These games and more like them can be even more effective if used in conjunction with school curriculums, especially in elementary schools during time allotted to earth sciences and biology, for example.

Please, society needs more of these! Awake game developers of the world! Please, we'd like some more!
Ann is a freelance new media journalist, educated in Finance Economics. She considers herself to be a citizen of the world, though she is American by nationality, and a legal resident of the state of Wisconsin (yeah, go ahead and chuckle). See her other blog: Missing The Bear.
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