Brian Fallow: Fanfare be matched by action?

With some fanfare a week ago in Vientiane, Laos, six nations launched an Asia-Pacific Partnership on Clean Development and Climate.

The United States, China, India, Japan, Korea and Australia represent nearly half the world's economic output, population, energy consumption and greenhouse gas emissions.

Clearly, then, any steps this group takes to "develop, deploy and transfer cleaner, more efficient technologies and to meet national pollution reduction, energy security and climate change concerns" are to be welcomed.

What it amounts to in practice remains to be seen. All we have so far is a lofty vision statement.

Imparting value and content to that promissory note will begin with a meeting of the six powers' foreign, energy and environment ministers at Adelaide in November.

But, as is the case with many diplomatic communiques, the language of the vision statement papers over some fundamental tensions and unresolved questions.

Right up front, it proclaims the over-riding nature of the goals of development and poverty reduction.

So it is immediately up against the fact that, until we have energy prices that tell the environmental truth, dirty technology is going to be cheaper, at least in the short run.

In the long run, cooking the planet does not make much economic sense, least of all for India and China, which have more than a billion mouths to feed. But, as Maynard Keynes famously said, in the long run we are all dead.

The agreement is non-binding and involves no commitment to reduce emissions. Instead, the six powers propose to collaborate on the development of an array of technologies ranging from energy efficiency and renewable, through "clean" coal, carbon capture and storage, to nuclear power. Biofuels, home building, nanotechnology, nuclear fusion ... you name it, it gets a mention.

Either resources will be spread thinly or some picking of winners will have to occur. Who gets to do that? Well, normally whoever pays the piper calls the tune.

The partners are emphatic that this is intended to complement the Kyoto Protocol and not to replace or undermine it.

The apparently last-minute inclusion of Japan, which has undertaken obligations under the Kyoto treaty, lends credibility to the claim that this is not just a Kyoto outsiders' club.

But underlying the rhetoric surrounding the agreement is the notion that the practical approach to the problem of man-made climate change is to develop and diffuse new technologies, not to restrict countries' ability to use existing technologies.

The implied contrast is with Kyoto, which reflects the notion that we face a tragedy of the commons that requires rationing the right to emit greenhouse gases, much as the right to use land is limited by private property and (at least in our waters) the right to fish is rationed by tradeable quotas.

The most economically rational way of ensuring transition to the successor technologies, it is argued, is cap and trade: create and limit tradeable rights to emit greenhouse gases and allow a market to ensure that the most cost-effective mechanisms to reduce emissions are adopted first.

Kyoto's supporters argue that a distinction between a technology approach and the protocol's cap-and-trade approach is bogus.

Greens co-leader Jeanette Fitzsimons says it is nonsense to suggest new technology is somehow outside the scope of the Kyoto Protocol and an alternative to it.

She says Kyoto is about ends not means. Countries that have undertaken obligations under it are required to reduce emissions, but Kyoto says nothing about how those reductions should be made. Nations are free to achieve those goals by adopting new technology or by using less energy or by planting more forests or by buying carbon credits from those who have more than they need to meet their targets.

She believes the new pact is just hot air designed to make it look as if these countries are doing something while making sure they are not held to account for the damage they are doing to the planet.

Others have suggested a more perfidious motive: to pre-empt the negotiations due to begin at Montreal in December on an international climate change regime for the period after 2012 when Kyoto's first commitment period ends.

To be environmentally useful, it would have to involve more stringent targets, but to be economically viable, it would have to bind a larger proportion of the world's emitters.

Kyoto, in short, is in danger of collapsing under the weight of free-rider problems.

With the US and Australia out, Kyoto covers little more than half of developed-country emissions. That reflects the fact that the US and Australia rank second and third respectively among developed countries in terms of per capita CO2 emissions from fuel combustion (Luxembourg is No 1).

It will not be long before developing countries' emissions outstrip those of the developed world.

But it is tough to persuade China, with per capita GDP of about US$1100 ($1600), or India, where it is lower still, to do anything that might retard their economic growth.

In the context of fears about losing jobs to those countries, the US baulks at adopting obligations that would restrict its economy but not theirs.

Which leaves the rest of the developed world - that is, the Kyoto community - with major free-rider problems and the need to minimise the impact of greenhouse policy on their export and import-competing sectors.

This state of affairs allows people to run a strange circular argument that goes like this: the US is such a large part of the climate change problem that it has to be part of any effective solution. It is not part of Kyoto, so Kyoto won't work. But if Kyoto won't work, you can't blame the US, or anyone else, for having no part in an ineffectual agreement.

Clearly, the development of clean technologies is something that has to happen if the problem of man-made climate change is to be addressed.

But the vision statement of the Asia-Pacific partnership also speaks of deploying and transferring that technology. This is the hard part.

It requires that the uptake of the technology makes sense to those who make the decisions, whether through price signals in a market economy or as a matter of national policy and regulatory fiat in a command economy.

Kyoto is at least an attempt to grasp that nettle by setting up a mechanism for price signals. It also has a mechanism whereby Kyoto countries can earn credits by financing the use of clean technology in developing countries when that would not otherwise occur.

Whether the new group has anything concrete to offer on that front, it is too soon to tell. If not, it will be dismissed as an exercise in tokenism and spin.