Monday, October 26, 2009

Climate Change: Creating The Climate For An About Turn In Copenhagen

THE minister of environment and forestry, Jairam Ramesh has circulated a discussion note on climate change which is a significant departure from India’s basic positions on this issue and aligning it with that advocated by the US.

A careful reading of his discussion note makes clear that this is not “some flexibility in India’s stance” as he has argued in his press statement on this issue within India’s national consensus but an about turn. If the Indian government takes this position, it will not only be a complete betrayal of the people of this country but indeed of the entire developing world.

The argument that India should be with the G20 and not G77 has nothing to do with climate change negotiations – India emits only 1.2 tons carbon dioxide per capita as against the figures of the US 21 and 10 tons for the EU.

India is not on the same side as the club of the rich and any attempts to side with the rich countries will not signify any independent position but a capitulation to their continuing grab of the global carbon space. Even if India cuts all its emissions in the future, it will make no difference – its emissions are less than 5 per cent of total global emissions with 17 per cent of the world's population. Contrast this with the US - 22 per cent of all global emissions with about 4 per cent of the world's population.

Right To Development At Stake
The past record of the rich countries has shown that without concerted global pressure, they will refuse to take binding cuts and continue to endanger the globe. Yes, the emerging countries have some role in the solution to the global climate crisis even though they have not created the problem. But breaking the unity of the developing countries before Copenhagen will rank with India's about-turn accepting that Intellectual Property be introduced into the GATT negotiations of 1989.

The consequence has been the imposition of TRIPS and the iniquitous WTO order with its enormous adverse impact on the global poor. The climate change negotiations is not just about the environment but about India and the developing countries right to development. This is what is at stake here.

Let us look at what Jairam Ramesh suggests. His major points are that India should take a per capita plus approach and give up per capita convergence principle. It is important here to understand the difference between the continued emission of countries – the flow of emissions -- and the historically accumulated emissions of countries or the existing stock of emissions.

As CO2 decays very slowly, it is the stock of emissions emitted by the rich industrialised countries that today constitutes the major problem of the developing countries for their development. If we want to limit the rise of temperature to 2 degrees C with a 50 per cent probability, then out of the total 640 Gigatonnes (GtC) of the carbon budget available from 1800 till 2050, already 330 GtC been emitted and the rest 310 GtC will also be spent within the next 20-25 years at the current rate of emissions.

Out of this, the Annex 1 countries (or the rich industrialised countries) have already grabbed more than 77 per cent of the current stock of greenhouse gases, with a share of population that is less than 15 per cent of the world. The rest, including India and China have more than 85 per cent of the global population and have contributed only 23 per cent to the existing stock of GHG gases.

If we accept a per capita plus and not a even a per capita convergence approach, it means not only forgetting that the rich countries have already hogged most of the carbon budget, but also allowing them to grab the major part of what is left as well: allowing them a much higher carbon space from the future share of the developing countries.

If we want to take a more conservative figure, reducing the risk of a 2 deg C change to be within 75 per cent probability, our carbon budget for the future is only 190 GtC instead of 310 GtC taken above and we will run out of this very quickly indeed. The issue of future carbon space would become even more critical then.

Kowtowing To The US
What is the implication of asking everybody to reduce and not taking a per capita convergence approach? It simply means that while the rich countries continue on a high carbon path to meet their luxury consumption, we will have to immediately go in for a low carbon emitting path to meet even our subsistence needs. If they do not vacate some carbon space by drastically reducing their emissions, every developing country will have to pay a very heavy price to save the globe.

Just to put some numbers. A coal based plant can be put up for Rs 5 crore per MW and will produce electricity with a 80 per cent plant load factor. Using a low carbon - - solar route - the capital cost will be around Rs 20-25 crore per MW. But that is not all. Since the PLF is about 25 per cent for solar plants, we will have to install about 3-4 times as much – the capital cost for producing the same amount of electricity is about 12-15 times that using the coal route or a high carbon route! So choosing a low carbon per capita plus approach that allows the rich countries to continue with higher emissions will impose huge costs on the developing countries. That is why the fight for every bit of carbon space in the global negotiations.

