Kyoto Negotiations

“The most vulnerable part of the Earth’s environment is the very thin layer of air clinging near to the surface of the planet, that we are now so carelessly filling with gaseous wastes that we are actually altering the relationship between the Earth and the Sun – by trapping more solar radiation under this growing blanket of pollution that envelops the entire world,” Vice President Gore told the U.N. Global Warming conference of 159 nations this morning in Koyto, Japan.

In what was one the most dramatic speeches in recent memory, Gore announced to world leaders: “Whether we recognize it or not, we are now engaged in an epic battle to right the balance of our Earth, and the tide of this battle will turn on when the majority of people in the world become sufficiently aroused by shared sense of urgent danger to join an all-out effort.”

Applause filed the halls of the Kyoto International Conference Center. “We must achieve a safe overall concentration level for greenhouse gases in the Earth’s atmosphere.”

The message is serious. So serious in fact, the DRUDGE REPORT has calculated that Vice President Al Gore is burning more than 439,500 pounds of fuel, or 65,600 gallons, at a cost of more than $131,000 on his 16,000 mile daytrip, just to deliver the warning.

Now that’s commitment.

Air Force II’s Global Warming Express features an itinerary that takes the vice president from Washington to Florida to Washington to Alaska to Japan and back — all in just 72-hours.

Saturday, December 6, 1997

9:45 a.m. – Air Force II departs Andrews AFB enroute Fort Myers, Fla.

12:05 p.m. – Air Force II arrives Southwest Florida Regional Airport. Gate 69-A.

2 p.m. – Vice President Gore addresses the 50th Anniversary/Rededication, Everglades Municipal Airport, Everglades National Park.

6:40 p.m. – Air Force II departs Florida en route AFB.

8:35 p.m. – Air Force II arrives at Andrews Air Force Base.

9:45 p.m. – Air Force II departs Andrews Air Force Base en route Elmendorf Air Force Base

Sunday, Dec. 7

1:15 a.m. — Air Force II arrives Elmendorf Air Force Base, Anchorage, Alaska

2:45 a.m. — Air Force II departs Elmendorf Air Force Base en route Osaka, Japan

Monday, Dec. 8

5 a.m. — Air Force II arrives Osaka International Airport, Osaka Japan

11:15 p.m. — Air Force II departs Osaka, Japan en route Elmendorf Air Force Base

12:35 p.m. — Air Force II arrives Elmendorf Air Force Base, Anchorage, Alaska

2:05 p.m. — Air Force II departs Elmendorf Air Force Base en route Andrews Air Force Base

Tuesday, Dec. 9

12:45 a.m. — Air Force II arrives Andrews Air Force Base

Al Gore flew into Kyoto this morning — allegedly not to solicit funds at the more than 100,000 Buddhist temples here — and immediately delivered a “Blame America First”sermon. Few evangelists could have evoked a more gloomy apocalyptic vision (storms, floods, droughts, loss of biodiversity), all brought about by the wasteful consumptive ways of modern man. This was a favorable forum for Al Gore and he took advantage of it — playing to his environmental constituency and counting on the fact that the American people would hear very little about his remarks in Kyoto.

Gore’s recommendations echoed the other Malthusian policies being bandied about in Kyoto: There should be less of us, we should consume less and we should produce material goods by less energy intensive means. The cost of each of these policies was naturally not discussed.

Gore waxed eloquently about the plight of the poor countries, the need for the United States to take the first step, the potential of appropriate technology (How to Lose 30% of That Messy Energy Fat with No Pain!) and stated that he had instructed the American negotiators to be more “flexible.” The US, Gore stated, would move ahead with coercive energy conservation steps whether an acceptable treaty was achieved or not.

Gore in Earth in the Balance had argued that those who refuse to accept the reality of global warming are akin to those who allowed Hitler to come to power. Moderating his remarks somewhat today, he compared climate treaty critics to the tobacco executives who lied about the health effects of cigarettes.

