March 1998

Cost-Free Treaty

The Clinton Administration has finally released its official economic analysis of the Kyoto Protocol. Testifying before the House Commerce Committee on March 4, 1998, Janet Yellen, chairman of the Presidents Council on Economic Advisors, stated that “our overall assessment is that the economic cost to the United States in aggregate and to typical households of attaining the targets and timetables specified in the Kyoto Protocol, will be modest.”

The administration estimates that the cost of achieving the Kyoto targets will range from $7 to $12 billion per year in 2008 to 2012, assuming that the administration is successful in including the developing nations in an emissions trading scheme.

The administration also estimates that the price of emissions will range from $14 to 23 per ton of carbon equivalent. This will lead to an increase in household energy prices of between 3 and 5 percent, fuel oil prices of about 5 to 9 percent, natural gas prices of 3 to 5 percent, gasoline prices of 3 to 4 percent and electricity prices of 3 to 4 percent.

The administration is claiming that electricity deregulation will save electricity consumers about $20 billion per year, offsetting the cost of reducing greenhouse gas emissions. The administration has not as of yet proposed an electricity restructuring bill. “It is becoming clear to me that the administration support for restructuring [is] a way to mask the costs of complying with this treaty,” responded Subcommittee Chairman Dan Schaefer (R-Colo). “I would like the benefits of restructuring to flow to the consumers.”

These price increases would raise the typical households yearly energy bill by between $70 and $110, according to the administrations numbers. Electricity restructuring, however, will save the average household about $90 per year.

The administration also argues that the protocol will not hurt the competitiveness of U.S. industry. Energy, according to Yellen, only constitutes 2.2 percent of the overall costs of U.S. industry. She also argues that there are already substantial energy price differences across countries and this has not cause U.S. firms to go over seas.

Finally, Yellen says that there will be no “significant aggregate employment effect” resulting from compliance with the protocol. Some jobs from energy intensive industries will be lost, but “a large number of jobs will be created in other sectors many of them high-tech jobs paying high wages.” She also claimed that, “The President is firmly committed to assisting any workers who are adversely affected during the transition to a climate-friendly economy.”

Can Federal R&D Do the Job?

President Clintons $6.3 billion plan to create technology to reduce greenhouse gas emissions has started a debate on the merits of federal research and development funding. Joseph Romm, deputy assistant secretary with the U.S. Energy Department argues that federal funding has led to improvements in energy conservation.

He points to better halogen lights and more-fuel-efficient cars as evidence. It is difficult though to “tease out what gains stem from government efforts, and what might have been done anyway.”

The Environmental Protection Agency (EPA), for example, reviewed its Green Lights Program at the behest of the General Accounting Office (GAO). The GAO found that the voluntary program (2,300 companies pledged to upgrade lighting for 90 percent of their floor space over 5 years) fell far short of its goal replacing only 34 percent of lighting.

More importantly, EPA failed to account for other factors that may account for the changes. Electric utilities, for example, were already offering financial incentives to customers who upgraded lighting when Green Lights was instituted. Also, one-quarter of the firms in the program were makers and sellers of lighting, those most likely to already use state-of-the-art lighting.

The Clinton administration wants to approval for an additional $277 million for the Partnership for a New Generation of Vehicles, a joint venture between the Department of Energy and the Big Three auto makers to develop a car that gets 80 miles per gallon. Many are skeptical that it will be successful given the prevalence of low, stable energy prices.

“In the 1970s, energy-efficiency improvements were almost all driven by higher prices,” said William OKeefe, executive vice president of the American Petroleum Institute. “People had incentives to substitute new technology for energy use,” he said. “Improvements have been slower in the 90s because the price of energy, particularly crude oil, has been very low” (Investors Business Daily, February 23, 1998).

The Administrations Negotiating Strategy

On March 4, 1998, Undersecretary of State Stuart Eizenstat reassured the House Commerce Subcommittee that the U.S. was committed to getting “meaningful” developing country participation. Under questioning, however, Eizenstat admitted that the Clinton Administration will sign the Kyoto Protocol as it now stands even if developing countries do not agree to participate. When asked whether this takes away the U.S.s leverage to get developing country participation, Eizenstat replied that it will give negotiators greater leverage because it will show that the U.S. is serious about stopping global warming.

