Concerns over global warming are driving an era of change characterized by emissions trading and investment in new and renewable energy technologies. But a new book expresses doubts on the need for such investment, and blames ‘climate alarmists’ for driving inefficient interventionist policies.

This month, some 4000 delegates representing the 188 parties to the United Nations Climate Change Convention and other nations are meeting to assess the progress that governments have made in reducing man-made climatic changes. During the two-week meeting in Milan, Italy, delegates will examine current emission levels and discuss national action policy measures to overcome the increase in greenhouse gas concentrations.

“The fact that 2003 is on track to be one of the warmest years on record should be a warning that we must all take seriously,” said Joke Waller-Hunter, the Convention’s executive secretary, in the run-up to the Milan meeting. “We can see growing evidence that many governments have been inspired by the Climate Change Convention and its Kyoto Protocol to strengthen action at the national level, but more needs to be done to stop the increase in greenhouse gas concentrations.”

Despite measures currently in place to limit emissions from Europe, Japan, the USA and other industrialized countries, combined emissions could grow by eight per cent from 2000 to 2010, or about 17 per cent over 1990 levels, the UN said. This compares to Kyoto targets, which call for a five per cent decrease in greenhouse gas emissions from 1990 levels by 2012.


Kyoto has inspired action on climate change, but will the benefits outweigh the costs?
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Key driver

The Kyoto Protocol – a pact agreed between governments in 1997 – has become a major challenge for the energy industry and also a key driver for policy and technology development. In spite of the fact that it has not yet been ratified – and, indeed, may never be ratified – many countries are using it as a benchmark for implementing emissions reduction programmes.

The USA was widely criticized for pulling out of the Kyoto agreement. Nevertheless, it has implemented a National Climate Change Technology Initiative (NCCTI), which includes the Climate Change Technology Programme (CCTP). The CCTP is a multi-agency research and development (R&D) initiative which aims to focus activities on President Bush’s climate change goals, both near- and long-term. The CCTP provides a forum for inter-agency exchange of information on ongoing R&D activities. It is designed to provide an opportunity to develop a comprehensive, coherent, multi-agency, multi-year R&D programme plan for the development of climate change technology, tied to specific climate change goals and objectives.

In parts of the world where the Kyoto Agreement has been signed, serious efforts are being made to reduce emissions in line with specific targets. The European Union has agreed to an eight per cent reduction in emissions over 1990 levels, with different targets for individual countries. The EU is in the process of implementing a CO2 emissions trading scheme which will start in 2005 and will be fully operational by 2008 (see PEi July 2003, Vol 11 Issue 6, page 16-18).

Power generation companies are at the centre of emissions reduction programmes. In the EU, power generators account for around one-third of total CO2 emissions. A recent report from Pricewaterhouse-

Coopers indicates that carbon emissions from the sector are rising, with seven of the region’s top ten generators reporting an increase in emissions in 2002. If these generators are going to meet their caps under the emissions trading scheme, they will have to limit their CO2 output by as much as 100m t/year by 2012.


The IEA forecasts that global CO2 emissions will rise at a slightly higher pace than overall energy demand over the next few decades
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Kyoto critique

But a new book published by the Institute of Economic Affairs and written by Robert L. Bradley Jr. of the Institute for Energy Research in Houston, Texas, questions the validity of implementing cap-and-trade programmes and mandatory greenhouse gas emissions targets; the costs of such schemes are likely to far outweigh the benefits.

Bradley’s book is a critique of the Kyoto protocol and the environmentalist lobby which promotes it as the only solution to climate change issues. In it, he cites evidence that questions the scientific basis of Kyoto as well as the economic basis of its aims and policies.

Estimates of the cost of meeting emissions reductions under Kyoto vary widely; in his book, “Climate Alarmism Reconsidered”, Bradley cites studies which estimate the cost of compliance varying from $26 per ton for the USA (with full international trading) to $716 billion for all Annex 1 countries (with Annex 1 trading). But the effectiveness of Kyoto as a tool for achieving reductions in emissions is debatable, says Bradley.

Countries are unlikely to achieve Kyoto compliance in the 2008-2012 compliance period, and the fact that Kyoto is viewed as an economic burden by some countries, and that it does not include nations from the developing world, is one of its main weaknesses. In addition, says Bradley, one study of the climate effects of Kyoto compliance shows that only about five per cent of the human influence on climate would be reversed if Kyoto commitments remained honoured from the first compliance period (2008-2012) through to the end of the century.

“It is estimated that a 60-80 per cent reduction in worldwide CO2 emissions will be necessary to stabilize atmospheric concentrations at 1990 levels, compared with a 5.2 per cent reduction from 1990 levels – for developed countries only – in the Kyoto Protocol,” states Bradley in his book. “Prominent scientists have estimated the number of Kyotos that will be needed at between ten and thirty.”

Cap and trade

Emission trading schemes are often viewed as an efficient way of achieving targets as they are, in theory, driven by market forces. Bradley, however, states that there are too many critical questions surrounding cap-and-trade schemes: what should the baseline level of emissions be for different industries to avoid economic and competitive distortions? What credit will be given for carbon sinks given the large uncertainty and slow evolution of knowledge regarding the carbon cycle? A taxation scheme, is, however, more easily adjustable to new information, is more transparent and is administratively simpler.

Either way, meeting Kyoto targets signals higher prices for end-consumers. In the EU, energy prices are already among the highest in the world, and still-higher prices are needed to discourage consumption, says Bradley. In spite of this, the EU has set a goal of reducing greenhouse emissions by 60 per cent from 1990 levels by 2050. Meanwhile, the IEA projects that emissions in the EU will be ten per cent above 1990 levels by 2030.

Government intervention to protect the environment or slow climate change is therefore ineffective, Bradley believes. It has a negative impact on the availability, dependability and affordability of energy.

The optimists’ view

A key theme in Bradley’s book is that the pro-Kyoto lobby – or “climate alarmists” – are too pessimistic about the impact that global warming will have on the environment and economy. In addition, Bradley states that the evidence so far indicates that the influence of anthropogenic emissions on the climate has been moderate or benign. Climate models that predict significant temperature rises are too simplified and therefore prone to inaccuracies.

Increased concentrations of CO2 in the atmosphere will have benefits for plant life and agricultural productivity, says Bradley, while undesirable plant growth and pests can be controlled through technology. The ability of societies and economies to adapt to changes is underestimated. Bradley also points out that the sensitivity of climate to greenhouse gases decreases as greenhouse gas concentrations increase, while higher CO2 emissions have been partially offset by increased absorption by plants.

Addressing problems

Bradley concludes that taking small steps towards emissions reductions through cap-and-trade programmes is not a cost-effective way of addressing the problems they are designed to solve. These programmes will also have greatest impact on the poorest nations and on the poorest people in the wealthy nations.

Bradley proposes a range of policies that would benefit the environment and increase economic efficiency. These include: removing subsidies that keep energy prices below market levels; introduce peak pricing; streamline corporate tax codes to allow investment in energy-efficient technology; remove non-market barriers to increase the amount of electricity generated by nuclear power and hydropower; and liberalize developing country economies to reduce primitive biomass usage.

References

“Climate Alarmism Reconsidered” by Robert L. Bradley Jr., pulished by the Institute of Economic Affairs, pp177. ISBN: 0 255 36541-1