TCS Daily

Waking Up to Kyoto

By Carlo Stagnaro - February 16, 2005 12:00 AM

On 15 July 2004 the European Environment Agency (EEA) released the following statement: "EU15 greenhouse gas emissions decline after two years of increases." The news release explained that in 2002 the EU15's emissions were 0.5 percent lower than the year before. It may look like a small step: under the Kyoto Protocol, which takes effect this week, the continent is committed to reducing its emissions by 8 percent from 1990 levels by 2008-2012 . Thus, the EEA argues, "assuming the 8 percent reduction were to follow a linear path, emissions should have fallen 4.8 percent by 2002," vis-à-vis the actual data of the EU15 being just 2.9 percent below the reference year.

The problem is complicated by two facts. First, the emission cut is more modest if you look only at carbon dioxide, the leading greenhouse gas, which accounts for over four-fifths of total emissions. In 2002 CO2 dropped by just 0.3 percent below 2001 levels. And it is still 1.4 percent higher than in 1990, "largely because of growing emissions from road transport."

Secondly, the EEA recognizes that "on this basis, only four countries are on track to comply with the national targets." They are France, Germany, Sweden, and United Kingdom. At least three of them enjoy such a situation because of past actions that have nothing to do with the Kyoto Protocol. Moreover, this trend is likely to be reversed in the next few years. In fact, France is a low emitter because some 80 percent of its electricity is generated by nuclear plants. Germany still benefits from the reference year being defined as 1990, which was before the re-unification of East and West Germany. The former communist country's industry was inefficient and highly polluting. Today it emits less because of its rapid development after massive Western investments. Finally, the UK shifted from coal to natural gas in the 1980s, after Margaret Thatcher's battle with the coal unions.

The most interesting part of the EEA news release is not the numbers. It is the explanation of why EU15 emissions dropped in 2002: "The overall 0.5 percent fall in EU emissions between 2001 and 2002 reflected lower emissions from households and the services sector, mainly due to warmer weather, and from manufacturing industry, particularly the steel industry in Italy and the UK, as the economy slowed." So, to recap: on the one hand global warming seems to be a kind of antidote to itself, and on the other a little exciting economic performance caused the emissions reduction.

This reminds us that emissions cuts do not come for free. Kyoto's economic impact might have been mitigated by the lack of effective coordination among member states. Things are likely to change this year, as the European Trading Scheme and stricter controls on breakthroughs enter into effect. Cutting emissions means that fewer fossil fuels can burned. This means one of three things: either we consume less energy, or we find energy sources other than hydrocarbons, or we hope the buying and selling of quotas makes up the difference between actual emissions and Kyoto limits.

Consuming less energy means giving up a lot we now take for granted, including heating houses in winter and air-conditioning them in summer, or traveling by private car rather than relying on public transportation. Obviously not many people would accept such changes in their lifestyle without some form of coercion. One way to coerce people to consume less is by raising taxes, making electricity and gas more expensive. Thus, Kyoto will make us poorer.

Some suggest we find alternative sources of energy. Which ones? Perhaps nuclear power, which is an emission-free source of energy. However most environmentalists, who provide the cultural case and political support for climate policies, don't like nuclear. At any rate, building new nuclear plants would take years - and we don't have time. The so-called "renewables," such as sun and wind, are by far more costly than carbon-based energy. Moreover, they provide just a small share of the total consumption (for instance, in Italy sun and wind account for a tiny 0.01 percent). Even if you think an exponential growth in renewables is possible, there is no way they can account for a significant share of total consumption by 2008-2012. And renewables have a mostly negative environmental impact: photovoltaic cells take up space; wind mills destroy the landscape, make a lot of noise, and kill hundreds of birds everyday.

Lastly, to buy emission quotas you have to spend resources. You have to pay for them. We'll do that both as consumers and as taxpayers. According to the Union of Industrial and Employers' Confederations of Europe (UNICE), European climate policies might cost as much as 0.5 percent less GDP. The International Council for Capital Formation estimated the consequences of this in terms of thousands of job losses every year (up to 50,000 job losses in Italy in 2012). Kyoto will make us poorer... and unemployed.

It might seem like we face an eternal struggle between ecology and economy. But this is not so. If all of these actions could help us to save the planet, the game might be worth the trouble. Unfortunately, it is more likely we are wasting time and resources. The scientific community is far from agreeing on how our atmosphere works. In fact, our climate has been warming for some 20,000 years, i.e. since the end of the last glacial era - it is questionable that the process has "unnaturally" accelerated after Industrial Revolution. The Kyoto protocol aims at reducing developed countries' emissions by a small percentage,. But if the alarmists are right, what we need is global emissions to fall by 60-80 percent. The treaty has a very limited goal; moreover, big emitters (including the US and developing countries such as China and India) are left out. Thus, any effort undertaken by the others (who account for a minority of global emissions today, and a small minority by 2050) is a waste of time and resources which might be invested in more productive ways.

EU Environment Commissioner Stavros Dimas recognized that near- to medium-term targets are premature at the moment. It sounds like a hint that the EU can't afford more; if climate change has to be a global challenge it's fine, but the Old Continent will unlikely go on alone after 2012. If you read between the lines, you'll understand that the EU cannot trash the Kyoto Protocol if it wants to keep its credibility. Yet, this doesn't imply that it will give up its economic welfare in order "to do more."

Radical environmentalists have seemingly won the battle over Kyoto, but as Europeans realize what cutting emissions is about, the tide will turn in the climate war.


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