TCS Daily

Kyoto's Mr. Inside, Mr. Outside

By Emily Sedgwick - August 30, 2002 12:00 AM

It should come as no surprise that the European Union is leading the effort to harmonize global energy policy in Johannesburg this week. But behind the scenes, 11 states are mobilizing to enact their own Kyoto Protocols despite unanimous congressional and presidential rejection of EU Kyoto harmonization efforts.

Concurrent to the start of the Johannesburg Summit, the 27th annual New England Governors and Eastern Canadian Premiers (NEG/ECP) met in Quebec City to discuss the implementation of Kyoto standards by northeastern elected officials. These rogue state leaders in the northeast and elsewhere, under the pretext of adhering to treaties with Canadian provinces, are forging ahead with Kyoto-style emissions controls on the taxpayer's dime.

All six New England governors participated in the NEG/ECP conference, and four New England states have already developed Kyoto-style climate action plans. New Hampshire was the first state in the nation to pass legislation enacting CO2 emissions reductions similar to Kyoto, and Massachusetts was the first to issue regulations along the same lines -- all within the last year.

Eleven states -- Alaska, California, Connecticut, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island and Vermont -- support Kyoto-like emissions standards because these states collectively generate only 16 percent of their energy from coal, compared to an average of 59 percent for the other 39 states.

According to Marlo Lewis of the Competitive Enterprise Institute, the emissions standards recommended by NEG/ECP would increase electricity prices 33 percent and eliminate 55 percent of electricity generated from coal. If adopted and enforced, the new standards will force businesses and residents out of states with relatively productive and efficient policies and into the 11 inefficient cartel states seeking to harmonize interstate energy policy.

These 11 states are some of the worst for business at present, and residents pay more than 35% of all state and local taxes combined, nationwide. Controlling for population differences, these 11 states levy an 28 percent higher tax burden per resident relative to the national average -- $3,921 per person, on average, compared to $3,054 for the remaining 39 states. The emissions racket desired by these 11 high-tax states will drive population and businesses into their tax jurisdictions by imposing stiff regulations on more efficient states.

Meanwhile, the worst possible outcome of Johannesburg would be the creation of a World Environmental Organization, such as the European Union apparently prefers, as part of enactment of this year's five-part agenda that includes ratifying the Kyoto Protocol and other environmental treaties plus increasing aid to developing nations. Undersecretary for Global Affairs Paula Dobriansky and others have argued, correctly, that creating additional treaties and bureaucracies fails to address the shortcomings of existing treaties and bureaucracies. Secretary of the Treasury Paul O'Neil earlier this summer outright rejected the tax harmonization proposals backed by the same emissions harmonization EU network.

According to Margot Wallstrom, the EU Commissioner for the Environment, Kyoto "is about international relations, this is about economy, about trying to create a level playing field." For U.S. states collaborating with Canadian provinces and the 100 heads of state participating in the Johannesburg Summit this week, the issue is harmonization on a massive scale.

The Kyoto Protocol calls for the United States to reduce emissions of greenhouse gases to 7% below their 1990 levels by 2012. The data clearly document that the implementation of Kyoto at the international level would have severe economic effects on the United States and other world economies, while providing minimal benefits to the environment. If the United States complies, the Department of Energy has estimated that growth in gross domestic product could fall by half.

Less attention has focused on certain states seeking to implement their own Kyoto treaties. Yet, the end result is identical for states here that seek to implement Kyoto as for high tax, high regulation countries seeking to do the same: It raises the bar to a level playing field as they revel in short-term gains.

Jon Reisman of the University of Maine-Machias compared the Kyoto Protocol CO2 emissions standards to the NEG/ECP standards and discovered remarkable, if unsurprising, similarities. The NEG/ECP model would reduce greenhouse gas emissions to 1990 levels by 2010 and reduce emissions to 10 percent below 1990 levels by 2020. In addition, NEG/ECP recommends establishing a "regional, standardized greenhouse gas emissions inventory" and creating a "regional emissions registry and trading mechanism," much like Kyoto.

Kyoto protocols at the international and at the state level in the United States will not protect the environment so much as they will reduce the competitiveness of distinct tax jurisdictions. High taxes and tedious regulations at both international and interstate levels have made these jurisdictions less competitive.

Rather than working to reduce their own tax and regulatory burdens, these countries and states would downgrade their competitors by imposing their complicated tax and regulatory structures on everyone else.

Emily Sedgwick is States Projects manager and Dan Clifton is Federal Affairs manager for Americans for Tax Reform.

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