There is one unchallenged parameter for quality rankings of universities: publications in peer-reviewed journals. The same holds for quality measurements of candidates applying for professors’ chairs at ambitious research universities. Peer-reviewed publications typically have a rather narrow disciplinary scope. Moreover, the flow of research money also follows disciplinary logic. The scientific peers deciding on research grants tend to share the same mentality with the publication peers. All this makes for a strong bias in favour of disciplinary excellence when academic quality is measured.

The bias is exacerbated when the ranking of journals is taken into account. For academic research careers, you have to show publications in so-called “A journals”. Their peer review tends to be strictly disciplinary, although top journals like Nature or Science have a multidisciplinary appearance and at least encourage some interdisciplinary consideration of a paper’s impact.

In public debates about this bias, representatives of the disciplines would reply that their impact is universal and their methods often come from neighbouring disciplines, so they are not so “disciplinary” as they may look. But that is no satisfactory excuse, given the fact that some of the biggest research challenges of our days find no adequate resonance in the submitted papers sections of A journals.

The general public as well as politicians and the media are aware of the quality rankings of universities, research institutions and countries. The most popular and most visible indicator is, of course, the head count of Nobel Prize winners. What politicians and the public are typically unaware of is the strong disciplinary bias that governs publications in A journals and even more the Nobel Prizes. These exist only for three natural science disciplines, physics, chemistry and medicine/physiology. The Peace and Literature Prizes are outside academia, and the Economics Prize, since 1969, is not a Nobel Prize proper but the Swedish Central Bank’s Prize in Economic Sciences “in Memory of Alfred Nobel”. Even this has become more and more a prize reflecting disciplinary excellence.

Complex systems and truly transdisciplinary problems are at a disadvantage when it comes to peer-reviewed journals, university rankings and academic careers. It is not easy at all to measure the extent of that disadvantage because scientists aiming at academic careers typically don’t even try to address complex and transdisciplinary problems, knowing that it would be difficult to find adequate journals.

Practical problem solving requires interdisciplinary research

Real world problems such as the ecosystem of the Black Sea and its eutrophication; the cultural determinants for the spreading of contagious diseases; or explanations for the miraculous growth since fifteen years of the Chinese economy, require interdisciplinary approaches. Solving them typically is a highly political affair, and quick results are rare. It may take decades to prove a hypothesis. Researchers engaging in such complex problems cannot realistically hope to win a Nobel Prize or similar honours during their life time. Universities that are in need of public recognition, i.e. high academic ranking scores, tend also to neglect interdisciplinary research even if they are encouraged by governments, local communities or the private sector to engage in it.

According to Einstein, we cannot solve problems using the methods that have created the problems. But in the present mindset, humanity tries exactly to do that. Many of the problems of our world relate to relatively blind applications of science and technology and leaving the steering to market powers or to state bureaucracies. The competition for economic achievement and scientific excellence is a reflection of that mindset. And the mechanism of scientific quality control nearly excludes the growing of sciences that analyse the complex, non-disciplinary nature of the prevailing destructive mechanisms.

A chance for Europe

Universities in Europe may be well positioned just to take a bold and new approach and embrace complex, interdisciplinary research. As a rule, they are not in a position financially to compete with disciplinary excellence of the mega-enterprises of US American universities. The latter can throw hundreds of millions of dollars at one problem such as the biochemistry of Alzheimers disease. Given the history and culture of European countries, European universities may well be better equipped than their American counterparts to successfully work on the fascinating array of complex and interdisciplinary problems our world is facing. Europe provides unique “laboratory” conditions for the study of some of the biggest real world problems.

Let me sketch out some of the problems that are worth studying:

• Healthy societies need a fair balance between public and private goods, or else between democratically legitimated laws and the powers of markets. Today’s markets are international, while laws remained national. This gives markets an unfair superiority over the law. Only through international legislation do we have a chance of re-balancing public and private interests. The EU tries to do exactly that. We need to study how well that works and what the limits and what the obstacles are.
• Global warming has become the highest environmental concern. Which are the realistic measures of mitigation and what can we do in terms of adaptation? I suppose we are in need for a new technological revolution that allows us to more or less de-couple economic and social well-being from the growth of energy demand. But which are the technologies doing that? And which are the policies to give those new technologies a realistic chance to take off?
• Ageing societies are in need of a fundamental restructuring of their social security systems. I suppose that on average people will have to work some five years longer. But they need not do the same work that has been designed for people aged 25–50. In fact, there are hundreds of societal and economic functions that can be better performed by the elderly than by the young. Think of all the tasks requiring experience, judgement, caution and care. In addition, there are many functions where age represents at least no major disadvantage. The respective jobs have to be designed, and regulation has to be developed and adopted encouraging the elderly to accepts the new assignments.
• Globalisation, migration and rapid structural change have put an enormous stress on people. In part that can be answered by life-long learning, – an exciting challenge to our educational system. In part, however, the new rapid changes have made people insecure, fearful and often wildly angry. In this state of mind, many have resorted to fairly primitive, often fundamentalist religions. The nexus between rapid-change economies and religious fundamentalism has consistently been denied. I suggest it should be addressed.

These are four out of perhaps fifty major and complex questions waiting to be addressed. Let me venture to say that old Europe, after having gone through the abysses of political fundamentalism, ethnic and racial violence and devastating wars, has emerged to be uniquely qualified to address such kinds of complex and intricate problems. The European unification movement, starting with Robert Schuman, Konrad Adenauer and Alcide de Gasperi and leading in 2007 to the 27 members European Union stretching from the Atlantic to the Black Sea, has been a unique success story, unparalleled in human history, of peace making, of multiculturalism, and of cultural and scientific rejuvenation. We Europeans should not be shy about ourselves, even if China has higher growth rates, the USA have a more formidable military power, and the Islamic world shows a more passionate dynamism. Hasty growth, powerful armies and aggressive passion may turn out to be part of the problem rather than part of the solution.

Opportunities for the elderly

It would lead too far into fields beyond the competence of the author to expand further on European visions. Instead, I choose to use the Festschrift for one of the grand old men of intellectual Europe as a welcome occasion to say a few words about new opportunities for the elderly.

The demographic transition from the predominance of the young in a growing population towards a stable population with a high proportion of old people is typically deplored by politicians, journalists, and by the managers of the pension systems.

In reality, I suggest, this is the natural and unavoidable state of a “sustainable” society. It also represents a new cultural universe full of exciting new opportunities. One of them lies indeed in harnessing the specific capacities of the elderly.

Let us begin with the family. What is a better holiday from young families’ stress than leaving the children under grandparents’ supervision? Actually, children tend to like that too, for a change, exploiting the seasoned habits of tolerance of the old generation.

But we can go further into public life and the private sector. Who is there in the local community to defend and protect cultural heritage and the beauties of the environment? Who is there to come with wise judgement as opposed to profit maximising options for the economically powerful? Who has the time to welcome guests from near and far and make them feel at home? Who can repair an old radio manufactured in 1970? And who is so attached to the village or the small town not to be lured into the already overcrowded megacities? It’s all the old generation folks.

