A Superstorm Reminder
Will Hurricane Sandy, an immense hybrid of winter storm and tropical hurricane, at last allow all Americans to see climate change as an urgent threat? While climatologists do not know whether this unusual type of storm is caused by a warming climate, its high death toll, along with economic costs that may exceed $50 billion, could be enough to convince more Americans to take a clear-eyed look at the increasing number of extreme weather events in recent years.
The only economically sensible and effective way to address this enormous global challenge is by putting a price on carbon and then freeing markets -- rather than government -- to innovate and choose among fuels and technologies. Sandy will not, in itself, be enough to spark this change. But together with the weather disasters that will certainly follow, it may provide a significant push.
U.S. recognition that climate change is a real and urgent threat to the nation's and the planet's well-being is the key to some form of effective international accord. While neither that recognition nor a global agreement will happen in 2013, both will come eventually as the threat becomes overwhelmingly obvious. The longer we wait, unfortunately, the higher the cost will be.
As the United States embarks on the production of unconventional oil and gas resources, the need to price carbon will only become more compelling. In addition to sparking a U.S. economic recovery, these new resources could lower the price of gas and perhaps later of oil -- aiding a eurozone recovery, roiling the fossil fuel markets, introducing greater price volatility and, over time, dramatically shifting global geopolitical alignments as newly oil-rich North America becomes far less dependent on Middle Eastern energy sources.
It's the Economy, Stupid
No "foreign policy" issue in 2013 will matter as much to the global economic, political, and security outlook as whether the United States and Europe are able to deal with their economic crises.
If America's political parties can agree on a way to climb down from the fiscal cliff, the resolution of the acute economic uncertainty that has gripped the country for the past 18 months would unleash private sector investment, spark an economic recovery, and give new weight to the country's international role. Such a compromise might help resolve the United States' present, crippling political polarization.
In purely economic terms, an agreement is certainly achievable. Whether political conditions will allow it depends on whether the Republican Party, having failed to make Obama a one-term president, now judges either that an agreement is in its interest or that the country's economic need is paramount. If so, and if the Democratic Party is also in the mood to compromise, the economic benefits will be very great.
For Europe, the world's largest economic entity and a critical leader of a liberal and peaceful world order, the challenge is to summon sustained economic discipline and political will. Progress has been made: Governments have convinced themselves, if not the markets, that they will do whatever it takes to save the euro. Thanks largely to the efforts of two Italians -- Mario Monti, the technocrat prime minister installed to put Italy's house in order, and Mario Draghi, the new head of the European Central Bank -- concrete steps have been taken that prove a rescue is possible. But painful structural reforms will have to be endured for many years -- a tall order for any single democracy, let alone for many sharing each other's pain.
In effect, the euro crisis morphed in 2012 from a life-threatening emergency to a chronic disease that will be with us for years to come. The challenge for 2013 is to maintain the harsh treatment, avoid setbacks, and continue to inch toward restored growth.
Between a half-dozen unfolding and potential crises in the Middle East, the no-longer-avoidable economic and political challenge confronting the United States and Europe, and a shaky U.S.-China relationship to be navigated past fresh shoals, 2013 looks to be a year of defining importance in international affairs.
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