Though the minister has now clarified that India’s per capita plus approach should be achieved through domestic legislation, arguing for accepting the Australian proposal of putting such domestic undertakings in a schedule is nothing but bringing binding obligations on both the developed and the developing countries. It is moving away from the Annexe 1 and Non-Annex 1 countries distinction and would effectively dilute the Kyoto and Bali consensus.

It is obvious that this is a move to placate the US, the only hold out amongst the rich countries from Kyoto. We cannot abandon positions agreed after decades of global negotiations merely to please the US. The argument in this context given in Jairam Ramesh’s discussions note that India should sign a climate change agreement with the US during the prime minister’s November visit and before Copenhagen will be a completely  wrong message to the global community. The world will see this for what it is – India’s shift from a leader of the non-aligned movement and the G77 to a subordinate ally of the US.

Based on per capita entitlements, the rich countries owe the developing countries a huge carbon debt. This is not just a notional figure, but the actual additional burden that they will have to shoulder because of a lack of carbon space and the rich countries already hogging most of it. The demand that the rich countries make financial and technology transfers to developing countries is only a small reparation for this huge carbon debt. Unfortunately, Jairam’s discussion note’s argument for a more “nuanced position” on this may only end up by allowing the rich countries to renege on this debt.

We have no quarrel with the minister’s argument that India should work out a comprehensive climate mitigation plan and enact domestic legislation for this. The minister's advocacy of domestic action without linking it to the global negotiations would have some merit if all his suggestions were not in line with what the rich countries have been demanding from India – cut your emissions and take binding commitments.

The one domestic initiative that India can and should take does not figure in his list. This is enacting domestic legislation that any technology, which helps climate change mitigation can be compulsorily licensed similar to the provision for life saving drugs. This would make India (and the developing countries) transition to a low carbon path easier and would remove the double burden that the developing countries are being asked to pay. On one hand, we have to adopt high cost technologies for reducing emissions, on the other we have to pay monopoly prices to global MNC's to buy such technologies.

A Departure From The National Consensus
The problem with India's climate change negotiations is on par with its other negotiations – keep people in the dark and make major moves without transparency. Major decisions have been taken which already constitute a departure from the national consensus.

Prime Minister Manmohan Singh in Heiligendamm had agreed that India's per capita emissions will never be more than that of the industrialised countries. This means that we will adjust our future flows only to their future flows and without any reference to their already very large stock in the atmosphere.

In Aquila, again, India in the G20 discussions agreed that it will remove all fossil fuel subsidies. Kerosene subsidy, the issue in question, is for a section of the population that produces hardly any emission. All this have been done without any national discussion. The minister's letter therefore should not be seen in isolation but as a part of a continuing strategy that India is following in its foreign policy – a steady drift towards the US.

The US has offered no concessions as yet in the global negotiations. They are arguing that the world must tear up all its previous agreements and simply accept what the US wants to do. In this scheme, there is no global compact called Kyoto, no common but differentiated responsibility and no historical emissions.

They have the lions' share of current stock of emissions and must continue to retain this share as the world cuts down future global emissions. Bringing the US into global negotiations on these terms would be nothing but an abject surrender to the US.

The minister's note also implies that since climate change will affect India more, we should take unilateral action. The experience of Nuclear Non-Proliferation Treaty shows that one sided agreements generate no pressure on the rich and the powerful. Unless the world stands up and says that the US and the club of the rich cut their emissions drastically, the world cannot be saved.