One word about social security. The present system of employment knows one sharp moment in one’s life where retirement begins. Only self-employed people such as farmers, doctors, independent craftsmen or artists have maintained the habit of a gradual retirement. It is the masses of employed people who constitute the “demographic problem” as they sharply retire by the millions. What I suggest is not what is presently introduced in Germany, namely a mechanical prolongation of the work life before retirement from the age of 65 to 67. What I would find a lot more attractive is the establishment of a “third phase” of life with new job opportunities for the elderly and with very flexible working hours. The elderly would have options how much of the pension benefits earned during the “second phase” of ordinary work they want to consume during their third phase. The earlier they do that, the lower the benefits. Conversely, if they gainfully work in the third phase until the age of eighty without touching their benefits from the second phase, then they would earn bonanza payments easily three times as high as normal after retiring from the third phase. All sides would benefit: Gainful and meaningful work beyond second phase retirement means added value to the economy; the public or private pension funds benefit from not having to pay for fifteen years; and the elderly workers enjoy satisfaction and a significantly higher income during their old age. Sweden has introduced a somewhat similar system (without explicitly speaking about a third phase) and has reduced youth unemployment dramatically, chiefly because there was more added value around, from which added employment arose.

Virtues of 21st century universities

Let us now go a step further into the academic world that has been particularly impatient kicking the elderly out, – because they seemed incompetent to publish in A journals. If the complex and interdisciplinary problems of which I mentioned a few are to be addressed, it will be specifically the wealth of experience and oversight of the old generation scientists that qualifies them. The scarce resource in such fields is not methods of mathematics or molecular biology that impress the peers working for the A journals. It is rather the judgement about which elements from quite different disciplines are needed to be brought into a synergistic relation.

Think of the challenge of re-balancing public with private goods. That work will require an understanding of internationally mobile capital; international law, notably trade law; some history and philosophy of public goods and democracy; concrete experience with successful public-private partnerships; knowledge of the working methods and legitimacy of civil society groups, etc. etc. The disciplinary departments of political science or economics or law would be completely overwhelmed by the complexity of this challenge. Hence they tend show no inclination to engage in that kind of research and they don’t reach out to other departments to overcome their perplexity.

The study of global warming faces similar challenges. Here there is need of first class scientists of meteorology, botany or ocean dynamics to cope with the challenge, but also questions abound of international law, capital markets, political analysis, civil society or technologies.

All the assumed fifty odd complex questions referred to earlier show the same feature of needing disciplinary facts and interdisciplinary reasoning and analysis. In most cases, academic study is just not enough. Universities also need to leave the ivory tower and interact with real world actors in the public and private sectors. This is a demand that cannot be easily met by academic youngsters. They tend to be too impatient, too ignorant of the needs and limits of public life, or too greedy of making money in the private sector.

It is my belief that European universities of the 21st century should try to excel in the study of such complex, interdisciplinary problems. Also academic teaching would benefit from it, because universities should not graduate their students packed with disciplinary knowledge and methods and without exposure to the real world complexities. If non-European universities join in, – all the better.

The university staff would highly benefit from a healthy mix of young and old, of “hungry”, impatient researchers and wise and patient scholars having the overview of complex problems. As for the qualifications of the elderly, they must enjoy the mentality of the impatient youngsters but they should also have a credible dignity hat typically comes with age.

It would be the best of all (academic) worlds if also a new generation of A Journals emerged that accepts publications with a definitely interdisciplinary scope, using peers of outstanding credibility and judgement. Peers like Professor Mircea Maliţa!

Festschrift at the occasion of the 80th birthday of Professor Mircea Maliţa, “Coping with Complexity at the Beginning of a New Century”

When I began preparing this address on the Old and New Europe in their transatlantic relations, I saw with a degree of relief that hundreds of wise men and women had already written or spoken about the subject in recent months. So my task looked like a pretty easy one, just to summarise what wiser people than myself have said. That was the good news. The bad news was that much of what the wise men and women have said was mutually contradictory. Hence any summary would be confusing or absurd and would have sounded like:

• New Europe is closer to America than Old Europe because America is called the New World, but in the end the two are the same. Or:
• Old Europe is closer to America because it is so much like America as regards annoying the fellows on the other side of the Atlantic. Or:
• Old Europe believed that Blix was supposed to find weapons of mass destruction in Iraq while New Europe new better because of closer ties to the Pentagon. Now that everybody knows that the weapons of mass destruction were only put on the agenda for “bureaucratic reasons”, we need no longer distinguish between Old and New Europe.

So I feel a bit confused about New and Old and you should too. Let me suggest a contest between you and me. My job is to speak about the confusion, and yours is to listen. If you finish first, please let me know. Then I declare you the winner.

“Of Paradise and Power“

One of the prominent writers on the subject is Robert Kagan. In Of Paradise and Power, he sees a deep and structural divide between us Europeans and the US: To make his point, he needs no distinction of old from new Europe but regarding America, he doesn’t see much of a distance between Republicans and Democrats either. He says that even moderates in the US think like the hawks in terms of making use of America’s insuperable military power while even hawks in Europe are inclined to think in terms of paradise and international law to solve international conflicts.

At a lecture in Berlin ten days ago, Kagan insisted that most of today’s US policy that is annoying Europeans has actually been cooked by the Clinton administration. But that is grossly inaccurate, according to Frank Loy, the chief climate negotiator of the US under Clinton who listened to Kagan’s Berlin lecture and was much angrier about him than I am. Loy told me three days later, still full of anger, that arrogant unilateralism was an invention of the Bush people; and whatever came close to it during the Clinton years originated from the Republican dominated Congress after November 1984, not least from Newt Gingrich then House majority leader, and from the notorious Jesse Helms.

Other Americans tell me that after 9/11 the internal security system has turned absolutely frightening for liberals. Public institutions and private companies are encouraged to spy on staff and report to the Secret Service, reminding badly of the McCarthy times if not of the worst times we had in Europe. Kagan doesn’t touch that dimension and shouldn’t be surprised that Democrats and liberals feel he is not talking about their America.

Even inside the Republican government there is a rift. Newt Gingrich, now an advisor to Rumsfeld, said in April 2003: “The last seven months have been six months of frustrating and unsuccessful diplomacy and one month of successful military campaign”. His intention is clear to de-moralise Powell.

We learn from all this that Kagan is grossly over-simplifying American realities. Nevertheless, I find his observation absolutely convincing that Americans and Europeans are actually not that different by their human nature but by military realities. He also notes that historically this reality is a new phenomenon resulting from the collapse of the Soviet empire. Before 1990, America was simply not the only superpower and therefore had strong reasons to fear an all-out war. Hence, oddly, the Cold War served as a stabilising factor.

After 1990, all that was gone, and now America is the only military superpower left and hence is behaving, guess how? Just as Britain did during the 19th century and Germany tried to behave somewhat later and France and Spain somewhat earlier. At such times of the European nations’ military dominance, says Kagan, it was the USA to insist on diplomatic rather than military solutions. And let me add that civil freedoms at these times were well protected in the USA, not in militarised European states.

When explaining the propensity of nations to tailor their strategies to what they realistically can expect to achieve, Kagan quotes an old English proverb saying that if you are a hammer, the world around you looks like full of nails. The message being that in our times there is only one hammer left, the USA.

