The Case For Planetary Protectionism

While the Kyoto treaty was ultimately undermined by the absence of the United States, the world's biggest polluter, a shift in leadership hails a new era of participation, even leadership from the nation at this year's Copenhagen summit on climate change. Tragically, and somewhat ironically, the resultant treaty may still be missing the signature of the world's biggest polluter—that mantle now having passed to China.

Persuading the Chinese government to voluntarily curtail its economic development for the greater good, including those countries that caused the predicament we face today, may be beyond even the political skills of the Obama administration. So if politics can't solve this thorniest of problems, maybe economics and consumer behavior can.

Chinese economic growth is largely dependent on the appetite of consumers in the West, and primarily the United States, for low cost goods and services as has been well documented in the recent financial crisis. With signs that those same consumers, even in the United States, are now increasingly concerned about the environment, and in an era where conspicuous consumption is definitely last year's fashion, there has perhaps never been a stronger opportunity to strengthen a culture of environmental as well as fiscal responsibility in the goods and services we consume.

If carbon emissions legislation takes effect around the world without uniform participation, consumers will essentially face a choice between two types of goods—those that are produced in compliance with efforts to reduce emissions and those that aren't. If consumers can be persuaded to patronize only the former, then the basic laws of supply and demand will force global compliance.

Chinese companies that want to continue to build economic growth through the American consumer will quickly re-tool manufacturing processes to get back in the game. And American companies seemingly shut out of manufacturing industries will have the opportunity to offer up lower carbon cost alternatives with the advantage of reduced transportation costs.

Of course any government support to influence such behavior will face cries of protectionism. But such planetary protectionism unlike the damaging nationalist protectionism of the past actually makes sound global economic sense.

National protectionism is criticized because it distorts economic efficiency, by introducing some kind of false cost into the system to favor local suppliers, usually in the form of import tariffs.

In a world where carbon emissions are now seen by the majority as an economic, as well as environmental cost, planetary protectionism would actually increase economic efficiency by recognizing the true costs of production, not introducing false costs.

Such a movement toward planetary protectionism will require three key components:

  • Affordable Compliant Alternatives. Consumers will only make the "right" choice if given affordable options. Environmental responsibility has to work alongside fiscal responsibility, not as an opposing option. The good news is that many companies are realizing the financial as well as environmental benefits in areas such as reduced packaging and transportation. These efforts must be further encouraged.
  • Supply Chain Environmentalism. Consumers must be confident that the "right" choice made by them also reflects the "right" choice made by every company along the product's supply chain. In a world of global supply chains, this means globally applied standards. The good news again, is that companies like Wal-Mart are already insisting that its thousands of small suppliers in China meet or exceed local environmental standards.
  • Trust and Transparency. Consumers need a simple labeling system to identify compliant and non-compliance goods. They also need to have complete trust that the system is transparent and valid.
This will require a globally supported standard for carbon measurement and reporting. If the leaders of the world want consumers to succeed where politics can't in bringing China in line with carbon emissions reductions, they should make sure that a system of globally recognized and verifiable standards of measurement and reporting are one of the key outcomes of Copenhagen.

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