Unilateral action by India with its low level of emissions without linking it to binding emission cuts for developed countries would in no way solve the problem. Even a Nick Stern has talked of India and developing countries putting conditionalities on the developed world and forcing them to change their ways. A Jeffry Sachs talks about the need to lift all Intellectual Property Rights for climate mitigation technologies. It is indeed strange Indian ministers and officials speak in a completely different voice.

India’s climate policy must be founded on the development needs of the majority of its population and the needs of India’s future development. The minister's proposals in their current form are only a thinly veiled proposal to barter India’s energy and developmental future for a seat at the high table curtsy the US. This we must reject.
Prabir Purkayastha

Saturday, October 10, 2009

Indo-US Nuclear Deal: An Overrated Initiative

On the first anniversary of its coming to fruition, the much-trumpeted Indo-U.S. nuclear deal stands out as an overrated initiative whose conclusion through patent political partisanship holds sobering lessons for India, writes Brahma Chellaney

For United States President George W. Bush and Indian Prime Minister Manmohan Singh, the nuclear deal was a prized legacy-building issue. Mr. Bush ensured the deal wasn’t a divisive subject at home by forging an impressive bipartisan consensus.

By contrast, Dr. Singh’s polarising single-mindedness on the ballyhooed deal and refusal to permit parliamentary scrutiny injected intense partisan rancour into the debate. Given that India may have to assume new international legal obligations on other fronts too — from climate change to the Doha Round of world-trade talks — the noxious precedent set by the deal must be corrected in national interest.

The deal indeed was a milestone, symbolising the deepening ties between the world’s oldest democracy and largest democracy. But on the first anniversary of its coming to fruition, the deal stands out as an overvalued venture whose larger benefits remain distant for India, including an end to dual-use technology controls and greater U.S. support in regional and global matters.

The deal offers more tangible benefits to the U.S. While significantly advancing U.S. non-proliferation interests, the deal — embedded in a larger strategic framework — fashions an instrumentality to help co-opt India in a “soft alliance.” It also carries attractive commercial benefits for the U.S. in sectors extending from commercial nuclear power to arms trade.

To be sure, the deal-making was a tortuous, three-year process, involving multiple stages and difficult-to-achieve compromises. At its core, the deal-making centred on India’s resolve to safeguard its nuclear military autonomy and America’s insistence on imposing stringent non-proliferation conditions, including a quantifiable cap on Indian weapons-related capabilities.

Eventually, a deal was sealed that gave India the semblance of autonomy and America some Indian commitments to flaunt, best epitomised by the decision to shut down Cirus — one of India’s two research reactors producing weapons-grade plutonium. No sooner had Congress ratified the deal package than the White House made clear the deal was predicated on India not testing again, with “serious consequences” to follow a breach of that understanding.

The more recent G-8 action barring the transfer of enrichment and reprocessing (ENR) equipment or technology to non-NPT signatories even under safeguards is a fresh reminder that while New Delhi is taking on legally irrevocable obligations that tie the hands of future Indian generations, America’s own obligations under the deal are unequivocally anchored in the primacy of its domestic law and thus mutable.

If there were any doubts on that score, they were set at rest by the American ratification legislation that gave effect to the deal, the U.S.-India Nuclear Cooperation Approval and Non-Proliferation Enhancement Act of 2008, or NCANEA. This Hyde Act-plus legislation unabashedly declares that the bilateral 123 Agreement is subservient to existing U.S. law and “ any other applicable United States law” enacted henceforth.

That the U.S. has used the G-8 mechanism to deny India the “full” cooperation it bilaterally pledged shouldn’t come as a surprise because the NCANEA obligates Washington to spearhead a Nuclear Suppliers Group ban on ENR transfers. Having formally proposed such a ban in the NSG, Washington got the G-8 to act first — a move that puts pressure on the NSG to follow suit and, more importantly, brings on board in advance all potential ENR-technology suppliers to India.

Even on the unrelated and unresolved issue of granting India an operational right to reprocess U.S.-origin spent fuel, the U.S. government has notified Congress that such permission, while subject to congressional approval, would be revocable.