To add an element of scare, let me at this juncture tell you what observers say in Washington about the Bush team’s operational principle: “Ready – Fire – Aim”, in this sequence. And I am learning that this is a strategic idea originating from Harvard Business School, chiefly for start-up entrepreneurs: If you wait until you exactly know where to aim at, it will be too late to shoot. Now I don’t mind that first shoot then aim mentality for start-up businesses but I must say I find it scaring if it has infested the Pentagon. And so much is certain: this attitude was not in place in the Clinton years.

Returning to Kagan’s views on power-dependent mentalities, I should like to add that mentalities are not only dependent on military power but also on the physical experience of war. My wife brought that home to me when she observed during early 1980s that there was a fundamental difference in war fiction novels and films between the US on one hand and Europe on the other. German, Soviet, French, Italian, Polish or Scandinavian novels and films were very similar in that they all depicted the war as the ultimate tragedy and disaster. In US novels and films, with the exception of some Vietnam war sagas, war consists of battles between the heroes and the villains, — and as the heroes are the winners, war isn’t a bad thing per se.

I tell this to substantiate my view that the transatlantic divide that we are feeling in our days is not Schröder vs. Bush but rather roots much deeper in history.

The “old European” experience is clearly shared by nations that Donald Rumsfeld counts as New Europe. The Polish President, Aleksander Kvasnievsky, recently said in an interview with Der Spiegel that the description of new and old Europe was wrong and that Poland was, of course, “old Europe”. And ninety percent of the Spaniards rejected Aznar’s support to Bush and clearly wanted to be seen as Old Europe.

Living with US dominance

This brief historic introduction was perhaps necessary to better understand the state of affairs of transatlantic relations. Europe must learn from Kagan and others that we are in no way better animals than our American friends. Nevertheless, our historical experience may qualify us for a different role. That experience includes horrible wars and dictatorial governments as well as the deliberate and successful submission to the European Union of earlier national sovereignty.

Our American friends, on the other hand, would do good realising that other people may have good reasons not to follow the present American model. As a matter of fact, people around the world do feel troubled by the fact that America is touching their own daily lives more than their own government does. This disturbing observation has induced Thomas Friedman, author of the brilliant book The Lexus and the Olive Tree to write an enlightened article in the New York Times (June 2, 2003) entitled Why the rest of the world hates America. He too refers to the unparalleled ascent of US military power after 1990 and adds the dominance of US cultural and economic ideas about how society should be organised. If Washington judgments and decisions touch peoples lives more than their own parliament’s and government’s decisions, the very notion of democracy is at stake: What’s the use of going to the ballots if whom you vote for matters less than how some fellows on the Potomac behave?

That is something to reflect on. The US is claiming to crusade to bring democracy to the world but by its unforgiving unilateralism makes people feel that democracy is not about influencing the forces that lie behing their real lives. What is the credibility of such crusade on democracy?

Gerard Baker and others in the Financial Times (30 May, 2003) show less sympathy than Friedman with the powerless and put it more matter-of-factly: “the future of transatlantic relations will ultimately be decided far more in Washington, by the sole superpower, than in Brussels”.

Does that mean, perhaps, that New Europe is the part of Europe, which has given up questioning the supremacy of the US while Old Europe is still struggling with it? Kagan says, we should not give up but should leave our “paradise” and build up military powers matching those of the US. It is an expensive advice: The US spends three percent of its GDP on defence, Germany only 1.1 percent. Although both figures are small compared to the six percent Britain spent during the glorious “Rule Britannia” times of the late 19th century, I don’t see any realistic strategy for tripling European defence budgets. Anyway I see no reason how such dramatic militarisation would solve any of the transatlantic problems and would rather create new ones.

Moreover, I see no need to bolster European self-confidence by running after the hammer. Instead I do see fascinating new roles for good old Europe which I shall outline momentarily.

European preference for the rule of law

The role of good old Europe as I see it is that of a mature global player who has learned the hard way that all fare better if internationally there is a rule of law, applying, of course, to everybody. Wars should be considered for defensive purposes only or under the explicit mandate from the United Nations, i.e. with explicit consent of the US, China and Russia.

The European Union was founded first as the European Economic Community after the war with a view to end all European wars forever. For this, it was simply necessary to subordinate international relations under the rule of law. Kagan himself quotes Steven Everts from Britain explaining and justifying the European project this way. By surrendering to the Union many traditional powers of the nation state, the European nations created the most successful, most prosperous and most peaceful period of history on the Old Continent.

We have no reason to leave this road of success. Rather we should attempt to geographically extend it, as we are presently doing with the accession to the Union of ten more countries all of which have suffered from the war and from authoritarian regimes. Europe’s global role should be one of strengthening the UN and of working on the establishment of a rules based world order.

This is also the view of US philosopher Richard Rorty, of the German Jürgen Habermas and the French Jacques Derrida, of the Swiss Adolf Muschg, of Umberto Eco from Italy and Fernando Savater from Spain. They all feel Europe should further develop and maintain that attitude of a proud and peaceful alternative to the present US policy of unilateralist dominance.

Coming from this perspective I would not put the blame on Europe for the present transatlantic tensions. They are unavoidable as long as the US government keeps de-legitimating the UN and international law and tries to divide Europe into old and new.

Sure enough, we have made mistakes in Old Europe. Chancellor Schröder was inconsistent with the said allegiance to the UN when declaring that Germany would under no circumstances participate in a war against Iraq. He surely assumed that there was no “case of defence” conceivable and that therefore the NATO Treaty’s Article 5 (used in the case of Afghanistan) would under no circumstances apply. It would have been easier for the US to accept this, had he said so explicitly. (Schröder and Chirac were right, on the other hand, not accepting the US language of constantly mixing up Al Quaeda, Saddam Hussein and Islamic fundamentalism.)

However, another major mistake was made by Old Europe in February and March. At that time we should have admitted publicly that without the US military build-up around Iraq, Saddam Hussein would not have moved on any of the Western demands. Had we said so, it would have been much easier for President Bush to eventually withdraw his troops without a war and yet without loosing his face.

Is the tide turning against G.W. Bush?

Admitting smaller mistakes will not suffice to re-establish transatlantic friendship. Robert Kagan and most Americans would probably reply to Rorty and his European colleagues that all that soft rhetoric of a rules based world would never impress Al Quaeda, Hamas or Kim Yong Il. And here the Americans are right.

For a while I hoped that the Iraq war might have a positive effect on the Israel-Palestine conflict. Palestinians have realised that the US is not bluffing and some leaders feel that it may be better for their people in the end to accept the “roadmap for peace” designed by foreign powers (including Europe!). At the Aqaba meeting, the US seemed to make progress also in taming Sharon. But only a week later Bush’s strategy suffered a massive setback. Anyway, the Palestine question is a bit outside today’s focus and is outside my own competence.

It is not out of our focus to look at some of the more contentious new catchwords used by the Bush Administration. Is it right for one country to call other countries “rogues” or “failed states”? Is it right for one country to declare “regime change” in another country an aim of its foreign policy? Can one country classify others as an “axis of evil”?

Clearly, in the present European political language, such are all impossible notions. What I nevertheless would be willing to accept is the use of these terms if they express what the US government, parliament or public choose to believe – as long as they don’t become instrumental for unilateral military action.

