TCS Daily


How Green Was Their Folly?

By Constantin Gurdgiev - March 8, 2005 12:00 AM

Last month, after years of negotiations and dire warnings of impending environmental collapse, the much-awaited Kyoto Protocol became a part of the Euro-reality. With all the hype, it is easy to miss the main point: the Protocol is futile and costly - an example of well-intended political voodoo, discarded by the US for all the right reasons.

The original Kyoto Protocol of 1997 called for a reduction of greenhouse emissions to 5.2 percent below 1990 levels and required ratification by the nations producing at least 55 percent of the world's emissions. With its arbitrary reduction targets and lack of scientific justification, it failed to muster the support of 40 percent and had to be renegotiated. The new Kyoto Protocol (NKP) of July 23, 2001, moderated the demands down to 1.8 percent reduction on 1990 levels. The majority of the signatories to the Protocol, including the world's fastest growing polluters, China, India and Brazil, have no reductions commitments under the NKP. At the same time, the overall world emissions levels currently run at 13-15 percent above the 1990 level.

Three fundamental arguments underlie support for the NKP: (1) NKP is a necessary measure that can address the problem of global warming; (2) NKP is a moderate policy response to the failures of the orthodox laissez-faire approach to development; (3) NKP will support emergence of greener technologies and consumer alternatives. In reality, all three claims are, at best, bogus.

NKP is neither necessary nor appropriate.

Contrary to reports in the press and the environmentalist academia, scientists know precisely the rate of global warming for the foreseeable future. Data since the 1870s show that as we emit more carbon dioxide (CO2), each additional increment of emissions results in less warming than the previous one. The bad news is that over the 20th century, emissions were growing at an increasing rate. This means that the rate of global warming will remain constant, unless we reduce the rate of emissions growth.

This is precisely where the Protocol lobby made a major error. The NKP focuses on the level of emissions, going beyond targeting of growth rates. In doing so they ignored scientific analysis of the forecasted rates of temperature increases within and outside the NKP constraints. They also ignored the need to determine the extent of human affect on the global warming in excess of naturally driven warming cycles. The costs of this error are staggering: the NKP may result in economic losses amounting annually to 1.1-2.3 percent of global GDP growth, while achieving only marginal environmental improvements. The reason for this is simple - even with moderated restrictions, OECD countries are facing a requirement to cut their emissions by at least 15 percent on 2004 levels. Adding to this the projected rates of emissions growth in the Third World countries, OECD countries will need to lower their emissions by as much as 30 percent by the end of the first quarter of the century. The latter could translate into a full 3 percent loss of global GDP per annum.

But wait, things can get worse. Suppose the developed countries bear the costs and see their income shrink by 0.5 percent per annum (a scenario roughly consistent with a 3 percent cut in growth). The economic recession will spill over into developing economies. The pace of rainforest clearing will accelerate. The tourism industry around the world - an environmentally friendly route for economic development - will stagnate. Global demand for eco-friendly goods (that carry a heavy price premium) will collapse. Expensive alternative fuels will become infeasible. The net result will be a meltdown of the markets for environmentally friendly technologies and consumer products.

Gloomy scenarios aside, let's get back to the actual numbers. Despite hysterical predictions of climatic meltdown, it is apparent that global warming trends are modest. In 2001, the US National Academy of Sciences, hardly a conservative body, predicted that "...additional warming in the next 50 years [will reach] 0.75°C, plus or minus 0.25°C". This forecast, based on the 'do-nothing' scenario, is statistically more accurate and 4 times lower than the outlandish claims made by the UN. The only threat to this trend comes not from the US or Europe, but from China and India - the countries exempt from Kyoto restrictions.

The NKP will not reverse this trend. Consider the standard UN assumption of a 4.5°F rise in temperature per doubling of CO2 emissions. Under this deeply pessimistic claim, if fully implemented by all countries, by 2050 the NKP will reduce the world surface temperature by just 0.04°F. By 2100, the savings will add up to less than 0.11°F. In short, the mean global temperature forecasted in the absence of restrictions for January 1, 2050 will be delayed by only 288 days. Given that the modern surface thermometers cannot distinguish a change of less than 0.19° from normal year-on-year variations, the Kyoto-generated savings are unlikely to register on the radar before the year 2155.