Fortunately, America’s Constitution divides powers — the Administration can propose but Congress must approve. And the Vice President did not amuse the congressional delegation, which came to Kyoto to keep the Chief Druid in check. They were not pleased with Gore’s attack on their character and were even less amused by Gore’s seeming willingness to evade the Constitution. Science Committee Chairman Jim Sensenbrenner noted that his hearings had found very credible expert opposition to the global warming theory. He was not pleased with Gore’s ad hominem attacks.

Senator Chuck Hagel was quick to point out that the Byrd-Hagel Resolution said some very clear things – the U.S. would not cripple its economy, the U.S. would not penalize energy use without developing nations doing the same. The Nebraska Senator also noted that while the unanimous vote (95-0) might overstate support for that resolution, the fact that over 65 senators had co-sponsored the resolution was evidence of very strong Senate views. Green Senators Lieberman, Chafee and Kerry were not co-sponsors of this resolution and have little credibility in discussing it.

One can only hope that Senators Hagel, Congressmen Sensenbrenner, Dingell and the other reasonable members of this delegation will take the next step and ask that no Kyoto Treaty be signed. Minor changes and rhetoric cannot remedy this treaty. Moreover, with the Asian economies are now in serious disarray, any steps to raise energy prices and to further reduce car demand would be foolish. Much work remains to be done.

Implications of Global Energy Rationing

A startling picturte is beginning to emerge regarding COP-3’s discussions of emissions trading, joint implementation and credits. The Europeans have answered criticisms over its emissions “bubble” (which allows low-emissions European nations to offset the higher emissions of other European nations) by arguing that other countries should also form “energy suppression” trading blocs. Do so, they argued, and you too can benefit from internal emissions trading. Thus, a Kyoto agreement might well encourage the creation of new trading blocs throughout the world.

What the energy-suppression architects seem to envisage is a brand new global monetary system made up of energy-usage “currency.” Nations that don’t produce energy would be rewarded with wealth transfers from countries that do. The climate treaty would require a compliance agency functioning much like a world central bank to process transactions of green “currency” and to regulate emissions banking activities.

Past political attempts to create such special currency regimes – food stamps, agricultural allotment systems, oil import quotas, and agricultural curtailment schemes have encountered severe problems. A political fable goes: the farmer contacts the USDA, noting that last year he had not grown 100 head of cattle. He found this so profitable that next year he plans to not grow 200 head of cattle. His question was: what kind of cattle shouldn’t he grow?

The complexities of an energy curtailment system with its negative production quotas of varying types of energy all measured from an arbitrary baseline would dwarf any problems associated with past efforts. Nonetheless, advocates for emission trading roam the halls here at Kyoto, chortling over the rents they will earn if such a regime ever comes into play.

Interestingly, the Kyoto discussions — which will have massive impacts on the economies and trading patterns of the world — are taking place with almost no participation by national trade or economics ministries. Environmental ministers head almost all of the 165 national delegations represented here. Yet such agencies are the only groups who will clearly benefit from increased environmental controls. Certainly, the burden of any emission reduction program would be borne by those individuals, regions and sectors targeted – not by these bureaucrats. And the agency won’t care; after all, an environmental agency is responsible only for “saving the planet,” not for advancing human welfare. Allowing the green fox to guard the economic hen house is not smart, and, when the price tag for Kyoto comes in, some heads may yet roll.

COP-3 in Kyoto is the culmination of earlier summits the Rio Conference in 1992, the implementation of energy curtailment policies starting at COP-1 in Berlin, and the further refinement of those policies at COP-2 in Geneva. (These people really know how to pick conference sites.) All these meetings produced ambiguous documents. Was it Will Rogers who stated: America has rarely lost a war or won a treaty?

The ambiguities are now coming back to haunt us. At Rio, the US and other developed nations promised to curtail energy use ‘voluntarily’ by large amounts. COP-1 and COP-2 moved these agreements along. The original agreement wasnt clear about the responsibilities of the developing nations, but the Berlin agreement promised the developing world that they faced no commitments.

Now in Kyoto, only a handful of nations have met their commitments. Katie McGinty, Al Gores acolyte in the White House, complained that our failure wasnt the Administrations fault — the Congress had failed to provide adequate subsidies for green technologies, our economy had grown too fast, and energy prices were too low.