Rejecting unilateral military action has nothing to do with cowardice or Anti-Americanism but is indeed rooted in the said European experience of WWII and after. And let us remember that European NATO partners did not hesitate to support the “war on terrorism”, when the USA was attacked on 9/11.

After 9/11, nearly all people of this world including many Islamic people felt shocked and were on the side of the USA. A year and a half later, public opinion has massively turned against the US. To quote an American source: “There is little doubt that stereotypes of the United States as arrogant, self-indulgent, hypocritical, inattentive and unwilling or unable to engage in cross-cultural dialogue are pervasive and deeply-rooted.” So says The Independent Task Force on Public Diplomacy of the Council of Foreign Relations of the USA in a Report published a few weeks ago.

It is fair to assume that this massive change of tide has not been engineered by Schröder and Chirac. Most of my own American friends rather put the blame mostly on George W. Bush, on Donald Rumsfeld or on Fox media. Some of my friends believe that the tide is simply turning against G.W. Bush and are confident that his government will just be a transitory if embarrassing period after which reason will again assume the upper hand. They tell me that since a very long time, America has never been so deeply divided internally than in our days, and that despite all the patriotic feelings after 9/11, and despite near-unanimous backing of the American soldiers fighting in Iraq.

Of course, if you are on the side of Bush, as Kagan no doubt is, you are inclined to deny the existence of a divide. But then, there is a fundamental asymmetry of logic: If of two people in a room one is saying we agree and the other says we don’t , the latter is right and the former is not. In any case, we Europeans should never say “America” if we mean the Bush administration.

I still agree with Kagan that the transatlantic rift goes beyond President Bush’s current policies. So I try to go deeper into the rift challenge, in two steps. One step, following Rorty, Habermas and the others, is an outline of a proud European vision from which an extent of world-wide European influence could follow, which the US simply cannot ignore. The second step addresses what Continental Europeans see as an Anglo-Saxon preoccupation, namely the idea that it is good for all if we have as much economic competition as possible and that the survival of the fittest among the competitors is also good for all.

The European vision and the European Union

Let me begin with the European vision.

An essential part of the European vision will always be our fundamental friendship with the United States. The US have been so immensely helpful after WWII in establishing and defending freedom, democracy and the rule of law. And the US at the time of George Washington and Thomas Jefferson were the first in the world to adopt a democratic constitution based on European ideas.

The business communities in particular on both sides of the Atlantic are very eager to return to business as usual in the mutual relations and do not support such silly jokes as renaming French fries into Freedom fries.

But the European vision has to be far more ambitious than returning to business as usual in transatlantic relations. Much of the European vision is already in place and has to do with what is now called the European Union.

At the beginning there was the determination never to allow wars again among European countries. Nearly sixty years later, wars have become virtually inconceivable between France and Germany and the rest of the EU, and everybody in the world is appreciative of that achievement.

The beginning was modest by today’s standards: the Community of Coal and Steel, then considered core industries. From 1957 on, based on the Treaty of Rome, six countries became the European Economic Community, – a free trade zone pretty much like NAFTA. As more cultural, fiscal, environmental and legal matters were added, it became the European Community. A European Parliament was created, which over the years was given ever more powers. It will in the future be entrusted with electing the EU President.

The Community developed strong mechanisms of harmonising its policies. The Commission has the privilege to propose new directives, although the Councils of ministers can reject them and negotiate about details. In the field of the environment it is said that EU Directives and Regulations determine some 80% of the legislation of member countries. In agriculture it is more.

The European Court of Justice oversees the implementation of Community law and has often forced member countries to change their policies accordingly.

The Single European Act of 1987 was the first amendment to the Treaty of Rome and with its “Four Freedoms” (of movement of people, goods, services and capital) kicked off a new phase of integration leading through the Maastricht and Amsterdam Treaties to the new name of the European Union.

Meanwhile the number of member countries, all of them voluntarily joining, grew from six to fifteen, and another ten are joining in a year from now.

The Maastricht stability criteria were also the basis for the introduction of a European currency with presently 12 countries participating.

And since this weekend we are confident that we shall have a European Constitution overriding national constitutions.

From this formal description of the EU it is already clear that the NAFTA zone is light-years apart from that degree of integration. What Americans in particular tend to find revolting is the idea a supranational authority has powers to convict citizens and firms from one member country.

Differences go still further. The EU has a tradition originating from its earliest years of embedding the market economy into a web of social policies. In Germany we call it Soziale Marktwirtschaft, a term introduced some fifty years ago by Ludwig Erhard, then minister of economic affairs. The inclusive kind of market economy was extremely successful in demonstrating that the market economy was not only good for the high achievers but also for the less fortunate. The socially inclusive capitalism has also become official policy of the EU. Notably the Cohesion Funds of hundreds of billions of Euros serve to shift money from the rich to the poorer regions of the Union. In NAFTA countries the poor regions can only dream of such mechanisms in the absence of which rich regions as a rule get ever richer and poorer ones ever poorer.

Of course, the European vision would be a lot more attractive still if we were enjoying steady economic growth, which, alas, is not the case. I cannot offer you any miracle solutions to that problem. But I give to consider that growth in economically mature countries is correlated with population growth. The USA (and Canada and Australia) still benefit from immigration. Notably the US acts as a huge “vacuum cleaner” sucking in talented people from around the world, not least from overpopulated Asian countries but also from Europe and Latin America. These immigrants typically are in their best years and immediately begin to work and to increase economic output. Europe and Japan, by contrast, have hardly any internal population growth and apply fairly strict anti-immigration policies. Germany has taken in some two million immigrants from the former Soviet Union, — mostly as pensioners! All this may explain much of the transatlantic (and trans-pacific) differences in growth rates.

To respond to this challenge, Europe should adopt more liberal immigration policies and develop many more English language university courses. We should actively compete with America on attracting the elites of the world and on attractive conditions for modern industries. Moreover we should further liberalise labour markets, rebalance our social security system and otherwise improve conditions for investors without, however, giving up on the inclusive model of capitalism and on the maintenance of a first-class infrastructure.

This also means we should not compete for business by constantly cutting taxes. Functioning states need money. But then, what the OECD calls harmful tax competition originates mostly from the USA, and President Bush keeps pushing this agenda, to the detriment both of US public services and of transatlantic relations.

Economic Darwinism and Globalisation

Let me come to what I impolitely called an Anglo-Saxon preoccupation of ever enhancing economic competition. The quasi-moral value of competition is something that you don’t find in ancient Asian, African, Latin American or continental European cultures.

Having served as a professor of biology, I know, of course, Charles Darwin’s Origin of Species through Natural Selection, published in 1859 and know about the evolutionary power of competition. But let me submit that Charles Darwin, after his visit to the Galapagos Islands, made it clear that the evolution of diversity was dependent on barriers. The evolution of diversity presupposes millions of cases of survival of the less fit, while natural selection mainly works to reduce diversity. Diversity, on the other hand, is the precondition for resilience of the system against unexpected shocks and therefore enjoys artful conservation! This is a fact known to biologists but often ignored by economists using biological selection as a natural law to support their economic “Darwinism”.

