AFTER TWO MAJOR NEGOTIATING sessions, the global warming treaty drafted by 160 nations faced very difficult talks before it could be implemented.
In December 1997, at a conference in Kyoto, Japan, industrialized nations agreed upon a 5.2% cut in the emissions of gases linked to global warming-mostly carbon dioxide-by around 2010.
But nations made little substantive progress toward implementation during a meeting in Buenos Aires, Argentina, in November 1998. Another meeting was planned for late 1999.
Buenos Aires
Conferees at Buenos Aires did agree to a late 2000 deadline for resolving issues remaining from the first meeting, including rules for enforcing the global warming pact.
Also, the U.S., the European Union, Japan, and other nations pledged to reach agreement by 2000 on an international emissions trading system and a method for funding emissions reductions programs in developing countries.
At the Buenos Aires talks, developing countries continued to oppose any voluntary reductions in their greenhouse gas emissions.
China, India, and other countries blocked a proposal that the talks include a debate on whether poorer nations should commit themselves to voluntary greenhouse gas emissions limits. They argued that the industrialized countries emit most greenhouse gases and should reduce them the most.
The developing nations also supported compensation for members of the Organization of Petroleum Exporting Countries, which fear oil revenue losses if the Kyoto treaty reduced fossil fuel use.
Stuart Eizenstat, U.S. undersecretary of state, said, "Buenos Aires has not only sustained but advanced the momentum of Kyoto. Serious hurdles remain to make this workable and complete, but this agreement gives us a way to move forward."
Kirsty Hamilton of Greenpeace International said, "We are very disappointed that there has been no progress on key issues at this meeting, and that has got to be deeply worrying for everyone."
U.S. joins
The global warming treaty got a boost, of sorts, when the U.S. signed it during the Buenos Aires meeting.
Peter Burleigh, acting U.S. ambassador to the United Nations, signed the pact at U.N. headquarters in New York City. The U.S. was the 60th nation to sign.
The agreement was to go into effect when ratified by 55 countries, representing 55% of 1990 developed world emissions.
The Clinton administration said it would not submit the treaty to the U.S. Senate for ratification until further improvements were made in the protocol-particularly that developing nations agree to "meaningful participation" in emissions reductions.
The U.S. emits about 25% of global CO2 emissions, and its participation was considered necessary for the success of the treaty.
To meet its pledge under the accord, the U.S. would have to reduce emissions about 7% from 1990 levels within 15 years.
Vice-Pres. Al Gore said, "Our signing of the protocol underscores our determination to achieve a truly global solution to this global challenge."
Gray Cook of Greenpeace said the U.S. had to sign the treaty, or it would be "holding the rest of the world hostage by supporting the agenda of the fossil fuel industry."
Howard Ris, executive director of the Union of Concerned Scientists, said, "Signing the treaty is an important step, but reducing pollution at home is the giant leap we need too protect us from global warming."
Opponents
Sen. Chuck Hagel (R-Neb.), an opponent of the pact, said the administration`s signing of the treaty contradicted the will of the U.S. Senate, which had voted 95-0 to oppose any treaty that lacked participation by developing nations.
Sen. Frank Murkowski (R-Alas.) said, "I really believe that the treaty is dead-it just hasn`t been buried yet. Rather than trying to breathe life into a dead treaty, we should shift the focus to efforts to reduce global emissions with a mix of 21st century technology, market-oriented approaches, and American ingenuity."
Jerry Taylor, director of natural resource studies at the conservative Cato Institute, Washington, D.C., said the U.S. signing was merely symbolic.
He said, "The Kyoto treaty is dead as a doornail, and the administration knows it. Signing the treaty at this point means nothing, due to the intractable bipartisan opposition in the Senate. It is nothing but symbolism, obviously an administration priority."
The Global Climate Coalition, a U.S. group which opposes the treaty, said the U.S. should not have signed because developing nations still were not cooperating.
Connie Holmes, GCC chairman, said, "American families know that these meetings are ending with major developing nations still refusing to participate. Until countries like China and India get into the game, the global climate treaty will be neither fair nor global."
