Co-Financing of Global Environmental and Social Standards: Trends in Climate Policy and International Cooperation


by Thomas Ruddy,, September 1999


Executive Summary

Core rights in the social (labour) and environmental spheres for all comprise a starting point for this study. Whether such rights will be incorporated into trade agreements, in side agreements, or neglected altogether is a central question for the turn of the millennium. Trade agreements may not have been intended to be the right place to deal with such "special issues", but the World Trade Organization WTO is increasingly being called upon to do so because of its power of imposing sanctions.

Therefore another central focus of the study is the encounter of the environment with the trade regime, as symbolized by the meeting of Klaus Toepfer with Renato Ruggiero in Geneva last Spring. Kofi Annan described his new compact with business leaders at the World Economic Fourm in Davos in February 1999. These are described as principles derived from the Rio Earth Summit in 1992. There is a conceptual link between these principles and individual rights in the paradigm of global public goods established by the team working under the United Nations Development Program UNDP's Inge Kaul.


In the Summer of 1999 it has become apparent that neither Asia nor Africa will accept having future economic (trade) benefits made contingent upon either social or environmental factors. Two ways out of this dilemma are conceivable: one would be to lower standards even further towards a common denominator, and the other to offer the South better market access to allay its fears of protectionism.

One further need is that for a new form of global governance, in lieu of a central authority or agency, to monitor the adherence to minimum standards of human dignity worldwide. Lean governments are obviously unable to take on this role. The Organization for Economic Cooperation and Development OECD issues only voluntary guidelines. The WTO Millennium Round will surely include discussions on this issue. In the North nongovernmental organizations NGOs press for human rights violations to be addressed, but only the most outrageous -- mass killings, genocide and ethnic cleansing -- can receive attention by a UN hampered by the lack of financing. At the same time, voters and labor unions threatened by globalization defend domestic jobs and markets, giving the South reason enough to suspect the North of protectionism and to resist the imposition of core standards. Unless a solution to this stand-off is found, one must eventually expect a state of anarchy to arise in which there is no one responsible for global human dignity except companies such as Enron which will do little more than to invoke Transparency International to combat bribery in the bidding for major infrastructure contracts.




Table of Contents

Conceptual framework page
Climate policy and the theory of capping and trading emissions  
Global public goods                                                       07
The background: globalization  
Latest positions in public policy circles, NGOs and academe on climate and trade  
Selections from trade and climate newsletters  
Cases in which raising the efficiency of power generation can count as part of ICT  
Graph of co-financing 19
Earlier positions in public policy circles, NGOs and academe on climate and trade 20-100




Conceptual framework

Question: Is the world community getting closer to or farther away from avoiding human-rights abuses?

Method: literature survey, monitoring newscasts, subscribing to online news services and searching the global Internet.

Researcher's standpoint: Western, and Western European, influenced by the theses developed under the leadership of Prof. Dr.Dr. F.J.Radermacher during multistakeholder consultations of the German Forum Info2000 program, and carried over into the Information Society Forum of the European Commission, as evident in the researcher's related theses set up for this ASIS Climate Change Action Group,

Points left open: Globalization is transferring power from the nation-state to multinational corporations, MNCs. But MNCs will still be accountable to their share- and stakeholders. Just as nation-states are intermediaries between the world community and their voter constituencies, so are MNCs intermediaries between their nations-states and their stakeholders. Emerging nations spurred by both economic and demographic growth, especially the Far Eastern "Tiger" states, are developing new forms of more-or-less democratic governance. It remains to be seen, however, and falls beyond the scope of this study, what forms of corporate governance will emerge among MNCs' stakeholders in the Far East.

This problem complex calls for a multidisciplinary approach: solutions are sought mainly through economics, history/ government / political science, geography, international law and diplomatic negotiation techniques. But also the behavioral sciences and cultural disciplines are important in understanding the problems involved, and include comparative religion and ethics. Likewise the natural sciences have an important role to play, in that the central climate problems are defined by chemistry and biology, while the central energy question is also answered by technocrats and physicists (nuclear power).

