Oh no, Kyoto

AP

Get used to it

THE Kyoto Protocol, which binds industrialised countries to cut their emissions of greenhouse gases, was signed with much fanfare in 1997. For the United States, the deal was done by Vice-President Al Gore, who could fairly claim to have been one of the first public figures to focus attention on the dangers of global warming. Now, three years on, nearly a decade after the first UN treaty on global warming was signed, the protocol seems to have been dealt a lethal blow—and it was wielded by the man who defeated Mr Gore for the American presidency, George Bush.

In truth, the protocol was already in deep trouble even before Mr Bush took office. The most recent round of negotiations over the implementation of Kyoto, held in The Hague last November,ended in disarray. The EU had refused to accept the American arguments that the Kyoto targets should be met through the use of more flexible mechanisms, notably the free trading of emission rights (including trading between countries) and the claiming of credit for forest and agricultural “sinks” that absorb carbon dioxide, the principal greenhouse gas. Some European ministers made it clear that they wanted Americans to feel some economic pain more than they wanted a workable agreement. Unsurprisingly, the Americans made it equally clear that they could not possibly implement Kyoto as it stood, for the cuts it required would be far too swingeing.

Mr Bush has now dropped two big bombshells, which may conceivably kill Kyoto altogether. Last month, to the embarrassment of Christie Whitman, head of the Environmental Protection Agency, and other top officials, he abruptly announced a U-turn on a crucial aspect of his domestic policy on climate change: a campaign pledge to regulate CO₂ through domestic environmental laws. And last week, he made it clear that his long-stated opposition to the Kyoto targets was not open to post-election persuasion. Some of his aides have flatly declared that the Kyoto agreement is dead.

AP

A tree-lined sink

Mr Bush's actions sparked a ferocious storm of criticism from every corner of the world, from Europe to Japan, and from Canada to China. Much of this was mere posturing, with environment ministers claiming to be shocked, shocked by a state of affairs they already understood. In addition, admittedly, there was a layer of genuine surprise at the administration's clumsy handling of it all. One American energy boss, a veteran observer of climate-change diplomacy, said he was amazed by “the manner and tone of how all this has been handled: it was inexperienced and immature.”

The Europeans were only too happy to take the moral high ground. Yet, as their blindly rigid approach in The Hague showed, their position was hardly more tenable than that of the Americans. Quite fortuitously, two EU member countries are reasonably close to their Kyoto targets—Britain, thanks to its dash to gas in electricity generation, and Germany, thanks to the closure of much of East Germany's polluting industries. But the rest of the EU is hardly more likely to meet the Kyoto targets than is America. Mr Bush's apparent torpedoing of the deal could well have let hypocritical Europeans off the hook.

The dialogue between the EU and the Americans remains highly strained. After a curt reception of a delegation led by Margaret Wallstrom, the European environment commissioner, this week, Ms Whitman issued a curious statement that captures the Kafkaesque quality of current American thinking. She starts on a seemingly cheerful note: “I continue to be as optimistic as the president.” She then goes on to reiterate Mr Bush's hard line: “the Kyoto Protocol is unfair to the United States and to other industrialised nations because it exempts 80% of the world from compliance. That is why the United States Senate voted 95-0, to warn against sending the Senate a treaty that could damage the economy.” But she concludes by offering some hope: “Global climate change is a serious issue that this administration is committed to addressing by working closely with our friends and allies.”

Clear as mud

This statement has left everybody concerned with climate change scratching their heads and wondering whether the Kyoto treaty is really dead or not. There is a still more profound issue at stake, argues Maurice Strong, an environmentalist who was in charge of the earth summit in Rio de Janeiro in 1992. It was at that gathering that the then American president, Mr Bush's father, signed the Framework Convention on Climate Change, the landmark treaty that launched the process that led to Kyoto.

Mr Strong argues that the younger Mr Bush's attack on Kyoto could mean one of two things. Perhaps the president rejects the entire Rio process of international engagement on climate change. Alternatively, Mr Bush may object chiefly to the details of the Kyoto blueprint—the specific bundle of emissions targets and timetables agreed in 1997 in that Japanese city. If what Mr Bush opposes is the first, Mr Strong thinks that this “will be not just a setback, but an immense tragedy.” But if Mr Bush means the second, and if he comes up with some innovative counter-proposals, then the president might have provided a much-needed shock that revives the troubled treaty.

Working out what Mr Bush really means, and whether he will be the scourge or the saviour of the global environment, depends greatly on understanding the reasons for his opposition to Kyoto. This would be an easier task if Mr Bush had announced his policy in, say, a thoughtful speech on the matter. He has not, and his aides say that he will not do so until a cabinet-level panel completes an exhaustive review of the options.

However, the administration has already cited several arguments for opposing proposed action on climate change. It cites uncertainties about the science, the lack of participation of poor countries, the economic burden imposed on the United States and the political impossibility of getting the Kyoto treaty ratified in the Senate. All four of these warrant a closer look.

