The High Cost of Kyoto
Champions of the Kyoto Protocol say curbing carbon emissions will ensure a safer, more prosperous future for all. But if developing countries don’t go along with it, Kyoto could put the bite on U.S. GDP
June 1 1998 by Ronald Bailey
“YOU CANNOT UNDERSTATE THE IMPACT THAT the regulation of carbon dioxide emissions under the Kyoto Protocol will have on American business,” says Fred Palmer, CEO of Western Fuel Associates, a large cooperative of coal-burning electric utilities. “Cutting CO’ emissions to meet Kyoto goals would devastate not only utilities, but also a whole host of other industries, including aluminum and iron smelting plants, paper and pulp manufacturers, oil refining, automobiles.” Direct energy costs are likely to soar by at least 50 percent.
“Already, the Environmental Protection Agency (EPA) has begun to explore how it might regulate the CO’ emissions from the burning of fossil fuels like coal and oil,” says Palmer. In fact, the green zealots at the EPA have already been caught discussing how to begin implementing limits on carbon emissions, even before the Kyoto Protocol has been submitted by President Clinton to the Senate for ratification. In a recent internal memo, EPA officials claimed that the agency had the authority under the Clean Air Act to establish pollution control requirements for CO’ including a “cap-and-trade” scheme that “would be seen as a concrete step to move forward domestically on global warming while continuing to work for progress internationally in follow-up to Kyoto.”
Once the memo was made public, EPA officials hastily declared the document “predecisional” and dropped for the time being its proposals to regulate CO’ as a pollutant.
Palmer points out just what is at stake. If the EPA models its CO’ regulations on its current Clear Air Act sulfur dioxide and nitrogen oxide standards, that would mean that any company that emitted more than 100 pounds of CO’ per year would be subject to EPA restrictions. Therefore, any of the millions of businesses that burn the equivalent of $7,000 of fuel oil annually might be forced to obey very detailed regulations on the use of energy in manufacturing, transportation, and heating and cooling. Even big buildings like hospitals, schools, plants, and apartment buildings that use a lot of oil for heating would likely be subject to federal regulations. In order to keep track of how every watt is produced and used, the EPA will have to impose a complicated accounting scheme that will likely make the federal tax code look simple by comparison. Enforcement of these new CO restrictions could entail substantial fines and perhaps even jail time for executives who fail to comply with them.
Worse yet, the playing field will be radically tilted in favor of America’s international competitors in developing countries like China and Brazil because they will not have to pay more for energy or subject themselves to the same centralized regime of international energy controls with which U.S. companies will have to contend.
The greens inside the administration, including Vice-President Gore, know that the costs coming out of several different independent econometric models are enough to scare most business executives, so the administration is trying to counter them with well-massaged and soothing, but phony, numbers of its own.
Janet Yellen, chair of the President’s Council of Economic Advisors, presented the administration’s funny numbers to the House Commerce Committee in March. She claimed that meeting
“You can pretend that emissions trading will happen and that it’s perfectly efficient and can be instantaneously put in place and that every country gives up its sovereignty. If we do all those things right, then CO= emissions reductions wouldn’t cost us too much,” says WEFA (formerly Wharton Economic Forecasting Associates) economist Mary Novak. “Or you can be realistic.”
“What is at risk is that if we go ahead and sign the Kyoto Protocol, and then other countries simply say no to our carbon emissions trading proposals after we sign,” warns Novak. “That would be very costly to our economy.”
Novak is right to be worried. Key developing countries whose emissions of CO’ will surpass those of the U.S. early in the next century-China, India, Brazil, Indonesia, along with some 120 other countries-oppose emissions trading and absolutely refuse to consider limiting their own energy use as a way to cut CO’ emissions. If the developing countries don’t cut their CO= emissions, efforts to slow the alleged threat of global warming will fail.
The next long step toward hobbling energy use by American businesses and consumers will be taken at the
Protocol, including the development of an indicative list of consequences, taking into account the cause, type, degree, and frequency of non-compliance.” Translation: At
Nevertheless, on the basis of the heroic assumptions of developing-country participation and international emissions trading, Janet Yellen triumphantly pulled an econometric rabbit out of her hat. She claimed that “the resource costs of attaining the
There is no historical parallel for such deep cuts, according to economist Russell Jones of the American Petroleum Institute. He points out that during the “energy crisis,”
Yellen’s funny numbers assume that carbon emissions would be reduced merely 3 percent from what it would otherwise be. The administration assumes that the
Right now, the bare concept of emissions trading is limited to just Annex B countries. Russia and the Ukraine are the only Annex B countries that are likely to have emission permits for sale, largely because their emission levels set under the Kyoto Protocol are based on 1990 carbon emission levels, which were much higher than they are today due to the collapse of their inefficient post-Soviet economies. WEFA estimates that they will be able to offer permits for only about 160 million tons of carbon emissions in 2010. So even if the U.S. bought up all of those permits (which is unlikely since the Europeans, Japanese, Australians, and New Zealanders are likely to bid for those permits too)-and actually cut its domestic emissions by 75 million, that would still leave 265 million tons left to cut by 2010. Janet Yellen says the administration is counting on including the developing countries in the international emissions market. But there is no provision for setting binding limits on developing countries’ emissions. Developing countries such as
As Congressman Dan Shaefer (R-CO), chairman of the House Subcommittee on Energy and Power, succinctly put it in March: “With respect to meaningful developing country commitments under the Kyoto Protocol: it is a done deal and they don’t have any.”
