Why climate change policy won’t hinge on international talks by Michael Levi @FortuneMagazine September 25, 2014, 8:49 AM EDT E-mail Tweet Facebook Google Plus Linkedin Share icons World leaders gathered at a United Nations summit this week to kick off 15 months of negotiations aimed at finalizing a climate pact next December in Paris. If you focus on those international climate talks, though, you’ll miss most of the real action. The fate of global efforts to tackle climate change – and of the businesses that will win and lose as a result – depends far more on what countries do at home. Climate change has long been approached as the ultimate foreign policy problem. Greenhouse gas emissions anywhere raise temperatures everywhere. What that means for climate policy is that emissions cuts anywhere curb global warming everywhere. Since cutting emissions usually costs money, it makes sense for each country to ask other countries to act while trying to do as little as possible themselves: that way, they keep their costs to a minimum, but still benefit from reduced climate change because of what others have done. The danger is that if every country adopts this attitude, no one will do much of anything. The only way out of this beggar-thy-neighbor quagmire, strategists have long assumed, is for countries to reach a legally binding pact in which they all curb greenhouse gas emissions at the same time. That’s why people have long paid attention to the international climate talks. It’s also why, after the last big talks at Copenhagen in 2009 failed to produce a legally binding climate treaty, so many people assumed that climate action was dead. Yet something perplexing happened in the nearly five years since. Leaders from the United States to China moved forward with domestic climate policies despite the absence of a solid international foundation. The Environmental Protection Agency (EPA), for example, announced regulations aimed at coal-fired power plants earlier this year despite no international agreement requiring that it do so. Three things explain what’s going on. Countries are taking actions that cut carbon emissions for all sorts of reasons that have nothing to do with climate change. China, for example, is facing massive challenges as a result of its dependence on coal. Suffocating pollution is wrecking public health, hurting productivity, and boosting the risk of social unrest. Chinese leaders have responded with a plan that includes a gradual shift toward natural gas and renewable energy and away from coal. A happy byproduct of this set of policies is reduced greenhouse gas emissions. But China isn’t waiting for an international deal to take these steps, because it has other reasons to pursue them. And if businesses and investors focus on diplomatic negotiations to divine where China is heading on climate policy, they’ll be inevitably surprised. Policymakers around the world are also discovering that it’s possible to loosely coordinate their climate efforts with each other even absent an international deal. Conventional wisdom about climate diplomacy owes a lot to experience with nuclear arms. During the Cold War, if the United States wanted to cut its nuclear arsenal, it needed iron-clad assurances that the Soviet Union was cutting its arsenal too. That meant not only tough legal requirements but also extensive and mandatory monitoring and verification to ensure that the secretive Soviet military wasn’t cheating. Many have long assumed that something similar was needed for climate change in order to ensure that every country was doing its part. But the United States doesn’t need a treaty or a complex inspections system to know roughly what Chinese emissions are and what policies China has adopted to reduce them – it can rely largely on a mix of market data, news reports, and intelligence. (China has an even easier time tracking the United States.) Each country can adjust its national policy as it sees shifts elsewhere in the world – even without a treaty. The last reason that climate policy will be determined mainly at the national level is that that’s where the most important political forces lie. Take the United States as an example. The biggest sources of opposition to strong U.S. climate action are skepticism that it is a serious problem and concern by some industries (notably coal and oil producers as well as energy-intensive manufacturers) that they’ll lose out as a result of robust climate policy. Whether or not there’s an international deal doesn’t matter much to them – they have independent reasons to oppose aggressive action. This means that watching domestic politics, rather than international diplomacy, will give far more insight into where policy is heading. None of this is to say that international climate diplomacy doesn’t matter. The overall tone of the international climate talks can bleed over into domestic policy and politics. International commitments can also help lock in policy at home: the United States, for example, decided unilaterally in 2009 to cut its emissions by 17% from 2005 levels by 2020, but became more committed to that goal after pledging it publicly in Copenhagen. That political commitment has had wide-ranging consequences for emissions and for business as the Obama administration has rolled out a series of regulations and other policies designed to meet its target. And targeted international deals can help speed the flow of funds to climate friendly projects in poor countries and accelerate the diffusion of low-carbon technology. But that doesn’t change the bottom line: Spend too much time watching the international climate talks and you’ll miss the real climate action. Focus on what’s happening in national and state capitals if you want to know what’s really going on. Michael Levi, a senior fellow at the Council on Foreign Relations, is author of The Power Surge: Energy, Opportunity, and the Battle for America’s Future. Levi writes for the Council on Foreign Relation’s Energy, Security, and Climate blog.