Kyoto Protocol Can be Fixed

Robert Stavins, professor of public policy and Chair of the Environment and Natural Resources Program at Harvards Kennedy School of Government, said at a briefing for Capitol Hill staff members that the Kyoto Protocol is flawed, but can become a good foundation for future greenhouse policies if it is fixed.

To fix the protocol it will be necessary, says Stavins, to include at least four developing countries: China, Brazil, India, and South Korea. Stavins argued that limiting the protocol to developed countries will cause energy intensive industries to relocate to developing countries, driving up future emission control costs for these countries.

Another remedy for the protocol is clearly defined and workable rules for an international emission trading system. Such a system, argues Stavins, will drastically cut abatement costs for the industrialized countries. He claims that the U.S. could cut its compliance costs by as much as 90 percent with the right system.

Stavins also recommends that rather than distribute emissions allowances free of charge to U.S. firms, the U.S. government should auction the allowances, using the proceeds to lower federal taxes on labor and investment (BNA Daily Environment Report, February 27, 1998).

Kyoto is Doomed to Fail

In an article in Foreign Affairs (March/April 1998), Richard N. Cooper of Harvard University argues that the Kyoto Protocol as it now stands is “bound to fail.” The Kyoto framework is a set of agreed-upon national objectives that allows each country to comply in its own way. This will be achieved through trading emission rights.

The problem, as Cooper sees it, is that it will be impossible to arrive at an agreed upon distribution of emission rights between rich and poor countries, precluding developing country participation which will be needed to stabilize greenhouse gas emissions.

There are three reasons, says Cooper, why collective action on climate change will be difficult. First, “Effective restraint must . . . involve all actual and prospective major emitters of greenhouse gases.” Second, “the rewards from restraints on greenhouse gases will come in the politically distant future, while the costs will be incurred in the political present.” Third, reducing greenhouse gas emissions “will involve changes in behavior by hundreds of millions if not billions of people, not merely the fiat of 180 or so governments.”

Other problems, of course, involve the high costs of compliance. If a family of four in the U.S. wishes to sustain its current level of emissions it could be required to pay $2,200, says Cooper. U.S. transfers to the rest of the world could be as high as $130 billion a year.

What then does Cooper recommend? “[M]ost of the reduction in the rich countries must come at or near the points of final demand, where the number of consumers is greatest,” says Cooper. “The reductions must be achieved by some combination of taxation, exhortation, publicity, and environmental education.”

Since it is necessary for governments to change the behavior of its citizens it may be far easier for the parties of the Framework Convention on Climate Change to agree to a common use of emission reduction instruments rather than to a national allocation of emission rights. The instrument that Cooper favors is a carbon emission tax.

Monitoring such a tax could fall under the authority of the International Monetary Fund, since all “important” countries, with the exception of Cuba and North Korea, “hold annual consultations with the IMF on their macroeconomic policies, including the overall level and composition of their tax revenues.”

The IMF would report to a monitoring agent of the treaty and these reports “could be supplemented by international inspection of major taxpayers such as electric utilities, and the tax agencies of participating countries.

Finally, Cooper points out that carbon taxes would yield $750 billion worldwide, some of which should go to the United Nations to pay for refugee programs, peacekeeping and other UN programs.

Leading Climate Change Myths

John Christy, as a key contributor to the 1995 IPCC report, “participated with the lead authors in the first and the final drafting sessions, and in the detailed review of the scientific text.” He writes in the Montgomery Advertiser (February 22, 1998) that much of what passes for common knowledge in the press regarding climate change is either “inaccurate, incomplete or viewed out of context.”

Many of the misconceptions about climate change, Christy contends, originate from the six-page executive summary, the “Summary for Policymakers (SP).” It is the most widely read and quoted of the three documents published by the IPCCs Working Group I, but had the “least input from scientists and the greatest input from non-scientists.”