This analysis assumes that the polluting Western industries will remain in the high tax countries. Yet, at least some pollution will be exported from Europe to the NKP-exempt developing world. Today, China emits 50-70 percent more pollution than the US per unit of output. This means that every unit of greenhouse gases saved in the West may result in a gain of 1.5-1.7 units elsewhere if industry migrates in search of lower costs. The irony is that far from reducing CO2 emissions, the NKP may actually raise the levels and the growth rate of global pollution. The Kyoto Protocol fails to consider this scenario.

Is NKP a moderate policy response?

Most of the evidence and policy proposals on global warming come from the environmental lobby and the 'unorthodox' scientific community. The former is directly vested in the agenda and cannot act as an objective assessor in policy debate. More worrisome is the position of the 'unorthodox' scientists, who tend to politicize the debate about global warming. The latter tendency was pronounced in the European media circus that surrounded the NKP enactment.

This approach is emblematic of the 'unorthodox' thinking in social sciences. It gave the world Marxism, Stalinism, planned economies and fascism in the past, and supports anti-trade movements, anarcho-socialism, dogmatic pacifism and multicultural relativism today. It delivered the blockbuster visions of the deep-freeze spreading across the Northern hemisphere, induced by global warming - a sci-fi scenario that no one outside of Hollywood can take seriously.

Support for the doomsday cults amongst the ideologically driven scientists is nothing new. In 1968, Paul Ehrlich, the 'unorthodox' science guru, predicted that by the 1980s the world will see hundreds of millions of people starving to death due to a lack of food. The global famine, in Ehrlich's view, was inevitable because of high birth rates in the Third World. Contrary to his predictions, economists found that the high death rates in Africa act to retard growth opportunities. Trade controls, supported by Ehrlich's intellectual descendants in the anti-globalization movement, exacerbate the developing world's plight. All along, food production globally is in surplus relative to demand.

In the 1980s some 'unorthodox' thinkers, like the Nobel Prize winning Paul Samuelson, continued to argue that the Soviet model can be competitive vis-à-vis the 'orthodox' US market economy. In the 1990s 'unorthodox' thinkers, aligned with the environmentalist pundits predicted a 'Giant Sucking Sound' of jobs fleeing to Mexico as the outcome for NAFTA.

The 'orthodox' scientists use historical data in testing their theories. The 'unorthodox' ones use non-falsifiable emotive arguments. The plight of some rare species, taken out of the context of evolutionary pressures and standard climatic cycles cannot be used to justify irreversible decisions on taxation, retardation of opportunities and redistribution of income, as advocated by the NKP.

The latest credible evidence on global warming, surveyed in an article by John Browne in Foreign Affairs (July-August 2004), shows the need for moderate changes in the way we currently treat harmful emissions. Since the mid 19th century, CO2 emissions have increased by 25-35 percent, while the global economy grew three-hundred-fold. We do not know the rate of change in CO2 absorption in the ecosystem. As a result of this, the cautious 'orthodox' policymakers prefer to advocate small-scale measures aimed at stabilizing green-house emissions at around 550 parts per million - well within the status quo scenario. This requires not a reduction of emissions, but a cap on emissions growth.

The New Kyoto will endanger the development of greener economy.

NKP supporters claim that carbon taxes can stimulate the development of new alternative technologies. This is a weak justification for the NKP-imposed measures. Taxing CO2 emissions to subsidize green technologies will involve: (a) administrative costs (in the EU member-states these run around 55-70 percent of the collected revenue), (b) crowding out of private investments through less efficient public sector programs; (c) politicizing of R&D priorities. In Europe, a CO2 tax will hurt the poor the most and will require welfare subsidies. In short, NKP-generated tax revenues will be wasted before a single euro reaches productive R&D programs.

The only beneficiaries of these transfers will be the current advocates of draconian programs. The environmental science community can look forward to a windfall of new financing, while lobbyists will be assured of their place at the policy-setting tables. Neither one of these groups has so far been responsible for delivering a single productive environmental technology that can exist outside the Magic Kingdom of Taxpayer Subsidies.

In a nutshell, the US is right in rejecting the NKP madness. The NKP will reduce the growth rate of world economies while shifting pollution to countries where the international community has no control over emissions. It may also reduce incentives for the development of greener alternatives in the West. No one remotely sane would subscribe to the idea that such a measure can do much good to our environment. The NKP's enactment is a worrisome reflection of the global leaders' failure to think beyond the standard 'tax-and-charge' policies. It is a sign that the deeply rooted environmentalist hysteria is displacing common sense and science in policy making.

The author is a lecturer in Economics in Trinity College, Dublin, a research fellow at the Policy Institute and IIIS, and a director of the Open Republic Institute (www.openrepublic.org)

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