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Financial panic—the most reassuring news in weeks

Rachel Ilana Block's picture

There’s been a lot of worrying news lately – particularly, news that looks bad for achieving global multilateral action on climate change.  The collapse of the Doha trade negotiations in July has been interpreted by many – including World Bank President Robert Zoellick and former EU Trade Commissioner Peter Mandelson – as steepening the “uphill struggle” of the UNFCCC negotiations.

More recently, the unfolding global financial crisis is weakening optimism about tackling climate change.  The financial crisis is dominating headlines and bumping climate change ever lower on the international agenda.  The metaphors abound, as climate change “takes a back seat” and is “left out in the cold.”

As tends to happen in situations of financial strain, some are behaving as if the environment were a luxury good that is now out of reach.  Afflicted with crisis-induced amnesia, we are at risk of forgetting the connections between environmental sustainability and long-term welfare outcomes, and forgetting that the world can’t afford not to combat climate change and its impacts.

Even the governments most reliable when it comes to funding global public goods such as climate change mitigation are backpedaling.  Feeling squeezed, some European countries have drifted towards beggar-thy-neighbor policies in response to the banking crisis (e.g. Ireland and Germany’s government guarantee of deposits in domestic banks, reducing relative trust in and thus the competitiveness of foreign-owned institutions).  Also, there’s a very real threat that the EU economies will abandon their existing emissions reductions targets.

Rather desperate pleas and promises for continued advance of action on climate change have appeared from Warsaw to Sydney, while the Bank has made efforts to reassure environmentalists and client countries that funding won’t disappear.

But if I am just a little less worried now than I was a week ago, it’s not because Juan Manuel Barroso has asked nicely for the EU to preserve its emissions targets.  It’s not because Australia has announced that it’s sticking to its newly minted cap-and-trade plan.  And it’s not because the Bank will ensure donors make good on their commitments to the just-launched Clean Investment Funds.

If I’m just a little less worried—just a little—it’s because the leaders of the US and Europe have shown that they can cooperate to avoid the proliferation of a global public bad.  The unfolding global financial crisis, that is.  And China is eager to see this new wave of international cooperation travel beyond the Atlantic to reach Pacific shores and include Asian economies.

The $700 billion question is, then, can we imagine powerful, vocal national coalitions influential enough to demand action from national leaders?  If the U.S. Congress can pass an unpopular bailout plan that is flawed but necessary, and endeavor to convince a skeptical public of its necessity, surely there is hope that they—and their global counterparts—do nothing less on climate change?

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