TCS Daily

Prosperity First

By Alan Oxley - April 29, 2004 12:00 AM

Environmental officials in Brussels are getting edgy. Energy and economic officials are steadily revising up their estimates of the cost (principally higher energy prices) of implementing the Kyoto targets to reduce greenhouse gases. Claims that the Kyoto targets can be met without slowing growth seem increasingly hollow, especially as doubts mount that Europe can maintain sustainable growth. But it is Asia which spotlights Kyoto's fatal flaws.

Asia seems back on its high growth track. China is recording 10 percent annual growth in GDP, propping up the global economy in the process, and even India is growing at record rates. Asia generates about half of the world's emissions of carbon dioxide (CO2) and its share is rising. Asia's emissions of carbon dioxide will surpass those of OECD countries by 2015. Yet the Kyoto Protocol doesn't require Asia (except Japan) to cut back emissions. When the Protocol was drafted the developing world refused to support it unless they were free of obligations to cut emissions.

This is the first flaw in the Kyoto Protocol: its reach is incomplete. It is like a law which sets out to reduce a government's debt by limiting how much government agencies can spend, but then exempts about half from the obligation, allowing them to run up as much debt as they like.

The second flaw is the strategy laid out in the Protocol to tackle greenhouse gas emissions. It aims to reduce them by increasing the cost of electricity. Generation of electricity is the biggest source of CO2 in low-income Asia. Electricity also happens to be vital to reducing poverty. Economic growth is essential to that and expanding generation of electricity is in turn essential to growth. If Kyoto's cuts applied to low-income Asia, growth would slip. The Kyoto strategy is politically unacceptable in developing Asia. It even looks like it can't work in Europe.

Economic officials in Europe were always wary about the claims by the Environment Directorate-General of the European Commission that compliance with Kyoto would cost no more than 0.5 percent of EU GDP. Analysis commissioned in 2002 by the International Council for Capital Formation shows losses to EU member states range from 3 to 5 percent of GDP. EU energy officials are worried. The Commissioner for Energy and Transport, Loyola de Palacio, told the Financial Times in February, "We should look at other ways of achieving our goal - to reduce emissions - while maintaining the competitiveness of our industry."

This has not diminished the ardor of European Greens. They have always argued that the Kyoto Protocol would be effective, despite increasing doubts about the accuracy of the climate change science used to justify the Kyoto strategy. Even after it became clear that the US, the world's biggest generator of greenhouse gases, would not accede, they still maintained the Protocol would be effective.

Asia cannot raise the standards of living of its people without economic growth. Its share of carbon dioxide emissions will expand proportionately. In 1990, Asia accounted for 25 percent of the world's emissions, compared to 30 percent from the Americas and 21 percent Europe.

Source: Energy Information Administration, U.S. Department of Energy.

By 2020, Asia's share of emissions is projected the by the East West Centre in Hawaii to rise to 41 percent, America's share falling to 29 percent and Europe's to 14 percent.

Source: Energy Information Administration, U.S. Department of Energy.

The reason for this is simple. Asia depends more on fossil fuel for energy than Europe. Ninety-two percent of Asia's energy reserves are coal. In addition, consumption of oil will rise dramatically as the number of automobiles rises, first in the near future in China and later in India.

Some in Europe evidently think that Asia can be coerced to follow the Kyoto strategy in reducing electricity consumption. Green institutes like the Centre for International Environmental Law in Geneva, which regularly undertakes research for Greenpeace and the World Wide Fund for Nature, has prepared reports arguing that trade sanctions can be imposed against countries that do not reduce greenhouse gas emissions. Most international trade lawyers would point out that the WTO would not permit such action. This may explain why Green groups have advocated for years that WTO rules be changed to give rights to restrict imports unless they are produced according to the environmental standards of the importer.

While European Greens might feel that it is morally acceptable to consider trade sanctions to coerce developing countries to comply with their (flawed) blueprint to address global warming, others in Europe are unlikely to do so, especially when Asian economies are playing such an important role in supporting global economic growth.

One would also like to think some in Europe might be troubled with the idea that there is a greater moral good to get developing countries to apply Kyoto-like strategies than to reduce poverty among hundreds of millions of people. Bjorn Lomborg points out in The Skeptical Environmentalist that adapting to the impact of climate change rather than trying to prevent it costs billions of dollars less, making money available to lift millions out of poverty. Unfortunately we rarely hear this from government officials in Europe, including those in charge of aid agencies.

There is also enough scientific doubt about the nature and pace of climate change to avoid committing to blueprints like Kyoto that have little effect, except to reduce economic growth. The practicable approach to climate change is research and development of technologies which will contribute positively to reduction of greenhouse gases. They will not have the dramatic effect hoped for by the designers of the Kyoto blueprint. Just as well. But they will be more effective. Poor countries can't afford fancy research and development, but wealthier countries can. Making Asia prosperous is a surer bet.


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