TCS Daily

On Creeping Collectivization

By Hans H.J. Labohm - December 3, 2004 12:00 AM

When lecturing about Kyoto, I sometimes provoke my audiences with the proposition that the Kyoto Treaty, which aims at reducing the emission of man-made greenhouse gasses, equals communism via the backdoor. The reactions are mixed. Some people take it humorously and laugh. Others, however, look at me with glazy eyes. Both kinds of reactions warrant clarification on my part.

Among the authors who have developed profound insights about the dangers of creeping collectivization -- in terms of loss of efficiency, wealth and individual liberty -- Friedrich von Hayek occupies a prominent place. What would Hayek have written about Kyoto? Nobody knows. Yet, I venture the thought that it is possible to infer his views about the issue from his intellectual legacy. Let us see what the application of Hayekian reasoning will produce.

But first a couple of preliminary remarks about the immediate effects of the European mini-Kyoto. Will it reduce emissions? Contrary to what many believe, it will not. On the basis of the allowances allocated to existing facilities covered by the EU emission trading scheme, Fred Singer, the dean of the climate sceptics, forecasts that European industry will be allowed to increase annual CO2 emissions by 5% during the first phase of the scheme (2005 to 2007) relative to their emissions in 2000. Additional allowances will also be available through reserves set aside for the construction of new plants. If all these reserve allowances are issued, then emissions would be permitted to increase by an additional 6%. In total, the first phase of the scheme could therefore allow emissions to increase by up to 11% relative to 2000 levels. And Singer comments: 'These increases are in stark contrast to the commitments of European Member States under the Kyoto Protocol which require a collective reduction in emissions across all EU 15 countries of 8% by 2010 from 1990 levels.'

Moreover, there is this little snag of 'paper compliance'. As David Victor of the Council on Foreign Relations argues, Russia (and Ukraine) agreed in Kyoto to freeze emissions at 1990 levels, but the collapse of the post-Soviet economy in the early 1990s means that their emissions are already far below that target and unlikely to recover fully by 2008. Selling the windfall to nations in emissions deficit could earn Russia (and Ukraine) a considerable sum of money. Since the windfall is free -- completely an artifact of the luck and skill of the diplomats in Kyoto rather than the result of any effort to control emissions -- these extra credits would squeeze out bona fide efforts to control emissions. That buys 'paper compliance' but no reduction in emissions.

So formally the system will run smoothly, but there will be no reductions of emissions. On the contrary, they will still rise. In the mean time there will be a net flow of resources to Russia (and other countries) in order to pay for the emission allowances which Russia does not need for itself. That is a boon for Russia and -- if we take official statements at their face value -- a source of deep satisfaction of European policymakers because it helps Kyoto to enter into force. Whether the average citizen/taxpayer is equally satisfied remains to be seen. Of course, it is true that all European parliaments have approved Kyoto. But did they know the shortcomings of the underlying science? Have they been fully informed by their governments about the costs and benefits of Kyoto? Did they know that Kyoto will result in a net cooling which is so small that even in 2050 it will not be possible to detect it, even with the most sophisticated thermometers? And did they realise that Kyoto is like the proverbial camel's nose: nothing to get excited about in the beginning, but devastating in the end?

Emission trading: in conformity with market principles?

It is often argued that CO2 emission trading is in conformity with market principles. However, if we take a closer look, it is not. It requires a prior act of creating and distributing (property) rights (to emit), where no rights existed before. Only governments can do so.

In Europe, national emission ceilings are the outcome of negotiations between the EU member countries and other countries which will join the scheme. Subsequently, individual countries are free to distribute the emission rights nationally according to schemes to their liking.

The proponents of Kyoto admit that the European mini-Kyoto is only a tiny first step to achieve a substantial reduction of man-made greenhouse gas emissions. Many more follow-up steps will be required. Estimates range from ten to thirty additional Kyotos in order to make a real dent into emissions. Of course, in the beginning costs will be relatively low, because it concerns the collection of low hanging fruit. But as the process progresses, the screws will have to be tightened in every successive phase and the costs will rise exponentially.

Countries that are presently exempted form any emission cuts, such as China and India, Brazil and Mexico, will have to join at a later stage (after 2012). Ultimately all 193 countries in the world have to join in order to eliminate loopholes in the system. It should be borne in mind that their allocations will have to be accommodated within a shrinking total of available emission allowances.

Some Kyoto adherents foresee an evolution of the system, whereby in a couple of decades the worldwide distribution of CO2 emission rights will be taking place on the basis of equal rights per capita. Such an allocation would be in conformity with traditional UN egalitarian philosophy, to which some countries, however, have explicitly taken exception, while other countries have remained conspicuously silent. It goes without saying that this would require a degree of central control at the global level which is unprecedented in the history of mankind.

Is it likely that 193 countries will be able to reach agreement on the worldwide distribution of emission rights in some ten to thirty consecutive negotiation rounds over the next few decades? If the pace at which (infinitely less painful) WTO negotiations are taking place is any guide to us, the answer is negative. What then about a more 'effective' alternative? If countries are not willing to voluntarily cooperate in order to reach a compromise on an overall accord for the worldwide distribution of emission rights, the only conceivable alternative solution is that it will be imposed on them. Unfortunately, this implies, first of all, that national parliaments will have to be excluded from the decision-making, because one cannot run the risk that these will obstruct the outcome of the 'negotiations' by their veto. Moreover -- and irrespective of support or disapproval of their parliaments -- even national governments should not be allowed to frustrate the successful outcome of 'negotiations'. That means that either some directorate of leading nations, or some group of permanent officials or autonomous body should be put in charge to prepare proposals. For practical reasons these proposals can only be marginally adjusted during the 'negotiations', because otherwise the whole package will fall apart. Subsequently, these proposals are expected to be officially rubber-stamped by all countries. All this implies that the only 'effective' solution to this problem will spell the end of both national sovereignty and democracy in such a crucial field as is the use of energy.

Of course, the smooth running of the scheme requires quasi-permanent preparation of new proposals, close monitoring by an army of inspectors which will have to operate worldwide, and sanctions in case of non-compliance.

As regards sanctions a parallel can be drawn with the EU Stability Pact, which stipulates that budget deficits of member countries should remain below 3% of GDP. But, as we know now, in this case sanctions are very weak and ineffective. Kyoto is a different ball game. The stakes are high. As Sir David King, scientific adviser to the British government keeps reminding us, the threat of global warming is more serious to the world than that of terrorism. In the same vein his compatriot, Sir John Houghton, the former head of the British Meteorological Office, who also served on the Intergovernmental Panel on Climate Change (IPCC), has compared global warming with a 'weapon of mass destruction'. Kyoto is aimed at nothing less than 'saving planet earth'. This implies that we should not shy away from radical measures to enforce compliance: zero tolerance!

But Kyoto's scientific base is still fatally flawed

Ironically, this huge bureaucratic moloch in the making is based on science which is fatally flawed. Recent peer-reviewed literature offers a spate of articles refuting crucial elements of the man-made global warming hypothesis, thereby undermining the scientific basis underlying the models and scenarios by the IPCC. These models and scenarios do not stand up to rigorous scientific analysis, while the extreme projections, the ones that make the best scaremongering headlines, are nothing but sheer fantasy.

But so far Kyoto has proved to be impervious to logic. Let's hope that its inherent loss of national sovereignty and democracy will concentrate the minds. Until then, Hayek will be spinning in his grave.


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