The politics of global warming simmered through 1999 in a long-range prelude to an important meeting on the Kyoto Protocol of 1997.
At the sixth conference of the parties (COP-6) to the United Nations Framework Convention on Climate Change (FCCC) late in 2000, negotiators planned to discuss the difficult subject of implementation.
At the start of 2000, however, ratification of the Kyoto Protocol remained the more immediate challenge. The protocol required ratification by 55 countries, a total that was supposed to include developed countries accounting for 55% of the carbon dioxide emissions from the industrial world in 1990.
And ratification depended heavily on action by the US, where opposition remained strong. In 1997, the US Senate had passed a resolution promising to reject any climate treaty that did not include developing countries and that threatened to harm the US economy.
Moreover, a long list of issues surrounding the Kyoto Protocol remained unsettled enough in 1999 to make it difficult for countries to assess the likely effects of ratification. The issues were as fundamental as how parties to the treaty would enforce its provisions, especially how they would deal with noncompliance.
Other questions arose. A group in the US published a study in 1999 throwing doubt on the abilities of countries signing the protocol to live up to the commitments they undertook. And the science of global warming remained subject to uncertainty.
It was clear that scientific doubt was not going to derail political movement toward an international effort to reduce emissions of greenhouse gases, especially CO2. Whether the protocol would remain at the core of that effort was as uncertain as global-warming science, however. Even if never ratified, the protocol congealed international pressure to reduce human reliance on fossil energy.
One supporter of the agreement, speaking at a conference in September 1999 sponsored by the Centre for Global Energy Studies and Oil & Gas Journal, described Kyoto as a step in the transition from an economic system based on hydrocarbon energy to one based on hydrogen and renewables.
"This long-term transition will proceed regardless of near-term Kyoto Protocol ratification prospects," said Seth Thomas of the Worldwatch Institute. "But forward-looking governments and firms are likely to utilize the protocol and growing public concern over climate change as a wedge for further opening up markets in carbon-free energy."
The agreement
The Kyoto Protocol called on 38 developed countries-referred to as Annex B countries-to cut emission of greenhouse gases from 1990 levels by an average of 5.2% during 2008-2012. Size of the cuts for individual countries and regions varied. The protocol allowed some countries to increase emissions.
Countries that were called upon to cut emissions of greenhouse gases included the European Union 8%, the US 7%, and Japan 6%. Countries allowed increases included Norway 1%, Australia 8%, and Iceland 10%. EU countries apportioned their Kyoto commitment unevenly among individual members, with some of them allowed increases.
The protocol evolved from the FCCC, a product of the UN Conference on Environment and Development of June 1992. Held in Rio de Janeiro, the conference became known as the Earth Summit.
The FCCC aimed at "stabilization of greenhouse concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system." At the CGES-OGJ meeting at which Thomas spoke, another speaker pointed out that scientists do not know what that level is.
"Indeed," said Clement B. Malin, retired Texaco Inc. vice-president-international relations, "scientists generally acknowledge that their ability to contribute meaningfully to its determination, if at all, is decades in the future."
In addition to the emission cuts, the treaty would oblige parties generally to account for and report policy programs, pay and provide for the transfer of technology to developing countries, and cooperate to achieve goals of the protocol and FCCC.
Problems of ratification
Malin, who attended the COP-3 meeting in Kyoto, Japan, that produced the protocol, pointed out that national governments would not be able to assess effects of the agreement on their countries until a number of issues were settled. The difficulty made ratification in time for the late-2000 COP-6 meeting on implementation unlikely.
Many countries discussing ratification, he said, would be troubled by lack of specifics about compliance. The protocol gave the COP responsibility for setting compliance procedures. It also said that procedures involving "binding consequences" would be adopted by means of an amendment to the protocol. So details about compliance could not be available until after ratification.
