Kyoto Negotiations

Russian President Vladimir Putin’s chief economic adviser, Andrei Illarionov, has formally recommended that Russia reject the Kyoto Protocol.  Ratifying Kyoto, he said, would mean setting up bodies to limit economic growth not only on a national level, but also on a supranational level. An organ of legal interference in the internal affairs of the country would be created.

The Kyoto Protocol, Dr. Illarionov explained, is based on flawed science which claims there are man-made factors behind global warming.  He believes that Russias economy will grow so fast over the next decade that emissions will increase substantially.  If Russia agrees to Kyoto it would have to constrain economic growth or be forced to buy emissions quotas from other nations.
Dr. Illarionov went further when speaking to journalists on April 14.  He said, First we wanted to call this treaty an interstate Gosplan, but then we realized that a Gosplan is much more humane, so we should call the Kyoto Protocol an interstate gulag.  In a gulag, people were at least given the same rations, which did not lessen from one day to the next, but the Kyoto Protocol proposes decreasing rations day by day.

The Kyoto Protocol is a death treaty, no matter how strange this seems, because its main purpose is to stifle economic growth and economic activity in countries that assumes obligations under this protocol.  Some reports suggested that Dr Illarionov even compared the treaty to Auschwitz.  (Reuters, Interfax).

The British Governments Sustainable Development Commission is worried that the United Kingdom will not be able to meet its Kyoto targets because its economy is behaving in too American a fashion.  The Commission, chaired by former Green Party head Jonathan Porritt, frets in a report to Prime Minister Tony Blair released April 14 that, American-style patterns of growth in aviation, road transport and fuel use are wholly unsustainable and will damage the quality of life of present and future generations.

Mr. Porritt remarked that, while economic growth has been faster in the UK than any other European country, this is accompanied by much greater inequality in income, and a long-hours, high-pressure employment culture more characteristic of American society.  The report calls on the UK government to use taxation to affect the price of energy and fuel and calls for ministers to adopt more “joined up” thinking over the next five to 10 years.  (Daily Telegraph, Apr. 14)

Aviation demanded and received a separate, special deal in the Kyoto Protocol, but several governments and the European Union are now actively exploring ways to reduce greenhouse gas emissions from airplanes.  The goal is to reduce airline passenger demand, and the methods being considered are additional taxes on air travel or including airlines in a cap-and-trade system. 

Emissions from aviation are substantial.  For example, in the United Kingdom aviation accounts for 15 per cent of carbon dioxide emissions, and this is estimated to grow by two thirds by 2050.  Cheaper flights and more passengers account for most of the projected increase.

The German Environment Ministry is arguing that government regulation is a necessity and has suggested that aviation be included in the EUs proposed carbon cap-and-trade system. On the other hand, the British Airports Authority has reacted to speculation by insisting that it would only enter an emissions trading system if it were on a global scale.  Caroline Corfield, head of media relations for BAA, has stated, If you put prices up, it will have an impact on demand.

 Trucost, a group which advises investors on corporate environmental and social risk, estimates the average price increase for airline tickets will be 2 per cent and will continue to increase as the cost of reducing emissions rises.  This will most affect low-income passengers, who tend to be more price sensitive.  (The Observer, Mar. 24, Edie, Mar. 24.)

In Canada, Action Plan 2000 earmarked $210 million in government funding to promote technologies that reduced greenhouse gas emissions in industry and transportation and gave $125 million to cities to encourage use of such technologies.  Another $100 million went to promote foreign demand for these Canadian solutions.  Despite these efforts, Canadas greenhouse gas emissions in 2002 were the highest ever.  This puts Canada well off the mark of reducing emissions by 5.2 per cent from 1990 levels as called for in the Kyoto Protocol.

 We seriously underestimated the difficulty of getting reductions and overestimated the payoff from new technologies, said a senior official working on climate change.  Nevertheless, last month the Canadian federal budget allocated $1 billion more to support new environmental technologies.  Ottawa is also offering the one ton challenge, in which it calls on individual Canadians to reduce their greenhouse gas emissions by one ton.  (Toronto Star,  April 5 and 6).

