Kyoto Negotiations

COP-8 Declaration under Fire

A draft “Delhi Declaration on Climate Change,” which is to be adopted at the Eighth Conference of the Parties to the UN Framework Convention on Climate Change (COP-8) currently underway, is being attacked by both the European Union and the G-77 and China. The declaration was rejected by the EU as “disappointing, unacceptable, and biased.”

“We find the declaration concentrated on adaptation and not on the mitigation of greenhouse gases,” said Thomas Becker, an EU spokesman. “There is no mention of the Kyoto Protocol in the declaration.” The EU also objects to the attempt to link global warming to sustainable development. “To link these issues completely will not be wise from a negotiation point of view,” said Becker. “We are not at all pleased with trying to start such a trend” (BNA Daily Environment Report, October 29, 2002).

The EUs objection to the linkage is probably due to the U.S.s ability to redefine sustainable development in terms of poverty eradication and economic development, which are not compatible with Kyotos objectives. Indeed, the draft recognizes, “that poverty eradication, changing consumption and production patterns, and protecting and managing the natural resource base for economic and social development are overarching objectives of, and essential requirements for, sustainable development.”

 The draft also talks about technological advancement and transfers, capacity building, economic diversification, and strengthening of institutions, things that the U.S. insisted should be the focus of the World Summit on Sustainable Development (WSSD) in Johannesburg. It also states, “Policies and measures to protect the climate system against human-induced change should be appropriate for the specific conditions of each Party and should be integrated with national development programs, taking into account that economic development is essential for adopting measures to address climate change.”

The G-77 and China also expressed disappointment in the document and demanded that it contain a call “to urge ratification of the Kyoto Protocol by all parties that have not done so.” The declaration should also name Africa as the region suffering the most from climate change (Outlook India, October 29, 2002).

What will Canada do next?

Canada cant seem to make up its mind on what to do about Kyoto. On October 24, the federal government released a plan that would require major reductions in carbon dioxide emissions and a 20 percent reduction in energy use by individual Canadians. The plan would reduce emissions by 180 megatons, but fall short of the Kyoto target by 60 megatons. The government hopes this shortfall can be accounted for through a variety of other measures, including claiming credits for natural gas and hydroelectric exports to the U.S.

The plan has met with significant opposition from the provincial governments and industry. On October 28, energy and environment ministers from Canadas 10 provinces and three territories, gathered at a one-day meeting in Nova Scotia, rejected the federal governments plan to implement Kyoto. “All of the provinces have agreed that the federal plan is inadequate, and now we have a new plan to develop a national plan,” said Lorne Taylor, Albertas environment minister. “We have a provincially led process, instead of a federally led process, and thats the way it should have been in the first place.”

The provinces have come up with their own 12-point approach to address climate change. It calls for “full and informed” input from all Canadians, a plan that ensures that no province will bear an unreasonable share of the burden and that respects provincial and territorial jurisdiction. It also says that all “real emissions reductions since 1990 should be recognized, that all credits for forest and agricultural sinks go to the province or territory that owns them, that the plan maintain the competitiveness of Canadian industry, that the federal government should continue to demand credit for “clean energy” exports to the U.S., and that the plan should include incentives to encourage the use of energy sources that emit less carbon (BNA Daily Environment Report, October 29, 2002).

Canadian Prime Minister Jean Chrtien has rejected requests from the provinces to meet with them and to delay Kyoto ratification. “My intention as long as something unusual doesnt happen is that we will ratify Kyoto before Christmas,” he told reporters. I think some people only have one goal in mind, and that is to postpone and postpone. It is not what we said to Canadians in the Speech from the Throne. We made a clear commitment that there would be ratification before Christmas.” Chrtien added that he wont be meeting with the premiers and territorial leaders until next year (Toronto Globe and Mail, October 30, 2002).

On the international front, it appears that Canada has backed away from its request to be allowed to count natural gas and hydroelectricity exports to the U.S. towards its Kyoto target. Instead, it is asking for an assessment of the role of trade in less greenhouse gas intensive energy sources in meeting Kyotos objectives. If the new proposal is accepted, Canada would not object to having the old proposal dropped from the agenda.

Russia: Will it or wont it Ratify Kyoto?

Russia has sent mixed signals on whether it will ratify the Kyoto Protocol. At the World Summit on Sustainable Development (WSSD) in Johannesburg, Russia stated that it really had no economic interest in ratifying the protocol, but then reversed that statement a short time later and said that it would ratify by November.