Among other issues, Malin said, were credit for emission reductions resulting from management of forest sinks and land-use changes, funding and technology transfer to developing countries, compensation to developing countries for harm to their economies from policies adopted by developed countries, and limits on the observer status of industry and other nongovernment organizations at meetings of negotiating bodies.
Also, details remained to be negotiated for the protocol`s important flexibility mechanisms allowing emission cuts in one country to offset commitments of another. The mechanisms included joint implementation for developed countries, the clean development mechanism for emission-reduction projects in developing countries, and emissions trading.
The flexibility mechanisms were supposed to globalize the effort to cut emissions of greenhouse gases. They aimed at enabling countries and companies to cut emissions in the most cost-efficient way, applying credits to reductions where they were not required to areas where they were required but where cuts would be more costly to achieve.
The mechanisms did not receive universal support, however. Opponents were thought likely to try to make them difficult or impossible to use. Yet the availability of comprehensive trading mechanisms was crucial to acceptance in countries, such as the US, facing large costs of compliance.
Related to the flexibility mechanisms was an issue that became known as supplementarity. It suggested that countries should be limited in their abilities to use the flexibility mechanisms to meet commitments in their own territory.
Another possible limit on the attractiveness to countries and industry of the flexibility mechanisms was a protocol provision specifying that emissions reductions resulting from joint implementation or clean development mechanism projects be "additional to any that would occur" in the absence of the flexibility provisions. The issue, known as additionality, raised a series of questions about definitions and baselines to be applied in determining what was "additional."
Feasibility questioned
Beyond the uncertainty over ratification were doubts that countries called upon to cut emissions of greenhouse gases and most supportive of the protocol actually could meet the Kyoto targets.
In an October 1999 paper published by the American Council for Capital Formation`s Center for Policy Research, Mary H. Novak, senior vice-president of WEFA Energy Services, assessed dimensions of the challenge.
She cited several studies showing that industrialized countries in North America and the Pacific region would be unable to achieve their Kyoto targets without "extensive use of the Kyoto [flexibility] mechanisms."
And a review of five government studies and one independent analysis led WEFA analysts to conclude, Novak said, that in Europe, where support for Kyoto was strongest, "the emissions targets cannot be achieved without exorbitant carbon taxes or extensive use of Kyoto mechanisms."
One of the six studies reviewed, by the Asia Pacific Energy Research Center of Tokyo, did not produce statistical findings comparable to the other five.
The remaining five studies estimated that cuts from baseline projections of CO2 emission levels needed to meet Kyoto targets would be 21-30% in North America and 19-29% in Annex B Pacific countries of Japan, Australia, and New Zealand (Table 1).
"The assessments of Western Europe`s potential for reducing carbon emissions from its energy sector as required to meet the Kyoto Protocol targets by the end of the next decade are uniformly pessimistic," Novak noted.
"Even the prospects for incorporating Eastern Europe in its `bubble` do not support proponents` views that the target can be achieved through inexpensive measures."
The "bubble" reference was to a provision allowing groups of countries to aggregate their emissions cuts as long as net reductions achieved Kyoto targets, as the EU had done.
Novak further pointed out that the European studies didn`t indicate extensive use of Kyoto flexibility mechanisms. The measures would reduce costs only if they were plentiful relative to all needs of the countries seeking to acquire emission credits.
"Given the projected demand for energy to meet economic growth objectives, the industrialized countries of Annex B would have to pay dearly to attract credits from countries focusing on economic growth," she said.
Differing approaches
In a comparison of the studies, Novak observeddifferencesinapproach between Europe and other Annex B countries.
Study findings common to all six studies were that:
- Required cuts in carbon emissions from energy sources would be very large despite efficiency gains in all the countries for energy and carbon use.
- CO2 emissions were related to all facets of the energy use integral to economic growth, and significant carbon and energy-use efficiency gains in the short term would be difficult.
- Large contributions from technological innovation to achievement of Kyoto targets by the commitment period would be unlikely and, to the extent they developed, expensive.