Nearly a century before Darwin, Adam Smith discovered the productive sides of competition on the markets, laid down in his pivotal book on The Wealth of Nations. This groundbreaking work is seen as the origin of modern economic thinking and has shaped the Anglo-Saxon civilisation more than others. It reached all cultures over the last 200 years and has become dominant throughout the world after the collapse of communism. But why is it then that so many people feel threatened by markets and openly fight against further liberalisation? I see two reasons for this:

• The losers and the scary simply feel threatened and think (often rightly) that they would be better off with less competition;
• The benign function of markets requires strict rules, which at Adam Smith’s times were guaranteed by a strong nation state. The state is supposed not only to set and monitor the rules but also to take care of whatever may be necessary for a healthy development but is not profitable as a private economic activity (for this, Smith gives the example the construction and maintenance of lighthouses).

The first reason for fighting market competition must be refuted, but not the second. It is indeed essential to have rules (and to have an authority paying for infrastructure) reaching as far as the market forces do.

Now I am coming to an interesting observation concerning economic globalisation. Global capital has been around, of course, for a long time. But so long as we had the Cold War, capital was massively interested in keeping countries in the Western camp of market economies. For the high achievers and for capital owners, the social welfare state was no doubt a nuisance, but still preferable to communism. So they grudgingly accepted in each nation state measures such as affirmative action, extended workers rights and a whole host of redistributional taxes. When the Soviet Union collapsed, all of a sudden, the field was free for attacking everything that since a long time had been seen as a nuisance.

This is the new situation emerging after 1990, which was given the name of “globalisation”. It has been proven that the term globalisation entered the media not before 1992. Globalisation is clearly benefiting the high achievers and the capital owners. In the absence of a communist threat, they can now force nation states (and sub-national bodies) into ever fiercer competition against each other for optimum conditions of profit making, regardless of the costs to democracy, to the public, to the environment and to future generations. This what some consider global economic Darwinism falling back far behind Adam Smith!

Globalisation coincided with the new US American superiority. After all, both had the same origin, namely the collapse of the Soviet Union. But the synergies go further. The US has by far the largest institutional investors and by far the strongest universities, patent holding companies, acquisition and mergers banks, accountant firms, entertainment industry and computer firms, in addition to its superior military. The US is by far the biggest beneficiary of the new and global economies of scale. The “winner takes all” phenomenon works chiefly to the favour of the US and by the same token to the disbenefit of other countries.

This may explain some of the anti-American undertones found in the “anti-globalisation” movement. This too is part of the transatlantic relations problem. America would do good to understand this nexus and could co-operate with Europeans, in establishing global rules.

Let me just indicate a line of thinking that I adopted when dealing with globalisation. In the situation of states coming under more and more pressure from the international financial markets, public goods too come under dangerous pressures. If we want to re-balance public with private goods, what we have to do is a systematic strengthening of civil society to create the necessary public pressure in defence of public issues. This can unite millions of people, mostly of the civil society on both sides of the Atlantic and may constitute an essential pillar of friendly transatlantic co-operation in the future.

This is not meant as yet another idealistic longing for the paradise. We do have to sort out our real problems and we Europeans and Germans have to do our homework including in the war on terrorism.

But at least I hope to have shown to our American friends that European visions, inclusive capitalism and the evolution of globally respected rules are not meant as anything like Anti-Americanism.

Introduction

This piece was written by a European and an American both deeply engaged in efforts to moderate global warming, and each of whom has lived in both Europe and the United States. We give a perspective on the present situation regarding climate change in Europe; a parallel perspective on the situation in the U.S.; and then close with a series of recommendations and policy opportunities that should be on the agenda of the transatlantic partnership, but which reflect the reality that Europe is the leading geopolitical unit today in defining and mobilizing global progress toward a regime of carbon limits that holds out the possibility of avoiding the most catastrophic consequences of global warming.

I: Grim facts on climate change

It has become clear to climate scientists that the carbon emission targets set by the Kyoto Protocol were not nearly ambitious enough to “prevent dangerous anthropogenic interference with the climate system”, as stated in Article 2 of the UN Framework Convention on Climate Change (FCCC).

The Arctic Climate Impact Assessment (2004) was perhaps the most powerful wake-up call of the past few years. It showed a picture of Greenland’s fresh water cover in summers 1992 and 2002 with the area of the latter being easily four times larger than the former and being nearly half the size of Greenland itself. Mighty vertical water currents tunnel down into the ice and appear to be lubricating the rocks on which the ice masses are sitting, thus accelerating the rate at which they move towards the sea beyond that which had been previously estimated.

Fig. 1: Freshwater lakes on Greenland during Summers 1992 and 2002.

This Assessment and other facts served as the scientific basis for the November, 2006 Review on the economic consequences of addressing or failing to act on climate change published by Sir Nicholas Stern, former chief economist of the World Bank. This report had been commissioned by British Prime Minister Tony Blair and Chancellor of the Exchequer Gordon Brown.

The Review suggests that early action to reduce greenhouse gas emissions would be much cheaper than originally assumed, and that delaying action will risk horrendous damage that could amount to as much as 20 percent of world GDP.

Climatologists tend to converge around the conclusion that global warming of an average of 2°C above pre-industrial levels should be seen as the threshold beyond which the anthropogenic interference with the climate system would become “dangerous”, to quote Article 2 of the FCCC.

All this information was available at the FCCC’s 12th Conference of the Parties in Nairobi in November, 2006. One had hoped that a post-Kyoto architecture could be negotiated but nothing of the kind happened. Nairobi was basically a bureaucratic gathering with no visible political initiative, although some progress was made on policies aimed at discouraging deforestation and laying the groundwork to bring emissions from deforestation under the post-Kyoto framework.

The EU had nothing to contribute to the coming debate on post Kyoto.

II: The EU’s bumpy learning phase

Nevertheless, the EU considers itself in the vanguard of climate policy. It was instrumental in launching the FCCC, which was adopted in Rio de Janeiro. Five years later, at the third Conference of the Parties of FCCC in Kyoto, the EU was one of the major players and ultimately the decisive one, in urging adoption of the Kyoto Protocol.

And finally, it was the EU which adopted the first international regime of carbon trading, through its Emissions Trading Scheme, ETS (Directive 2003/87/EC).

The first phase of the ETS, from 2005 to 2007, intended as the “learning phase”, ends this year. Some lessons can certainly be drawn from this learning phase. The EU had seen economic growth and growth in carbon emissions since Kyoto’s adoption, leading to demand for higher volumes of carbon allowances than appeared available in 2003. Therefore despite the political decision, taken under heavy influence from the major emitters, to allocate the allowances free of charge, allowances had a positive price from the start.

Fig. 2 shows the development of the price per ton of CO₂ emissions. The market price underwent a conspicuous collapse in May, 2006, due to the leaking of research data that major emitters were sitting on large quantities of unused allowances. At the time of the initial allocation they had claimed many more allowances than they actually needed.

Fig. 2: ICE-ECX Carbon Financial Instrument Futures Contract

What was more irritating than permit hoarding, not least to end-use consumers, was that some power utilities, notably in Germany, raised electricity prices in proportion to the market value of the allowances that they had obtained free of charge in the first place.