Now Russia says that it could be as long as a year before it ratifies Kyoto. The protocol has been sent to various ministries for an assessment, said Nikolai N. Pomoshnikov, an official with Russias Ministry of Foreign Affair. Ratification would require amending various domestic laws, which would take three months to a year.

Pomoshnikov also said that “long-term impacts [of global warming] are still not clear and so there is a need to understand the implications of climate change.” To that end Russia has announced that it will hold a World Conference on Climate Change in Moscow in Fall 2003 (Outlook India, October 26, 2002).

Russia Wants to Burn More Coal

Russian President Vladimir Putin wants his country to make greater use of its coal reserves, which are estimated at 3 trillion tons. But this would make it difficult for Russia to meet its Kyoto target, not to mention that it would eat up all of its available “hot air” emissions credits that many countries are counting on to meet their own targets.

The Kyoto Protocol cannot come into effect unless either the U.S. or Russia ratifies the treaty. Since the U.S. has already said it wont ratify, it is up to Russia to win the day. At the World Summit on Sustainable Development in Johannesburg, Russian Prime Minister Mikhail Kasyanov said that “ratification will take place in the very near future.” But Putins call for exploiting coal puts this commitment into doubt yet again.

Environmentalists are not pleased. “By preparing to burn more coal for its energy needs, Russia aims to free more natural gas for lucrative exports to Western markets,” said Natalia Olefirenko, climate programs coordinator with Greenpeace Russia. “It is a flawed approach, and it amounts to a sell-out of the Russian environment because growing use of coal is likely to adversely affect the countrys ecological balance and cause acid rain” (Asia Times, October 3, 2002).

EU to Miss Kyoto Target

The International Energy Agencys Chief Economist, Fatih Birol, said that the European Union will not be able to meet its Kyoto targets even with new policies to promote the use of renewable energy.

Even if the EU were able to increase the share of renewable energy to produce electricity to 30 percent by 2030, it would still fall short of Kyoto. “Fossil fuels will still dominate,” said Fatih. “Even with these alternative policies [on renewables] we dont reach the Kyoto targets.”

In a business as usual scenario, the EUs emissions of carbon dioxide would rise to 3,146 million tons in 2010 and to 3,829 by 2030, compared to the 1990 baseline of 3,080 tons. With the above-mentioned renewable policies, emission would only be 4.9 percent less than the business as usual scenario in 2010, but still higher than the 1990 baseline. In 2030, emissions would be 19 percent less than business as usual, but still higher overall (Reuters, October 2, 2002).

EU to Chase the Hydrogen Holy Grail

The European Union has announced that it will initiate a major investment project to develop hydrogen power. According to European Commission President Romano Prodi, this effort will be just as important to Europe as the space program was for the United States in the 1960s, but “We expect an [even] better technological fallout,” he said.

The EU plans to spend $2.09 billion from 2003 to 2006 on hydrogen-related renewable energy development. Apparently the EU sees this as a hydrogen race with the U.S. Earlier this year the Bush administration launched the Freedom Car project, a fuel cell research effort, and has asked Congress to provide $150 million in funding.

But there is little reason to believe that such efforts will yield dividends. As noted by the Wall Street Journal (October 16, 2002), “Meanwhile, for all the hope surrounding hydrogen, it is still years, if not decades, away from making significant inroads into the power and transport markets, which currently account for most of the worlds oil and gas use.” Hydrogen is much more expensive than traditional fuels and would require massive infrastructure investments.

What the Journal fails to mention is that hydrogen is not an energy source, but merely a way to store and transport energy. That is due to the fact that there are no free standing sources of hydrogen. It must be extracted from water or other sources, which requires energy. It then must be re-oxidized to extract the energy. Energy is lost throughout the process, so that when all is said and done, less energy is produced than was used to get the hydrogen in the first place. The only way to overcome that is to circumvent the laws of thermodynamics.

Solar Power Plant Not So Impressive

Arizona Public Service Co. has begun construction on what will become one of the largest solar power plants in the world and could supply electricity for up to 3,000 homes. Solar power advocates are “oohing” and “aahing” over the power plant, but even this solar power behemoth is not that impressive.

Herb Hayden, director of APSs solar energy program, acknowledges that the biggest obstacle for solar power is that it costs twice as much as electricity produced from conventional fuels, but he thinks the project will break even. APS had been able to cover most of its costs on other solar projects by selling the power at a premium through its Solar Partners Program. Participating customersabout 3,000pay a monthly premium (read donation) for 15-kilowatt-hour blocks of renewable power. “It doesnt cover the costs, but it shows the product has value,” Hayden said.