Possibly worried that the Administration might try to resolve these problems, the U.S. Senate passed the Byrd-Hagel resolution which says that the U.S. will impose no further pain on the U.S. economy unless the major developing nations also sign up for energy conservation. Other nations are also realizing that an All Pain, No Gain carbon withdrawal plan is wrong-headed.

As a result, Kyoto is engaged in a desperate attempt to square the circle. Creative rhetoric to paper over the massive disagreements has proliferated. Language ranging from evolution to play are being introduced to suggest gradual, painless Third World commitments. New Zealand negotiators proposed that Third World nations agree to binding commitments sometime after 2012 but only if the developed nations had made progress by then. Third World spokesman rejected these ideas very quickly.

The poorer nations seem aware even if the U.S. is not that there are real costs of curtailing energy use. A Chinese delegate likened these proposals to a cartoon — a top-hatted gentlemen approaches a peasant cooking an open-fire meal and asks him to extinguish the fire to prevent global warming. He noted that the developed world might wish to reduce luxury emissions but that China was not about to reduce subsistence emissions. How ironic. China is more concerned with poverty than the US!

If the Chinese remain steadfast, the implications for Senate ratification are obvious.

Turnabout is fair play

Street Theatre is an important element of public policy and an element generally dominated by the Greens. Today, the arena was broadened considerably. Friends of the Earth (FOE) conducted an NGO poll to select the worst environmental offender. They then ceremonially delivered this Scorched Earth Award to the Global Climate Coalition (GCC), an industry NGO. A bowl of burnt soil was delivered to the industry groups headquarters, representing the greens fear that we are burning up the earth. The GCC swiftly threw away this dubious award.

But a symbol is a horrible thing to waste; thus, a contrarian coalition came together under the banner of ‘Friends of Humanity.’ Opposed to energy use restrictions under the climate treaty, the heavily outnumbered coalition teamed CEI with the Committee for a Constructive Tomorrow (CFACT), Eagle Forum, and Sovereignty International. Friends of Humanity ‘recycled’ the award, renamed it the Scorched Economy Award, and delivered it it back to FOE. This time, the bowl was filled with Japanese Yen coins — symbolizing the costs of a Kyoto global warming treaty.

Against the backdrop of a large anti-climate treaty banner, the coalition took the opportunity to extol science, technology, and economic progress, and denounced the climate treaty. Believing that energy benefits humanity, the pro-energy coalition expressed the hope that the Scorched Economy Award would compel FOE and other anti-energy groups to reconsider.

An official of Friends of the Earth-International graciously accepted the Scorched Economy Award. Along with a World Wide Fund for Nature colleague, he began a heated exchange with the pro-energy advocates on the merits of the climate treaty. The press corps seemed to delight in excitement. At the proper dramatic moment, the two sides agreed to continue their comments in a formal debate. CEI and CFACT vs. FOE and WWF in the Match of the Century! Next Tuesday, December 9.

Many at COP-3 are behaving as if the Clinton-Gore administration speaks for the U.S — as if the eager quest for an aggressive global energy restriction treaty was the goal of most Americans. Fortunately, while Clinton and Gore do indeed represent one element of the American polity, they do not speak for the American people. Under the US Constitution, powers are divided and the US Congress has a separate but equal voice on policy matters. Before any treaty becomes law, the US Senate must advise and consent. Before any new funds are spent, the House and the Senate must both concur. While the “emerging consensus” at Kyoto is warming the hearts of Administration officials, it is getting a cool reception from US legislators.

US Senators attending COP-3 are getting hot under the collar at what they consider irresponsible negotiating by Clinton-Gore officials, which may result in harsher energy restrictions for the US economy than for its Third World trading partners. Republican Senator Mike Enzi of Wyoming described the Kyoto conference as “an economic meeting disguised as an environmental meeting,” reports Bonner Cohen of the Earth Times. A disbelieving Sen. Enzi mocked the entire conference as “a Chinese plot to restrict the growth of the American economy,” noting the People’s Republic of China’s flat refusal to join the UN’s incipient global energy rationing regime.