At a July 2002 hearing on the Bush Administrations climate initiative, James Connaughton, Chairman of the Council on Environmental Quality (CEQ), testified that implementing the Kyoto Protocol would reduce U.S. economic output by up to $400 billion in 2010.  In contrast, a 1998 study done by President Clintons Council of Economic Advisers (CEA) found that the costs of implementing the Protocol would be $7 billion to $12 billion annually in lost output. 

The General Accounting Office has analyzed the stark difference between the two studies and concluded that there are two principal reasons for it.  First, the Bush Administrations estimate assumed that all reductions would be achieved domestically, while the Clinton Administrations estimate assumed that compliance would be largely achieved through the purchase of emissions reductions from other nations.  Second, the economic growth rate assumed by the Bush study (2.3 percent a year for 1995 through 2010) was higher than the growth rate assumed by the Clinton study (2.1 percent for the same time period), and thus forecast a higher level of emissions.  (GAO report, January 30, 2004).

litionRepresentatives Wayne Gilchrest (RMd.) and John Olver (DMass.) introduced on March 30 a House version of S. 139, the Climate Stewardship Act, known as the Lieberman-McCain bill after its two chief Senate proponents. Ten Republicans and ten Democrats joined as original co-sponsors of H. R. 4067.

The bill was referred to the Science Committee and to the Energy and Commerce Committee. One of the co-sponsors is Rep. Sherwood Boehlert (RN.Y.), chairman of the House Science Committee. However, Rep. Joe Barton (RTex.), the new chairman of the Energy and Commerce Committee, has a long record of opposition to energy-rationing legislation. A weaker version of S. 139 was defeated on the floor of the Senate last fall by a vote of 43 to 55.

According to the New Zealand Herald (Mar. 20), New Zealands recipients of emissions credits may be unable to sell them in their biggest potential market, the European Union.

The newspaper points out that, “The rules proposed by the European Commission, and now adopted with some amendments by the European Parliament’s environment committee, would shut out from the European emissions trading system credits arising from Kyoto forests – those planted since 1990 on land not previously forested – because they do not achieve permanent emission reduction from sources.”

New Zealand had been expecting to use these credits to cover growth in its emissions and provide a further 50 million metric tons of credits to sell to Europe. As an example, one company, Meridian Energy, sold credits it had received as a subsidy for its wind farm operation to the Netherlands government at NZ$10 a ton.

The Herald quoted Federated Farmers president Tom Lambie as suggesting, “If New Zealand was unable to sell credits to the Europeans, it raised a question about whether New Zealand should remain a party to the protocol.”

The European trade group for auto manufacturers has voiced its objections to EU emissions reduction plans privately. According to Scotlands Sunday Herald (Mar. 21), “A confidential memo from the European Automobile Manufacturers Association to the Environment Commissioner, Margot Wallstrm, claims that the proposed cuts will seriously damage the industry. The association represents Ford, General Motors, DaimlerChrysler, BMW, Fiat, Renault, Peugeot Citroen, Volvo, Volkswagen and four others.”

The Herald says that the memo suggests that the emissions cuts from 165 grams of CO2 per kilometer in 2002 to 120 by 2010 would raise the cost of a car by 2,700 (nearly $5,000) at an annual cost to the EU of 33.5 billion ($60 billion).

The memo states, “Car buyers are not prepared to pay any extra for cleaner, more environmentally-friendly cars. An over-ambitious carbon dioxide reduction policy that is essentially only car-technology focused, would impose massive additional costs per car along with tremendous negative societal costs for the EU economy, and would threaten the competitiveness of the European car manufacturing industry. Adverse impacts for the EU economy would include: a move of car production to non-EU countries, disappearance of large/premium cars, plant closures, sizeable job losses, decreased trade balance, reduced income tax and lowered economic growth.”

