The Climate-Trade Dilemma

Commentary by William Alan Reinsch

Published July 22, 2024

If you thought this week's column would focus on the Republican convention and the Trump-Vance ticket, you were wrong. I plan to take a look at both parties' platforms on trade once the Democrats have finished writing theirs. As far as the candidates are concerned, we know what we're getting on trade issues because we've seen it from both sides before. The addition of J.D. Vance as the Republican vice-presidential nominee and the replacement of Joe Biden with someone else is not likely to change either party's basic trade message, aside from some tweaks around the edges.

So, instead of retreading that ground, I want to tell you about a climate and trade simulation game that CSIS's Energy Security and Climate Change Program, along with the Scholl Chair, hosted last week. This will be a brief overview-we will publish a longer, more detailed paper soon.

Simulation games can be fun to play, although they are an enormous amount of work for the planners and people running them. They can be short, running just a few hours in a single afternoon, or long, lasting two or three days. This one was one entire day. No matter what the timing, there are always legitimate complaints that such games are too short, that participants do not have enough time to plan and execute their moves, and that events that would normally play out over long periods of time are unrealistically compressed.

In addition, one of the lessons of every game is that personalities matter. One of last week's participants observed that if we played the game a second time with all the same people but in different roles, the outcome would probably change. Someone else suggested that if we played it a second time with the same people in the same roles, the outcome would also be different because the players understood the game better and were more comfortable with their roles. It is tempting to do that as a psychology experiment, but this was a climate game, and CSIS was focused on climate and trade issues.

The main question was whether the players, representing most of the key nations in the G7+ (Group of Seven countries plus South Korea and Australia) and emerging markets categories, along with China, could set ambitious decarbonization goals and then make progress on meeting them. Like most things, it was complicated, but the short answer, sadly, was no-although the process of attempting produced some useful insights for policymakers, most of them not surprising.

First, the G7+ country players demonstrated the same difficulty in reaching agreement on a common approach that has been evident in real life. Efforts to construct a "climate club" that provided favorable tariff benefits to its members and penalties on imports from countries with less strict decarbonization policies were complicated by the issue of pricing, which enables taxing carbon, something Europe is in the process of implementing and the United States is so far resisting.

Second, China remained an outlier, not working in concert with the developed countries but also not having much interaction or success with the developing countries. The interesting aspect of that was not what the individuals playing as China did or did not do, but the lack of interest on the part of the other players in interacting with China.

Third, the most interesting group was composed of emerging economies, where the most obvious characteristic was a lack of cohesion. In the real world, this is a group that rarely operates as a coherent single entity. Game designers were interested in seeing whether that might change when the issue is a global commons problem that affects all of them, some more seriously than others. That did not happen. Leaders did not emerge, and most countries pursued their individual national interests rather than working to develop a united approach that would have increased their influence.

These were all suboptimal outcomes that illustrate the difficulty of making multilateral progress on a pressing problem that can only be successfully addressed collectively. That is echoed in the real world-art is imitating life. Countries are reluctant to make commitments on decarbonization, particularly if they are binding. They are afraid to take actions that might prove politically unpopular at home, a fear evidenced by declining political support for aggressive climate change mitigation measures that would cost consumers money or require them to change their patterns of behavior.

At the same time, countries that have the most to lose from the deteriorating climate-small island nations and poor, vulnerable coastal countries-have the least power to force change. That creates a dilemma that may be unsolvable. Rich, powerful countries that could pursue policies that would have a meaningful impact on climate have governments afraid to act aggressively for fear of losing their popular mandate. Countries that are willing to act because they are at risk are not big enough to make much difference. And so, we bumble along, mired in inconclusive meetings and taking half-measures with only marginal results. That leaves us vulnerable to the inevitable apocalyptic event that will force change in the worst way. I learned from my time on the Hill that the longer you postpone acting, the fewer choices you have and the more expensive they are. That seems to be exactly where we are heading, and our game provided little hope of a different outcome.

William Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C.

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