G8: U.S. Cooling Off to Summit

The United States is evidently not interested in an international consensus on environmental policy against global warming. Nor does it appear keen on new regulations to control financial speculation.

The U.S. government withdrew participation of treasury secretary Henry Paulson at the preparatory summit of finance ministers in Potsdam near Berlin May 18-19.

The official explanation was that Paulson needed to remain in Washington to prepare for the U.S.-China Strategic Economic Dialogue that takes place the following week. But sources in Berlin say the real reason is the German move to tighten controls over hedge funds and other speculative funds.

In place of Paulson, deputy treasury secretary Robert Kimmitt is attending.

German minister for finance and economics Peter Steinbrueck had expressed concern in March that hedge funds could, with their enormous amounts of capital, influence policy decisions or provoke financial instability.

"I'm worried that there are some hedge funds that have leveraged activities, for example, five or six or even seven times (more commitment than they money they have), and that creditors could be damaged whenever such hedge funds gets insolvent. We are talking about a lot of money -- and it can affect an economy, or the worldwide financial system."

Germany is hosting the summit of the heads of government of the eight most industrialised countries (Britain, Canada, France, Germany, Italy, Japan, Russia, and the U.S.)

The G8 summit is to take place Jun. 6-8 at the German seaside resort Heiligendamm on the Baltic Sea, 300 km northwest of Berlin. Leaders from the five major developing nations -- Brazil, China, India, Mexico and South Africa -- will also participate.

One of the key points set by the German government in the official agenda is "improving systemic stability and transparency of financial markets."

German labour minister Franz Muentefering has compared hedge and other speculative funds to locusts ravaging fragile economies and enterprises for short-term gains.

The U.S. government considers financial funds a necessary instrument to channel private investment on an international scale.

Steps to curb climate change are the other major area of differences between the German and the U.S.

governments. U.S. representatives have objected to numerous passages of a draft agreement prepared by the German government.

U.S. representatives want to avoid the proposed objective of reduction of all greenhouse gas emissions by 2050 by 50 percent. They also object to making commitments to cutting energy consumption.

U.S. officials object to use of the word "concern" to describe the latest assessment of the Intergovernmental Panel on Climate Change (IPCC). U.S. representatives had made similar objections during the closing meetings of the IPCC before the release this year of the group's three new assessments. They have already obtained a watering down of the original warnings and conclusions.

Despite this, IPCC scientists said clearly that human- made greenhouse gas emissions are responsible for global warming and resulting climate changes such as droughts, melting of the ice caps at the North Pole and on mountains, rising sea levels, hurricanes, and decimation of biodiversity.

Hans-Joachim Schellnhuber, director of the German Potsdam Institute for Climate Impact Research, told IPS that "the optimal result of the G8 summit would be that the original draft, as formulated by the German government, be approved by unanimity."

Schellnhuber said some of the objectives established in the original draft are reducing energy consumption by 30 percent by the year 2030, and creation of a worldwide carbon emissions rights market "which would channel investments into sound environmental policies and strategies."

A third important element in the original draft is the long-term commitment of restricting the global rise of temperatures to two degrees Celsius by 2050 relative to the beginning of the industrial revolution around 1750, Schellnhuber said.

"If the G8 governments do not reach consensus on such issues, then the summit can be seen as a failure,"

Schellnhuber said.

Many environmental organisations share Schellnhuber's views. "The most industrialised countries must think about formulating a final declaration for the summit without taking into consideration the U.S. government's opinion," Karsten Smid of Greenpeace Germany told IPS.

"It does not make any sense to accept compromises around a minimum common denominator. Such empty summit rhetoric does not help anybody any more."

Antje von Broock of the German environmental federation BUND urged the German government to "go alone for an ambitious policy against global warming. If the German government would unilaterally announce that it will reduce its greenhouse gas emissions by 40 percent by the year 2020, that would be a clear signal for other industrialised and developing countries," she said.