The alleged uncertainties of climate science are not a justification for Mr Bush's actions. It is notable that even such heavyweight companies as Ford, BP and Royal Dutch/Shell, all of which opposed Kyoto, have since shifted their positions towards supporting its general aims, if not its specific targets. This is because they recognise that the overwhelming consensus among the climate scientists is that global warming is real, that its effects will eventually be damaging or even catastrophic, and that the evidence of man's role in it is strong enough to warrant some action now.

The chief authority on this matter is the UN's Inter-governmental Panel on Climate Change, which includes most of the world's leading climate scientists. In the group's latest and most alarming assessment, it said that the earth could warm up by between 1.4°C and 5.8°C over the next century. Sceptics have tried to rubbish this prediction, pointing out that the IPCC gives no indication of relative probabilities for that range. Now, a team of (comparatively sceptical) experts at the Massachusetts Institute of Technology led by Henry Jacoby has completed that elaborate number-crunching exercise (see chart 1). By their reckoning, the median rise in temperature that the world can expect, if no action is taken, is a troubling 2.5°C.

The second argument put forth by Mr Bush's team is that developing countries such as India and China are not required to cut emissions, and so get a free ride while America suffers economic hardship. Under the Kyoto pact, only industrialised countries are required to cut their emissions of greenhouse gases during the first “commitment period”, to an average of about 5% below their 1990 levels by the end of this decade.

But does this mean that poor countries are getting off scot-free? It is true that China and India are already big emitters of greenhouse gases, and in a few decades may even be the world's biggest. Today, however, their contribution pales besides America's (see chart 2). It was the rich world that created today's problem by emitting greenhouse gases while industrialising over the past century; it is only fair, goes the argument, that rich countries act first to curb emissions. The Kyoto process envisages that poor countries will take on targets at a later stage.

That Mr Bush is challenging Kyoto on this point troubles many, because it suggests that he may have deeper philosophical problems with the Rio approach to climate change. His revelation that the poor are getting off scot-free rings hollow, for the notion of “common but differentiated” responsibilities is enshrined in the Rio treaty, which Mr Bush's father signed and which passed the American Senate unanimously. Even Republican insiders in the Senate say that there is room for compromise on this point—perhaps along the lines of a firmer commitment by developing countries that they will indeed sign up to Kyoto targets at a later stage.

A third objection from the new administration concerns cost. Some of this, too, is posturing. Claims by Mr Bush that America's “energy crisis” prevents it from taking action to curb emissions are bogus. There is no energy crisis in America, just a botched deregulation of electricity in California. Even so, the question of cost is paramount—and on this the Americans are more in the right than the Europeans.

The costs of the Kyoto Protocol, as with everything else involving climate change, are not known with any precision. Economic analyses range from zero or even net gain to staggeringly high. The IPCC reckons that a modestly flexible treaty would reduce global GDP by between 0.1% and 1.1% in 2010. But most economists agree that, if the treaty is implemented in a more flexible way, to allow market forces more play and encourage innovation and investment in clean technologies, the cost can be substantially reduced. Such provisions are envisaged in the language of the Kyoto pact, and were the starting-point for the Clinton team negotiating in The Hague. But they fell foul of the Europeans' suspicions of the market. The EU delegation insisted on a variety of measures, such as restrictions on emissions trading, that would have made the deal more rigid and more costly than it had been to begin with.

As for the fourth point, about congressional politics, there is no doubt that the Senate was never going to ratify Kyoto as it stood. But it did ratify Rio, and Mr Bush may now be underestimating the degree of public concern about global warming.

Fixing Kyoto

The game has moved on, however, and if there is now to be any chance of rescuing and improving Kyoto, some big changes must be made to its provisions. Chief among these are targets and timetables, which are key determinants of the treaty's economic cost. That is because one of the chief attractions of Kyoto to the environmental lobby is also its biggest drawback: the fact that it calls for sharp reductions in emissions over a relatively short period of time. That was meant to have the pleasing effect of galvanising politicians, and jump-starting the century-long process of dealing with climate change seriously.

The trouble is that front-loading deep cuts makes them much more expensive to implement. And that problem has only become worse as the American economy has churned out emissions over the past decade of growth. As a result, America's emissions are already well above their baseline of 1990, and higher by an even greater margin than the target set for the end of the decade (see chart 3). Many European countries also have a tough road ahead—which some have no real intention of travelling—but for most the required cuts are not as savage as America's.

Though few politicians on either side of the Atlantic pay attention, economists argue that there is a better way to reduce the economic burden of Kyoto: to introduce a “safety valve”. David Victor of the Council on Foreign Relations, a think-tank in New York, worries that governments will learn the wrong lessons from the Kyoto saga: that the demise of the treaty is due merely to the ambition of its targets and lack of will in the United States. In a timely new book, “The Collapse of the Kyoto Protocol” (Princeton University Press, $19.99), he argues that, while those factors are undeniable, the real cause of the treaty's collapse is the architecture of a pure “cap and trade” system, which allows ambitious targets but puts no limits on compliance costs.