The power utilities argued that for every marginal kilowatt-hour generated above earlier production levels, additional costs would accrue in proportion to the permit prices. This led to calculations of horrendous marginal consumer prices above 1.000 Euros per ton of CO₂ emitted (Schlemmermeier and Schwintowski, 2006).

Ironically, most of the major emitters flourished tremendously after the introduction of the ETS, although the causes of this prosperity are complex. Electric utilities benefited from acquiring an oligopoly position a few years after market liberalization, while non-ferrous metals producers benefited from rising commodity prices.

Another irritating effect came in in recent months. Under the Kyoto Clean Development Mechanism (CDM), emitters were allowed to trade some of their obligations outside Europe. Their favourite place were China and India, discovering that reducing Chlorofluorocarbons (CFC’s) was valued very high on the scale of greenhouse gas emissions because their Global Warming Potential (GWP) is several thousands times higher per kilogram than that of CO₂.

To meet the phase out date of 2010 under the Montreal Protocol, developing countries are quite willing to reduce their production and stocks for good money from Europe. As the reduction of such substances is much cheaper per unit of GWP than CO₂ emissions reduction this trade is profitable both for the developing countries and the EU firms in need of reducing greenhouse gas emissions. This bargain is the main reason for the continued fall of prices for carbon emissions permits, as seen in fig 2. The bargain is nevertheless irritating because it weakens the incentive to reduce coal, oil and gas intensity in Europe, while China and India swiftly substitute phased out CFS’s with HCFC’s, notably with HCFC-22, the production of which results in emissions of trifluoromethane (HFC23), as an unwanted by-product that is a super greenhouse gas with a GWP 11,700 times more than CO₂.

The general impression in the European public is that not all went well with the “learning period” of the ETS. It will be politically difficult to repeat the free allocation of emission permits next time, and more voices are already being heard suggesting an auction of the allowances for the next phase.

The second phase of the ETS runs from 2008 to 2012, coterminous with the Kyoto Protocol. The EU intends to deliver the commitments assumed in the Kyoto Protocol.

Although it seems uncertain whether the ultimate target of an eight percent emissions reduction from levels in 1990 will be reached, the EU has performed far better in curbing greenhouse gas emissions than nearly all other Kyoto signatories. EU performance has also outpaced the US and Australia who have not ratified Kyoto and have had drastic increases in greenhouse gas emissions since 1997.

Post-Kyoto initiatives of the EU

It is clear now that Kyoto was just the first step toward a robust, global regime of carbon limits.

Everybody seems to agree that the post-Kyoto regime will have to be a lot more ambitious than Kyoto itself.

Greenhouse gas emissions will have to be reduced to at least 50% of expected business-as-usual levels if greenhouse gas concentrations are to be stabilised at a level low enough to keep global warming within roughly 2°C. Recent work (Vattenfall & McKinsey) suggests that stabilizing the climate at 450 ppm CO₂ by 2030 is doable and affordable if we start very soon. This goal is roughly compatible with holding the warming increase to 2O°C.

Many believe that eventually we will have to get beyond that goal and reduce emissions to 80% below today’s level.

What can be done on the European side to reach this goal? Essentially three strategies are available and have to be combined:

• Increasing energy efficiency;
• Increasing the use of fossil-free energy; and
• Reducing the amount of carbon dioxide being released into the atmosphere.

The EU has been fairly cautious on energy efficiency.

The energy efficiency directive, 2006/32/EC (16 May 2006), requires member states to draw up national action plans to achieve 1% yearly energy savings in the retail, supply and distribution of electricity, natural gas, urban heating, and other energy products including transport fuels. The 1% target, however, is only indicative. The national action plans will need approval from the Commission and will be reviewed every three years, but there are no sanctions whatsoever. The process will be spread over nine years, starting in January 2008, although the first national efficiency action plans are due for submission on 30 June, 2007. The European Parliament had demanded binding targets but member states killed that proposal during a Council meeting in 2005.

On renewable energies, the EU is more progressive.

Its 1997 White Paper contained a commitment to double renewable energy supplies to 12% by 2010 from 6% in 1998. The EU seems to be nearly on track to reach this goal, not least because of the pioneering roles of Denmark, Austria and Germany and the adoption in Spain of the German model of feed-in tariffs for electricity from renewables that is piped into the power grid.

In January, 2007, the Commission published “An Energy Policy for Europe” (COM (2007) 1 final). Its most specific change against earlier policies is the proposal for a binding target for biofuels to reach 10% of vehicles fuel by 2020, twice as much as proposed in earlier documents. This ambitious goal seems like an attempt also to join the USA in reducing dependence on imported oil. However, it immediately met with fierce opposition by ecological and North-South NGO’s hinting at big dangers resulting from diverting land from food and from the last remaining nature reserves.

The big contribution towards an ambitious climate policy seems to be intended to come from a new initiative to aggressively promote and spread “Clean Coal Technologies”.

Important steps were the increase of plant efficiency, chiefly by combined- cycle coal and gas technologies, some CHP (combined heat and power) and, according to a new EU Communication, a massive drive towards CO₂ capture and storage (CCS) in coal-based power generation. Bringing CCS to commercial viability in coal-fired power generation would pave the way to possible applications in combustion processes using other fossil fuels, notably gas. The new name of this game is “Sustainable Fossil Fuels” in power generation.

CO₂ capture and storage is perhaps the strongest incentive for speeding up the introduction of the Integrated Gasification Combined Cycle (IGCC) because that technology involves the automated separation of CO₂ as well as of sulfur and also allows the “syngas” from the gasification process to be used as feedstock for the hydrogen economy. However, all this comes at a cost, and many utilities, chiefly in non- Kyoto states such as the US, say that present market conditions leave IGCC non-competitive with conventional coal burning power plants.

Nevertheless, in light of the reality that coal is going to be burned one way or the other in China, India, other developing countries, and the U.S., and in the absence of an aggressive strategy on efficiency and renewables, CCS and IGCC may turn out to be lifelines for Europe and the world in curbing the release into the atmosphere of carbon dioxide.

Efficiency is more promising

It would be a lot more attractive, however, to have a well- orchestrated strategy to increase energy productivity.

On a macroeconomic scale, it is generally possible to extract at least four times, and in many sectors ten times, as much added value from one unit of energy than is presently achieved, be that unit kilowatt-hours, barrels of oil or gigajoules (Weizsäcker et al, 1997, Lovins et al 2005). The process may take 40 years but that is also the typical life-span of power plants. In addition, we are facing a new wave of decisions on the next generation of power supplies in Europe. Building too many dinosaurs now will make it virtually impossible for the next generation of politicians to shut them down or convert them without huge economic disruption.

The German grand coalition government has made energy efficiency its top priority and is trying during the twin Presidencies of the EU and G8 to popularize the concept.

III: The US and Climate Change

After years of dragging their feet, 2006 – 2007 will be seen as the years when Americans finally made up their mind that global warming was a serious crisis that required action.

American science helped to identify and highlight this issue in the 1980’s and 1990’s, and American NGO’s formulated the basic cap-andtrade policy model that underlies Kyoto and the ETS. American political timidity in the 1990’s and then outright obstructionism under the second President Bush slowed global progress on this issue. Fortunately, Europe took the lead – and did so relatively vigorously, sensibly, and with a careful eye to keeping the door open for the U.S. to rejoin the international process when it could.

