Download Study on the Particularity of a Low-carbon Economy Under the

Study on the Particularity of a Low-carbon Economy Under the
International Institutional Arrangements
QU Jianzhong, XING Lirong
School of Economy, Shandong University of Technology, Zibo, Shandong, P.R.China, 255049
[email protected]
Abstract: This paper studies the particularity of low-carbon economy under the international
institutional arrangements of United Nations Framework Convention on Climate Change (UNFCCC), its
Kyoto Protocol and Copenhagen Accord from the perspectives of institutional arrangements and
concludes that low-carbon economy is not only a product based on the certain level of the development
of productive forces and production relations, but also result of institutional arrangements. The
institutional arrangements give each country the responsibilities and obligations of developing
low-carbon economy and show greater, wider and further impact on every field in the world than that of
other economies. The institutional arrangements combine the economic area, political area together with
spiritual realm.
Keywords: institutional arrangements, low-carbon economy, energy revolution, carbon trading
1.
Introduction
Issues such as global warming and energy security arouse strong concern among the international
community, thus the concept of low-carbon economy emerged and has been frequently uses by the
international community, in particular, the convening of United Nations Climate Change Conference in
Copenhagen in December 2009. Low-carbon economy becomes the cutting-edge ideas and global hot
topics once again among the academics and policy makers both at home and abroad.
As at the initial stage of low-carbon economy, there are still large differences in the understanding of its
implications. The main representative interpretations are as follows. (1) The Cutting-edge Concept.
The low-carbon economy is a cutting-edge economic concept with broad social characteristics, guiding
the direction of revolution in all areas of the society. (2) New Industrial Revolution. The low-carbon
economy cored as the energy revolution is the fourth industrial revolution after the first, second and
third industrial revolution marked with the invention of steam engine, electricity and computer and
internet respectively. It will lead to completely changes in all aspects of global production, circulation,
consumption, distribution and management system. (3) Economic Development Model. The low-carbon
economy is a brand-new economic development model, evolving from the high-carbon energy to
low-carbon energy, involving the full optimization of industrial structure and energy structure and
complete revolution of modes of production and lifestyle. (4) New Economic Form. The low-carbon
economy is a new economic form. About the economic form, there are three different views. First, the
low-carbon economy is regarded as a new social economic form after the hunting economy, agricultural
economy, industrial economy and information economy. Second, the low-carbon economy is viewed as
a new market economic form, a kind of institutional economy. Third, low-carbon economy is considered
the same as eco-economy, recycling economy and green economy, designed to solve environmental
crisis and energy crisis.
All the various interpretations of the low carbon economy are concerning one problem: low-carbon
economy is a new economy influencing global economic development. Since it is a new economy, it has
its uniqueness distinguishing from other economies. Due to the background of international institutional
arrangements, low-carbon economy is given distinguished characters distinct from other economies.
This paper provides some research on the above.
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2.
International Institutional Arrangements of Low-carbon Economy
Douglass. C. North thought that institutions are social game rules and will provide specific incentives
framework, thus creating a variety of economic, political and social organization. Institutions are made
of formal rules (laws, constitution and regulations), informal rules (habits, ethics and codes of conduct)
and their implementation effects.
So far, international institutional arrangements of low-carbon economy refer to the “United Nations
Framework Convention on Climate Change”, and its “Kyoto Protocol” and “Copenhagen Accord”.
In 1960s, United Nations began to concern the harm of global warming to human society. In 1970s,
United Nations launched global climate changing process through the form of international law. Finally
“United Nations Framework Convention on Climate Change” was passed in the United Nations
Conference on Environment and Development in 1992 and entered into force in March 21, 1994. From
1995, the Conference to Parties (COP) holds once a year. In 1997, the Third Conference of Parties
adopted “the Kyoto Protocol” as an effective agreement of “United Nations Framework Convention on
Climate Change”. Under the Kyoto Protocol, 37 industrialized countries commit themselves to a
reduction of their collective greenhouse gas (four greenhouse gases and two groups of gases) emissions
during 2008~2012 by 5.2% from the 1990 level. Kyoto Protocol coming into effect in February 16, 2005,
provides quantified emission-reduction targets only for the developed countries, but no legal binding
emission limitation or reduction obligation requirements for developing countries. Up till now, the
number of the parties to UNFCCC is 194, among which 190 members have ratified the Kyoto Protocol.
However, the Kyoto Protocol does not regulate global warming gases emission-reduction after 2012. In
December, 2007, on the thirteenth Conference of Parties in Bali, Indonesia, the parties reached “Bali
Road Map”, deciding new agreement on post-2012 global warming shall be signed in Copenhagen on
the fifteenth Conference of Parties in December, 2009. In the COP fifteenth, the parties reached a
non-legally binding Copenhagen Accord. Based on the data released by the Secretariat of UNFCCC on
March 31, 2010, 112 countries (111 countries plus EU containing 27 members) agree the Copenhagen
Accord, among which 41 developed countries present the emission-reduction targets up to 2020 and 35
developing countries release their emission reduction action plans on the foundation of obtaining the
supportive capital and technology, but still more than 80 countries do not express their ideas on the
Copenhagen Accord. United Nations plan to continue negotiations and try to reach a “post-Kyoto
agreement” in November 29 to December 10, 2010 in Cancun summit in Mexico.
