Climate change

The huge fracture down the middle of the BRICS

PUBLISHED : Wednesday, 28 March, 2012, 12:00am
UPDATED : Wednesday, 28 March, 2012, 12:00am

Tomorrow the leaders of the so-called BRICS countries - Brazil, Russia, China, India and South Africa - will meet in New Delhi for their fourth annual summit. Inevitably, they will spend much of their time in the Indian capital trying to persuade the world that they stand together on a broad range of issues.

Their efforts are unlikely to succeed. Originally invented as an investment pitch to help Goldman Sachs sell more securities, the BRICS have never looked convincing as a united economic or political bloc.

Consider China and India. It is hard to imagine two emerging economies that are less similar. India is demographically young, whereas China is old. India's growth is driven by domestic consumption, China's by investment. China is a manufacturing powerhouse, India is dominated by services.

In geopolitical terms too, China and India are usually perceived as rivals rather than allies.

About the only area where they might seem to share any common ground is in their staunch opposition to the developed world's proposals for a global deal to reduce greenhouse gas emissions.

Yet even this apparent solidarity is illusory. When it comes to dealing with climate change, the interests of China and India are poles apart.

The thing is that although the greenhouse gases we pump out affect the world's climate as a whole, threatening to push the average global temperature up by some 3.5 degrees Celsius by the end of this century, the effects - and the costs - of this warming will vary widely from country to country.

In general, poorer countries close to the equator will suffer the most, largely because of the harm done to local agriculture. According to a new research paper by Niggol Seo at the University of Sydney's Faculty of Agriculture, Food and Natural Resources, Africa, Latin America and India would be especially hard hit.

By the end of this century, the economic damage inflicted by unabated climate change is likely to cost India US$1.5 trillion a year (at current prices). To put that into perspective, the cost is almost 90 per cent of India's present gross domestic product.

In contrast, regions further from the equator will mostly pay a much lighter cost. The exception is Europe, which could suffer severely from disruptions to North Atlantic ocean currents, and from flooding in the low-lying Netherlands.

Russia will hardly suffer at all, and according to Seo, the cost to China of unabated climate change will be modest, at US$360 billion a year by the end of the century, or just 5 per cent of current GDP.

Clearly India, along with Latin America, Africa and Europe, should have a powerful incentive to press for a global deal to cut greenhouse gas emissions.

But although a global climate deal would be the best outcome for the world as a whole, it would not be in everyone's interest.

Seo has modelled the economic impact of an 'optimal' global deal on emissions, which restricts the average temperature increase to less than 3 degrees Celsius by 2100. Factoring in the costs of environmental damage, a carbon tax and the cost of cutting emissions where marginal reduction costs are lower than the tax, he finds that the price of mitigating climate change varies widely between regions.

Europe would be the biggest beneficiary. The continent would still face massive economic costs, but they would be around US$650 billion lower with a deal than without one.

Latin America, Africa and India would also benefit. For India, the annual cost of a global deal on emissions would be US$1.1 trillion - US$400 billion less than the costs of unabated climate change.

For the US, there is little difference between the impact of the 'business as usual' scenario and the costs of a deal. But for Russia and China, costs would increase enormously as a result of a global deal to limit emissions.

As by far the world's biggest producer of greenhouse gases, for China the cost of limiting their output as part of an optimal global deal would far outweigh the cost of letting climate change run on unchecked. According to Seo, by the end of the century a deal would cost China over US$1 trillion a year, or almost US$700 billion more than the cost of doing nothing.

Of course, no model is perfect. But the implications of Seo's study are plain. While Brazil and India have a strong incentive to pursue a global agreement to combat climate change, it is in the clear interests of Russia and China to do everything they can to sabotage any deal.

In other words, there is a huge split right down the middle of the BRICS on the one issue on which they are perceived to stand shoulder to shoulder.

India, and to a lesser extent Brazil, seem not yet to have woken up to this huge clash of interests. When they do, the apparent solidarity on display at this week's BRICS summit will vanish in a puff of smoke.