Nebraska GOP Sen. Chuck Hagel, of Byrd-Hagel resolution fame, is similarly perturbed. In his view, the Clinton-Gore administration is not paying sufficient attention to the issue of national sovereignty. Nor are the negotiators in Kyoto paying heed to the formidable scientific evidence against the global warming hypothesis (in fact, they are doing their best to suppress open and honest scientific debate).

It doesn’t help matters that the US State Department seems to be going out of its way to antagonize American legislators. One example: environmental activist Curtis Moore, former aide to the late Senator Ed Muskie, asked why the Administration was not pushing for even more aggressive energy reduction targets. He provided an excuse – he understood how hard it was to take the correct stands when reactionary legislators such as Senator Hagel were looking over their shoulders. Moore went on to note that, although he intended no disrespect, Senator Hagel had received some $70,000 in contributions from energy companies. The Administration’s respondent dodged the substantive question but made no attempt to address the attack on the senator’s integrity.

Should the Kyoto treaty ever make its way to Washington’s Capitol Hill, expect it to face serious scrutiny.

We’re Already Feeling the Kyoto Chill

Reporters, delegates, NGOs, and other climate conference participants are already experiencing what life will be like on an energy starvation diet. In keeping with the fanaticism of the occasion, the thermostat of the Kyoto conference hall has been turned WAY down. Outside, three penguin ice carvings still stand, placed there by greens who planned for the ice birds to melt in the “warming” climate. Mother Nature is obviously not cooperating for the television cameras. The politically-incorrect air in Kyoto is positively cold. Shivering conference-goers are walking around with coats, scarves, even gloves – indoors. Hasn’t anybody at the UN considered the human health effects of under-heated facilities? People of the world, this is your future if the global warming lobby gets its way.

Seizing the Moment

Debate is severely muted at Kyoto – not surprisingly given the large number of true believers who are leading this Green Children’s Crusade. There are, of course, discussion meetings among the various NGOs (non-governmental organizations) and today we free market environmentalists tried to enter a meeting to present our views. Despite the clear notice that this was a “public” meeting of environmental NGOs, we were politely but firmly ejected.

Believing that All Things should be Considered, we have elected to mount our own seminar. We’re titling it “A Contrarian Briefing on Global Warming Policy” and have pulled together a scratch team from among the tiny number of contrarians attending the conference: Science and Environmental Policy Project’s Fred Singer on the scientific issues; the Hoover Institution’s Thomas Gale Moore on the beneficial aspects of global warming; Mark Kirk of the House International Relations Committee on the politics of the climate talks; Charles River Associates’ David Montgomery on the economic costs of carbon withdrawal; CEI’s Fred Smith on climate change prevention versus adaptation/resiliency. We’ve invited the entire press corps to the event – and expect lots of hostile questions.

A Word from Our Sponsors

Let it never be said that CEI’s efforts in Kyoto have gone unnoticed. On one of our shivering tours of the chilly halls of the conference center, we happened upon a draft report listing the “Forces of Darkness” and found — yes, you guessed it, our name. A bit unfair since we’re the ones who believe in keeping the light bulbs of the world burning brightly. Then again, objective fairness was never meant to be the hallmark of the Kyoto Conference. The draft described the “infamous” CEI as no friend of the earth, and even accused us technophiles of advocating “junk” science. Worse, it implied that we are advancing “climate confusionism” – could this be the application of ancient Eastern philosophy to the issue of global warming?

All of this recalls the story told by Mark Twain of the individual who was tarred and feathered and ridden out of town on a rail. Asked later about the event, he stated: “Well, if it hadn’t have been for the honor, I would rather have walked.” Still, this incident does suggest that civility is quickly vanishing from what was already a fierce intellectual debate. The Kyoto global warming lobby clearly views the climate treaty as offering its best hope of erecting a global regulatory apparatus with real power over the world economy. The environmentalist establishment will fight fiercely to ensure that its goal is realized.

WASHINGTON, DC — The Advancement of Sound Science Coalition (TASSC) and the European Science and Environment Forum (ESEF) today announced that more than 500 physicians and scientists have signed an open letter to world leaders opposing the climate change treaty now being negotiated in Kyoto, Japan. The text of the letter is:

“As responsible members of the scientific and medical communities, we support efforts to improve the global environment and public health.