International institutional arrangements of low-carbon economy give each country the responsibility and
obligations to develop low-carbon economy and integrate the economic field, political field and spiritual
realm.
Some experts point out “United Nations Framework Convention on Climate Change”, known as the
United Nations “Climate Constitution”, together with its “Kyoto Protocol” and the forthcoming second
commitment period surrounding the “post-Kyoto agreement”, with “UN Charter”, “Establishment of
WTO Agreement”, will become the world’s most important legal documents and generate great impact
on the world’s political and economic structure.
In addition, in order to put pressure and influence on the countries’ carbon emission reduction, reports,
reviews, initiatives and protests on carbon emissions also belong to an international low-carbon system
arrangements no matter they are from intergovernmental international organizations (such as the United
Nations Intergovernmental Panel on Climate Change, World Meteorological Organization, the
International Energy Agency, etc.) or non-governmental international organizations (such as the World
Wildlife Fund, Greenpeace, Friends of the Earth, etc.).
3.
Analysis on the Particularity of Low-carbon Economy in the International
Institutional Arrangements
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The formation of a new type of economy is bound to have a major impact on various aspects of social
reproduction and change its operation mode and mechanism, further influence and restrain people’s
economic action and lifestyle. International institutional arrangements of the low-carbon economy make
it distinct from any of the formation and development of the economy. The apparent uniqueness are as
follows.
3.1 Characteristics of institutional economy of low-carbon economy in the international
institutional arrangements
“The United Nations Framework Convention on Climate Change”, and its “Kyoto Protocol” and the
“Copenhagen Accord” propose the requirement of greenhouse gases emission reductions and specific
reduction targets and obligations on major countries. Although still a non-binding regulation, the Accord
clearly defines countries in the world “common, but differentiated responsibilities of global climate
change” and stresses the problem of global climate changing which can not be solved by any one
country and has to depend on the joint efforts of all the countries in the world. Under this circumstance,
irrespective of energy, environment and the needs for human’s survival, low-carbon economy is not an
economy whether a country is willing to implement or not, but has to implement just from the
perspectives of social responsibility of institutional arrangements.
Parties in order to achieve emission reduction targets certainly implement institutional reforms at home
first, such as establishing carbon emission standards, levying carbon taxes, implementing compensation
paid for carbon credits. Low-carbon domestic institutional arrangements surely push this country on the
way of low-carbon development. Unlike other economies mainly achieving through market role,
low-carbon economy has to depend on both market roles and institutional roles. Low-carbon economy is
a significant problem involving global human security and sustainable development and no country shall
shirk its responsibilities.
3.2 Obvious characteristics of carbon diplomacy of low-carbon economy in the international
institutional arrangements
Carbon diplomacy refers to the bilateral and multilateral diplomatic negotiations on the problem of
reducing greenhouse gas emissions among countries or regions within the framework of international
collaboration under the “United Nations Framework Convention on Climate Change” and its “Kyoto
Protocol” and “Copenhagen Accord”. In addition to the organization and promotion of United Nations,
low-carbon economy has been implemented by some countries and regions, such as the European Union,
the United States and Japan by virtue of its technical advantages in this area for realizing various
political and economic purposes, protecting the environment, improving climate. These countries
practice the UNFCCC and carbon diplomacy frequently. Multilateral carbon diplomacy mainly relates to
the problems of global coordination of carbon emissions and distribution of carbon emissions space,
while bilateral carbon diplomacy concerns more about low-carbon innovation, cooperation and
competition for low-carbon technologies and product development space, because each country hopes to
share larger market and greater profit in the area of new energy and low-carbon technology. In short,
based on international carbon institutional arrangements, the diplomatic background is the unique
feature that any other economy does not own. Therefore, carbon diplomacy has increasingly become the
focus of global diplomacy. For instance, characteristics of carbon diplomacy have been rather obvious in
the bilateral US-China high-level contacts since 2009 and the field of climate changes is the core issue
of bilateral cooperation.
3.3 Great impact on the national foreign trade policy of low-carbon economy in the international
institutional arrangements
Any kind of previous economy does not have such direct and clear influence on the national foreign
economic and trade policies as low-carbon economy because of international institutional arrangements.
