July 1998

Kyotos Regulatory Burden

There has been a lot of economic analysis done on the costs of reducing greenhouse gas emissions. So far these analyses have concentrated on the costs to households and businesses of higher fossil fuel prices. In a new study, Mark P. Mills of Mills-McCarthy Associates Inc., looks at the costs of regulatory compliance, including staff time, consulting support, and legal services. For many businesses, according to Mills, these costs will exceed the costs of higher fuel prices. Other costs include the bureaucratic and administrative costs that will be financed by taxpayers.

The reason these costs will be so high is that under the Clean Air Act, once a substance is classified as a pollutant, any business that emits over 100 tons per year of the pollutant becomes a stationary source and subject to EPA regulation. Thus, according to Mills, such a classification for CO2 would bring one million businesses under the authority of the EPA.

Nearly all manufacturing businesses would become regulated, according to the study. The only businesses to escape would be average to small sized print shops and textile shops. The rest, totaling some 300,000 firms would be regulated. About 400,000 mid-sized to large commercial buildings would fall under EPA regulation, including 28 percent of all educational buildings and 25 percent of all medical/health care facilities. Over 150,000 farming businesses and over 100,000 commercial trucking businesses would also be regulated.

Mills also discusses the potential for reducing CO2 emissions or substituting alternative energy sources for fossil fuels. He points out that “Unlike emissions of certain substances that can be harmful, carbon dioxide emissions are not an unwanted by-product, or pollutant, arising from contaminants present in the basic fuel sources. Carbon dioxide emissions are the intended outcome of oxidizing the carbon in the fuel to obtain energy. There is thus no avoiding, or cleaning up, carbon from the fuel source. Carbon is the fuel source.” This sets the regulation of CO2 apart from the regulation of substances such as sulfur dioxide (SO2) which environmentalists claim is a good model for regulating CO2.

As to the use of alternative energy sources, Mills argues that such solutions “are not conceivable.” Achieving the same amount of growth in energy supply in the next two decades as was supplied by nuclear power over the last 20 years would require that “the entire portfolio of renewable energy sources would have to be increased by 3,000 percent.” Such a feat is impossible, according to Mills. In any case the growth in nuclear power over the last 20 years only accounted for 30 percent of the total increase in national energy supply, the rest was supplied by fossil fuels.

The study can be downloaded from www.greeningearthsociety.com

Canada Will Be Hard Hit by Kyoto

A new study by Standard and Poors DRI, a Toronto-based think tank, says the compliance with the Kyoto Protocol could cost the Canadian economy between $5,000 and $7,000 per person in lost production. The study also says that it could take ten years for the Canadian economy to recover. It goes on to say that Alberta and Saskatchewan, which will be particularly hard hit, may never recover. Albertas Premier Ralph Klein says that “Certainly the position as it now stands to reduce by six percent 1990 levels by the year 2010 is unacceptable and we think would have dire economic consequences for the province of Alberta” (Calgary Herald, July 5, 1998).

Little Progress Made in Bonn

The Clinton Administrations prospects of meeting the conditions set under the Byrd/Hagel resolution diminished significantly at the meeting of the subsidiary bodies of the United Nations Framework Convention on Climate Change in Bonn, Germany on June 2-12. The Byrd/Hagel resolution, adopted by the Senate last year, states that the U.S. Senate will not ratify any climate change treaty that does not include emissions reductions targets and timetables for developing countries, or that will be harmful the U.S. economy.

The Bonn meeting was held to iron out the procedural and methodological details regarding implementation of the Kyoto Protocol and to prepare an agenda for the November meeting in Buenos Aires. Key items on the agenda included the application of the three cooperative mechanisms the Clean Development Mechanism, emissions trading, and joint implementation developing country commitments, forestry and land use issues, among others.

No agreement could be reached regarding the cooperative mechanisms. Of the three mechanisms, emissions trading proved to be the most controversial. The U.S., supported by several developed countries, presented a proposal that would allow unlimited emission trading, while the European Union proposed caps on emission trading. In the end the delegates could only agree to a “compilation document” that included all of the proposals. The delegates agreed to clarify language regarding forestry and land use (Failsafe, July 1998).