Why is the climate problem central? It is illustrative of the many "issues" that are going global, demanding new solutions, which involve use of some part of the global commons.

Furthermore, recently some innovative approaches to the climate problem have put it in relation to basic issues of human dignity and property rights. Proponents of these approaches make the widely understandable assertion that every person on the planet has a right to use the atmosphere part of the global commons, both for breathing and for the economic development associated with the oxidation of fossil fuels. The climate change negotiations have brought forth a mechanism designed to compensate financially for differences in the resource-allocation strategies preferred by groups at different stages of development.




Climate policy and the theory of capping and trading emissions


Ideally, if the developing countries in the South do not choose to use their rights now to generate carbon dioxide, CO2 (or more comprehensively classified as greenhouse gas GHG) emissions, so the theory goes, they could sell the rights until they reach the state of development when they, or their children, would some day be in a position to use more electricity. With the proceeds they could, in the meantime, accumulate enough credits to pay for new equipment to provide their future power supply with a higher energy efficiency. Combined-cycle power plants are more expensive than conventional coal-fired technology, but the advantage of the more efficient new equipment is that it makes possible marginal costs of GHG abatement which are considerably lower than what would otherwise have to be expected if the South used conventional technology. Higher efficiency would help minimize the projected rise in GHG associated with growing populations. GHG abatement by means of new equipment in the South is also cheaper than making further efficiency increases in the North would be.

The international negotiating community has to cope with a lack of trust between the North (OECD) and the South (G-77).


TREND: WRI proposes to overcome this impasse by taking a new approach to the problem of climate change, re-evaluating guilt from the Industrial Revolution and potential for remediation, and to allow the South to get onboard by using a new indicator, GHG intensity.

With the negotiating partners N + S, each suspects, or in some cases even accuses, the other of free riding on itself. Both face the classic prisoners' dilemma preventing better cooperation.


TREND: Pessimists claim there is no comfortable way out.




The background: globalization

Globalization is resulting from such factors as:

  • the end of the Cold War,
  • weaknesses in the voting system that give the advantage to low-tax proponents,
  • weaknesses in the government bureaucracy that act as disincentives on effectiveness

Globalization is causing a roll-back of government capabilities. Governments are being forced to cut back services and to lower their borders. Meanwhile multinational and footloose transnational businesses (MNCs and TNCs) and nongovernmental organizations NGOs are gaining power vis vis the traditional nation state.

In addition, technological change and lowering of communication and transport costs are

leaving anarchy among individual countries' domains of sovereignty.

Globalization is exacerbating inequality, helping rich countries to grow faster than poor ones.

"Playing fields are far from level, and access to markets is hardly free and competitive. ..For both rich and poor countries, globalization appears to be reducing the space available for the pursuit of autonomous policies. Even accountability to voters seems to be diminishing as politicians of every hue must increasingly placate global markets and ensure competitiveness" (Rao, in: Kaul, p.72). Environmental and social conditions are likewise extreme, posing a challenge for the application of any standard criteria for a level considered the minimum acceptable one across cultures.



TREND: UNDP's Kaul introduces a new paradigm.

Why does the literature survey rely so heavily on the new book co-edited by the UNDP's Inge Kaul, Global Public Goods, GPGs? Kaul's book puts the globalization debate in a perspective that is more in tune with that of this study, namely international development cooperation and human rights. Other comparisons with different focusses include that of Brown University's Wade on Gray and Rodrik as well as that of Smadya of the World Economic Forum Davos on Greider and Korten in Foreign Policy, winter 1998-99, p.52 and 71, respectively,