3.3.1 The international low-carbon institutional arrangements provide a basis for foreign trade and
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economic policies
For example, according to United Nations Framework Convention on Climate Change (UNFCCC), its
Kyoto Protocol and Copenhagen Accord, countries such as EU and US prepare to collect carbon taxes
on the high-carbon products. Carbon taxes collection is to urge countries to respond to and implement
international conventions, thus to decrease carbon emission. Although carbon tariffs have not been
implemented so far, with the rising pressure of climate warming and energy and gradual promotion of
international negotiations under the “United Nations Framework Convention on Climate Change”
together with the further development of low-carbon economy, it is not impossible to implement carbon
tariffs. Once implemented, carbon tariffs will have a significant impact on trade in energy-intensive
products.
3.3.2 The domestic low-carbon institutional arrangements provide a basis for foreign economic and
trade policies
For instance, those countries imposing carbon tariffs on imports usually impose carbon tax measures on
domestic products to restrain high-carbon products. The implementation of carbon tariffs is to follow the
principle of national treatment and fair competition.
3.4 The characteristics of simultaneous development of virtual economy and real economy of
low-carbon economy in the international institutional arrangements
The real economy of low-carbon economy mainly refers to production and distribution activities of
low-carbon products, technologies and services. Virtual economy of low-carbon economy mainly refers
to financial activities serving the greenhouse gas emissions reduction. The reason for simultaneous
development of virtual and real economy is the formation of a special carbon market in international
low-carbon institutional arrangements.
Any economy will generate some new products, technologies and services market, but in an
international low-carbon institutional arrangements low-carbon economy forms a kind of carbon credits
exchange market, apart from the formation of low-carbon products, technologies and services markets.
Carbon credits exchange market is quite different from general product, technology and service market
in trading participants, transaction objects, trading modes, price formation mechanisms.
“Kyoto Protocol” provides three “offshore emissions” flexible mechanisms for developed countries
meeting their greenhouse gas emission reduction obligations. One is Emission Trading (ET). It means a
country may sell the remaining credits to those countries that may not fulfill their obligation, if this
country over fulfills its obligation, that is, its emissions lower than the required standards in the
Convention for those developed countries with emission reduction obligations. One is Joint
Implementation (JI). The other is Clean Development Mechanism (CDM). The latter two mechanisms
mean countries bearing emission reduction obligations may invest in other low-cost countries and the
saving emission reduction credits are returned to the investing countries offsetting their emission
reduction obligations. The difference between the latter two mechanisms is that the second is applicable
among developed countries while the last is available between developed countries and developing
countries. These three mechanisms allow the rapid expansion of carbon trading market in some
countries both domestically and internationally. According to World Bank statistics, global carbon
turnover was 31.2 billion U.S. dollars in 2006, 63.01 billion U.S. dollars in 2007, 135.1 billion U.S.
dollars in 2008, 143.7 billion U.S. dollars in 2009. The United Nations and the World Bank predicts that
market capacity of global carbon trading is about 190 billion U.S. dollars in 2012 and will exceed the oil
market to become the world’s largest market. Inevitably carbon credits will replace oil as the world’s
largest commodity.
The expansion of global carbon trading market enhances the level of carbon currency. Carbon emissions
further derivative as financial assets with investment value and liquidity, driving the development of
global carbon finance market, thus low-carbon swaps, low-carbon stock, low-carbon futures, low-carbon
funds, low-carbon project development financing and other related financial intermediary activities
emerge. The development of carbon finance further promotes global carbon market value chain division
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and the carbon emissions trading market further expands.
3.5 Special international social responsibility of a company given by low-carbon economy in the
international institutional arrangements
Low-carbon economy in the international and national institutional arrangements is not only just an
economic development model, but also a rule to affect the operation of the global economy and
businesses philosophy, model, and changing means through the power of regulation, media, morality
and idea. Businesses and consumers are given a kind of social responsibilities to protect environment
and resources, so that low-carbon products and low-carbon operation become new competitive factors in
the global economy. Some multinational companies have begun to consider low-carbon as an important
condition for selection of suppliers. For example, Wal-Mart, Procter & Gamble, Unilever and other
companies require suppliers to measure and report their greenhouse gas emissions, urging suppliers to
provide low-carbon products. The purpose is to respond to national carbon tax policies and consumer
resistance to high-carbon products, meanwhile to enhance the image of corporate social responsibility.
This can give the global corporate international social responsibility, which other economy can never do.
4.
Conclusion
The above analysis shows that low-carbon economy in the international carbon institutional
arrangements possesses obvious specialty compared with other forms of economies. Low-carbon
economy is not only a product based on the certain level of the development of productive forces and
production relations, but also the promotion of institutional arrangements. The institutional
arrangements give countries the responsibilities and obligations of developing low-carbon economy and
show greater, wider and further impact on every field in the world than that of other economies. The
institutional arrangements combine the economic area, political area together with spiritual realm.
Low-carbon economy has become the development trend of world economy and all the state, enterprises
and individuals should promote low-carbon concept, develop low-carbon industries and products and
advocate low-carbon life, thus to promote sustainable development of economy and society.
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