“This flawed treaty will force the U.S. to commit to emissions reductions that will put Americans on a strict energy diet, a more than 30 percent cutback in our energy use, while allowing our international competitors to increase their emissions,” warned Congressman Weldon (R-FL) in March. “What about the jobs that will move to more than 130 countries overseas that are not committed to these emissions reductions?”
The heads of eight
Key developing countries, including
There is a political problem. Most European countries and developing countries don’t fundamentally believe emissions trading is politically or morally the right thing to do, says Novak. “They believe that the
Stuart Eizenstat, undersecretary of State for Economic, Business, and Agricultural Affairs, and the chief
A skeptical Representative Ralph Hall (D-TX), the ranking Democrat on the subcommittee, snorted, “What hammer do we have over these [developing countries]? Are we going to bomb them? Are we going to put a special prosecutor on them?”
“I don’t believe there’s any chance over the next 20 or 30 or 40 years that the developing countries will devote any resources to carbon abatement,” says Thomas Schelling, professor of economics at the
So what would it realistically cost the
WEFA’s analysis concludes that complying with
Economist David Montgomery of Charles River Associates notes that even assuming that the
President Clinton has promised not to implement any part of the Kyoto Protocol until it has been ratified by the Senate. Undersecretary Eizenstat repeated that promise when he testified in February before the Senate Foreign Relations Committee that “we have no intention…of trying to impose or take any steps to impose what would be binding restrictions on our companies, on our industry, on our business, on our agriculture, on our commerce, or on our country until and unless the Senate of the United States says so.”
But even if the treaty is not passed by the Senate, the administration could nevertheless use the treaty as a framework for developing carbon abatement policies, just as the EPA was trying to do earlier. In fact, Senator John Kerry (D-MA), has already suggested that the lack of ratification need not impede compliance with its goals. Remember SALT II? President Carter signed it, couldn’t get it through the Senate, but he declared that he would observe it anyway.
Representative James Sensenbrenner (R-WI) summed it up best: “I believe the Kyoto Protocol to be seriously flawed-so flawed, in fact, that it cannot be salvaged,” declared the House Science Committee chairman. “This treaty is based on immature science, costs too much, leaves too many procedural questions unanswered, is grossly unfair because developing countries are not required to participate, and will do nothing to solve the speculative problem it is intended to solve.”
Business executives should urge the Clinton administration to pull the plug on the Kyoto negotiating process now-before the U.S. becomes even more entangled in a treaty that could cause significant damage to our economy while doing nothing to fix the alleged problem of global warming.
Is The Earth Really Getting Warmer
THE CONCERN OVER GLOBAL WARMING FIRST arose when early computer climate models predicted that the earth’s temperature might rise by between 5 and 9 degrees Fahrenheit over the next century due to the increased levels of CO’ in the atmosphere that the burning of coal and oil have caused. And indeed, certain land-based temperature records suggest that the planet is getting warmer. But measurements made by NOAA satellites and weather balloons show virtually no warming over the past 20 years. Still, the original climate computer models predicted the atmosphere should have warmed by 0.4 to 0.6 degrees centigrade over that period.
Global warming alarmists predict that hurricanes and floods will become fiercer. But the frequency of intense hurricanes and their maximum windspeed have declined significantly over the past half century. Rainstorms that drop more than two inches in 24 hours have increased modestly since 1910; there is now one additional heavy rain every two years. There has been no significant trend for long-term or extreme droughts in the
The predictions of sea level rise due to glacial melting have been greatly reduced to only about 10 inches over the next 100 years. Let’s put that in context-over the past 60 years sea level rose by six inches. Did anyone notice? But even the claim that sea level will rise has been called into question. Some scientists predict that a slightly warmer world will mean a slightly wetter world. They theorize that this could mean greater snowfall in
What appears to be happening is that globally winter nighttime temperatures are getting warmer. There is no evidence that summer daytime temperatures in the
The bottom line, according to NASA climate scientists Roy Spencer and John Christy, is that the earth is likely to warm up modestly-perhaps an average of 1 to 1.5 degrees Centigrade over the next century.
But what if the climate models are correct and it turns out that global temperatures will increase substantially. Do we have to act now? Should the
An important study published in Nature in 1996 concluded that waiting to cut carbon emissions would give scientists and engineers time to develop less carbon-intensive energy technologies to which we can switch at a lower cost in a few decades. In other words, we needn’t take drastic and costly action now. Humanity can wait at least a decade or so to see if the climate models turn out to be right. And if they are, then technological innovations and judicious capital investment will make it possible to reduce carbon emissions more cheaply in the future before they become a significant problem.
Dr. Jerry North, head of the Department of Meteorology at Texas A&M, says he thinks there may be something to global warming, but he adds, “I think it’s too early to start action now. I believe that we have a decade or so in which can collect data and refine our models before we have to act.”
Ronald Bailey is an independent writer and television producer in