A third possible more general perspective might be to take one of the central issues in the debate on globalization involving one of the experts, MIT's Paul Krugman. Krugman is regarded by many as an advocate of free trade for stressing the wide applicability of early 19th Century economist David Ricardo's theory of comparative advantage. Jan-Peter Olters, though, points out that Krugman criticized the term "competitiveness" (the German term being "Standortwettbewerb" coined by Dr. Herbert Giersch, former president of the Institute for International Economics, Kiel) in Krugman's 1996 book Pop Internationalism as being alien to economics because it says nothing about the central concern, welfare. Olters explains that the term was originally used only in a corporate context, but then hijacked by the business lobby and applied to nation states. There it had come to mean the ability to attract investment. This distinction was documented in Olters' article "The Unfriendly Competitiveness Whip" in World Economic Affairs, Winter 1999, p.78. The "whip" is itself a term reminiscent of the "golden straitjacket" image mentioned throughout Friedman, Thomas L.: The Lexus and the Olive Tree: Understanding Globalization, New York: Farrar Straus Giroux , 1999. Konrad von Moltke of Dartmouth and the Free Univ. of Amsterdam concurs that the idea of "Standortwettbewerb" has been overplayed (per personal communication with him). Consequently, competitiveness appears to be less appropriate as a central issue in the debate on globalization, clearing the way for an alternative key concept such as Kaul's global public goods to become all the more useful.

And there is a fourth possible more general perspective: mention of the authors of central texts such as Ohmae, Thurow and Hazel Henderson along with a comparative review of books by Greider, Krugman, Garten and Barber in Mother Jones, March /April 1998, p.67. Finally there is a fifth perspective in the debates with Greider and Rodrik featured in the cover story of the Boston Review, Dec./ Jan 97-98,


According to the new book coedited by the UNDP's Inge Kaul many erstwhile domestic issues are becoming new hybrid domestic/ global issues, as more and more "internal sovereignty" (Reinicke, 1998, p.57) is eroded or surrendered to the global marketplace. A "public good" is a concept comparable to the "commons" described in Garrett Hardin's seminal 1968 article entitled "The Tragedy of the Commons" (in: Science 162, Dec., pp.1243-1248). National public goods are today being continually degraded, while their counterparts, global public goods GPGs, remain in short supply. GPGs nonetheless could serve as a means of operationalizing a reform of globalization. GPGs define the issues to be addressed in the anarchic sphere among the sovereignties of nation states. Regimes (Young, 1997, p.5-6), themselves comprising a form of "intermediate global public good" (Kaul, p.454), are increasingly needed to fill the gaps among nations, where new forms of global governance could evolve.



The economic forces fuelled by globalization are threatening to become a "race to the bottom" in the environmental and labor standards practised in many developing countries. The more highly developed North wonders how to improve conditions in the South. "The crucial issue is whether the use of trade sanctions, formalized in the context of trade agreements, to accelerate the development and enforcement of labour standards in developing countries would be effective, beneficial and sustainable.... [and whether] trade clubs should be the vehicle to enforce them," Birdsall, Nancy and Robert Z. Lawrence: "Deep Integration and Trade Agreements: Good for Developing Countries?" In: Kaul, Inge et al.1999, pp.143-144.



TREND: This concern is very controversial at the trade talks in Geneva as of Summer 1999. The U.S. wants labor and environment standards included, but UN Sec.Gen.Kofi Annan and the International Chamber of Commerce ICC have advocated putting such issues into side agreements. The EU called for putting investment rules in future agreements, and doing a sustainability assessment of the measures in future agreements (see also details on its position in the coming sections). "...European leaders tend to oppose the U.S. thrust for a world regime of free capital markets," adds Wade, Robert: "The Coming Fight over Capital Flows", In: Foreign Policy, Winter 1998-99, p.52,, where the great "Asian Crisis" of 1999 and resulting "battle over capital controls" are discussed.


TREND: Arguably the most significant development of 1999 has been the encounter of environment policy with trade policy symbolized by the meeting between Toepfer of UNEP and Ruggiero of the WTO in March.


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Copyright 1999.
Last revised: November 06, 1999.