That day is now near, and it will become a lot nearer when the US Congress enacts its own national cap-and-trade system.

There is a good chance that this will happen during this Congressional session, which means in the 18 months before the next Presidential campaign begins to paralyze the rest of the political process; and there is a good likelihood that if the law that is enacted is centrist and solid, President Bush will not veto it.

What has happened in the US to make this possibility imminent? Several things at once:

• The science became stronger, more visible, and more urgent.
• Business leaders, particularly the multinationals, came to understand that action on global warming was an imperative and began to remove the silent veto they exercise in American politics. General Electric, Wal-Mart, DuPont and others reflected a broad, silent change in mainstream American business attitudes toward global warming when they came out in favour of a mandatory national carbon cap.
• Thoughtful Americans noted that almost all of its allies with the quixotic exception of Australia, whose stance on this issue was quaint but not politically significant, were marching in the opposite direction.
• Many conservative evangelical Christian leaders decided that action on global warming was not only congruent with, but required by, their doctrinal beliefs.
• Former Vice-President Al Gore’s powerful movie, An Inconvenient Truth, ratcheted up the sense of urgency among those American opinion leaders already concerned about global warming. Intensity and urgency were the critical elements that had been missing in the American political discourse on global warming.
• The Democrats taking control of Congress by a thin margin now forces all stakeholders to reconsider their assessment of what may or may not be possible in the new Congress. That reassessment is by no means complete.

IV: The Impact on the Transatlantic Relationship

There are two pre-eminent reasons why climate change is both a critical and a formative issue for the most important geopolitical relationship in the world – that between Europe and the U.S.

The first reason climate change is a critical issue in the transatlantic partnership is because attitudes toward global warming specifically and environmental issues generally have their roots in fundamental values, life-styles, consumer habits and political outlooks.

It is one thing to share a broad consensus on democratic values and the market system, modulated to different degrees by state regulation or intervention; we grumble about each others’ political institutions and economic policies, but we do not differ fundamentally. But it is quite another thing for the European end of the transatlantic partnership to feel that environmental concerns are a bedrock and enduring priority for its own governments and a standard by which to judge the American government; and for Americans to feel vaguely that environmental issues constitute only one of many desirable agendas that need to be taken into account, and that on “green issues” the Europeans are “over the edge”. This rift becomes more serious as both ends of the partnership begin to understand that the “the environment” is really about “the economy, stupid.”

The second reason climate change is a critical and formative issue in the transatlantic relationship is because ultimately global warming requires that the Western industrial pattern, now imitated or imposed in virtually every part of the globe, undergo a carefully managed, full-scale, and relatively rapid transition to a low-carbon economy.

The process of decarbonizing our energy generation, our goods production, and our transportation systems on this planet is a task that is both daunting and imperative. It is one that will remain high, perhaps paramount, on our agenda and our children’s agenda for as long as they and we are alive.

What America must do is reasonably clear.

The US must pass a national carbon cap, with no “escape hatches” or other vitiating gimmicks.

It must then join Europe’s preliminary and fragile dialogue with China and the other giant economies of the South to build a bridge over which the US, China, Brazil, India and others can walk to join the young international regime of carbon limits.

In addition to these basic steps the US should, in concert with Europe, work on a plan of “carrots and sticks” in the trade area that will encourage other countries to join an eventual global carbon-reduction regime.

Such a plan should be linked to the evolving world trade system — for example, after a certain date requiring countries that have not taken a cap and joined the global carbon-reduction regime to accompany exports with certified carbon allowances to offset the CO₂ emissions involved in their manufacture. Measures of this type will in any case be necessary for domestic political purposes in the US and Europe if they are to support a serious global regime with the ambitious measures necessary to avoid the worst consequences of global warming.

These steps are simple to describe but not easy politically for the US to adopt. Following this course will, however, allow the US to participate constructively in the formation of a successor to the Kyoto Protocol, and will also serve to align once more the stances of the two partners in the transatlantic partnership in regard to climate change.

We suggest that Europe, as the transatlantic partner that in fact presently leads this process, should consider even bolder steps.

What might an American who has lived in and admires Europe advise Europe to do in this context? The following ideas will strike some European observers (though surely not the European co-author of this piece!) as unnecessarily bold. The opposite is true; if anything, they are not bold enough.

• Europe should continue to advance and improve the European Trading System. This is the world’s only full-fledged carbon capand- trade system. If it is weakened rather than strengthened; if it does not develop strong and impartial enforcement mechanisms; if it becomes a political horse-trading where favoured industries can get cushiony allowances; or on the other hand if it pushes too far too fast and causes unnecessary job loss and economic dislocation – any of these “ifs” could slow down or imperil the development of a wider post-Kyoto global carbon-limits regime. The ETS must grow in rigor and solidity. It need not set quantitatively more ambitious CO₂ reduction targets at this time. Both business and the public must be able to look at the ETS and say: “Yes, it is working, it is getting stronger, and we can live with it. This is the path of the future.”
• Europe should expand and intensify its dialogue with China. In the end only China’s self-interest will draw it into a global agreement. But the forces in China that want to do that need the exposure, the experience, and the analytic information necessary to make their political case domestically. An early objective should be discussion between the EU and China about an EU-supported financing scheme to make China’s next 100 coal plants “carbon-neutral”, with continuation of the scheme beyond 2012 conditional upon China joining the international system of carbon-restraints (which of course it will influence in large measure). Tony Blair, to his credit, started this process. Germany will now have to play a lead role in continuing and expanding it.
• The EU should take the bold and innovative step of inviting selected sub-national American political jurisdictions to join the ETS on a limited basis. That would include the state of California; the New England states that have limited CO₂ emissions from utilities; a forthcoming initiative of five Western US states to establish a regional carbon cap; and a growing number of other states or regional groupings that are now considering carbon limitations of various kinds. The participation should be limited in the amount of trading allowed so that it does not distort the European system, and the talks preparing this will necessarily be difficult because of the thorny American legal issues it will raise. But moving in this direction is important for creation of an international system, and its effect on American politics will be positive. The worst thing would be for Europeans to conclude that in order to “keep America in the game” they must move more slowly. On the contrary, the only thing that will “get America in the game” is to keep the pace of movement steady and serious.

• While one of the greatest virtues of cap-and-trade systems is that it treats all emissions as equal and drives economic actors to “hunt” vigorously for the lowest-cost, most efficient ways of reducing carbon, the world-wide stampede to build dirty coal plants is so large, and promises to lock in such a high level of carbon emissions, that special attention is required. The present EU discussion on when and how to seek carbon-neutral fossil fuel energy generation is the single most important debate on this issue, and if Europeans can drive it to a bold and successful conclusion, this will have enormous impact on both the U.S. and China. Recent work in many quarters, including a notable study on the costs of global abatement by Vattenfall and McKinsey, concludes that “dirty coal” can be tamed in terms of global warming if we move firmly and soon. Only Europe is now capable of defining and implementing that vital new direction.

Fig. 3: Marginal abatement cost in the different demand scenarios (assuming opportunities are adressed in order of increasing cost).

V: The Transatlantic Partnership to Combat Climate Change

We divide our list of policy choices and opportunities that now lie before the transatlantic partnership in the area of climate change into three categories.