A number of like-minded boffins agree that, since global warming is caused by the growing stock of greenhouse gases in the atmosphere (rather than any one year's level of emissions), strict caps in the short term make little sense. The cost of meeting a specific emission target can be astronomical if, say, firms do not have enough time to adjust or if they have long-lived capital assets. Mr Victor argues that Kyoto must be amended with some safety valves (such as extra credits that a country could issue if costs of compliance skyrocket in a given year), to ensure the economic burden is supportable.

The end game

Will the shock that Mr Bush has given to the Kyoto deal result in the adoption of any such sensible proposals? Since even Mr Bush's administration does not seem to know its own position on global warming, it is hard to say. The next few months will bring several opportunities for America and Europe to clash on this matter. Talks among several dozen environmental ministers are due later in April in New York. For that meeting, Jan Pronk (the Dutch environment minister who chaired the failed talks in The Hague last November) is preparing a robust new proposal that he hopes will bridge the ever-wider gulf between the EU and America. The Bush administration has also said America will still participate in the next round of the Kyoto process, due to be held in Bonn in mid-July. However, it is not clear that the taskforce now developing a new climate change policy will be finished by July—or what poor Ms Whitman will say in Bonn.

Given all this, several outcomes are possible. First, it is plausible that the entire Kyoto process may fall apart completely. This could happen suddenly at the Bonn gathering, or in painfully slow fashion thereafter. If the Europeans maintain their hostility to market approaches and continue their hypocritical attacks on Mr Bush, they could well push the talks off the rails.

Even more deadly, though, would be the revelation that Mr Bush's opposition to Kyoto extends beyond targets and timetables to the entire Rio process. However, such a derailment seems unlikely, as public support for action on global warming is strong in both Europe and—say some recent opinion polls—even in America. There are signs that Mr Bush's stridency on the Kyoto pact and his desire to open Alaska to oil exploration may be provoking a broader green backlash that could rally support in Congress for action on global warming.

Another possibility is that Europe forges ahead with the Kyoto treaty while America dawdles. Comments from Mr Bush's national security adviser and others suggest the White House believes that Kyoto will die without the United States. Not so fast, say various outraged European officials. Sweden's environment minister, Kjell Larsson, insists that “the Kyoto Protocol will not fail just because the United States doesn't join.”

Technically, he is right: the treaty can come into force if 55 of the signatories ratify it, including a big share of the polluters. In practice, that means the EU must persuade Russia and Japan to sign. Realistically, however, he might be talking nonsense. After all, any treaty that purports to address global warming without the support of the country with the biggest emissions, which also happens to be the world's biggest polluter, is surely a farce.

Not necessarily, argues Michael Grubb of Britain's Imperial College. He reckons that the only salvation for the process will come from bold, but measured, steps taken by the EU. He argues that Russia will ratify the treaty since it has much to gain from the sale of its plentiful stock of unused emissions. Japan is trickier, since it is even less likely to meet its targets than Europe; that is why the Japanese are as keen on market mechanisms and trading as was the previous American administration. In the end, though, Mr Grubb argues that Japan will not allow its refusal to ratify to provide the nail in the coffin for a treaty bearing the name Kyoto. By the time the next earth summit takes place, in September 2002, in Johannesburg, he reckons it may be in force, even without America.

The key, he argues, is for Europe to do this not with bitterness, and certainly not in the rigid, moralistic and ultimately costly tone that it adopted in The Hague. Rather, he argues for Europe to pursue as flexible an interpretation as possible, so that Kyoto becomes potentially attractive to the United States. By forging ahead, he notes that Europe would also show that it is not merely posturing over Kyoto. This may help persuade poor countries to commit voluntarily to targets in future, which in turn may lure America back to the table.

The last option, of course, is that Mr Bush surprises everybody and comes up with a credible set of proposals that revives the Kyoto negotiations, either by the Bonn meeting, or more likely some time thereafter. To do that, however, he will probably need to come up with some serious domestic initiatives on climate change, so as to claw back some of the credibility and goodwill he has lost on this issue in recent weeks.

Such an outcome seems less fanciful when one considers that it is not only green groups, or even the ordinary punter, that wants action on climate change. Many of America's biggest businesses, ranging from DuPont to United Technologies, and even to coal-fired utilities like AEP, support action on climate change and want regulatory certainty on the question of carbon. Those are the sorts of voices that Mr Bush should heed. One of Mr Bush's top lieutenants this week even insisted that his boss would be a world leader on this issue. The ultimate irony of the past two weeks' coruscating attacks on the American president is that he could yet turn out to be Kyoto's saviour after all.