Can We Salvage Kyoto?
By Bill Moore
In Part One of EV World's interview with the author of The Collapse of the Kyoto Protocol and the Struggle to Slow Global Warming, David Victor outlined how the underlying foundation of the treaty is the concept of emissions trading.
Nation's would set targets for their greenhouse gas emissions. They would be also be allocated permits that could then be traded internationally. A nation that successfully reduced its emissions below its target could let permit holders sell their credits to companies in other countries who were not meeting their target emissions. The overall goal would be to gradually reduce GHG emissions worldwide, especially among the leading industrialize countries.
The system is based on a US model set up among utilities and other emitters of sulfur dioxide, the principle agent in the formation of "acid rain." While the SO2 system worked well in the United States, Victor has grave reservations about its enforceability at the international level. His concern is that nations that didn't like how their permits were allocated or had other issues with the treaty could simply walk away from it, as the United States did recently.
A Windfall and A Shorter Winter
Of equal concern - - the second major shortcoming of the currently Protocol - - is the potential transfer from the United States of billions of dollars into the coffers of the Russian Federation and Ukraine.
According to Victor, when the treaty was negotiated in Kyoto in late 1997, the Russians and Ukrainians bargained hard to base their emissions on industrial production levels set in 1990, prior to the collapse of their economies.
Since that time, Russian industrial output has slumped dramatically and their GHG emissions are 25-40% lower than they were in 1990. The result is a huge potential windfall for these two nations and a few others formerly behind the old Iron Curtain. Because GHG emissions have been cut due to severely depressed national economies, these nations would have lots of permits to sell to the West.
Perhaps somewhat cynically, the Russians actually would like to see some global warming, Victor contends. Apparently the Russian's reason that global warming could open up huge tracts of land to agriculture and other uses, as well as extend growing seasons in other parts of the country where winters have been historically long and cold. From their perspective, a little warming could be good thing, assuming that this warming doesn't inadvertently trip some climate trigger and thrust the world into another of the many recurring Ice Ages that mark the planet's geologic and climate history.
"The scientists in Russia and the Ukraine, especially in Russia where they have done an enormous amount of work on global warming, are basically of the mind that a little bit of global would actually be good for Russia. So, they don't want to do anything about global warming."
"What they demanded in Kyoto," Victor alleges, "were allocations of emission permits that are much, much higher than Russia and Ukraine will ever possibly need, in part because their economies collapsed. . ."
"What people worried about is that all of the difference between their actual emissions and their target they can sell in this emissions trading program. We've done the calculations here at the Council on Foreign Relations and estimate that Russia and Ukraine would make somewhere US$20-170 billion just by selling that windfall to Western countries." Victor agrees that a giant share of this would, in all likelihood, come from the United States, where a booming economy the last 10 years has virtually torpedoed any chance of meeting its Kyoto target.
Victor is not only concerned about the wisdom of transferring US$20-170 billion to Russia and Ukraine, most of which he thinks would probably end up in Switzerland, but he also thinks this issue is a real "show-stopper,"politically for countries like the US.
"I think, politically, it's very hard to sell this idea to the (US) Senate that we are somehow going to be buying compliance on paper, but actually we're not doing very much at the margin to control global warming. We're sending a whole lot of money to Russian and Ukraine.
Should Developing Nation's Be Compelled to Comply?
As if a huge and questionable transfer of wealth from the United States to Russia and others wasn't a sufficient obstacle to selling the Protocol to the American Senate, where the treaty must be ratified, Kyoto also harbors a couple of other "landmines".
The third questionable element of the treaty, as it is currently written, is its exemption of the developing nations of the world from initial compliance.
Nations like China the second largest emitter of CO2 after the US and India are both exempt from emissions compliance. Opponents in the US Senate - - including Senator Chuck Hagel (R-Ne) - - as well as the powerful energy lobby argue that until China and India, as well as other advanced developing nations, are compelled to reduce their emissions, there is little point in accepting the treaty.
But on this point, Victor said he disagrees with the Bush Administration and other Kyoto opponents.
"The worry is that if you don't put limits on the emissions from the developing countries that industry is going to move from the United States and other industrialized countries and into the developing world. Economists call that carbon leakage. And so although you're controlling emissions in the industrialized world, you're not actually solving the problem."
"It's going to be very hard, essentially impossible, to get the developing countries to agree to meaningful limits right now for a couple of reasons," Victor explained. "One of them is, so far the industrialized countries haven't done very much. So, the developing countries are waiting to see whether or not the industrialize countries are willing to put their own money into this issue that industrialized countries, themselves, say they care so dearly about."
"And then the emissions from the industrialized countries are much higher per capita than they are from the developing world. US emissions are almost ten times higher on a per capita basis than the emissions from China. So it seems to me its fair that the US and the industrialized nations take the lead on this. And that then once they've created a system and demonstrated that it works, that we can then bring the developing countries in some kind of a meaningful way."
No Meaningful Way to Measure All Greenhouse Gases
Convincing skeptical American or other Western politicians to accept a treaty that they see would put their respective nations at a potential economic disadvantage in a highly competitive global marketplace, one increasingly dominated by goods made in China and other advanced developing nations, will be hard enough. But if there's a final nail in the coffin of Kyoto, Victor believes it's the World's inability to even accurately measure greenhouse gas emissions.
