The Road from Kyoto to Buenos Aires
Commentary by John C. Topping, Jr.
President of the Climate Institute since its
founding in 1986, Mr. Topping, who is co-author of a book
on the U.S. Clean Air Act, served from 1983 to 1986 as Staff
Director of the Office of Air and Radiation of the USEPA.
In the weeks since the Kyoto Conference there has been a surge
of international business sector interest in green energy development.
Nowhere has this been more apparent than in the auto industry
where the big three US auto makers, perhaps conscious that Honda,
Toyota, and Daimler-Benz appeared to be seizing high ground, have
begun to bolster their investments in electric, hybrid or alternate
fuel vehicles. Meanwhile, the remarkable breakthroughs in the
electric power sector with large-scale renewable investments by
such giants as Enron, BP, Shell and Tomen Corp. have continued
apace with regular announcements of significant scale ventures,
both on and off grid.
Outburst of Business Interest
This explosion of corporate interest in green energy development
may be driven by several factors - a perception of medium and
long-term profitability in sales of such vehicles or technologies,
hedging against the possibilities that competitors might get a
leg up in potentially lucrative markets, or a perception that
greenhouse emissions limitations may cause a fundamental shift
in fuel or engine choices. Whatever the cause, this marked change
in corporate energy investment may sharply lower the likely costs
of measures to protect the climate.
Yet the heartening post-Kyoto developments in the business sector
should not obscure the defects that make the Kyoto Protocol unlikely
to realize the ambitious goals of the Rio Climate Treaty, unless
significant strides are made between now and the November 2 -
13 Buenos Aires COP4 of the Framework Convention.
Lack of Incentives
A major shortcoming of the Kyoto Protocol is its failure to provide
near term incentives for green energy development or early emission
reductions. Binding targets for industrialized countries in a
2008 - 2012 time frame are too distant to provide much financial
inducement to entrepreneurs to develop greenhouse benign products
in 1998 or 1999. The current protocol provides little incentive
for emissions reduction within industrial countries before 2008.
More glaring perhaps than the absence of early reduction credits
is its failure to create even a level playing field for renewables
and efficiency applications. OECD country governments now spend
roughly seven billion dollars annually on energy R&D, only
about a fifth on renewables or efficiency. Regrettably the Kyoto
Protocol does little to redress this imbalance or to phase out
multi-billion dollar industrialized country subsidies to domestic
fossil fuel producers. The Kyoto Basket, a compilation of 28 voluntary
initiatives from which countries might elect greenhouse mitigation
measures tailored to their circumstances, seeks to create such
a level playing field and encourage markets for greenhouse benign
energy. Announcement by national governments and international
agencies by COP 4 of such initiatives would provide near-term
signals not provided directly by the Kyoto Protocol.
A second deficiency of the Kyoto outcome is the lack of a significant
inducement to developing countries to institute comprehensive
greenhouse mitigation measures. Given the wide disparity between
their per capita emissions and those of most industrialized countries,
few developing countries can be expected by COP4 to subscribe
to legally binding emissions limits which would lock in these
wide per capita differentials. Yet there is tremendous room for
reductions largely on a no regrets basis in rapidly industrializing
countries, particularly if industrialized countries made good
on their promises of the 1992 Rio Conference. Reorienting the
focus of OECD country energy R&D to encompass the needs of
the two billion, largely rural dwellers in developing countries,
who lack electricity, and active support of solar, wind and biomass
investments by international financial institutions would simultaneously
achieve development and environmental objectives. Encouragement
of high efficiency in electricity consuming products where demand
will grow rapidly - e.g. refrigerators, air conditioners and lighting
- will allow countries to avoid billions of dollars in capital
investments in new power plants. Thailand’s labeling program
is a useful model; the Energy Star Program which has spurred US
and Japanese firms to remarkable efficiency innovations may be
readily adaptable to key developing countries. Once fleshed out,
the Clean Development Mechanism set out in the Kyoto Protocol
may foster greenhouse benign energy innovation in developing countries.
Senate Opposition
Perhaps the largest obstacle to the implementation of the Kyoto
Protocol is its current unsalability in the US Senate where a
two-thirds affirmative vote to ratify is required for the US to
become a party. Prior to the Kyoto Conference the Senate unanimously
passed the Byrd-Hagel Resolution asking that the US not sign a
protocol with legally binding emissions limitations unless developing
countries agreed to binding limitations within the same time frame.
The voluntary commitments provision crafted by the Clinton Administration
to assuage US Senate concerns was deleted by COP3 after a fierce
attack led by several OPEC nations and other key developing countries
and quietly abetted by some US fossil fuel interests who believed
its defeat would doom the treaty in the Senate.
Yet Kyoto Protocol opposition in the US extends far past the
fossil fuel industry to include the nation’s leading labor,
business and farm organizations. The common thread among treaty
opponents is anxiety over potentially large costs; unionized labor
has an additional concern that differential carbon requirements
will provide a convenient excuse for employers to shift manufacturing
jobs to lower wage countries not subject to emissions limits.
If US Failed to Act
US non participation in an emissions control regime would ensure
its failure, causing industrial country parties to shirk their
treaty requirements and encouraging developing countries to pay
little heed to spiraling greenhouse emissions. If the world is
to avoid an environmental replay of the League of Nations experience,
both President Clinton and the Congressional leadership will need
to show a remarkable deftness and spirit of accommodation.
The President has one hole card in this negotiation - the potential
to propose reform of US environmental laws to permit integrated
environmental rulemaking. Although US environmental laws have
afforded a high degree of protection to human health and the natural
environment, their arcane nature, excessive rigidity and a structure
which pigeonholes problems as air, water and solid waste, costs
the US economy billions of dollars annually. Over the next decade
potentially significant air quality regulations are likely to
be implemented in the US involving fine particles, ozone, oxides
of nitrogen, sulfur oxides and mercury. Although these regulations
may yield significant health and ecological benefits, their overall
costs are likely to run many billions of dollars annually. Moreover,
the statutory rigidity of the Clean Air Act makes it very difficult
to develop these regulations in an integrated manner to optimize
benefits and minimize costs and virtually impossible to mesh them
well with significant water and hazardous waste rules.
Possible Reduction, Less Cost
By promoting an optimization of air quality and climate protection
rules the Administration might achieve reductions in both air
pollution and greenhouse gases at less overall cost than would
be incurred from air pollution regulations only, without such
integration. The President might break the post-Kyoto deadlock
by endorsing the idea of an integrated approach to climate change
and air pollution and appointing a commission to recommend to
the President and Congress necessary Clean Air Act amendments
to effectuate such a strategy.
The business community would welcome such a Presidential initiative,
both because of the cost savings and the much greater regulatory
certainty. If such a commission were to deliberate in 1998 and
recommend in early 1999 legislation to authorize a consolidated
strategy for pending air quality and climate protection measures,
this could be enacted by late 1999. Integration of air quality
regulations could free up savings to offset a major portion of
US greenhouse mitigation costs.
Potential for Ratification
Enactment of such legislation could lay the groundwork for ultimate
Senate ratification of an emissions protocol, ideally one incorporating
or accompanied by incentives for early reduction, procurement
and tax incentives to stimulate renewable, cogeneration and efficiency
applications, and incentives to developing countries to install
clean energy technology.
Only such an approach has a realistic prospect of effectuating
the global emission reductions necessary to stabilize greenhouse
concentrations.
