Unequal Costs of Kyoto
By S.Fred Singer
Published in Washington Times , June 17, 2002
There is general agreement that the Kyoto Protocol, rejected by the Bush Administration as "fatally flawed," is ineffective in reducing the accumulation of greenhouse gases in the atmosphere. But debate is still ongoing about the cost of imposing mandatory caps on the emission of carbon dioxide, and thereby on fossil fuels that produce the energy needed for transportation, electric power generation, and other uses. Caps translate to a stiff tax on gasoline and electric bills.
Overlooked in the debate has been the fact that the economic impact of Kyoto on the United States would be at least four times greater than on Europe. Perhaps this accounts for the enthusiastic support for the Protocol by European states. Angered by US rejection of Kyoto, British environment minister Michael Meacher last month launched yet another attack on the White House, accusing it of responsibility for making the earth uninhabitable! A lurid report just released by the UN Environment Program also predicts a series of unimaginable climate disasters.
The chorus of doomsayers is swelling in anticipation of the August conference in Johannesburg celebrating the 10-year anniversary of the Rio climate treaty. However, even the most passionate supporters of Kyoto must admit that, if punctiliously enforced, it will moderate a calculated temperature increase by only 0.05°C in the year 2050. That's an unmeasurable one-twentieth of a degree Celsius!
Opinions on the costs of Kyoto have been divided. During the Clinton-Gore years, tame economic advisers in the White House claimed that the costs would be zero - or even negative - because of the savings from using less fuel. On the other hand, the U.S. Energy Information Administration and most independent economists put the annual cost at around 2 percent of GDP; some estimates go as high as 4 percent. That works out to about $3000 per year for each US household.
To make matters even worse for Kyoto supporters, a group of economic specialists under the leadership of Yale professor Robert Mendelsohn have concluded that higher CO2 levels coupled with a moderate climate warming would actually produce economic benefits and raise GDP. This scholarly conclusion was published by the prestigious Cambridge University Press in 1999 and has never been challenged. It removes any rationale for the Kyoto Protocol and would logically argue that we should burn more coal, oil, and gas rather than less.
Couple this to the fact that the scientific basis for Kyoto is extremely shaky. The just-released U.S. Climate Action Report to the UN, which created a huge flap by misrepresenting the White House position, can charitably be described as junk science. The best global data, obtained from weather satellites, show no detectable warming trend in the earth's atmosphere. This finding invalidates the results from theoretical climate models, the same ones that are used to predict substantial future increases in temperature. While no one would deny the existence of a greenhouse effect, it appears that the models still need further work before they can be trusted to support drastic policies like Kyoto.
In July 2001, in Bonn, Germany, 178 countries decided to move ahead with Kyoto, while the United States stood aside. The Kyoto-Bonn accord allows countries to subtract carbon sequestered in "sinks," like forests, from their permitted emissions of CO2. (At the November 2001 meeting in Marrakech, Morocco, Russia was able to increase its allowance for such sinks.) Bonn also permits the trading of emission allowances, a feature that would reduce compliance costs and also yield considerable financial benefits to Russia and other Eastern European nations (EE) that sell their unused allowances.
Yale economist William Nordhaus has modeled the economic impacts of Kyoto-Bonn, both with and without US participation. A highly regarded environmental economist, he is often sympathetic to the promoters of global warming. But his results, detailing the costs of Kyoto, including emission trading, are an eye-opener: Kyoto-Bonn would reduce the economic competitiveness of the U.S. with respect to the European Union (EU) and other high-income (OHI) countries, principally Japan, Canada, and Australia.
As summarized in the journal Science (vol.294, pp. 1283-84, 9 November, 2001): If the U.S. had joined in the Kyoto treaty with other industrialized nations, its total abatement costs, discounted over time, would have amounted to $2.2 trillion, while Europe's costs would have been only 0.5 trillion, less than 25%. OHI costs would have been even lower, a little over 10% of those of the U.S. Russia and other Eastern European nations would have gained $1 trillion through the sale of CO2 emission permits.
Without US participation, US costs of course drop to zero, while EU's drop to $0.3 trillion and EE's gain drops to $0.2 trillion. The reason for the lower European costs is that without the U.S. the Protocol achieves even less than it did before Bonn. With US participation, Kyoto might have achieved a greenhouse-gas emission reduction (compared to 1990) of five percent; without the US, this drops to one percent.
When the US Senate, in July 1997, rejected any Kyoto-like treaty by unanimous vote, it did so partly because developing countries were not required to cut their emissions - even major powers like China, Brazil, and Mexico. The Senate did not consider the effects of Kyoto on US competitiveness with respect to Europe. The Congress should study Prof. Nordhaus' remarkable report - and so should the White House -- as they toy with schemes to place Kyoto-like restrictions on US energy use.
S.Fred Singer is Professor emeritus of Environmental Sciences at the University of Virginia and visiting Wesson Fellow at the Hoover Institution at Stanford University.