The Group of 77 and China, a bloc of more than 100 developing countries, refused to accept an agenda item for Buenos Aires to discuss developing country commitments. A Saudi delegate said that the issue of developing country participation was settled in Kyoto and would not be revisited (BNA Daily Environment Report, June 8, 1998).

House Committee Keeps Tough Language

The House Appropriations Committee approved on June 26th a $7.4 billion spending plan for the Environmental Protection Agency. The bill also includes a provision stating that none of the money can be used “for the purpose of implementation, or in contemplation of implementation” of the protocol. The committee successfully fended off attempts to soften this language.

The Clinton Administration is complaining that the provision will prevent them from “setting energy-efficiency standards, pushing industry to adopt such measures, or looking for ways to give credit to companies that lower their emissions before the treaty is implemented.” The bill may face a veto, says the Administration, unless the anti-protocol language is removed (Greenwire, June 26, 1998).

Also, Congress cut $200 million from appropriations bills requested by the Administration for energy efficiency and development of renewable technologies, and essentially ignored President Clintons $6.3 billion, five-year climate initiative (AP Online, July 7, 1998).

NAFTA Countries Agree to Implement the Kyoto Protocol

Environmental ministers from the United States, Canada, and Mexico agreed on June 26th to work together to develop greenhouse gas emission offset projects under the Kyoto Protocol. The council for the Commission on Environmental Cooperation (CEC), formed under a side pact to the North American Free Trade Agreement, released a statement which reads in part, “Within the framework of the protocol, the CEC will work with the three nations and the private sector to develop North American opportunities for the Clean Development Mechanism (CDM).”

The CDM is a mechanism whereby developed countries can earn emission offsets by transferring “environmentally friendly energy technologies” to developing countries. Under the agreement Canada and the United States will transfer technology to Mexico. European Union officials, however, want to include Mexico among the industrialized nations under the Kyoto Protocol because it is a member of the Organization of Economic Cooperation and Development (BNA Daily Environment Report, July 2, 1998).

Kyoto Protocol Reassessed

An article appearing in Foreign Affairs (July/August 1998) takes a look at the long-term prospects for the Kyoto Protocol. The goal of the climate treaty is to stabilize emissions at levels that are not dangerous to the economy or ecosystems. While it is not certain what this means, the authors use the European Union recommendation of stabilizing emissions at twice pre-industrial levels. To reach this goal without developing county participation would require the participating countries to become net carbon sinks. And even this, according to the authors, would only slow global warming. If the industrial countries are serious about stabilizing greenhouse gas emissions, they must pay the developing countries to reduce their emissions, say the authors.

The authors point out that “it will be nearly impossible to slow warming appreciably without condemning much of the world to poverty,” unless large sums of money are spent on R&D to reduce reliance on CO2 emitting energy sources.

The Clinton Administrations plan does spend money on R&D, but, say the authors, the plan is faulty. The first stage of the plan calls for spending money on tax incentives and R&D expenditures “to encourage energy efficiency and the use of cleaner energy sources.” Then, according to the Administrations plan, “after a decade of experience, a decade of data, a decade of technological innovation,” whichever administration is in office in 2007 will cap emissions and implement a domestic trading system. However, at the end of the aforementioned decade U.S. emissions will be 20 to 25 percent higher than 1990 levels.

“It is simply laughable,” say the authors, “to forecast that Washington would then impose a cap on emissions stringent enough to turn the energy economy around in three to five years.”

Warmer Temperatures Means Less Variability

One of the predictions made by climate modelers is that increases in mean global temperature will cause temperatures to become more variable and record-setting temperatures will become more frequent. An article in Climate Research (April 9, 1998) tests this hypothesis by presenting the “results from 3 different empirical analyses used to address the interrelated issues involving changes in temperature variability and trends in record-breaking extreme temperatures.”