"It turns out that technically, it is essentially impossible to monitor emissions from any of those sources or (carbon) sinks except for the CO2 released by burning fossil fuels," Victor stated. And so my argument has been continuously over the last decade that if we are really serious about dealing with the global problem we ought to start with that part of the problem that we can monitor easily and which also happens to be most of the problem. And that then we can build up the institutions around that and then add the other gases later on."
"It is sort of a technical issue, but it turns out to be important because we're talking about an emissions trading system that's worth trillions of dollars in which tens or hundreds of billions could move across borders every year. It's akin to creating a new form of money and we need to be able to monitor it accurately where these emissions are coming from so we are sure every ton of emissions is covered by a ton of emission permit."
Victor explained that the reason CO2 is so easy to measure is because we know precisely how much of it is found in the fossil fuels we burn. "Fossil fuels are mostly carbon. We know how much carbon they contain. We can weigh them. We know the quantities of fossil fuels consumed in industrial societies, because we have lots of data sources about that. So, technically that's a relatively easy problem to solve."
Should We Start Over or Work with What We Have?
"That's the sixty-four thousand dollar question," replied Victor. "There are several pathways to get from the current impasse to a system that actually can work."
"I've argued in this book that the Kyoto Protocol is more or less a dead-end and so the efforts to bring the Protocol into force as it stands are unlikely to work. And even if they did work, they'd create a treaty that couldn't expand and adjust over time to create a sensible, long-term architecture."
"But at the same time, scraping the whole thing and starting over at square one would be diplomatically very costly and would eliminate a lot of very productive things that have been done over the last few years."
Victor believes that one of the most valuable parts of the Kyoto Protocol is its system for reporting the emission of greenhouse gases. He thinks we can use the system and its data to build a better regulatory framework. "A good data system is the backbone of any serious regulatory scheme," he said.
It is his view that the nations should use the basic Kyoto Protocol as the starting point for renegotiations of its "core obligations." He thinks the emission targets and timetables need to be rethought, especially distortions like the Russian windfall. He would also revisit the monitoring issue, setting aside for now all greenhouse gases except CO2 generated by fossil fuels.
The most important element he wants renegotiated is the penalty mechanism for countries that don't meet their obligations. Right now, no one knows what it will cost to institute policies and technology to control GHG emissions. Countries that miss their targets could be severely penalized financially as they hunt the globe looking for permits to buy at potentially exorbitant prices. Victor, along with a number of other economists would like to see the incorporation of a "safety valve" that sets a realistic target price for permits. A country could pay a fee, he suggests something between US$10-50 a ton for emissions over their target limit.
"The nice thing about that mechanism is that it would put a ceiling on the cost of compliance. So firms and governments would know immediately from day one exactly how much it would cost to comply with the treaty, and that would eliminate all those worse case scenarios that are making so hard to bring the treaty into force."
Is There Any Political "Wiggle Room" Left?
Given the angry response of the Europeans after President Bush unilaterally withdrew the US government from further Kyoto negotiations, it is clear that a lot of people have stakes their political reputations and futures on the Protocol. Europe's answer to the Bush decision was to call on the Russians, the Japanese and others to move ahead with negotiations and ratification without the United States.
We asked Victor if the Europeans are too committed to the current Protocol framework to be brought back to the bargaining table.
"It's a big problem right now because the Europeans have been very vocal in their support of the Kyoto Protocol. It's a European diplomat who is the president of what's called the Conference of the Parties, which is the formal mechanism for fleshing out the last details of the Kyoto Protocol. It was the Conference of the Parties in The Hague last November that ended in such disaster. Europe has a lot riding on the Kyoto Protocol and even worse, many of the key players in Europe are from Green Parties and are very reluctant to be the first to announce that they don't think the Kyoto Protocol as written is viable."
"I think they've painted themselves a little bit into a corner and to some degree they may be delighted that Bush Administration is taking the heat right now for having done such damage to the Kyoto Protocol."
Victor stated that while the press has focused on the White House's "ham-handedness" in pulling out of the treaty, he also said that much of the blame also must rest with the Europeans for not being able to get beyond Kyoto. As might be expected, European governments have reacted negatively to The Collapse of the Kyoto Protocol. Victor did tell EV World that the analytical community, however, has been generally favorable to book and its recommendations.
"I think it is still too early to make a judgment on life after Kyoto. So many of the political forces have lined up completely in favor of the Kyoto Protocol, in which case they're not really willing to budge yet, or completely opposed to Kyoto Protocol, in which case they're not interested in talking about alternatives to Kyoto because they rather like the idea that the whole thing could go down in flame."
Victor believes certain people in key industries like the coal industry are delighted by the American President's action. However, he warns, "I think they've got to be pretty careful because in 2004 or 2008, they may not have their friends in the White House. Now is the time for them to put into place a system that makes sense."
David Victor personally believes that an alternative to Kyoto is already in the "works," to use his word.
"The evidence of that is going to be the European governments and the US are going to lower their expectations for what can be achieved at the big conference that going to happen in July in Bonn (Germany)."
He thinks both sides are going to realize that this is a serious issue and that they "need to find some way to work together and that's going to lead to some kind of alternative to Kyoto."
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