Industry`s view
The American Petroleum Institute said, "Signing the protocol was a mistake, just as agreeing to it in Kyoto last year was a mistake. Through this act, the administration has surrendered negotiating leverage with developing countries who remain adamantly opposed to even voluntary limits on greenhouse gas emissions. The administration is also disregarding the advice of the U.S. Senate.
"This is a debate which for too long has been driven by rhetoric and media events. The President now should send the protocol to the U.S. Senate and call for debate and vote. The Senate has already said, in a resolution adopted 95-0, that it will not ratify any agreement which would either exclude the participation of developing nations or harm the U.S. economy.
"As has been acknowledged by scientists and independent analysts, the protocol will do little to reduce carbon dioxide concentrations while imposing unacceptable costs on the pocketbooks of American consumers. The agreement would dramatically slow growth and cost the jobs of American workers.
"This debate is not about a choice between action and inaction. Rather, the U.S. must decide on a set of actions consistent with our state of knowledge about climate change and the need for continued growth in the U.S. economy.
"The petroleum and natural gas industries acknowledge the potential for human-induced risks from climate change, and we are committed to addressing that risk. Oil and gas producers are already voluntarily reducing greenhouse emissions and are developing new technologies to make even greater reductions."
Emissions trading
The Buenos Aires talks focused on establishing a global emissions trading program-the Clean Development Mechanism-which would allow developed nations to reduce greenhouse emissions in poorer countries to earn credits against their own limits.
The U.S., Japan, and Russia had opposed any caps on international trading of emissions credits, arguing that could allow gains at the lowest possible cost.
U.S. delegation head Melinda Kimble said, "Around 80% of investment in new plants and equipment in the energy sector will take place in the developing world over the next 20 years," and industrialized countries have the money and technology to reduce emissions from those plants.
But the European Union opposed allowing developed countries to meet more than half their own reductions goals through emissions trading credits. The EU said that could result in "climate fraud," allowing countries to avoid making domestic reductions.
Ritt Bjerregaard, EU environment commissioner, said, "The use of flexible mechanisms must never be an excuse for neglecting obligations back home."
Meanwhile, India and other developing nations argued for a system of entitlements that would encourage richer nations to invest in clean technologies in the developing world as a way to cut emissions.
Industrialized nations responded that the emissions-trading and technological aid programs should work in tandem, but the Kyoto treaty should not be transformed into a foreign aid program aimed mainly at helping poorer countries.
Other views
William O`Keefe, an API vice-president, said there was a marked hostility to the U.S. and industrialized nations during the talks. "There is a level of trust that is missing when 170 nations cannot even discuss the agenda," he said.
O`Keefe said the arguments at Buenos Aires were chiefly about economics. "Simple math proves that the U.S. is energy-efficient since we contribute 25% of the world`s emissions but we produce 25% to 30% of the world`s gross national product. Thus trying to force the U.S. to cut emissions is really about cutting the American economy."
Holmes said, "If they were truly concerned about the environment and reducing greenhouse gases, then it wouldn`t matter to them whether the emissions reductions came from the U.S. or through emissions credits purchased on the world market.
"The developing world has been trying to implement the Clean Development Mechanism portion of the treaty under a set of temporary rules so that they can start benefiting from investments in their countries.
"The problem is that there is no way to credit these investments, and it leaves out emissions trading, a key component of the U.S. position."
The protocol
Article 3 and Annex B of the protocol established binding emissions targets below 1990 levels for 38 developed nations and the European Union for the 2008-2012 time frame.
Japan agreed to a cut of 6% below 1990, and the EU 8% (but grouping the European nations together allowed for wide variations among EU countries).
Several nations would be able to increase emissions (Australia 8% above 1990 and Norway 1%) while several others (Russia, Ukraine, New Zealand) had only to return to 1990 levels.
Overall, the 38 developed countries had to reduce their emissions about 5.2% below 1990 levels.
The pact covered six major greenhouse gases: CO2, methane, nitrogen oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride. It set 1990 as the baseline year for the first three gases and 1995 for the last three.
Article 3 allowed the counting of net changes in sinks "resulting from direct human-induced land use change and forestry activities" since 1990, but details had not been determined in late 1998.