- Early retirements of nuclear power plants might widen the gaps between Kyoto targets and baseline forecasts.
- Scope was limited for meeting Kyoto targets through fuel substitution because of large increases in the use of natural gas under way before start of the commitment period.
One of the differences among the studies was treatment of Eastern Europe and the former Soviet Union. Most of the studies didn`t expect emission credits to be readily available from these areas, which the studies assumed would be stressing economic growth and increasing their consumption of carbon-emitting energy.
The EIA took the different view that such credits would be widely available from the economies in transition.
European and US studies also diverged in their assumptions about use of the flexibility mechanisms.
The US tended to expect widespread use, a view central to the Clinton administration`s assertions that costs of Kyoto compliance could be held in check. The EIA study said use of emissions trading might reduce costs of CO2 emission cuts and make the Kyoto targets achievable.
The European Commission, however, supported only limited, transitional use of emissions trading.
"...Can Western Europe meet their Kyoto targets through the aforementioned mechanisms and without strict compliance penalties?" Novak asked.
"No. They can make some progress, perhaps substantial progress, following this path, but they cannot achieve a binding goal. Moreover, since the stated goal is to propose further reductions beyond the Kyoto targets, the problem will continue to grow."
US costs
Much of the Kyoto Protocol`s fate pivoted on the ratification decision in the US.
Because the US accounted for one fourth or more of the world`s emissions of greenhouse gases, many countries otherwise inclined to support the Kyoto effort withheld ratification pending developments in the US. And the outcome in the US was far from certain.
The protocol violated outright one of the Senate`s conditions for ratification: that developing countries, expected to account for most future emissions of greenhouse gases, be part of the effort to reduce emissions. And the other condition, that the protocol not threaten economic growth, created further problems.
Despite assurances by the administration of President Bill Clinton that economic damage would be slight, private and government studies indicated otherwise.
An October 1998 report by the federal Energy Information Administration had estimated total costs to the US economy during the compliance period 2008-2012 averaging $77-338 billion (1992 dollars).
In 1999, EIA updated the study to estimate economic consequences of an early start toward Kyoto compliance, with phase-in of carbon emission reductions beginning in 2000 instead of 2005, the prior study`s start date. EIA conducted both studies at the request of the House of Representatives Committee on Science.
For both studies, EIA analyzed six cases based on levels of reductions for US carbon emissions from energy. The cases ranged from 24% above 1990 levels, designated 1990+24%, to 7% below 1990 levels, 1990-7%. The reference case assumed that carbon emissions would reach 1.791 billion tonnes in 2010, 33% more than the 1990 level. Of the 1.633 billion carbon equivalent tonnes of greenhouse gases emitted in the US in 1990, 1.346 billion tonnes came from carbon emitted by energy use.
EIA`s analysis assumed that Kyoto initiatives would apply a carbon price to each fuel at its point of consumption according to its carbon content. The carbon price didn`t apply directly to electricity; instead, it increased the assumed cost of electricity because of carbon prices applied to fossil fuels burned for generation.
In each of the six cases, the early start reduced the carbon price projected for 2010. Sample changes, in 1996 dollars: in the 1990+24% case from $67/tonne to $62/tonne; in the 1990+9% case from $163/tonne to $149/tonne; and in the 1990-7% case from $348/tonne to $316/tonne (Fig. 1).
Average carbon prices projected for the commitment period 2008-2012 also declined under the early-start scenario: in the 1990+24% case from $65/tonne to $60/tonne; in the 1990+9% case from $159/tonne to $146/tonne; and in the 1990-7% case from $349/tonne to $310/tonne.
EIA explained that introduction of carbon prices prior to 2005 would lower demand for energy services in that period because of the direct effects of higher energy prices on energy markets and the indirect effects of higher energy prices on the economy. The early start would further accelerate changes in energy-use equipment.