For years to come, the deal will generate eclectic controversies because it is rife with unsettled issues, ambiguities and the avowed supremacy of one party’s variable domestic law.

To help the beleaguered Indian government save face, some issues — ranging from a test prohibition to the political nature of fuel-supply assurances — were spelled out not in the bilateral 123 Agreement but in the subsequent U.S. presidential statements and NCANEA. As a result, the final deal gives America specific rights while saddling India with onerous obligations.

Politically, the deal was oversold as the centrepiece, if not the touchstone, of the new Indo-U.S. partnership to the extent that, a year later, New Delhi seems genuinely concerned about India’s declining profile in American policy. Clearly, New Delhi had over-expectations about what the deal would deliver.

Still, there are some key lessons New Delhi must draw from the way it handled the deal. The first is the importance of building political bipartisanship on critical national matters. Had the Prime Minister done what he repeatedly promised — “build a broad national consensus” — India would have strengthened its negotiating leverage and forestalled political acrimony.

Dr. Singh’s approach was to play his cards close to his chest and rely on a few chosen bureaucrats. Not a single all-party meeting was called. Consequently, the government presented itself as deal-desperate on whom additional conditions could be thrust.

A second lesson relates to Parliament’s role. Even if there is a lacuna in the Indian Constitution that allows the executive branch to sign and ratify an international agreement without any legislative scrutiny, a forward-looking course would be to plug that gap by introducing a constitutional amendment in Parliament, rather than seek to exploit that weakness.

Sadly, the government chose not to place the final deal before Parliament even for a no-vote debate before it rushed to sign the 123 Agreement on September 10, 2008, just two days after Mr. Bush signed NCANEA into law. This extraordinary haste occurred despite Dr. Singh’s July 22, 2008 assurance in the Lok Sabha that after the entire process was complete, he would bring the final deal to Parliament and “abide” by its decision.

But no sooner had the process been over than the government proceeded to sign the 123 Agreement without involving Parliament, although the deal imposes external inspections in perpetuity and leaves no leeway for succeeding governments. A year later, Dr. Singh has yet to make a single statement in Parliament on the terms of the concluded deal, lest he face questions on the promises he couldn’t keep, including the elaborate benchmarks he had defined on August 17, 2006.

In the future, Parliament must not be reduced to being a mere spectator on India’s accession to another international agreement, even as the same pact is subject to rigorous legislative examination elsewhere. In fact, when the government tables the nuclear-accident liability bill, Parliament ought to seize that opportunity to examine the nuclear deal and its subsidiary arrangements.

The bill — intended to provide cover mainly to American firms, which, unlike France’s Areva and Russia’s Atomstroyexport, are in the private sector — seeks to cap foreign vendors’ maximum accident liability to a mere $62 million, although each nuclear power station is to cost several billion dollars.

Yet another lesson is to stem the creeping politicisation of top scientists. This trend has drawn encouragement from two successive governments’ short-sighted use of topmost scientists for political purpose. Such politicisation was on full display during the nuclear deal process. The top atomic leadership made scripted political statements in support of deal-related moves, only to be rewarded with special post-superannuation extensions beyond established norms.

The current unsavoury controversy among scientists over India’s sole thermonuclear test in 1998 — and the atomic establishment’s frustration over the attention dissenting views are receiving — is a reflection of the damage to official scientific credibility wrought by the deal politics. All this only underscores the need to bring the cosseted nuclear programme under oversight.

If truth be told, national institutions have been the main losers from the partisan approach and divisive politics that the deal came to embody. The deal divided the country like no other strategic issue since Indian independence, with the deteriorating national discourse reaching a new low. Such divisiveness, in turn, seriously weakened India’s hand in the deal-related diplomacy. A new brand of post-partisan politics must define India’s approach in Copenhagen and the Doha Round.