The U.S. sought and won Article 17, which allowed emissions trading between developed nations, and Article 6, which permitted joint implementation of reduction programs.
Article 12 set the Clean Development Mechanism giving developed countries credits toward their targets through project-based emission reductions in developing countries. Details remained to be negotiated.
EIA study
Janet Yellen, chairman of the U.S. Council of Economic Advisers, said the White House estimated implementing the Kyoto pact could cost the U.S. economy $7-12 billion/year in 2008-2012.
She said increases in energy prices to pay for emissions permits would raise the average household`s energy bill in 2010 by $70-$110/year, and gasoline prices by 4-6¢/gal.
She said the administration`s "modest" cost estimates assumed that international emissions trading permits would be in place, along with joint implementation programs and "meaningful participation" by nations such as China and India.
But the U.S. Energy Information Administration disagreed with the cost estimates.
It issued a study that claimed the U.S. might need large energy price increases in order to meet its tentative commitments under the Kyoto pact.
It said because 83% of U.S. greenhouse gas emissions in 1990 were CO2 generated by use of fossil energy, any actions to reduce them would have a large impact on energy markets.
EIA examined six cases with different reductions in energy-related carbon emissions.
In the case with the highest target, carbon emissions were reduced by an average of 122 million metric tons/year relative to the projected baseline emissions between 2008 and 2012, which allowed an increase of about 24% above 1990 levels.
For the lowest target, emissions were reduced on average by 542 million metric tons relative to the baseline, or 7% below 1990 levels.
Each case implicitly assumed different levels of international actions, offsets, or sinks, but they were not quantified. To reduce energy-related carbon emissions, EIA added a carbon price to the price of delivered fuels based on their carbon content.
Conclusions
EIA said what the Kyoto Protocol would cost the U.S. economy depended on the international permit trading system, on projects to reduce emissions or develop sinks in other countries, and on domestic actions to reduce other gases and develop sinks.
"These actions may reduce compliance costs by offsetting reductions in energy-related carbon emissions. The carbon price required to reduce U.S. energy-related carbon emissions ranges from $67 to $348/metric ton in 2010 (1996 dollars).
"In the more stringent reduction cases, the carbon price will decline by 2020 as more-efficient and lower-carbon technologies become economically available and penetrate later in the forecast horizon."
EIA said due to the carbon price, the average price of gasoline could be between 14¢ and 66¢/gal higher in 2010 than it would be otherwise, and electricity prices could increase by 20-86%.
It said higher energy prices would encourage U.S. consumers to reduce energy use by 4-18% in 2010, relative to the baseline. EIA said energy consumption would increase between 2010 and 2020 as the economy grew and carbon prices declined.
Petroleum consumption would be lower than it would be without carbon reductions but would remain above 1998 levels because of the demand for oil in the transportation sector, where there were few options for other fuels.
Gasoline consumption could be 3-18% lower in 2010 compared to the baseline, and jet fuel consumption might be lower by 1-16%.
EIA said because coal was the most carbon-intensive fossil fuel its price could rise between 153% and 800% in 2010 relative to baseline projections, and coal use would decline by 18-77%, particularly for electricity generation.
Natural gas and renewables would replace coal in electricity generation, and gas use would increase by 2-12% in 2010 over the baseline.
Renewables would capture 11-22% of the generation market by 2020, relative to 9% in the baseline, with major increases coming in wind, biomass gasification, and geothermal generation.
EIA said higher carbon prices would make nuclear generation more economic and would extend the operating life of existing plants, raising nuclear generation between 8% and 20% in 2010.
Economic impact
EIA noted that when energy costs rise other factors of production, including labor and capital, become relatively less expensive. Energy price increases encourage adjustments in which labor and capital are substituted for more expensive energy.
In the process, some economic activity is lost, which could reduce the "potential" gross domestic product (GDP) growth from 2%/year between 2005 and 2010 in the baseline to 1.9%/year.
It said recycling carbon revenues back to consumers would offset some of the harm to the economy. In the baseline, the actual GDP would grow at an average rate of 2%/year between 2005 and 2010.