The power plant, which will eventually produce 5.5 MW of electricity, will occupy 50 acres near the airport in Prescott, Ariz. By comparison, a small-to-midsize natural gas power plant that produces 250 MW of electricity occupies only a few acres. To equal that output using solar technology would require the use of about 2,300 acres.

APS currently has seven other solar power projects which produces a total of 1.7 MW of electricity and has committed to spending $12 million a year on solar power through 2004. A large part of the cost will be covered by surcharges on electricity bills, from 35 cents per month for residential customers to $39 per month for industrial customers. The surcharge raises about $20 million per year.

Hayden may be forgiven his somewhat misguided optimism since his company has little choice in the matter. The Arizona Corporation Commission approved in 2000 the Environmental Portfolio Standard, which forces investor-owned utilities to generate at least 1 percent of the electricity they sell from renewables. APS must generate 25 MW of electricity from renewable resources. They might as well smile about it.

Energy Bill Gets New Life

As the Congress neared adjournment this week, the energy bill appeared to be dead as House and Senate conferees continued to disagree on major outstanding issues. The decision today to hold a lame duck session after the November elections means that congressional staffers can continue to try to put together a deal, which could then be voted out and sent to the president in late November or December.

As with most conference committees on major bills, there have been many rumors about the negotiations but little certain information. The three climate titles, which the House conferees voted overwhelmingly to reject, are reportedly back in the mix at least in some form. Indications are that the Bush administration has been pushing for a bill and have let it be known that they could accept several major anti-energy provisions, including the Renewable Portfolio Standard for electric utilities.

U.S. Climate Negotiator Downplays Kyotos Trade Implications

Dr. Harlan Watson, the U.S. senior climate negotiator, said in Brussels on October 9 that it is possible that the U.S. could face trade disputes due to its unwillingness to ratify the Kyoto Protocol, but that such challenges were unlikely to succeed. Environmental activists have already filed suit against the Overseas Private Investment

Corporation and the Export-Import Bank, U.S. government agencies which environmentalists allege are responsible for global warming induced damages. They also support a challenge against the U.S. in the World Trade Organization.

But Watson said that he doesnt think that a country could successfully use trade rules to challenge the U.S. position on the Kyoto Protocol. “We do not believe that, based on what came out of Doha (the 2001 agreement to launch a new round of WTO talks), it will be a problem, but it wont prevent perhaps action being undertaken at some point,” said Watson. “We do not believe we can be penalized for not entering a treaty regime that we have not agreed to” (Reuters, October 10, 2002).

Justice Department Opposes California Emissions Law

On October 9, the U.S. Department of Justice weighed in on the side of the auto manufacturers in opposing a California requirement that 10 percent of motor vehicles sold in the state, for the model years 2003 to 2008, must achieve zero emissions. According to DOJs filing to the federal court of appeals in San Francisco, Californias zero-emission mandate encroaches on federal authority.

“The Energy Policy and Conservation Act provides that when a federal fuel-economy standard is in effect, a state or a political subdivision of a state may not adopt or enforce a law or regulation related to fuel-economy standards,” argued the Justice Department.

California claims that there is an exception within the federal Clean Air Act that allows it to set its own fuel-economy standards, but Justice said that Congress never authorized the states to enact their own regulations.

With the date of implementation rapidly approaching, General Motors Corp., Daimler Chrysler Corp. and several California auto dealers won a preliminary injunction to delay the mandate for two years. This lawsuit is not related to the California law passed earlier this year that limits vehicle emissions of carbon dioxide (Associated Press, October 9, 2002).

Center Urges Mandatory Emissions Trading

A new report released by the Center for European Policy Studies Task Force on Emissions Trading and the New EU Climate Change Policy concludes that an EU emissions trading scheme will only be successful if it is mandatory, and that certain industrial sectors should not be excluded.

In a voluntary scheme, member states or companies would determine whether or not they would accept the targets and engage in trading, which would mean that those with low abatement costs would have little incentive to participate in a market with higher abatement costs. This would lead to a market with many sellers and few buyers. “A trading scheme based on on-going voluntary participation is not likely to work,” says the report. “Such a scheme would lead to a market with an imbalance between sellers and buyers, thereby restricting the liquidity and, more generally, the efficiency of the market.”

