G-8's Climate Demands Set Up Showdown With Emerging Economies

By James G. Neuger and Dune Lawrence

July 9 (Bloomberg) -- By pressing developing countries to do more to combat global warming, the Group of Eight has set the stage for a broader showdown pitting most of the world's biggest economies against poorer-but-faster-growing ones.

The G-8 yesterday conditioned a promise to reduce greenhouse gas pollution at least 50 percent by 2050 on China, India and other emerging economies taking part in a ``global response.'' The two sides will square off today in Toyako, on Japan's northern island of Hokkaido, to air their differences.

``Responsibility shouldn't fall on developing countries for what is an unavoidable responsibility of developed nations,'' said Mexican President Felipe Calderon, who met with counterparts from Brazil, China, India and South Africa on the island before heading to Toyako.

Dubbed the G-5, those countries said the G-8's climate- change demands, inspired by U.S. President George W. Bush, reflected rich-world policies that would shackle their economies.

Climate change is one of several G-8 summit agenda items that divide the two sides. The G-8 leaders also said some poorer states are profiting from unfairly undervalued currencies, hoarding food surpluses and subsidizing energy prices.

Meeting in Sapporo, a three-hour drive from the G-8 site, the G-5 leaders signaled their desire to become a competing power bloc by issuing their first-ever joint declaration.

Vague Goals

That statement said it was ``essential that developed countries take the lead in achieving ambitious and absolute greenhouse gas emissions reduction.'' They pressed for cuts of 25 percent to 40 percent by 2020 instead of the G-8's vaguely worded ``mid-term goals.''

Marthinus van Schalkwyk, South Africa's environment minister, called the G-8's road map ``an empty slogan without substance.''

The five nations first met informally before last year's G- 8 summit in Germany. They announced plans yesterday to gather two months before next year's G-8 session in Italy.

The G-5 accounts for 42 percent of the world's population and 11 percent of the global economy, measured by real exchange rates, according to a June 2007 estimate by the University of Toronto's G8 Research Group.

The Group of Eight industrialized nations -- the U.S., Japan, Germany, Italy, Britain, France, Canada and Russia -- makes up about 13 percent of the world's population and 62 percent of its economy.

`The Main Culprit'

The wealthy economies also generate 62 percent of the world's greenhouse gases, making them ``the main culprit of climate change and the biggest part of the problem,'' said Kim Carstensen, director of the World Wide Fund For Nature's climate initiative.

Industrial world criticism extended to moves by developing nations to halt the export of some foods, stockpiling domestic supplies in the face of soaring prices for basic commodities. India, with an economy that expanded 9 percent in the year ended March 31, banned corn exports last week as it moved to cool the fastest inflation in 13 years. India already had curbed exports of rice, wheat and cooking oil.

The G-8's criticism of food policies drew a rebuke from President Hu Jintao of China, the world's fastest-growing major economy, with an expansion of 10.6 percent in the first quarter from a year earlier. China now ranks behind the U.S., Japan and Germany in economic size.

``Big developing countries'' aren't responsible for food price increases, Hu said in Sapporo. ``This is not a responsible attitude.''

Backtracking

Meanwhile, the European Union backtracked on a day-old promise to donate 1 billion euros ($1.6 billion) over two years to promote food production in developing countries when German Chancellor Angela Merkel said the funds have not yet been budgeted.

``The last word on this has not yet been spoken,'' Merkel said.

China was the main target of G-8 criticism of trade imbalances, facing accusations that it is keeping its currency at an artificially low level to gain a competitive advantage.

In language French President Nicolas Sarkozy said was aimed at China, the G-8 called for a ``necessary adjustment'' in exchange rates ``in some emerging economies with large and growing current-account surpluses.''

The surplus in China's current account, the widest measure of trade, increased 49 percent in 2007 to $371.8 billion.

While the U.S. has benefited from the Chinese yuan's 20.7 percent advance against the dollar since it was freed to float in July 2005, Europe has lost out. The yuan has cheapened 7.2 percent against the euro during that time.

As a result, Sarkozy said, China's exchange rate doesn't ``correspond to economic reality.''

To contact the reporters on this story: James G. Neuger in Toyako, Japan at jneuger@bloomberg.net; Dune Lawrence in Toyako, Japan at dlawrence6@bloomberg.net