Using land surface air temperatures from the 5 latitude by 5 longitude grid cell, the researchers discovered that for the period 1947 to 1996, there was a “general decline of the within-year variance of the monthly temperature anomalies in most locations.” The period 1897 to 1996 also showed an “overall decline in most areas” of temperature variance. “The result indicates,” say the researchers, “that as the world warms, the intra-annual variance decreases at a statistically significant rate.”

The researchers then “investigate the trends in the variation of the daily minimum and maximum temperatures within a winter and summer month (January and July),” using historical temperature data from stations in the United States, the former Soviet Union and China. They find that “[o]verall, variance in daily maximum and minimum temperatures is generally trending downwards through the period of historical records.” Januarys decline, they found, is 10 times greater then Julys.

Finally, they explore the “temporal trends in the occurrence of record-breaking extreme temperatures.” They found “no evidence for an increasing frequency in the number of days in which record high temperatures occur, and a statistically insignificant downward trend in the frequency of days in which record low temperatures are set.”

The researchers briefly discuss the new modeling studies that predict about 1.5 C warming over the next century. “The results of these new models, along with our results and other recent findings, suggest that the climate of the next century will be characterized by a modest warming, primarily in the high latitudes in winter, with decreased season-to-season and day-to-day temperature fluctuations,” they conclude.

New Light Shed on Sunspots

Professor Terry Robinson and Dr. Neil Arnold at Leicester University have constructed a computer model that may provide an explanation of how sunspots effect the climate. The model takes into account higher elevations of the atmosphere than previous models as well as the electromagnetic radiation associated with sunspots. Earlier theories argue that electromagnetic radiation heats up the outer atmosphere but is mostly dissipated by the time it reaches the Earths surface.

The Leicester model shows how pressure waves, the size of the whole planet, build up and vary with solar activity. These pressure waves interact with the jet stream leading to large climate changes. The computer models predictions correspond well with observations, but it will be some time before they can be fully tested to see if predictions of the future are born out (The Independent (London), June 27, 1998).

Weird, Wild Weather is the Norm

An article by Seth Bornstein, of Knight Ridder Newspapers, argues that the perception that the weather “has gone stark raving mad” may be more a function of “overheated media beaming each catastrophe into living rooms, and a real estate boom that has placed growing numbers of people in disaster-prone areas,” than of global warming. While this year has seen more than its fair share of extremes, we should be slow to draw any conclusions.

Supporting this point is Nicholas Graham, director of experimental forecasts at the International Research Institute for Climate Prediction in La Jolla, California, who states, “Were kind of hypersensitive because the weather during the winter was really strange. But says Graham, “The weathers always strange. How often do you see an article saying the weather around the country has sure been normal?”

William Gray, a hurricane prognosticator at Colorado State University says that, “I dont think the case can be made that theres more extremes of weather now than in the past. Weve always had unusual weather floods, droughts, and everything.”

Gary Kerney, assistant vice president of Property Claim Services, which tracks catastrophes for the insurance industry, definitely feels the media has played a major part in the erroneous perception of more extreme weather. He says that when he entered the business in 1981, “There could be tremendous damage, death and injuries caused by severe weather events in Kansas, for example, and you never heard about them in the media reports” (The Arizona Republic, July 5, 1998).

Are the Worlds Coral Reefs in Danger?

Recently there has been a lot of concern expressed about the health of the worlds coral reefs. And of course global warming has been fingered as a possible culprit. Estimates of coral damage say that 10 percent of the worlds coral reefs have been damaged beyond repair and another 60 percent will decline dramatically over the next 40 years.

But, according to Robert Ginsburg, a marine geology professor with the University of Miami, there is no way to know whether these estimates are accurate. “There are vast reef areas remote from civilization that have never been studied,” Ginsburg said. “How can anyone make a global evaluation?” Ginsburg, the founder of the International Year of the Reef, hopes to find out the truth about the condition of the planets reefs. But as of yet we do not know enough to warrant predictions of their decline (The Miami Herald, June 8, 1998).