The report supports the controversial European Commission proposal that insists on a mandatory system, even though many of the EU member countries want a voluntary system. Denmark, which currently holds the rotating EU presidency, hopes to complete an agreement on an emissions trading scheme by October 17 when the Council of Environment Ministers meets in Luxembourg. But disagreements over whether the scheme should be voluntary or mandatory is a major obstacle to reaching an agreement. The United Kingdom and Germany are the most vocal nations calling for a voluntary scheme.

If a voluntary scheme is adopted, says the report, it should be “combined with incentives for companies or sectors to join as early as possible. Such incentives could [include] the initial method of allocation, the coverage of greenhouse gases, the choice of baseline year, sector coverage, price caps on the cost of allowances, banking into the Kyoto Protocols first commitment period (2009-2012).”

The report admits that any emissions trading scheme is likely to have “considerable distribution effects on the controlled sources, consumers and governments, i.e. there are likely to be winners and losers.” The EU should attempt to “strike a reasonable balance between the different interests,” but there is no perfect solution.

One of the major benefits of an emissions trading scheme, according to the report, is that it allows participants to reach their targets at least cost. Moreover, the resulting carbon price would create “long-term predictability for business, which is a crucial element allowing efficient investment decisions in carbon-reduction technologies and techniques.” This is not clear, however. Many economists have pointed out that when the supply of emission credits (or any other commodity) is fixed, prices are very sensitive to changes in market conditions leading to large fluctuations in price, thereby decreasing predictability.

The reports executive summary is available at http://www.ceps.be/Pubs/2002/Executive%20Summaries/GHGEmissTrad.pdf.

More Trouble for Emissions Trading Schemes

The U.S. Environmental Protection Agency has released a report which heavily criticizes the open-market emissions-trading programs that are being run in three States: New Jersey, New Hampshire and Michigan. This follows on the heels of an announcement by New Jersey Governor James McGreevey (D) that New Jersey will discontinue its emissions trading program.

The report was conducted in response to a request by two environmental groups, Public Employees for Environmental Responsibility and the New Jersey Chapter of the Sierra Club. What it found was that there are serious problems with the programs and that they need to be fine tuned before the EPA will allow an expansion of state-specific, voluntary, open-market trading programs.

Open-market trading (OMT) programs are different than cap-and-trade programs in that they are voluntary, have no expressly defined cap, allow trading between various types and sources of pollutants, and allow credits to be generated through past emission reduction efforts to meet current requirements. Cap-and-trade programs, on the other hand, have a defined emissions cap for a specified group of participants that are required to reduce emissions.

The report evaluates the programs in New Jersey and Michigan because they are the only states with extensive programs. It finds that there are several factors that adversely affect the ability of the programs to reach emission reduction goals. “Foremost among these factors,” says the report, “were the lack of safeguards, use of data of uncertain quality, and limited regulatory agency oversight of trading activities. Many sources have opted not to participate, and problems in one state (New Jersey) have become so significant that it has announced its intention to terminate the program.”

Two of the most important missing safeguards, according to the report, are the lack of public comment on proposed trades, and an acceptance of shutdown credits in Michigan. In fact, 23 percent of Michigans total OMT credits and 80 percent of its volatile organic compound emissions credits were shutdown credits. This shouldnt be allowed, says to the report, because companies may be able receive credits by shutting down in one state and resuming operations in another.

The program also failed to use reliable emissions data. “Our reviews of 84 randomly selected trades in Michigan and New Jersey disclosed that no EPA- or State-approved quantification protocols were used to calculate credits,” bringing into question the validity of the credits. Moreover, the data used to measure emissions was of poor quality.

Finally, there was insufficient enforcement and oversight on the part of EPA, which led to questionable trades. For example, the EPA alleged that a New Jersey utility, PSEG, had violated clean air requirements when it failed to obtain permits for modifications on two power plants, which would have established lower compliance levels.

With lower compliance levels, PSEG would not have been able to claim as many emission reduction credits as it did. In a settlement with the EPA, PSEG agreed to retire 18,600 tons of emissions credits worth $16 million, which represented 90 percent of the tradable credits in New Jersey. Another New Jersey utility, Conectiv, used “cooler, off-season ozone credits to meet warmer, more polluted, ozone season requirements.”

EPA recommends that federal regulation be developed for OMT programs, that shutdown credits be disallowed, that states be required to use EPA- or state-approved quantification protocols, and that OMT programs use a “risk-based targeting approach for federal and state compliance assurance, enforcement and oversight of OMT trades.”