The memo was backed up by one from the Japan Automobile Manufacturers Association, which represents Nissan, Honda, Toyota, Mazda, Mitsubishi, Suzuki, Yamaha and six other car makers. The Japanese memo says, “Considering the increasing trend towards globalization, competition in todays automobile industry is getting extremely fierce. We advise that the economic situation of this key industry be taken into account when considering the introduction of increased environmental legislation.”

Environmental groups reacted angrily to the documents. Duncan McLaren of Friends of the Earth Scotland told the Herald, “The EC must stand up to the car industry on this issue. If the industry fails to deliver on its promises then the EC should legislate to force it to cut pollution. Past experience tells us that the threat of legislation is the best way to stimulate real improvements and technological innovations.”

The Connecticut state legislature is currently considering SB.595, which aims to reduce the states greenhouse gas emissions using Kyoto-like measures.  The bill has passed out of a joint committee and has the backing of the Governor.  Section 3 of the bill seeks to mandate reductions in greenhouse gas emissions to 1990 levels by 2010; 10% below 1990 levels by 2020; and 75% to 85% below 2001 levels by 2050 (unless another year is set). 

 A study by Charles River Associates for the American Legislative Exchange Council brings home the effects of the bill on the quality of life of Connecticut residents.  The study finds, A conservative estimate is that costs per Connecticut household of meeting these caps would be between $700 and $1300 per year over the next three decades, accompanied by the loss of about 20,000 jobs.  Connecticuts state product would be reduced by about 1.3% from baseline levels by 2020, and these losses would either remain stable or grow, depending on whether costs of sequestration level decline or remain constant.  The states budget problems would be worsened, with lower wages and incomes leading to a loss in tax collections of about $250 million per year by 2010.  Moreover, the bill would directly impose costs on the state to set up the trading system, and would raise energy costs for state and local governments.

Lewis Andrews of the Yankee Institute in Connecticut goes further, saying in an op-ed that the bill could cost Connecticut as much as $8.1 billion.  He concludes, Connecticut facing record budget deficits due to lower-than-expected revenues in 2002 and 2003 should not adopt an overly ambitious greenhouse gas reduction program that costs taxpayer dollars, destroys jobs, and does nothing to protect the environment.

 Copies of the Charles River Associates study are available by request from the American Legislative Exchange Council (

Several members of the European Union are having a hard time complying with the EU Commissions deadline for filing their detailed plans for meeting Europes Kyoto targets. The German government was rocked by open political warfare between the governments Socialist Party Economics Minister, Wolfgang Clement, and its Green Party Environment Minister, Juergen Tritten, until Chancellor Gerhard Schroeder personally intervened on the side of Clement.

Tritten had proposed emissions reductions from the current level of 505 million metric tons per annum to 488 million tons in 2005-2007 and to 480 million tons in 2008-2012. Clement, a key figure in Schroeders unpopular but necessary economic reforms, had objected strongly to these targets, saying, “Growth isn’t possible that way. I can’t support that as Economy Minister” (Reuters, Mar. 26). Schroeder decided on minimal cuts in the near future, with a target of 503 million tones in 2005-2007, followed by a deeper cut to 495 million tons in 2008-2012 (AP, Mar. 30).

The powerful German environmental movement reacted furiously to the news. Greenpeace energy policy expert Sven Teske told the German news wire DPA (Mar. 30) that the agreement “has nothing more in common” with the Greens’ policies.

“With this compromise, Red-Green [the ruling SPD-Greens coalition] has bowed out from climate protection,” Teske said. DPA concluded, “Clement, by rigidly defending industry’s interests, had cast a dark taint on the credibility of German climate policy, the Greenpeace expert charged.”

The argument seems to have affected Herr Schroeders attitudes towards energy suppression agreements like Kyoto. On March 26, he publicly questioned whether the EU should go ahead with its plans to implement Kyoto targets in the absence of Russian ratification. Reuters reported (Mar. 26) that he told a news conference, “We hope that Kyoto will be ratified, for example by Russia. But if that doesn’t happen, it will distort competition at the expense of European and especially German economy.” Reuters went on, “Without giving a direct answer, he asked: What happens with the emissions trading system if Kyoto is not ratified?”