  • Like night follows day, the Clinton Administration has once again blamed a natural disaster on manmade global warming. While surveying the wildfires in Florida Vice President Al Gore once again took the opportunity to push his global warming agenda. He said, for example, “theres only a one in one-thousandth [sic] chance that this is normal without the effects of global warming factored in” (Reuters, June 30, 1998).

Gore also argued that “These fires offer a glimpse of what global warming may mean to families across America. And that is why it is so critical that we get on with the job of cutting greenhouse gas emissions. Working together, we can spare other communities like those we have seen here today” (The White House Bulletin, June 29, 1998). Gore took the opportunity to unveil a new website called Florida Wildfires and Climate Extremes maintained by the NOAA at http://www.ncdc.noaa.gov/o1/climate/research/1998/fla/florida.html#change.

  • In the June issue of the Atlantic Monthly Ross Gelbspan writes, “While the climate crisis contains staggering destructive potential, it also contains a extraordinary opportunity to expand the wealth and stability of the global economy.” He goes on to say that to keep the earths atmosphere in the “hospitable state we have enjoyed for the past 10,000 years,” the nations of the world will need to cut carbon dioxide emissions by 50 to 70 percent. This would require virtually eliminating gasoline powered cars and coal fired power plants. “[T]he economic activity this would stimulate,” according to Gelbspan, “could provide significant employment for oil and coal workers, who could be retrained to manufacture . . . windmills, solar-energy systems and fuel cells” (Greenwire, June 25, 1998).

GAO Critiques Clinton Climate Policy

The Clinton Administrations blueprint for implementing the Kyoto Protocol lacks quantitative goals, specific time frames, and cost benefit analyses, according to the General Accounting Office. GAO Director of Energy, Resources, and Science Victor Rezendes testified before the Senate Energy Committee on June 4 that the Administration lacked a sound analysis of stage 1 of its overall plan, a $6.3 billion tax and subsidy package. It also lacks a coordination plan for the 14 federal agencies managing the program.

Of the $6.3 billion to be spent on stage 1, $3.6 billion would come from tax incentives to stimulate spending on energy efficient transportation and housing. But, says the GAO, the Administration “has no estimate of the expected benefits [of these tax credits] and thus is not explicitly tied to the protocols target for emission reductions.” The GAO says that “it is uncertain how much” the $2.7 billion proposed for R&D will “help the United States meet the target specified by the protocol.”

According to the GAO, stage 1 “lacks a quantitative goal for reducing greenhouse gas emissions, does not have a specific performance plan, and contains incomplete information on expected outcomes and links to the protocols target.” Therefore, “stage 1 may not provide a firm foundation for stages 2 and 3.”

The GAO report confirms suspicions that the administration is less interested in the costs of reducing emissions controls than in acquiring the controls themselves.

Gore Hints at Government Shutdown

Vice President Al Gore threatened to shut down the federal government if Congress does not approve President Clintons environmental funding requests. “We are putting Congress on notice,” said Gore. “We will not tolerate stealth attacks that do unacceptable harm to our environment or threaten public health.”

Gore recalled that three years ago Bill Clinton vetoed bills that had environmental riders which “led to government shutdowns.” Gore is concerned about the administrations $6.3 billion climate change program. He criticized the failure of Congress in prior years to “take early steps to confront climate change.” An unnamed White House source suggested that the veto threat was premature (Associated Press, June 16, 1998).

Cooler Heads Science Briefing

The Cooler Heads Coalition sponsored a science briefing on June 19 for congressional staff and media. The event featured climatologists Dr. Roy Spencer of NASAs Marshall Space Flight Center and Dr. John Christy of the University of Alabama, Huntsville.

Referring to the recent hand wringing over record high temperatures, Christy noted that record temperatures have to occur sometime and that the latest spike tells us very little about climate change. He argued that other selective statistics could just as easily be cited to argue against global warming. If one were to look at the last 100 years one would find that 37 states experienced their record temperatures before 1940 while only 13 experience their record temperature after 1940. Does this mean we are experiencing global cooling?