Canadian Government Hides Cost of Kyoto

In a presentation to two Cabinet committees on September 24, the Canadian government expunged figures showing the estimated costs of compliance with the Kyoto Protocol. Indeed, Cabinet ministers have been told by the Prime Ministers office to avoid references to a Kyoto implementation plan, according to the National Post (September 25, 2002).

The cost estimates were the result of a modeling exercise conducted by the government and agreed to by the Prime Ministers Office, the Privy Council Office, the Environment Department, and the Natural Resources Department. They show that compliance would result in 200,000 lost jobs and a 1.5 percent loss in GDP.

The provinces of Alberta and Ontario would experience the worst economic impacts, since each contributes about 27 percent to Canadas national greenhouse gas emissions. The cost of natural gas would also rise between 4 and 14 percent and electricity prices would rise by 2 percent by 2010. These estimates are based on greenhouse gas reductions of 170 megatons, about 70 megatons short of Canadas Kyoto target.

In a letter to the Canadian Manufacturers and Exporters, Prime Minister Jean Chrtien had promised that there would be an implementation plan and consultations before ratification. It now appears that Chrtien is reneging on that promise. The provincial energy and environment ministers are expecting to see a comprehensive plan to meet the Kyoto targets at an October 21 meeting in Halifax, but Chrtien has admitted that there isnt one.

“The development of the plan will take 12 years. Ten years. You know, it will not be in operation tomorrow,” Mr. Chrtien said. “There is a series of things that will have to be done and we will have to meet the commitment by 2012. There is a good chance that if we dont start, we will not be ready by 2012. So we have to start right now. We have a 10-year period to develop the appropriate plans to meet these international obligations that the Canadians want us to commit to. We will develop the plan. We will give the framework of the plan. But all the pieces of this plan will take 10 years to finalize.”

Lorne Taylor, Albertas environment minister isnt buying it. “Theyre either incompetent or theyre not telling Canadians the truth, because we dont have until 2012 to develop a plan,” he said. “We actually have to hit targets in 2012. Not develop a plan by 2012. I think the Prime Ministers comments just are indicative of the confusion thats reigning supreme in Ottawa right now.”

Canadas Environment Minister David Andersen sees no problem with ratifying Kyoto without an implementation plan. “Only on the second of September [when the Prime Minister announced in South Africa that Canada would ratify the treaty] did certain elements of industry take seriously the fact that ratification was a distinct possibility. They tended to think it could be avoided. Now, were having a much more constructive tone to the debate,” he said. Andersen went on to say that the government plans an advertising campaign to “indicate the costs are exaggerated and that the debate must be on a serious level.”

New York Wind Farms a Bad Decision

In August, New York Governor George Pataki announced a $17 million aid package to four private companies to develop wind farms in various parts of the state. But, according to Glenn Schleede, president of Energy Market & Policy Analysis, New Yorkers should be wary of the environmental claims of wind power.

The New York Energy Plan estimates that the eight wind farms, with a combined 250 wind turbines, would produce approximately 900,000 kilo-watt hours (kWh) of electricity per year. But this is a drop in the bucket compared to the states total electricity demand. For example, this amount equals 58/100 of 1 percent of the total electricity imported into New York in 2000. It is only 15 percent of the energy that will be produced from a single gas-fired combined cycle plant that is scheduled to come online in Athens, NY in 2003.

The wind power industry often claims that “electricity generated by the wind turbines will displace on a kWh for kWh basis electricity that would be generated by fossil-fuel generating units and any associated emissions.” But that simply is not true, says Schleede. “Such claims are generally exaggerated. For example, they do not take into account that any fossil-fueled generating unit that is kept available to back up the intermittent electricity from the wind farm will be giving off emissions while it is running at less than peak efficiency or in spinning reserve mode. Nor do they take into account the fact that other alternatives for reducing emissions are likely to be far more cost-effective.”

New Yorkers should also be aware that there is growing opposition to wind farms wherever they are proposed, in Europe, Australia and in nearly every state in the U.S., says Schleede. “Opposition is due to a variety of reasons including scenic and property value impairment, noise, bird kills, flicker effects of spinning blades after sunrise and before sunset, potential safety hazards from blade and ice throws, interference with telecommunications, and higher costs of electricity.”

Full Expensing of Capital Will Reduce Carbon Intensity

Several climate-related initiatives pose a serious threat to Americas economic future, according to Marlo Lewis, a senior fellow at the Competitive Enterprise Institute. One such scheme is President Bushs proposal to expand the Department of Energys Voluntary Reporting of Greenhouse Gases program to include the awarding of transferable carbon credits for voluntary greenhouse gas reductions.

