"2009 was shaping up to be the year the world got its environmental act together. Now it's looking like the global environment may be one of the biggest losers in the current financial crisis."

Saving the planet was never going to be easy. Avoiding the most catastrophic effects of climate changes will require cutting carbon emissions by 50 to 80 percent over the next four decades, scientists say. After years of deadlock, 2009 was shaping up to be the year the world got its environmental act together. Now it's looking like the global environment may be one of the biggest losers in the current financial crisis.

Lower prices for oil-which some analysts predict will hit $25 a barrel-is bad news for investors in green energy. But the big winner is likely to be dirty coal. It already accounts for about 40 percent of the world's emissions of carbon dioxide, the leading cause of global warming. The fuel is plentiful, and its price has fallen about one third since last summer's peak to $80 per ton. In China, the world's largest coal burner, prices have fallen by half and are likely to plummet further. All the top emitters of greenhouse gases depend mainly on coal for electric power. Dirty coal is now getting cheaper relative to other fossil fuels, such as natural gas and oil.

New "clean coal" plants would capture carbon and store it away underground, or at least to extract as much energy as possible for each kilogram of carbon pollution. The problem is that clean-coal plants are a lot more expensive than conventional "dirty coal" technology, and the financial crisis is obliterating schemes that would have paid the extra cost. Before the crisis, a team at Stanford University found that the world was investing only about 1 percent of what's needed on advanced coal technologies to meet carbon-emissions targets. Now a spate of canceled projects darkens the picture. There are lots of ways, in theory, to build low-emission power plants. One option is to turn coal into a gas and burn it in an ultra-efficient turbine. This "gasification" approach is not only highly efficient but it also produces nearly all of its carbon dioxide pollution in a concentrated stream that could be pumped safely underground, where it won't warm the atmosphere. So far, few investors are building plants that offer a model for how the technology would be deployed at scale. Before the crisis, a few power companies tried to build just the efficient gasification units, which are cheaper than the whole integrated plant, but most of those plans have evaporated in the last month. Only one large plant is still going forward in the United States, and that one won't include carbon storage.

Another route is to burn coal in pure oxygen without gasification, which also yields pure waste that can be pumped underground. A 30-megawatt demonstration plant is operating in Germany. A consortium of utilities is also testing a technology to remove CO2 from plant emissions, but no investor is willing yet to build a full-scale project. These options could double or triple the cost of a power plant.

A 300-megawatt plant that cut emissions nearly 90 percent would cost $1 billion to $2.5 billion, and the United States would need about 1,000 such plants to match its current coal-power output. China would need another 1,000. Since the 1960s, when U.S. utilities last made major investments in new plants, their average bond rating has fallen from AA to BBB, and now the credit crisis has made it all but impossible to finance any new plant, much less an expensive, clean one. The European Union has no money for its plan to build a dozen "zero-emission plants." The price of CO2 in Europe is too low to attract investors to this technology. The latest scheme to fix the problem—a giveaway of emission credits to investors who build clean-coal plants—is falling victim to the financial crisis, which has halved the price of emission permits, and thus the value of emission credits. The U.K. has been holding a contest for public funds to jump-start clean-coal technology. In November 2008 BP pulled out of the competition, citing its inability to form a successful consortium. Early in 2008 the U.S. government killed its investment in advanced coal due to exploding costs.

Environmentalists, in their opposition to coal of any kind, may provide the coup de grâce. Greenpeace, riffing on James Bond, is hawking a "Coalfinger" spoof on the Internet and is deep in a campaign to stop all new coal plants. U.S. environmental groups recently announced a campaign to expose clean coal as a chimera. Thanks to such efforts, in the United States it's now nearly impossible to build any kind of coal plant, including tests of clean technology. As the world economy recovers, nations will once again turn to their old stalwart, dirty coal.

At first sight, political turmoil in Thailand and the Philippines—repeated violent protests, impeachment battles, and military coups—gives the impression that democracy in Southeast Asia is on a downward spiral. One country in the region, however, has sustained a stable pluralistic democracy: the Republic of Indonesia.