“Given that economic prosperity is necessary for a cleaner environment and improved public health, action that harms the global and national economies should not be taken without compelling evidence of need.

“At this time, we believe the scientific understanding of the global climate is inadequate to justify drastic control policies and needs to be better developed to support limiting greenhouse gas emissions – limitations that would damage the economic well-being of most of the world’s population.

“We recommend the world’s governments defer taking action on a climate change protocol until the science shows limiting greenhouse gas emissions will benefit, not harm, the global environment and public health.”

Commenting on this expression of concern about the climate treaty, TASSC executive director Steven J. Milloy said “This letter has been in circulation only a short time. We are overwhelmed by the strength of the response and will continue to accept signatures. World leaders assembled in Kyoto should heed this call to avoid rash and harmful action on greenhouse gas emissions.”

TASSC and ESEF are not-for-profit organizations of scientists, former public policy officials and others interested in the use of sound science in public policy. TASSC is located at 1155 Connecticut Avenue, N.W., Suite 300, Washington, D.C. 20036. ESEF is located at 4 Church Lane, Barton, Cambridge, CB3 7BE, United Kingdom.

Copies of the signed letters are available for inspection in the TASSC office.

COP-3 opened as a Victorian drama, with the U.S. position in imminent peril as its prime defender, Undersecretary of State Tim Wirth, suddenly abandoned the fray and rushed off to make some “real” money. Still the U.S. team blustered on, railing against the binding energy restrictions demanded by the hard-line environmental zealots, yet still seeking to gain the approval of the virtuous environmental “maiden.” How, they complained, can we reconcile the protection of our planet with the need to safeguard the sovereignty and economy of the United States? As demanded by such plots, the U.S. and the EU publicly quarreled, accusing each other of blocking consensus! The U.S. team issued the expected symbolic threat – If the world doesnt respect our position, we will withdraw from negotiations.

But, as is the case with such conventional dramas, the abundance of such symbolic smoke is fully consistent with the absence of any reality of fire. The prologue and opening acts of the Kyoto drama were little more than the posturing so typical of past international negotiations. The Kyoto players have never really been in serious disagreement; everyone agrees that voluntary arrangements have “failed” (read: the market doesnt seem to respond the way the politicians and their environmental allies would like) and therefore we must do “something.” As long as that something strengthens political control of the energy economy, the details can be nuanced. Thus, a Kyoto treaty which gives each side something has always been in the cards.

When Vice President Al Gore arrives next week, expect the traditional “surprise” ending. The politicians will save the Kyoto Treaty at the last possible minute and will take their bows as the curtain comes down on a world dedicated to increased political control of energy use. The business villains, once again, will have been vanquished.

Thus, expect phrases such as “limited, carefully bounded differentiation” to emerge as the key elements of the New Global Order. Such phrases have become the Universal Solvent needed to dissolve away all negotiating difficulties. The concept makes it possible for all nations to agree to “tight” controls while preserving the “flexibility” needed to do whatever they would have done in any event.

The global environmental establishment will complain that all this is too little, too late, but the fact is they will have gained much. The Clinton-Gore team will have gained vast powers over the domestic energy sector – in effect, nationalizing this critical sector of the U.S. economy — giving the U.S. federal government effective control over 7.5 percent of U.S. GDP. They will use this power creatively.

This Strategy Finesses Compliance with the Byrd-Hagel Resolution

To date, the Byrd-Hagel resolution (passed in the U.S. Senate 95-0) constitutes the only formal effort by conservative and business interests to restore reality to the Kyoto drama. Under this provision, the U.S. cannot enter into any agreement that would impose “excess” costs on our economy or that would exempt the developing countries from incurring comparable costs. But, these restraints dissolve away under the “limited, carefully bounded differentiation” language emerging from Kyoto. Melinda Kimble, a key U.S. spokesman, still speaks fiercely of the need for “meaningful participation of key developing countries,” but that requirement is readily met in this new “differentiated” flexible world. Indeed, the newly coined approach of “evolution” in which such nations might be required to do nothing more than ensure the gradual reduction of normalized energy use in their nations (per capita, per dollar of GNP?) may greatly reduce the apparent costs of compliance by developing nations.