He also said that there is always a temperature spike with the dispersal of El Nio that releases an enormous amount of energy into the atmosphere. It happened in 1983 (though moderated by the eruption of El Chichon) and again in 1988. The 1988 temperatures and the comment by James Hansen of the Goddard Space Flight Center to Congress that “we can state with about 99 percent confidence that current temperatures represent a real warming trend rather than a chance fluctuation over the 30-year period” started the global warming scare.

Christy and Spencer are best known for their work with the satellite temperature record, which is a record of tropospheric temperatures. They discussed the importance of that data. The satellite data, according to Spencer, should be the most robust data if global warming occurs. The global warming signal should be 5 percent higher in the satellite data than in the surface temperature data. Yet the satellites record a slight cooling trend over the last 20 years.

Dr. Christy addressed recent challenges to the satellite data. One paper claimed to show that the satellite data actually show warming. The author, however, used only 9 percent on the satellite data the data with the least coverage and the greatest error. Each attack of the satellite data has disregarded the fact that this record is independently validated by a 98 percent correspondence with the radiosonde balloon data. These same scientists seem to put a lot of credence in surface temperature data that only cover 10 percent of the globe, nearly all of which is in the Northern Hemisphere.

Another Modeling Error

One of the key assumptions in the general circulation models (which are the basis for the IPCCs global warming predictions) relates to the sensitivity of climate to changes in the amount of energy reaching the earth. The models currently assume that every Watt per meter squared (W/m2) of energy added to the earth will cause the temperature to rise by .55C. A doubling of atmospheric carbon dioxide, according to the model assumptions, will add 4.5 Watts per meter squared (W/m2) of energy to the earth causing the temperature to rise by 2.5C. This is the basis for model projections.

A review article appearing in Climate Research (April 9, 1998) claims that this number is too high. Dr. Sherwood Idso, of the U.S. Water Conservation Laboratory, discusses some of the research he has conducted which downgrades considerably the amount of warming that may occur from an increase of anthropogenic CO2 emissions.

Idso first looked at changes in atmospheric water vapor that occurs in Phoenix, Arizona each year with the advent of the summer monsoon. By plotting daily minimum and maximum temperatures for the last 30 years as functions of atmospheric water content he was able to calculate a climate sensitivity factor of 0.17C per W/m2, considerably less than the model assumption. He then obtained data for the annual range of solar radiation reception and compared that with the annual temperature range at 81 locations within the United States. He found a climate sensitivity of 0.17C per W/m2 for the non-coastal stations and 0.087C per W/m2 for coastal stations (coastal temperatures are moderated by the ocean).

By combining the two results and accounting for the relative global percentages of land and water, Idso was able to estimate a global sensitivity factor of 0.113C per W/m2. Thus a doubling of atmospheric CO2 would increase temperatures by no more than 0.45C. Idso then looked at different global data sets on various factors such as cloud cover, radiation, and temperatures over water and land and consistently found a sensitivity factor of about 0.10C per W/m2 that would lead to a temperature change of 0.4C.

Since about 1900, however, there has been a 0.6C rise in temperature corresponding with a rise of only 2.45 W/m2 due to human greenhouse activity. Idso believes that other factors, such as energy output from the sun, random climatic fluctuation, or recovery from the Little Ice Age, can account for the additional warming.

The History of El Nio

Vice President Al Gore recently held a press conference in which he implied a connection between manmade global warming and more frequent and more intense El Nio events. The history of El Nio, however, shows no such correlation. An article in Nature (May 28, 1998) reviews El Nios past and finds that several El Nio events “that occurred before 1880 had effects at least as intense and wide-ranging as those associated with the current event.” This is true for the events that occurred in 1396, 1685-88, 1789-93 and 1877-79, all of which occurred before the buildup of manmade greenhouse gases and when temperatures were much cooler than they are now.

One of the most severe El Nio events occurred in 1789-93 and caused severe droughts in Southern India, Australia, Mexico, the Atlantic islands and southern Africa. In the Madras Presidency of India the droughts led to 600,000 deaths, about half the population. The droughts were periodically interrupted by “highly destructive rainfall.” One three-day period at Madras experienced 25.5 inches of rain. As with so many of the catastrophic scenarios trotted out by global warming gloomies, the purported link between El Nio and global warming cannot withstand historical scrutiny.