The “true believers,” as Christy calls them, rests their entire case on one sentence from the SP; “The balance of evidence suggests a discernable human influence on global climate.” Christy is quick to point out that “2,500 IPCC scientists did not write, sign or otherwise endorse the Summary for Policymakers” nor the one sentence statement.

Other statements in the SP are equally disturbing. It states, “. . . the 20th Century global mean temperature is at least as warm as any other century since at least 1400 A.D.” This statement, argues Christy, is not meaningful. The temperature of the Earths atmosphere has warmed in the last 150 years but the Earths atmosphere is cooler now than it was 1,000, 5,000, or 10 million years ago. Warming over the last 150 years occurred because the planet has been emerging from the Little Ice Age, which lasted from 1400 to 1850.

Christy says that the line was lifted, out of context, from the scientific text to make it look like the global warming of the last century is due to human factors while ignoring the fact that the warm weather 1,000 years ago could not have been manmade.

So what does the report really say? Essentially this: we know that climate has always changed naturally. But, “We cant actually measure human impact on the climate, however, because we dont know enough about how or why the climate changes naturally.”

Sun, Sun, Sun, Sun, Sunshiny Day

A new study published by Switzerlands Federal Institute of Technology corroborates recent studies that find that variations in the suns brightness contributes significantly to climate change. The institute pointed out in a statement that “Very small variations in the suns brightness are sufficient to cause noticeable changes in climate.”

The study reconstructed the suns brightness since 1874 and adjusted the measurements to take account of the 11-year sunspot cycle. The Swiss astronomers, Sami Solanki and Marcel Fligge, who did the study also found that the earth has warmed up faster in the last 20 years than would be expected from such variations which they attribute to “other sources” (AAP Newsfeed, February 23, 1998).

Clouds and Climate Change

One of the unresolved issues in climate change research is how aerosols affect the nucleation (a process which concentrates the available water in a small number of large ice crystals) off different types of clouds. Aerosol particles act as “cloud condensation nuclei” which increase the reflectivity of cloud-tops.

According to Nature (February 26, 1998), “cirrus clouds ice-particle clouds that lie between a few thousand meters up and the tropopause, at 10 to 20 km exert an overall heating effect, because their reflectivity at solar wavelengths is low, and they absorb more rising infrared radiation than they emit to space from their very cold cloud tops.”

Recent studies have suggested that cirrus clouds can evolve from jet contrails, which consist of soot and sulphuric acid particles. Because of the altitude of aircraft emissions the affect can be comparable to natural and athropogenic sources.

One of the implications of these findings is that if jet contrails are indeed partially responsible for warming then this must be taken into account when determining the temperature affects of CO2 emissions. “How changes,” concludes Nature, “in tropospheric aerosol concentration, including aircraft emissions, will affect all types of cloud is a vital question in assessing the overall climatic impact of anthropogenic emissions,” Nature concludes.

Ancient Climate Change

Climate scientists have searched into the far past, using ice core and deep ocean setiment samples, to compile climate records that contain clues about climate change. Until now, however, records of interglacial periods (as we are experiencing now) were scarce.

Now researchers have now been able to complete a detailed record that extends nearly 2 million years into the past. The results and analysis of this record is reported in a recent article in Science (February 27, 1998).

The record shows that temperature variations are far greater during glacial periods (ice ages) than during interglacial periods. North Atlantic sea temperatures, for example, varied by as much as 3 to 4.5 degrees C during glacial periods 450,000 and 350,000 years ago, while they only varied by about 0.5 to 1 degree C during the interglacial period which fell in between.

Another finding is that “the record shows that climate varies on regular cycles lasting form 1,200 to 6,000 years, in glacial and interglacial periods alike.” “Whatever the cause of the climatic gyrations,” says Science, “the records suggest that the worst climate swing likely in the present interglacial is another Little Ice Age.”

The article concludes, “a push toward warmth during an already-warm interglacial might boost climate shifts to devastating proportions. Then again, because past climate swings have been smaller in warm periods, continued global warming might dampen them even further.”

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