Currently, the DOE program is a simple voluntary reporting program with no regulatory significance. But, says Lewis, writing for Tech Central Station (September 10, 2002), the addition of the awarding of credits to companies that report greenhouse gas reductions will corrupt the “politics of U.S. energy policy” and “grow the greenhouse lobby.”

Under Bushs proposal, companies that begin to comply with Kyoto before it is ratified would be awarded credits that they could sell or use to offset future regulatory obligations. In the absence of a regulatory cap on carbon emissions, the credits are worthless. Only if Kyoto or a similar regulatory program were enacted would the credits yield dividends. “Credit-holders thus acquire cash incentives to support Kyoto, or lobby for its domestic equivalent,” says Lewis.

A credit scheme would be a zero-sum game where one companys gain is anothers loss. Every credit awarded in the voluntary early action period is one that wont be available during the mandatory period. Companies that dont or cant “volunteer” to reduce greenhouse gas emissions now will be penalized later under the mandatory cap, which means that the program isnt really voluntary.

Lewis argues that the Bush administration should stop legitimizing climate alarmism by playing games within the Kyoto framework. Instead, it should embrace non-regulatory, pro-growth policies that would also have the side benefit of reducing carbon intensity. Bush should lower tax barriers to investment by allowing companies to “deduct from current-year revenues, the full cost of capital investment,” says Lewis. Replacing the current system of capital depreciation with full expensing for all types of capital investment would eliminate barriers to economically efficient capital turnover.

At a briefing in Capital Hill on October 5 Danish statistician Bjorn Lomborg, once a member of Greenpeace, argued that predictions of the world heading for ruin are wrong. In 1997 he set out to challenge acclaimed economist Julian Simon who refuted environmentalist claims that the world was running out of resources. Lomborg discovered that the data on a whole supported Simon. “The Skeptical Environmentalist,” Lomborg’s new book is a composite of graphs, charts and statistics that factually show the earth’s environment is steadily improving.

His book asserts among other things that the global warming issue is overblown. In short he attests, “Things are getting better.” In his presentation, Lomborg said that global warming is a real issue, but suggested that the prime danger is the Kyoto Treaty, which he cites as a grand waste of money. He said, “Essentially Kyoto will do very little to change global warming. On the other hand Kyoto will be very expensive. It will cost anywhere from $150-350 billion a year, and that’s a lot of money when compared to the total global aid of $50 billion a year. Basically, just for one year of Kyoto, we could give clean drinking water and sanitation to every person on earth. This would avoid 2 million deaths a year, and assist half a billion people from not getting seriously ill each year.”

Environmentalists tend to be ecologically pessimistic about the future. Veterans of the environmental movement such as Paul Ehrlich of Stanford University and Lester Brown of the Worldwatch Institute have formed a litany of fears. These fears include depletion of natural resources, ever-growing population, extinction of species and pollution of the planet’s air and water. However, Lomborg’s approach is decidedly different. He says, “We must remove our myths about an imminent doomsday and remember we do not have to act in total desperation. Essential information is necessary to making the best possible decisions. Statistics tell you how the world is. Resources have become even more abundant and things are likely to progress in the future.”

The briefing was sponsored by the Cooler Heads Coalition, made up of 23 non-profit organizations that work on global warming issues.

Cold Winds Blowing in Canada

Canadian ratification of the Kyoto Protocol continues to recede into the future, as provincial opposition led by Alberta increases. The Chretien government had pledged to ratify before the World Summit on Sustainable Development in Johannesburg in lat August, but it appears unlikely that it will meet that target. Prime Minister Jean Chretien said that, “I think its important for Canada to position itself so as to sign Kyoto one day” (The Globe and Mail, April 16, 2002).

Environment Minister David Anderson admitted in an interview for the first time that meeting its Kyoto target to reduce greenhouse gas emissions by to 6 percent below 1990 levels could cost about $10 billion (US$6.35 billion) per year. But, said Anderson, that is a worthwhile cost in a $1.1 trillion (US$ 700 billion) economy. He also pointed out that Canada spends $12.5 billion (US$ 7.94 billion) per year on national defense (The Globe and Mail, April 5, 2002).

In a last-ditch effort to make a deal that would assuage internal opposition, Anderson tried to secure concessions from the European Union at the recent meeting of the G-8 environmental ministers that would allow Canada to receive emissions credits for exporting natural gas and oil to the U.S., arguing that by selling these “cleaner” fuels to the U.S. Canada is actually contributing to greenhouse gas reductions.