Still, policy does have implications. To sanction anti-energy use policies anywhere will have ramifications everywhere. If Kyoto leads to further energy restrictions in the U.S. the world will notice the impacts of declining economic and technological progress. Kyoto is all too likely to produce what CEI President Fred Smith terms “a baby step on the escalator to oblivion.”

Even such initial economic costs would likely exacerbate already troubling protectionist tendencies in the U.S. and elsewhere. Any effort by the U.S. to use the Kyoto Treaty to curtail energy would mobilize the business community into arguing for treaty enforcement via trade sanctions. David Montgomery, an economist with Charles River Associates, discussed this protectionist risk at the Competitive Enterprise Institutes Costs of Kyoto conference. He noted that the pressures and the tools for enforcing climate treaty measures will be trade — not environmentally — driven. Few outside the environmental establishment believes that trade wars will prove beneficial. In a world of “differentiated” compliance, the Byrd-Hagel resolution may well evolve into a new force for protectionism.

You Stay Poor, We Pile Up Credits

In the wake of Asian currency crises in South Korea, Indonesia, and Thailand, Third World countries cannot possibly accept “equivalent” emissions reduction targets. Nearly everyone recognizes this reality, but few are willing to come to terms with it. With economic turmoil as a backdrop, the U.S. delegation came forward with another major “concession” — it will support Joint Implementation which promises financial credits to developing nations moving toward reduced energy use. But this suggests that Annex I countries would create new foreign aid and technology assistance programs for those developing nations willing to curtail carbon emissions. The end result: The Third World must go on welfare so the climate will stay cold.

Looking for a different point of view? Check these “contrarian” web sites: www.cei.org, www.globalwarming.org.

Contact: Fred Smith, tel. (81 75) 344 8888. For back issues of Kyoto Update, check out www.cei.org or call Emily McGee at (202) 331-1010.

 Japans Foreign Minister opened the UN climate conference, known as “COP-3,” by calling it “an event that could change the history of mankind.” This statement is no exaggeration. Posing as the defenders of our planet, the worlds leaders seem eager to impose increased energy costs on a world economy already in crisis.

Fred Smith, president of the Competitive Enterprise Institute, noted that what happens at Kyoto will determine the future of the world economy. The world will either continue to move toward greater economic liberalization or it will move toward increasing political control. The issue is in doubt.

The 8000 or so official delegates, business representatives, and NGOs (non-governmental organizations) seek agreement on some form of global carbon withdrawal program some initial commitment to view energy use as a negative act that can and must be curbed. That decision would be the first global political endorsement of the Malthusian view that the problems of the world stem from too many people, too much consumption, and too much technology, in sharp contrast to the dominant western view of economic and technological change as positive forces. CEIs Smith noted: Malthus would be surprised at the extent to which his gloomy view of mankinds future has come to dominate the global policy debate.”

Moreover, Smith noted, the premise of the Kyoto conference is that the science of global warming is settled. Nothing could be further from the truth. Despite scientific, political and economic uncertainties, world leaders seem determined to impose energy restriction policies at any cost.

CEI, a free market research and advocacy organization, received UN credentials today as an official observer of the conference, or non-governmental organization (NGO). Thousands of NGOs are in attendance, with the category dominated by environmental groups. Very few NGOs are supportive of a free and open world energy market. The dominant view at Kyoto both among the NGOs and the politicians is that massive restrictions on global energy use are critical and overdue.

However, the policy debate is beginning to be a bit more balanced; joining CEI at COP-3 are other pro-liberty organizations such as Eagle Forum and Sovereignty International, who are representing social conservative and national interest concerns, respectively.

CEI is participating in the global warming conference for the next ten days as a voice of sobriety and reason in a forum that has lacked both in recent months. CEI represents the consumers and taxpayers of the world who stand first in line to pay for and suffer from the strident proposals on the climate negotiating table. The burdens of energy reduction policies being considered in this radical, fanaticized forum will fall chiefly on the poorest and most vulnerable peoples of the world.