La Nia is On the Way

The strong but shorter than average (8 months compared to 2 years) El Nio event that we have experienced is quickly giving way to its opposite, La Nia. Whereas El Nio is characterized by an accumulation of hot water in the Pacific Ocean near Peru, La Nia is characterized by colder than average sea surface temperatures in the same area. Sea surface temperatures have dropped by 15 degrees Fahrenheit from early May to early June.

The result could be a reversal of the weather patterns experienced last year. The northwestern United States could experience an abnormally cold and wet winter, while the South, which was cold and wet last winter, will be hotter and drier. And although the Peruvian fishing industry will profit from the turnaround, the eastern coast of the United States can expect a resurgence in hurricane activity which was nonexistent last year (The Washington Post, June 19, 1998).

Dont Expect Extreme Climate Swings

Scientists have found that violent temperature swings are uncommon during warm interglacial periods. Evidence from sea bed sediments going back 500,000 years show that temperatures only swing over a range of about one degree Celsius during interglacials like the one we are currently experiencing. In contrast, the latest Ice Age experienced violent temperature changes over a range of 10 degrees C from cold to warm and back again in relatively short periods of time (The Guardian [London], June 11, 1998).


  • In a speech at a Democratic National Committee fundraiser President Bill Clinton explained the continuing conflict between U.S. and Canadian commercial fisherman. He said, “I can tell you, one of my big problems with our best partner in the world, Canada, is that our salmon fisherman are fighting all the time . . . You know why? Because all the salmon are moving north, so there are more in Alaska and fewer in Canada, because of climate change.” Apparently the White House got this idea from a paper written by David Welch of the Pacific Biological Station. But Welch claims the paper said no such thing. “Its not global warming thats causing these fish to be intercepted. Its fisherman who catch a whole bunch of Canadian fish at the same time they catch U.S. fish” (Anchorage Daily News, June 19, 1998).
  • President Bill Clinton has nominated UN Ambassador Bill Richardson as Secretary of Energy, where he will oversee the federal governments alternative energy subsidy programs. Clinton said that a top Richardson priority will be global warming. “I believe that this challenge will require the greatest energy from our labs, from our scientists and technology, from an Energy Department that can work clearly with the private sector on what plainly will be one of America’s most important priorities for years and years to come,” Clinton said (Reuters, June 18, 1998).

Kyotos Cost to California

A new report published by Consumer Alert and the Pacific Research Institute finds that Californians would pay dearly to comply with the Kyoto Protocol. California relies heavily on fossil fuels. Oil accounts for 43.4 percent and natural gas 25.8 percent of Californias energy use. It also relies on large amounts of electricity imported from other states, half of which is produced with coal.

Taxes on energy use or on carbon emissions could raise Californias electricity bill from $2.6 billion to $10.4 billion, an increase of 12.5 to 50 percent. A tax on motor fuels of $.50 per gallon would add at least $7.7 billion to Californias annual driving costs, a 40 percent increase; and a $1.00 tax would add $15.4 billion, an 80 percent increase. A BTU tax on natural gas, oil and coal of $.60 would add 6.1 percent to Californias energy costs and a $1.00 BTU tax would increase annual costs by 10.6 percent.

The study notes that “People in some groups are especially vulnerable to energy cost increases, such as older people living on fixed incomes.” Eleven percent of Californias population is made of people 65 or older, many of whom live on fixed incomes. “A larger share of their income would have to go for higher energy and energy tax costs.” For a copy of the study, contact Consumer Alert at (202) 467-5809.

WEFA Completes Fifty State Analysis

WEFA, Inc. has released its analysis of the cost of complying with Kyoto. U.S. citizens in the year 2010 would see job losses, lower incomes and price increases across the board. Food prices would increase 11 percent, medicine 14 percent, and housing 7 percent. Real income for a household of four would drop by $2,700 in 2010. And 2.4 million jobs would disappear. Gasoline would rise by $.65 per gallon and home heating oil would rise by 70 percent (Investors Business Daily, June 15, 1998).