In 1999, after thirty years of Suharto’s centralistic, authoritarian rule, Indonesia embraced far-reaching decentralization and election reforms. Within a brief period of two years, the Indonesian government reshaped its administrative architecture, including the devolution of local tax and service responsibilities to more than 400 district governments. In view of its deep-seated authoritarian traditions, beginning with Javanese kingdoms and sultanates, moving through Dutch colonialism (1619–1942), and ending with Suharto’s New Order (1965–98), Indonesia’s rapid shift toward democratic decentralization stands out as one of the most remarkable political transitions in recent history.

Particularly notable is the peaceful and competitive conduct of Indonesian elections. Over the last decade, local citizens have elected more than 30,000 local councilors and over 400 mayors, regents, and governors, with little violence or intimidation. High voter turnouts (around 70 percent) and high replacement rates of incumbent executives (roughly 40 percent) bear witness to rising electoral competition in local polities. While subnational elections display considerable flux, the upcoming presidential elections in July 2009 suggest continuity. The latest national polls, for example, predict a comfortable lead for President Susilo Bambang Yudhoyono (49 percent) over his main competitor, Megawati Soekarnoputri (36 percent).

The institutionalization of democracy and decentralization, however, has yet to translate into substantive public sector reforms. Indonesia continues to score low in global governance assessments. According to Transparency International and the World Bank, Indonesia’s government ranks 126th (out of 180) in terms of corruption, and 129th (out of 181) in terms of administrative efficiency for business start-ups. With the introduction of regional autonomy, these governance problems have, to a considerable extent, been decentralized to hundreds of districts. Yet, despite formally uniform institutional settings, local governments exhibit vast differences in regulatory quality, administrative efficiency, and anticorruption measures.

What motivates some local governments to perform better than others? Implicit in this question, which stands at the center of my research, is the idea that local democracy is not only an end in itself, but also a means for improving government outcomes. The pronounced policy differences that arise in Indonesia’s district polities provide a good opportunity to examine the workings of Indonesian local democracy or, to use a different terminology, the political economy of local decision-making.

The findings from controlled case comparisons and subnational datasets suggest that policy variations are best explained by differences in government leadership. Good policy environments emerge primarily in cases where local regents and mayors, whose career aspirations are tested by direct elections, skillfully use their office powers to forge reform coalitions and supervise bureaucratic practices. Societal reform pressures that arise from local parliaments, business chambers, and nongovernmental organizations, in comparison, tend to be less significant drivers of good governance. While broad-based interest groups continue to struggle with collective-action problems, district council members seem more concerned with provincial/national party elites (and their party list positions) than with representing local constituencies. Thus, in Indonesia’s early stage of democratic transition, where societal pressures are yet to fully unfold, much seems to depend on leadership efforts to initiate, facilitate, and oversee government improvements.

Under what conditions, then, are local leaders likely to act in the public interest, rather for private gain? While direct elections provide basic incentives, the direction and strength of these incentives also hinge upon existing socioeconomic structures. Government leaders need to accommodate interests of powerful economic groups in order to secure support for campaign funding and co-investments in public goods. Whether these interest alignments result in unproductive rent-seeking and corruption, or in constructive government reforms, depends on the constellation and transparency of economic powers.  The more economic powers become concentrated in specific sectors, groups, and firms, and the less public-private interactions are monitored by local media, the greater the likelihood that leaders will pursue self-preferential and collusive strategies.

As a result, it is plausible to assume that a moderate economic concentration and strong media presence are conducive to better governance. At this point, only some districts fall into this category. But as globalization and communication technologies progress, local polities are bound to become more economically diverse and politically informed. With growing political awareness and increased incentives for better leadership, it is likely that Indonesia, over time, will see more public-private symbioses for reform and, thus, bridge the gap between well-functioning elections on the one hand and poor governance
on the other.