A final sobering lesson: Key national decisions must flow from professional inputs and institutional deliberations, not from gut opinions in which near-term considerations or personal feelings and predilections of those in office prevail over the long view of national interest. The lodestar to avoid disconnect between perception and reality is to ensure that any agreement bears the imprint of institutional thinking, not personal fancy.

(Brahma Chellaney is Professor of Strategic Studies at the Centre for Policy Research in New Delhi.)

Wednesday, October 7, 2009

The Demise Of The Dollar

The Independent (published from London) in its front-page article on Tuesday (October 6) headlined The Demise of the Dollar, by its legendary Middle East correspondent Robert Fisk exposing a secret plot by international central banks to topple the US dollar, has rocked the world.

In the report Fisk says secret talks have been taking place between Arab states and China, France, Japan and Russia, to stop using the US currency for oil trading and to move to a basket of currencies.

The proposed new basket supposedly includes the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for the six-member Gulf Cooperation Council (comprising Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE).

Finance ministers and central bank governors in Russia, China, Japan and Brazil have been working on the scheme, says Fisk, adding, the talks “may help to explain the sudden rise in gold prices, but it also augurs an extraordinary transition from dollar markets within nine years”.

He adds: “The Americans, who are aware the meetings have taken place — although they have not discovered the details — are sure to fight this international cabal which will include hitherto loyal allies Japan and the Gulf Arabs.”
Denials have been coming out thick and fast from all the central banks involved, especially Saudi Arabia. But given Fisk's formidable reputation, the report moved markets declined against 14 of its 16 major counterparts, Bloomberg reported.

As the Financial Times (of London) stressed: “The article in The Independent becomes quite serious in that The Independent has not been given to such rumours in the past. This is not The Sun, nor the NY Post. The Independent is a reasonably credible news source and we suspect that the leaks made to the newspaper are to be taken quite seriously. Certainly the markets are taking it as such, and we should also.”

Not surprisingly, the Financial Times is distressed. “This is not new news of course, for such a change from dollar pricing to some other methodology has been discussed, rumoured, tossed about for months, but this time we note that Japan and France are involved in the meetings and that changes the tenor of the rumours entirely. Too, the addition of the Saudis and the Emirates AND Kuwait to the meetings adds further importance and seriousness to the threats.”

FT is not alone. A rather alarmed Dennis Gartman of the Gartman Letter wrote: “IT IS UNANIMOUS: “THEY” HATE THE US DOLLAR and it appears that a fully fledged attack is being made upon the US currency this morning (October 6), with money flowing anywhere and everywhere… but particularly to the non-US dollars, the Canadian, the Aussie and the New Zealand dollars. Fears of problems in the Middle East; fears that the world is turning away from the US dollar as the policies being followed by the left-of-centre Obama Administration; fears of fears.. it makes no difference at this point. The rout is on, and it is not a pretty sight to behold.”

BNY Mellon, meanwhile, did not make much of the central bank denials: “Given the enormity of events these past two years, it is entirely understandable that investors took to the sidelines ahead of meetings of the G20 and G7 whose contingent were seemingly armed with a greater will to effect change. Yet given that these meetings appear to have actually contributed to a reinforcement of the status quo, then there seems little reason to believe that investors will not resume their prior activities. As such, this continues to bode ill for the USD.”

The idea of replacing the dollar for oil trading is not new. Venezuelan President Hugo Chavez has been seeking Arab support for a proposed oil-backed currency for some time now. In fact another report today in TOI says: “UN countries should agree on the creation of a global reserve bank to issue the currency and to monitor the national exchange rates of its members, the Geneva-based UN Conference on Trade and Development said on Tuesday in a report.”

But as Fisk wryly concludes: “Bankers remember, of course, what happened to the last Middle East oil producer to sell its oil in euros rather than dollars. A few months after Saddam Hussein trumpeted his decision, the Americans and British invaded Iraq.”

Roger Alexander