CRA Attempts to Reconstruct Clinton Administration Cost Estimates

The Clinton administration, represented by Janet Yellen, chair of the Presidents Council of Economic Advisors, has provided estimates of the costs of complying with the Kyoto Protocol in several congressional hearings. Though Yellen has not released the analysis she has laid out her assumptions. Charles River Associates (CRA), an econometric modeling firm, has taken those assumptions and reproduced the Administrations analysis. According to CRA:

  • Under the Administrations assumptions of worldwide emission trading the U.S. would purchase between 82 and 88 percent of its permits from abroad. The European Union and others wish to restrict that number to 50 percent.

  • Removing the series of assumptions about cost savings from emission trading, the cost of complying with the protocol increases from $7 billion in 2010 to $53 billion and permit prices increase from $14 to $193 per ton of CO2.

  • The Administration only takes into account the costs to energy markets (direct costs). Other studies take into account the effects of higher energy costs on other markets (indirect costs) which lead to estimates two to four times greater than direct costs alone.

  • The Administration assumes “extremely rapid replacement of coal-fired power plants by new natural gas plants by 2008.” “There is some inconsistency,” according to CRA, “between a very low permit price and achievement of these assumed changes.”

  • Using more realistic assumptions CRA believes that permit costs of $170 are plausible “even if there is a restricted form of international emissions trading.” This could lead to GDP losses 10 times greater than Administration estimates, increased household energy bills of $850 per year, and a rise in gasoline prices of $.50 per gallon.

The study concludes, “Given her assumptions, Dr. Yellens analysis is internally consistent and compatible with mainstream economic analysis. However, her costs estimates include only direct costs . . . and very optimistic assumptions . . . about the economys ability to reduce emissions at low cost.” Furthermore, the study concludes that, “If these assumptions [about worldwide, unlimited emissions trading] fail to materialize, the Administrations estimates of permit prices and GDP costs will need to be adjusted upwards by a factor of ten or more.” Download at: www.api.org/news/980603ChasRiver.pdf.

Dont Bank Russias Credits Just Yet

The Clinton Administrations economic analysis, which claims that the cost of reducing emissions 31 percent by 2008-2012 will be negligible, relies on the estimated availability of emission credits from Russia. Under the Kyoto Protocol Russia must reduce emissions to 1990 levels by the target date. As a result of its economic collapse, Russia is expected to have excess emission credits to sell in 2008. A new Russian government study, however, estimates that Russia will have between 273 million to 546 million metric tons of carbon equivalent in allowances for the years 2008-2012 which is much lower than previous estimates. Moreover, Russia may decide to bank credits to be applied to emissions reduction targets beyond 2012 that may emerge from the Kyoto Protocol, which could mean higher compliance costs in the U.S. (BNA Daily Environment Report, June 12, 1998).

Federal Oil Subsidies

Greenpeace has commissioned a study from Industrial Economics, Inc., looking at the level of federal subsidies to the oil industry. The study claims that in 1995 the federal government subsidized the oil industry to the tune of $11.9 billion per year (adding in the cost of defending the Persian Gulf oil supply raises the figure to $35.2 billion). Though its a bit of a stretch to classify tax credits (letting people keep their own money) as subsidies, the study does identify some true subsidies that are unwarranted.

The Strategic Petroleum Reserve, for example, which costs taxpayers between $1.6 and $5.4 billion in 1995, protects the oil industry from “disruptions in global oil markets and energy price shocks.” The study points out that private methods of avoiding the harsh effects of energy price shocks already exist. Futures markets and speculators have long filled the role of smoothing prices for all kinds of commodities. Oil companies themselves may find it useful to stockpile petroleum reserves.

Other subsidies include research and development programs, shipping subsidies, export assistance through the U.S. Export-Import Bank and the Overseas Private Investment Corporation, and liability protection. The study can be downloaded at Greenpeaces web site: www.greenpeace.org/~climate/oil/fdsuboil.pdf.