The European Union rejected the proposal out of hand. Margo Wallstrom, the EUs environment commissioner, responded that, “To count credits from trading with the United States, (which) has chosen to stand outside the protocol, would undermine the fundamentals and principles of Kyoto” (The Toronto Star, April 13, 2002).

Unlike Japan and Russia, Canadas ratification is not essential to meet the legal threshold to bring the protocol into force. Thus, while Japan and Russia have succeeded in extracting huge concessions from the EU, Canada is negotiating from a position of weakness.

“Canada does not want to sign up to Kyoto but it also wants to avoid the image problems which that would cause,” said one senior EU delegate at the G-8 meeting (Reuters, April 15, 2002).

Under Canadas federal system its national government has authority to ratify treaties. However, implementing domestic measures to satisfy international commitments, such as the Kyoto Protocol, requires provincial co-operation. Alberta Prime Minister Ralph Klein now appears determined that his provinces vast oil, gas and oil sands reserves will not be locked up or devalued by the Kyoto Protocol.

EPA: Clear Skies Initiative Would Increase Coal Use

An analysis by the Environmental Protection Agency claims that under President Bushs Clear Skies Initiative the amount of coal burned for electric power will increase by 7.3 percent over 2000 levels by 2020, or by about 79 million tons per year.

“Fuel diversity is maintained under the Clear Skies Initiative,” according to the EPA document. “Without legislation, generation from coal would likely be a smaller portion of the total fuel mix in 2020.”

Even with Clear Skies, however, the proportion of coal use in the production of electricity will fall from over 50 percent to under 45 percent. Moreover, “Enactment of Clear Skies will result in a slight increase in the number of coal mining jobs projected in 2020 relative to not enacting Clear Skies,” said the document.

Frank ODonnell, executive director of the Clean Air Trust, claims that the real motive behind the administrations Clear Skies Initiative is “to protect the coal industry.” Environmental activists are also concerned that the initiative would wipe away many existing Clean Air Act provisions and actually lower the emissions reduction required under law. They favor the Jeffords bill that has tougher emissions cuts under shorter timetables and would force more switching from coal to natural gas.

The National Mining Association disagrees with the EPAs assessment, however. According to their own analysis, based on Department of Energy numbers, coal use will increase by 300 million tons by 2020 under the existing Clean Air Act. Clear Skies, on the other hand, would lead to much smaller increases in coal use (BNA Daily Environment Report, April 17, 2002).

It is unlikely that Canada will be able to achieve its Kyoto targets without significant harm to the economy, Nancy Hughes Anthony, President and CEO of the Canadian Chamber of Commerce, said at a press conference on March 4.

Hughes accused the Canadian government of being less than honest with Canadians. “They are leaving the impression,” said Hughes, “that all it will take is for businesses to readily adopt new processes and for consumers to change their behavior overnight. Then Canada could meet its commitment of reducing greenhouse gas emissions by as much as 30 percent by the year 2012.”

Hughes noted that the governments Climate Change Website claims that consumers can reduce greenhouse gas emissions by buying energy efficient appliances and conserving on home heating. But this is deceptive, says Hughes. “Consumers will be asked to do a lot more.”

The burden on industry will be enormous, according to Hughes. “As Canadian industries bring in new technologies and fuel sources, it just isnt feasible to get them broadly in place by 2012.” Many of the technologies, such as fuel cells, that the government is relying on to meet its targets are still “mostly pilot projects,” said Hughes.

“It is unlikely that we will see fleet replacement with fuel cells in ten years when only prototypes are available now,” she said. “The technology is still being developed. Then we will need to allow companies time to retire existing fleets of trucks and cars. Then there is the infrastructure to support this new fuel source.”

Moreover, forcing companies to accelerate the retirement of plants and equipment will leave them with stranded investment costs that will be passed on to consumers and shareholders.

A major obstacle to Canadas compliance with Kyoto is its trade relationship with the U.S. Hughes pointed out that the U.S. has reduced greenhouse gas emissions by importing natural gas and nuclear- and hydro-generated electricity from Canada. “Yet the generation and production of these increases Canadas overall emissions.” Even though the federal government has lobbied to receive credit for clean energy exports, “It is not clear when or if this will be successfully achieved.”

She also pointed out how competitively devastating it would be for Canada to ratify the treaty, while the U.S., which buys 87 percent of Canadas exports, stays out.

