Asia Needs West to Lead on Climate Change

(Bloomberg) — It's a rare embarrassment of riches that reaches as far as the ozone layer.

China has just that in the form of its massive arsenal of foreign currency. Todd Stern, U.S. lead climate negotiator, made the connection when asked in Copenhagen if rich nations owe pollution-related reparations to poorer ones like China.

"China has $2 trillion in reserves," Stern said last week. "We don't think China would be the first candidate for public funding."

The reparations issue is a non-starter at a time when the U.S., Japan and Europe are spending untold trillions to stabilize growth. Yet another embarrassing figure is worth considering: $16.7 billion. That's how much Goldman Sachs Group Inc. allocated in bonuses this year, earning itself derision. It far exceeds the $10 billion in aid the U.S. and several developed nations suggest for financing emissions- reducing projects in poor countries.

No wonder China is balking at the U.S.'s climate-change ante. Governments spent more than $750 billion to bail out financial companies since the credit crisis began. Here we are talking about saving the Earth and leaders come up with a tenth the amount proposed by financiers like George Soros.

Time to Act

It's time for rich nations to act by example and commit to reducing greenhouse-gas emissions. Not talk, but genuine steps to right the environmental wrongs of the past. Only then will Asia get more serious about doing its share, and that's really what the global economy needs.

It's a cart-and-horse issue. China is now the world's biggest producer of greenhouse gases and its inclusion — along with India — is needed to give any climate-change treaty teeth. Yet countries like the U.S. need to get serious before officials in Beijing will do the same.

The excesses of the West's industrial revolutions are the reason temperatures and sea levels are rising and the frequency of deadly storms is increasing. Europeans polluted plenty in the 19th century and the U.S. returned the favor in the 20th. In a perfect world, now should be China's and India's turn to do the same as their economies boom.

Thing is, our planet can't handle 3 billion or so developing Asians polluting the way the West did. Just think how hard it's going to be to breathe when more than 1 billion Chinese and Indians own cars. While that sounds supremely unfair, it's the reality as world leaders meet this week to cobble together a climate treaty.

Good Luck Breathing

As Asians grow richer, there will be more cars, airplanes, coal-burning factories and air conditioners churning heat-trapping gases into the atmosphere. Aside from rising temperatures, that will lead to increased health risks, slower economic growth, less foreign investment, increased government debt and rising bond yields.

The region is rapidly reaching its environmental limits. It means the blind pursuit of rapid growth just isn't possible anymore. The question really is this: when will Asia choke on its economic success?

Yet rich nations most responsible for cooking the planet should take the lead. Early drafts of a Copenhagen agreement call for far steeper cuts to their greenhouse-gas emissions. Current proposals from nations including the U.S., Japan and Britain amount to a 10 percent to 17 percent drop. The hope is that they will jointly pledge to reduce heat-trapping gases at least 25 percent by 2020.

Earn That Nobel

Rich nations should go even farther than that. President Barack Obama, who accepted a Nobel Prize in Oslo last week, has a chance to earn it in Copenhagen this week.

This is a bigger economic issue than many realize. In April, the Manila-based Asian Development Bank said Singapore, Thailand, Indonesia, Vietnam and the Philippines may lose 6.3 percent worth of gross domestic product annually by the end of the century if climate change isn't stopped.

When island nations in the Pacific and Indian oceans warn of a "planetary Pompeii," they're not exaggerating. Rising sea levels are swamping coastal areas and encroaching on groundwater supplies, coral reefs are dying off and fish are migrating from warming waters. That may not bother the average hedge fund manager, yet it puts Asia on the front lines of trends will eventually encroach on bigger targets such as Jakarta, Mumbai, New York, Shanghai and Tokyo.

China is Key

Again, China is the key. The belief China will act is needed to get the U.S. Congress to back Obama's ambitions. It's also necessary to stop any U.S. or European move to raise taxes on imports from countries that don't require curbs on carbon-dioxide emissions. The World Bank says such taxes could reduce exports of Chinese goods by 20 percent.

Rapid growth is the linchpin of the Communist Party's hold on power in China, and it won't easily take steps to undermine it. That's why the U.S. and others that have been dirtying the world for centuries must act first. Along with aggressive emissions cuts, that means pledging more than Goldman's bonuses.

Only then will China follow. Once it does, the world economy will be better off for it.

(William Pesek is a Bloomberg News columnist. The opinions expressed are his own.)

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William Pesek is a Tokyo-based columnist for Bloomberg News, providing opinions and commentary on economics, business, markets, and politics throughout the region. His columns routinely appear in the International Herald Tribune, The Australian, The Straits Times, The Japan Times and many other publications around Asia and the globe. He writes a monthly column for Bloomberg Markets magazine and is a regular on Bloomberg Television. The opinions expressed are his own.