TCS Daily

Europe's Kyoto Bill

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

No matter how clear it becomes that the Kyoto Protocol will not work, the European Union will not admit that its climate policies will do nothing to affect global climate but will have a hugely negative effect on the global economy.

Writing in The Observer, British Prime Minister Tony Blair acknowledged that "even if the US did sign up to Kyoto, it wouldn't affect the huge growth in energy consumption we will see in India and China." He also urged for the creation of "the right market conditions to increase the necessary investment to develop and install new low carbon energy generation -- and to ensure it is shared with emerging economies." In this respect, Blair is consistent with the guidelines that were set by the leaders of the eight most industrialized nations in Gleneagles and, although he doesn't make the point explicitly, he has accepted the logic behind the American-led Asian and Pacific Partnership.

Alas, Blair's European colleagues keep playing with fire; they still insist that the 1997 climate treaty is a first, key step towards the mitigation of global warming. As a matter of fact, the EU has set further, stricter targets for the post-2012 period. Being self-imposed goals, there is still time to reconsider them, both in the light of the fact that Europe will not even be able to meet the first commitment period targets and of a more accurate evaluation of the costs of Kyoto.

It's easy for some to criticize Kyoto-skeptics as people willing to sacrifice the environment for the sake of economic growth. But most policy-makers seem to undervalue the economic impact of their choices. After all, if you are willing to pay any amount of money in order to pursue CO2 emissions reductions, you will never be able to evaluate your investment, and you will never be able to put it in a scale of priorities -- including environmental protection. For example, if there were a shift in electricity production from fossil fuels to wind power, some environmental degradation could follow -- wind farms need much more land to generate the same output, but also have negative environmental impact of their own.

It's important to weigh the costs and benefits of any environmental policy. As far as the costs of Kyoto are concerned, the Brussels-based think tank International Council for Capital Formation has just released three studies that focus on major European countries. For each of them, pursuing Kyoto targets will require spending significant resources to buy emission quotas abroad -- none of the cities will be able to achieve its national goals domestically. This will lead to dramatic increases in the price of energy (both electricity and gasoline), that in turn would result in a slower economic growth and job losses. The results of the studies for 2010 are summarized in the following table.








Natural gas




















One may still believe that, however expensive it may be, the cost of Kyoto is reasonable, for on the benefits side you have no less than the future of our planet. That would be a valid point if Kyoto were in fact a way to save the planet, and if the planet were in danger in the first place. Both those claims rest on fragile grounds. Even its supporters admit that the Kyoto Protocol will have no significant impact on climate change because, even assuming the worst scenario, it can't limit the dramatic emissions growth of emerging economies, notably India and China. Secondly (and luckily) all the alarmism misses the point: observed warming is not unprecedented, and it is at least in part due to natural causes that are largely beyond human control, including the Sun.

Since we are not on the edge of collapse, it is reasonable not to panic. The Kyoto Protocol is a bigger risk than climate change itself.


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