The Canadian Chamber of Commerce calculates that Canadas cost of complying with Kyoto would be a loss of about $30 billion per year in GDP, or a reduction of 2.5 percent. That comes to about $1,000 for every man, woman and child in Canada.

All these factors led Hughes to conclude that, “Canada cannot achieve its Kyoto targets and therefore, it would be foolish for Canada to ratify Kyoto at this time.”

The European Unions environment ministers agreed on March 4 to ratify the Kyoto Protocol. In 1997 the EU agreed to reduce its emissions of greenhouse gases to eight percent below 1990 levels, but so far has not ratified the agreement.

Although the move is being hailed as a major step forward, “The impact of the announcement was marred when EU member governments failed to set their own emission levels to meet Kyoto targets,” according to the Guardian (March 5, 2002). “Individual targets will now be decided by the European Commission.”

The commission also took the opportunity to call for renewed U.S. participation in the Kyoto process. “By taking this decision, the EU has reaffirmed its commitment to pursuing multilateral solutions to issues of global concern,” the commission said. “The EU continues to call for the United States to participate in the global framework for addressing climate change.”

The move clears the way for the EU formally to approve Kyoto at its summit in Barcelona in a couple of weeks. As noted by Radio Free Europe (March 4, 2002), “Todays decision also commits all 15 EU member states to deposit their individual ratification instruments with the United Nations together with the communal EU decision by June 1.” It remains to be seen whether the countries will follow through with the commitment made by their respective environment ministers.

The Netherlands is the only EU country to begin the ratification process, successfully piloting Kyoto through the lower house of parliament, but still needs to push it through the upper house for full ratification. The only Annex I countries to submit their ratification instruments to the United Nations are Romania and the Czech Republic.

 Japan Gets Cold Feet

Japan, the host of the 1997 negotiations that culminated in the Kyoto Protocol, may now be abandoning the treaty. According to the BBC (January 3, 2001), the Tokyo newspaper Yomiuri Shimbun reported: “The Central Environment Council, a government advisory body, has said in a report that, for now, industries will not be given any regulations to follow and, instead, will be allowed to combat gas emissions on a voluntary basis.

“Industry, which is responsible for 40 percent of all emissions,” it said, “will be asked to devise its own methods of control to publicize the amount of greenhouse gases emitted during the first phase of reductions, from 2002 to 2004.”

Putting off mandatory emission cuts may signal that Japan is having second thoughts about ratifying the Kyoto Protocol. Or it may mean that the Japanese government is taking account of the fact that the text of the protocol to be ratified includes no legally binding enforcement provisions. Thus there will be no penalties if Japan misses its 2008-12 reduction target.

“Prospects are that it will be very difficult for Japan to reduce gas emissions by 6 percent from the 1990 level as dictated by the protocol,” noted Yomiuri Shimbun. That would weaken the likelihood of Kyoto ever coming into force.

New Bush Policies this Month?

The Bush Administration has remained characteristically close-mouthed about its plans to announce new global warming policies, but rumors are swirling at an increasing rate. Informed sources on Capitol Hill told Cooler Heads that they expect the administration to announce a package of new policies before the Congress re-convenes on January 23.

On the other hand, there has been some press speculation, in Inside EPA and elsewhere, that President Bush will talk about global warming in his State of the Union address, scheduled for January 29.

The content of any possible announcement is an even greater mystery. Administration sources have talked vaguely in private about creating a mandatory registry for greenhouse gas emissions plus some sort of voluntary trading program for emission credits. It is not clear what would give value to owning, and hence purchasing, such credits unless the program were mandatory or offered some possibility of profit through future mandatory controls or federal payments or tax credits.

Administration decisions may be affected by the current media flap over contacts between the Bush White House and Enron Corporation, whose December 2 bankruptcy is one of the most spectacular in history. Enron was a founding member of the Pew Center on Global Climate Changes Business Leadership Council.

It is known that one of Enrons chief lobbying objectives during the waning years of the Clinton-Gore Administration was ratification of the Kyoto Protocol and adoption of mandatory carbon dioxide regulations in the U. S. Enron Chairman and CEO Ken Lay was reported to be the source of language in the 2000 Bush campaigns energy plan that advocated regulating CO2 emissions by electric utilities.

Enron would profit from mandatory cuts in CO2 emissions as a natural gas producer, pipeline operator, and trader in both energy and emission quota markets. Other major corporations have also been privately lobbying the Bush Administration to create a market for emission quotas (that is, to assign value to not producing or using fossil fuel energy). It is not known whether any of these corporations are doing this in order to forestall collapse.