For more information, contact Fred Smith or James Sheehan of CEI at the Hotel Granvia Kyoto, (81 75) 344-8888, room 870. E-mail: fsmith@cei.org / sheehan@cei.org.

Following is a list of experts on a variety of aspects involving the Kyoto negotiations that are available for contact. All of the contacts listed here have been prominent spokespeople on this issue leading up to events in Kyoto.

All Aspects of Global Climate Change Policies

• Marlo Lewis — Competitive Enterprise Institute — (202) 331-1010

• Jonathan Adler — Competitive Enterprise Institute — (202) 331-1010

• Sterling Burnett — National Center for Policy Analysis — (972) 386-6272

• Myron Ebell — Frontiers of Freedom — (703) 527-8282

• John Shanahan — American Legislative Exchange Counsel — (202) 466-3800

• David Ridenour — National Center for Public Policy Research — (202) 543-1286

• Joel Bucher — Citizens for a Sound Economy — (202) 783-3870

Science

• Steve Milloy — Advancement of Sound Science Coalition — (202) 467-8586

• Patrick Burns — Citizens for a Sound Economy — (202) 783-3870

Economics

• Angela Antonelli — Heritage Foundation — (202) 608-6220

• Peter Ferrara — Americans for Tax Reform — (202) 785-3264

• Barbara Rippel — Consumer Alert — (202) 467-5809

National Defense/International Relations

• Frank Gaffney — Center for Security Policy — (202) 466-0515

• Brett Schaefer — Heritage Foundation — (202) 608-6123

Small Business

• Karen Kerrigan — Small Business Survival Committee — (202) 785-0238

Consumers

• Fran Smith — Consumer Alert — (202) 467-5809

• Consumer Alert — Consumer Alert — (202) 467-5809

Seniors

• Thair Philips — Seniors Coalition — (703) 591-0663

• Nona Wegner — Seniors Coalition — (703) 591-0663

• Henry Hough — 60 Plus — (703) 807-2070

Property Rights

• Nancy Marzulla — Defenders of Property Rights — (202) 822-6770

• Grant Madsen — Defenders of Property Rights — (202) 822-6770

To reach these representatives in Japan, please contact their U.S. offices at the number listed.

• Craig Rucker — Citizens For a Constructive Tomorrow — (202) 429-2737

• Fred Smith — Competitive Enterprise Institute — (202) 331-1010

• James Sheehan — Competitive Enterprise Institute — (202) 331-1010

• Thomas Gale Moore — Hoover Institution/CEI — (202) 331-1010

The Brookings Policy Briefing, by Warwick J. McKibbin and Peter J. Wilcoxen, discusses the currently favored U.S. proposal, to be presented at the Kyoto Conference later this year, for the reduction of CO2 emissions. The proposal suggests an international system of tradable emissions permits with the total amount of emissions kept at the 1990 level. International negotiators would decide how the permits are initially distributed among the participating countries. Each country could then decide for itself how to allocate the permits internally. These permits could than be freely traded on an international basis. The system would in the beginning only involve developed countries with the intention that the developing countries would join at a later date.

The proposal was endorsed by some well-known economists – Kenneth Arrow, Dale Jorgenson, Robert Solow, Paul Krugman, and William Nordhaus. McKibbin and Wilcoxen suspect that some of the enthusiasm about international trading permits is more related to the theoretical concept than to the practical application, and note that not enough attention has been given to the practical problems of such a system. The authors then consider why an international system of tradable permits looks so favorable in theory.

The principal idea is that any company which produces CO2 emissions has to obtain enough permits to balance the amount of CO2 emissions it produces. The decision of how the permits are distributed among the participating countries, for example according to population, or actual CO2 emissions, would be subject to international negotiation and agreement. How they are allocated domestically is free for every country to decide. After that companies could trade their permits world-wide without any restrictions.

The advantages seen in this theoretical concept are:

The emissions could be kept to a pre-determined level.

This level of emissions would be achieved with a minimum of costs.

This would be possible because firms with the lowest abatement costs would undertake the abatement and then sell permits to companies which face higher costs and therefore would rather buy permits.

The government can control how the burden of the abatement costs are distributed among companies.

The government can influence the distribution of the costs through the way it allocates the permits in the beginning, for example through free distribution or auctions.