The first category consists of directions and adjustments that will help make it attractive for those countries now outside the system of Kyoto carbon reductions to participate in such a system. We call this category “carbon diplomacy”.

The second category, “slow and steady”, contains policies that contribute to climate stabilization, and which must be pursued steadily so that the costs of low-carbon systems come down and new technologies are refined, but in such a way that the they do not drive a country’s or region’s marginal cost of energy generation or goods production far outside the relevant global marginal cost curves. These policies, however, both help lay the ground for, and contain the potential for rapid acceleration within, a successor global carbon-limit regime once that is put into place.

The third and final category we call “win/win”: they are policies that both contribute to climate stabilization and increase the global economic competitiveness of whichever countries adopt them.

Generally, the faster these options are adopted and pursued, the greater the gain, both in greenhouse gas emission reductions and in economic performance. At the present time, Europe and Japan are broadly best positioned to pursue them.

a) “Carbon Diplomacy”

• Modify the ETS to provide quantity-limited “docking stations” so that sub-national jurisdictions such as American, Brazilian, Indian or Australian states and Chinese provinces that “take a cap” could trade a limited amount of allowances on the European carbon market.
• Europe should get on board wholeheartedly with the global effort to develop a system of “Compensated Reductions” under which the rainforest nations can receive credits in the international trading system if they arrest deforestation. (Deforestation accounts for roughly 20% of global greenhouse gas emissions.)
• Europe should expand its dialogue with China on climate and energy security to include:
  • Exploration of a “low-carbon zone” that would provide advantageous financing and low-barrier IP arrangements for the globe’s largest consumer market and its largest provider of goods.
  • Exploration of ways in which Europe could provide financing to cover the marginal debt service costs of making China’s next generation of coal plants carbon-neutral as long as China joins and remains part of a global system of carbon caps.

b) “Slow and steady” options:

• Set energy portfolio standards that require more renewables.
• Make Carbon Capture and Sequestration safe and affordable, and thereby break the back of the coal problem. Europe is presently in a strong position to extend its technological and IP lead in this area. The present internal debate in Europe over whether to require carbon neutrality for all fossil fuel plants by 2020 is one of the most important and exciting discussions currently ongoing in the climate arena, and its outcome will have enormous impact around the world.
• Set more demanding but reasonable carbon reduction targets within the framework of the ETS, but this time with the long time horizons necessary to affect capital investment decisions.

c) Win/win options:

• Sharply accelerating the drive for energy efficiency. Europe is in a position to ramp up its efficiency targets now. The U.S. cannot do so easily on an economic basis without either a national carbon cap or financial incentives that encourage utilities to “sell” efficiency to their customers [2], or both, in place.
• Begin to shift agricultural subsidies from payments for surplus or non-production to payments for carbon sequestration. Agricultural sequestration will be necessary as a “bridging” device over the next quarter century for offsetting carbon emissions from traditional sources until they can be replaced with low-carbon sources. The US and Europe between them pay their farmers several hundred billion dollars per year in counter-productive subsidies for various forms of economically useless behaviour or inactivity. It will be far easier to redirect these politically sensitive subsidy systems than to dismantle them. China, India, the US, Europe, Canada, Brazil and others will all, before we are done, be supporting “carbon farmers” of one sort or another. Designing the terms, institutions and enforcement systems of such a system needs to begin now. Either Europe or the U.S. could take the lead, or they could launch the first “study” phase together as an adjunct to the Doha Round now underway. (As this article goes to press, Europe and the US are working feverishly to find ways to “save” the Doha Round.)
• Begin to set efficiency standards for vehicles and aircraft which sharply increase mileage efficiency, achieve significant net carbon emission reductions, and sharply decrease reliance on imported fuel. (It is possible to have vehicles that will get as much as 500 miles per gallon of imported hydrocarbons). It will be possible with a single set of aggressive transportation policies to modernize the automotive sector, trigger development of a new generation of aircraft that are more efficient and emit less greenhouse gases, and provide increased income for the agricultural sector through national production of low-carbon fuels. Almost all of the world’s major auto companies are multinational, and it makes most sense if Europe, the U.S. and Japan start down this path together. However, any one of the three could begin alone.

Conclusion

In the trade-off between the aggressiveness of the steps required, and the time remaining in which to take them, it is clearly in the interest of humanity to start early and carefully, rather than late and drastically. Europe has grasped this; as of this writing the US is just beginning to awaken to that fact.

Every previous experiment with market-based systems suggests that once we adopt the system and unleash human ingenuity, commercial inertia, financial greed and naked ambition in the service of avoiding climate meltdown, it will happen faster, more easily, and more cheaply than even the shrewdest economists and pundits predict.

However, a difficult and fateful conversation with the large and growing economies of the South remains in front of us.

The one issue on which the US and Europe have no time to lose, then, is to get themselves facing in the same direction and working together once again on this vital issue.

Only in this manner will they be strong enough to insist wisely but firmly upon a set of incentives and constraints likely to make it in the self-interest of the developing countries to join a carbon-reduction framework that will, at last, be truly global. Let us remember that unlike past problems, the brutal reality that underlies the threat of global warming is that either we all succeed in avoiding the worst, or none of us will.

References

• Arctic Climate Impact Assessment (ACIA). 2005. Cambridge University Press.
• IPCC. Fourth Assessment Report (Summary), Feb 2007. www.ipcc.ch
• Lovins, Amory, Kyle Datta, Odd-Even Bustnes, Jonathan Kooney, Nathan Glasgow. 2005. Winning the Oil Endgame. 2007 edition by Rocky Mountain Institute, Snowmass Colorado.
• McKinsey and Vattenfall. 2006
• Schlemmermeier, Ben and Hans-Peter Schwintowski. 2006. Das deutsche Handelssystem für Emissionszertifikate: Rechtswidrig?, Zeitschr. f. neues Energierecht 10/3, p 195-199.
• Stern, Nicholas. 2007. The Stern Review on the Economics of Climate Change. London. Download: www.sternreview.org.uk.
• Weizsäcker, Ernst Ulrich von, Amory Lovins and Hunter Lovins. 1997. Factor Four. Doubling Wealth, Halving Resource Use. London: Earthscan.

[*] Peter Goldmark directs the Climate and Air program for Environmental Defense, a Washingtonbased NGO. Most recently the chairman and CEO of the International Herald Tribune, Goldmark has served as executive director of the Port Authority of New York and NJ and as budget director for the State of New York. He was president of the Rockefeller Foundation and encouraged their involvement in environmental issues, particularly energy.

Ernst Ulrich von Weizsäcker is dean of the Donald Bren School of Environmental Science and Management at the University of California, Santa Barbara. A professor of interdisciplinary biology who was the founding president of the University of Kassel in Germany, Weizsäcker has served two terms as a member of the German Parliament. He also acted as director of the United Nations Centre for Science and Technology for Development and president of the Wuppertal Institute for Climate, Environment, and Energy.

[2] In the U.S., “decoupling” means rewarding utilities for efficiency rather than for volume, i.e. “decoupling” utility profits from the volume of energy sold. Only California has “decoupled”; this step is responsible for the astonishing fact that California has experienced no increase in per capita energy usage for thirty years.