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Climate Realism

Climate Realism

Francis Fukuyama

There have been many abstract discussions about the need for global governance, but they tend to founder when confronted with the real-world political conditions that countries today face. This is no more so than in the case of climate change.

Climate change is the most wicked of wicked problems because of the nature of the incentives facing countries trying to deal with it. My former SAIS colleague Scott Barrett wrote a nice book about the problems of global collective action called Why Cooperate?, in which he applied some basic game theory to explain why some global public goods were easier to provide than others. A problem like an asteroid hurtling toward earth and threatening planet-wide destruction was actually one of the easier challenges. If there was a solution, like using a nuclear weapon to knock it off course, that solution could be unilaterally undertaken by a large country like the United States or Russia. That country would suffer immediate devastating consequences if the problem were not solved, and would not need widespread cooperation to move forward. The hole in the ozone layer caused by the emission of chlorofluorocarbons was successfully addressed by the Montreal Convention because there were a limited number of emitters who had alternative ways of making profits.

Climate change, by contrast, creates incentives that block any easy solution of the problem. The worst effects of carbon emissions occur sometime in the future, beyond today’s election cycle, and the greatest victims will often be poor people in another faraway country, or else generations not yet born. Lowering emissions, by contrast, imposes huge upfront costs as new technologies like wind and solar displace hydrocarbons. Most fundamentally, the large countries in the world have to agree to act collectively and not free ride on the actions of others. Politically, the fact that China has become the world’s largest carbon emitter gives groups in the U.S. opposed to climate action a great excuse not to, for example, impose a carbon tax on themselves.

I’m struck by the fact that so much of the discussion of climate mitigation in the West remains focused on individual-level changes in behavior like shifting away from meat consumption or substituting for plastics. These changes will in time contribute to a solution, but they duck confronting the big drivers of emissions that make a difference in achieving the Paris climate accord’s goals. According to estimates by the IMF, the rich world—the U.S., Europe, and Japan—will account for only a little more than 20 percent of the new carbon being emitted by the middle of the twenty-first century.  

As Martin Wolf points out, two countries on their own, China and India, will generate more than half of the new emissions over the coming generation. This means that Europe and North America cannot solve the emissions problem on their own; the biggest reductions will have to come from elsewhere, and particularly from China. Nor can the rich world tell still-developing countries that they cannot grow, because it remains the fact that the former are responsible for the greater part of the stock of carbon already in the atmosphere.

There has been a lot of unrealistic talk about how the rich world can somehow reset the global normative framework and pressure or shame China and India into doing the right thing on climate. While global norms can have some effect, they run up against very powerful incentives that prevent them from having too big of an effect. India, for example, continues to be highly reliant on coal as a source of electricity. Reforming the coal sector by privatizing Coal India has long been a goal of economic reformers, but a more efficient coal sector will mean a much higher level of carbon emissions. Importing natural gas as a transitional step or shifting to alternatives like wind and solar come at a significantly higher cost and will take years to accomplish.

The incentive problem is clear in the case of China. In 2020, Xi Jinping announced China’s plan to reach peak emissions by 2030, and to achieve carbon neutrality by 2060—both targets less ambitious than those of Europe and the U.S. Earlier this year, China pledged that it would stop building coal plants as part of its Belt and Road Initiative. In addition, the government shuttered coal mines and ordered utilities to reduce reliance on coal. These directives seem to have played a role in the electricity shortages that have spread throughout China in recent months, impairing the country’s manufacturing capacity.

This is all well and good, but it falls well short of what is necessary. Some 90 percent of Belt and Road energy projects remain fossil-fuel based, even if coal is falling in the mix. China made no similar pledges to stop building coal plants in China itself, and has begun to reverse its earlier decisions to move away from coal in light of the electricity shortages it has faced. No amount of rhetoric at the forthcoming Glasgow COP26 summit is going to change these underlying incentives.

It is not as if these problems do not affect Western countries. For all of its environmental consciousness, Germany remains heavily dependent on coal. This year’s sudden rise in natural gas prices ensures that it and other EU countries will not be shuttering coal production anytime soon. In recent days the Biden administration has evidently moved to strip many of the climate-related provisions out of the reconciliation bill that it is trying to get through Congress, due to the opposition of coal-producing West Virginia’s Senator Joe Manchin.

What all of this suggests is that serious action on emissions will not happen based on normative change alone. The real drivers will be material and cognitive—that is, the emergence of powerful incentives that match the level of the costs of mitigation, and lead to widespread acceptance of the fact that action is necessary out of simple self-interest. This has already begun to occur. This past year, China and Germany suffered devastating floods of an unprecedented scale, while the western United States saw long-term drought and an ever-increasingly tempo of wildfires. This has led to cognitive change, where increasing number of Republican voters are now accepting at least the fact of climate change, if not a willingness to do something about it.

Amidst deteriorating U.S.-China relations, there has been the hope in the U.S. that the two great powers could preserve an area of cooperation over climate. It was under this banner that John Kerry, President Biden’s climate representative, met with his Chinese counterparts in Zhengzhou this summer. He came away empty-handed, with the Chinese accusing the U.S. of hypocrisy in urging Beijing to greater climate action in light of its own track record.

We should be clear about what can be expected from talks such as these, which is not much. Neither country is going to make significant policy changes based on bilateral pledges made to one another. China will not act on climate as a concession to the U.S. in return for U.S. concessions on issues like, say, Taiwan. Each has extremely powerful domestic stakeholders that will ultimately determine the policies followed. The only thing that a U.S.-China climate accord could do is to eliminate an excuse that each side has been using to avoid action domestically, namely, that it cannot act as long as the other side continues to emit carbon as before. But this will work only as long as the two countries actually follow through on mitigation policies, and implementation will be dependent on the same material incentives facing domestic stakeholders.

The ability to implement climate policies will thus not depend so much on international agreements, as on the structure and functionality of domestic political institutions. It has been asserted that authoritarian countries like China are better able to act on climate than liberal democracies like the United States. In the aggregate, this is not true, but there is one respect in which China’s institutional setup is better configured for the coming challenges. This will be the subject of a future post.

Frankly FukuyamaClimatecarbon emissionsChinaUnited StatesCOP26John Kerrycooperation

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Happy Holidays,
Jeffrey Gedmin, Francis Fukuyama, and the American Purpose team