The authors then examined the problems that would arise in the practical application of the concept, which seems so intriguing in theory. McKibbin and Wilcoxen consider the sulfur emissions trading scheme in the U.S. as an example that the system can work for domestic problems, but they foresee many problems for a CO2 emission permits trading system on a world-wide basis.

One of the problems they see is that the emissions would be cut back to 1990 levels and kept there without any concern about the costs such a reduction would imply. Estimates of the economic impact of such a policy range from -0.5 percent increase in GDP per year for the U.S. to up to 2 percent of decline in GDP per year. Most of the studies lay between 1-2 percent decrease of GDP per year.

In contrast, the benefit would be the avoidance of potential costs from climate change. However very little is known about these possible costs and the impact of reduced CO2 emissions on the climate. Some studies have tried to estimate the potential costs of climate change in a scenario with an increase in temperatures of 2.5 – 3 C. The studies say the costs could be as much as 1.3 percent of GDP every year for the U.S. around the year 2050. The benefits would be much smaller for a mere restriction of emissions to the 1990 levels.

McKibbin and Wilcoxen contend that the evidence suggests that there is no real need to keep the emissions at the 1990 levels, because most of the studies estimate that the costs would be far greater than the potential benefits. In addition, the costs would arise now, whereas the benefits would occur far in the future.

The second problem mentioned in the Policy Briefing would be the enormous transfer of wealth from the U.S. to other countries, particularly to developing countries, as a result of the system. Some regard this as a positive part of the agreement, but the sheer amount of the transfer sum makes it unlikely that there would be enough political support given the usual problems of much smaller foreign aid budgets in obtaining approval. The enormous transfer sums would lead to large distortions in the international trade system; the result could be more volatility in exchange rates and the widening of the U.S. trade deficit. Developing countries would receive a huge amount of transfer money, however, most of the money would have to be invested in “environmental technology” to reduce emissions, even though most of these countries are in urgent need of money to improve infrastructure, education and health care systems. Developing countries are not expected to participate from the start, but without these countries’ participation, probably the most important factor of the concept would be lost (the difference in abatement costs), and the cost savings thus would be much smaller.

An additional problem would be that none of the participating governments would have any incentive to monitor the agreement. The costs would fall on domestic firms while the benefits would mostly go to other countries. As a result, there might be a tendency by national governments to “overlook” violations by domestic companies. A complex and expensive international monitoring system would be needed to enforce the treaty.

The authors then explore a possible alternative: a scheme of national permits and emissions fees. Each country would receive permits according to its 1990 level of emissions, and these could be distributed among companies however the country wished to do so. Besides these permits, every company would be able to buy additional permits from its national governments for a specific fee, for example, $10. Therefore, companies could buy permits from two sources – other companies and the government.

This system would not insure a specific emission level, but companies would always have an incentive for abatement if it could be done for less than the fixed fee. The result would not be a cap on emissions, but the abatement would be done with a minimum of costs.

The authors compare the scheme favorably to a carbon tax, because it could save companies a lot of money if the government decides to give away the permits up to the 1990 level for free. A tax would start with the first ton of emission, while the fee would only apply to companies that exceed their 1990 emissions level. McKibbin and Wilcoxen think such a scheme would provide a clearer picture of what the real costs of abatement are and providing this information might be important for future policy decisions if there is less uncertainties about cost and benefits in financial terms of climate change policy. It would also provide greater incentives for monitoring on a national level, because revenues through the fees could be added to governments’ budgets.

McKibbin and Wicoxen also suggest that the system would be flexible enough to adopt a possible change in policy in case scientific evidence would emerge that climate change is a bigger or smaller problem than expected; and if more information become available about the real costs of emission reduction. It would also allow non-participating countries to join by simply adopting the policy at home without the need for further international negotiations.

McKibbin and Wilcoxen conclude that their proposal would be much easier to implement and politically acceptable to more countries. It would probably slow the growth of CO2 emissions without a big distortion to the international system of trade.

They see, therefore, the choice as being not between an international trading system and their proposal, because they think the international trading system has no chance of agreement – but between their proposal and no policy at all.