Decisions needed in a post-multilateral globe: a column by Ingo Plöger.

The reality of international relations has changed profoundly, meaning that in the imagination of world leaders the geopolitical framework has changed once and for all, making other decisions necessary, for the main purpose of containing risk, and then in the search for better alternatives. The international scenario is moving quickly and the proper reading of options is becoming less and less predictable.

The post-pandemic factors and the war in Ukraine, and now Israel,  reversed the framework of multilateral proposals to such an extent that a new order of global powers superseded the dream of multilateral globalization.  Multilateralism had its first marked impact during the pandemic when the WHO (World Health Organization) was unable to offer multilateral help to those affected, being reduced to a provider of global information and a recommender of procedures. Surplus vaccines in developed countries could not be distributed to those who have not yet managed to vaccinate their people in developing countries, showing the global incapacity of human solidarity. The issue of vaccine patents was so poorly handled that in the end, in addition to having financial coverage of health investments by the companies involved, there was an exaggerated economic gain for them over the misfortune of others, fostering the impression of savage capitalism in the face of the social economy of market. Of ESG (Environmental, Social, Governance) in this particular aspect, we cannot show anyone who stood out, which showed a vacuum of global values. Post-pandemic, production value chains were completely unbalanced, due to the exaggerated demand for electronic components by the media and entertainment, the logistical collapse, and the lack of these components in mobility and other products. Not only them, but also the major issue of supplies in food supply chains and the increase in the price of fossil energy, caused supply inflation to take hold in world economies. Inflation, the most perverse impoverishing consequence of the most vulnerable classes, opened up a tremendous space in the pace of growth in global inequalities. As if that were not enough, environmental policies at COP26 gave no respite, and forced everyone involved to define their decarbonization goals by 2050, with intermediate goals for 2030 and 2035. The Ukrainian War followed, which overlapped all this dynamics of controversial trends, the force of choice between friends and enemies. Countries that needed to balance their unbalanced budgets during the pandemic and post-pandemic, due to the objectives of COP26, found themselves faced with a choice of political positions opposed to economic reason.

In this circumstance, the USA launched its IRA (Inflation Reduction Act), with gigantic subsidies of around $800 billion, destined for the transition from fossil to sustainable. Industrial policy is established through these measures. The European Union, with its Green Deal and responding to the USA, announced subsidies in a similar order to the USA, for the energy transition, expanding trade restrictions with CBAM (Carbon Border Adjustment Mechanism) import laws for products that carry fossil carbon and come from deforested areas and restricting mobility options. China, on its part, defined the Party’s objective of taking the global lead in the production of electric vehicles, imposing heavy subsidies on Chinese products aimed at exports. With this, China enterd into subsidized demand from the USA and Europe, causing severe distortions in the mobility market. In this scenario, the World Trade Organization (WTO) rules are long gone. The USA did not appoint its judge to the court, making it headless and ineffective on any trial in dispute panels. The three powers justify their measures on “the good of humanity and climate”. The race for a sustainable bio economy already began, and the fleet already left the fossil port towards a “healthy” horizon. Nevertheless, as with all fleets, there are ‘mother ships’ that provide guidance to the convoy. Everyone is on this train, some ahead and others behind, because this train is our universe of countries with their economic and environmental policies. The three ‘mother ships’ already show where they want to sail; the USA ship will continue on the path of favoring capital markets and the private sector, boosted greatly by cheap subsidized fuel. The ship Europa decided, in addition to boosting its economy with subsidies, to permanently close markets that it considers strategic, such as agriculture, among others. Now the opportunist ship China enters the so-called environmental markets with its subsidized products such as vehicles, chips and information technologies; without these very little innovation would be possible.

In the middle of all this talk, while the WTO is apparently falling apart, a new round of negotiations opens with an Open Sesame. The magic word for this door is: CARBON. At this table, the USA will contribute and favor economic sectors that show carbon reductions, but unlike Europe, they will invite international sectors for global negotiations, which will make the USA a great platform for fast, pragmatic business and alliances. Shared around the world, less clearly China and opposing the European way. Europe has already defined its internal carbon market, which will be one of the bases for financing compensations between European sectors and countries. Through CBAM, it seeks additional favor to domestic sectors in reducing carbon, through contingency on imports and by charging heavy duties. Europe had tried to export its Green Deal concept to the world.

And, where is the Latin American ship?

The good news is that the LAC fleet already set sail from the fossil port towards the “healthy” horizon. The other good news is that it has incredible environmental and biodiversity assets onboard. The LAC fleet is already powered by renewable energy for the most part and carries food and important supplies to those who want to transform themselves. The bad news is that she did not realize that on the negotiating table there is the new currency called CARBON. She still hopes that the WTO can once again be a fair round table, and he does not realize that she does not have the economic strength of the other three ships to make the Carbon Exchange turn around. The LAC fleet has its mother ship in Brazil, which could exert a relevant force on the Carbon Exchange, if it understands this game, and knows how to intelligently show and use its environmental asset in favor of carbon and not against it. The table is already set, we need to get into the game and make the great asset of the tropics count. The “green currency” that is on the table, has the metrics of the temperate countries. Other countries with a tropical reality need to move playing with its elements 1) If Brazil manages to present credible legislation for a regulated and voluntary carbon market and global temperature reduction, with the involvement of its civil society, it will be a natural leader for other countries in Latin America and the Caribbean, Africa, Asia and Oceania, who will come together in this new market, to make their products and services very competitive, being compensated for the carbon that they absorb. In Brazil, carbon market legislation is now on debate in Congress, which cannot be naive, to the point of wanting to be the only idealist in a world of savage capitalism, where only the strong will be respected. Brazil, for everything it has already achieved in the environmental, energy, sustainability and preservation areas, needs to wake up to monetize in this new Carbon Exchange, what others do not have and would like to have, and that is why they need to offer gigantic subsidies. If we know how to do the right thing with our potential in sustainable climate change, we will have a chance to enter this game with a respectable check book. This will not require billions of dollars in subsidies, but rather policies that bring together collective intelligence capable of offering extraordinary solutions to global climate change and at the same time combating poverty and hunger.

Who could possibly resist this offer?

  1. eesp_relatorio_verde-eng_digital_-ap3_v3.pdf (fgv.br)

A_luta_pelo_Verde_era_mercado_Carbono.pdf (apdbrasil.de)

Ingo Plöger is a Brazilian Entrepreneur, President CEAL Brazilian Chapter

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