The net effect of the early start would be to reduce marginal costs of carbon reductions in the commitment period by advancing some of the reductions into the period prior to 2008, when they wouldn`t count toward commitment targets.
Average carbon prices over the entire projection period, 2000-2020, thus would increase with an early start, EIA said. The overall cost would grow from $55/tonne to $59/tonne in the 1990+24% case, from $110/tonne to $124/tonne in the 1990+9% case, and from $231/tonne to $254/tonne in the 1990-7% case.
Economic effects
For economic consequences, EIA assessed loss in potential gross domestic product (GDP) and loss in actual GDP. The loss in potential GDP measured loss of productive capacity of the economy attributable to the reduction in energy resources available to the economy. The loss in actual GDP included the adjustment cost to the economy and reflected short-term economic dislocations resulting from higher energy prices.
With an early start to efforts to reach Kyoto targets, the US GDP would sustain losses beginning in 2000 because of elevated prices for goods and services. But the early start would smooth the transition of the economy to the longer-term target.
Figs. 2 and 3 show what EIA projected for losses in potential GDP and actual GDP assumed for the early start.
EIA pointed out that most of the adjustment loss would occur in about the first 5 years of the imposition of the carbon price, whether the start date was 2000 or 2005. Loss in actual GDP in the early start cases during 2000-2005 was half to three quarters of the loss in the cases with the 2005 start date during 2005-2010.
In the early start cases, EIA noted, actual GDP would begin to rebound back toward the reference-case level sooner, and the recovery would be smoother than in cases with a 2005 start.
By 2010, the GDP effects in the 1990+24% early start case would be about half those in the 1990+24% case with the 2005 start date. In the 1990+9% and 1990-7% cases, the GDP effects with the early start would be about one third of those of the 2005 start. The losses in actual and potential GDP in all cases would tend to converge by 2020 as the economy transitioned into a long-run path.
EIA assessed cumulative effects on actual US GDP during the period 2000-2020 on an undiscounted basis and on a net present value basis with a 7% discount rate. Table 2 shows results.
Although undiscounted values were similar in the 2005 and early start cases, the peak effects were less severe with the early start but occurred earlier, EIA said. On a discounted basis, the cumulative effects on GDP were larger with the early start.
An Atlantic divide?
Views of the Kyoto Protocol contrasted sharply on opposite sides of the Atlantic.
European governments seemed little troubled by scientific uncertainties that raised questions about the wisdom of costly precautions. Their view tended to be that the potential damage from global warming, if indeed it was a threat, was so great that remedies were appropriate before the science was certain.
In the US, scientific questions received more attention, at least in the political debate. And the questions yielded mixed responses. Some observers saw a clear pattern in observed warming beginning in the late 19th Century and a CO2 buildup in the atmosphere.
Other observers pointed out that most of the observed warming preceded the gas build-up and was therefore probably part of a natural temperature cycle. A theory even emerged in 1999 that the gas buildup was largely a natural response to natural warming as oceans released sequestered CO2.
But politics, not science, was sure to determine fate of the Kyoto Protocol. And in 1999, political support came mainly from the White House.
The Clinton team supported Kyoto ratification, and Vice-President Al Gore, a longtime supporter of extreme precautions against the possibility of warming, was seeking nomination as the Democrat Party`s candidate in the 2000 presidential election. Congress wasn`t so certain.
During the October 1999 American Council for Capital Formation conference at which Novak of WEFA Energy presented her group`s study, Rep. John Dingell (D-Mich.) summarized his position like this:
"In the 2 years since the signing of the Kyoto agreement, there has been little that I have seen to recommend it.
"The developing countries, especially China and India, remain as intransigent as ever. The European nations are busily trying to undermine the portions of the agreement dealing with emissions trading and flexibility, the very concepts that Kyoto supporters invoke when they claim that the costs can be made bearable.
"In the United States, the Kyoto agreement rests in a state of suspended animation, and we may hope that that will persist for a time."
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