As a carbon price was introduced, the average growth could be reduced to 1.6%/year, assuming a Social Security tax rebate, or to 1.2%/year, assuming a personal income tax rebate.
As carbon prices declined and the economy adjusted, GDP would rebound, and the average growth rate from 2005 and 2020 would be only slightly less than in the baseline.
The loss in GDP, plus the funds used to purchase permits internationally, represented the total cost to the economy.
EIA said over the period 2008 to 2012, the cost would range from $77 billion/year (1992 dollars) to $338 billion, depending on the level of carbon reductions and the recycling assumptions. This cost would be relative to a total economy of $7 trillion in 1996, growing to about $9.5 trillion in 2010, and about $11 trillion in 2020 (1992 dollars).
Reactions
Rep. James Sensenbrenner Jr. (R-Wis.) said, "I`ve suspected all along that the White House position on the Kyoto Protocol is unrealistic and untenable, and this EIA study confirms my suspicions.
"We now know the real story behind the Kyoto Protocol: Energy use will be more expensive, economic growth will be jeopardized, and American families will pay dearly for a flawed treaty. The administration tries hard to gloss over these fatal flaws, but it cannot sugar-coat the harsh realities that it would inevitably bring to our economy and our way of life."
The Global Climate Coalition said the EIA report "injects a dose of reality into the administration`s analysis of the economic effects of the Kyoto Protocol."
It noted the EIA findings for 2010 were much different from those Yellen had given Congress at several hearings.
The coalition said EIA estimated the protocol would raise energy costs for households by $335-1,740/year, compared with the administration`s estimate of $70-100.
Also, it noted EIA predicted gasoline costs could rise up to 66¢/gal while the administration estimated no more than 5.5¢. And EIA said the GDP would decline by $61-397 billion, while the administration estimated $1-5 billion.
GCC`s Holmes said, "This EIA analysis verifies our doubts about the administration`s claims of modest economic impact. Even if the administration is successful in obtaining an international agreement to trade emissions, the costs will be high."
But Howard Geller, executive director of the American Council for an Energy-Efficient Economy, said the EIA study was flawed because it did not account for ongoing or likely policies, programs, and associated technological trends that would lead to reductions in carbon emissions.
Geller said some examples were forthcoming appliance efficiency standards, tougher Clean Air Act standards which had been announced or were being implemented, programs that expanded utility investment in energy efficiency and renewable technologies, voluntary energy efficiency programs, and the growing willingness in the private sector to take early action and make voluntary greenhouse emissions reductions.
Geller said EIA assumed the U.S. would wait until 2005 to begin emissions reductions, ignoring voluntary commitments and early action.
And he said EIA failed to include a scenario the U.S. used policies other than a carbon tax to comply with the protocol. He said such policies could include minimum energy efficiency standards, tax incentives, revenue-neutral fees and rebates, and federal utility restructuring legislation with energy efficiency requirements.
Pew study
The Pew Center on Global Climate Change, which advocated marketplace solutions for global warming, urged Congress to enact laws to encourage U.S. companies to reduce gas emissions.
Executive Director Eileen Claussen said, "The cost of delay is significant, both in terms of the economic and environmental consequences. The problem is getting worse, and the longer we wait, the more difficult and expensive our response will be.
"Regardless of any eventual international framework, the U.S. can take steps to credit reductions in gases now and therefore encourage and reward companies that act to minimize their emissions."
The Pew report said a workable early action program required Congress to give companies a predictable credit mechanism and a clear legal framework.
It said the program had to be simple and flexible, reward only real reductions, recognize past voluntary greenhouse gas reductions, not exceed the U.S. greenhouse gas allocation, and not predetermine the eventual domestic regulatory program.
Sens. John Chafee (R-R.I.), Connie Mack (R-Fla.), and Joe Lieberman (D-Conn.) planned to push legislation in 1999 that would credit companies for taking voluntary steps to reduce their overall gas emissions in advance of a regulatory program.
The Interstate Natural Gas Association of America called the bill "a forward-thinking, practical first step in addressing the issue, and it provides incentives to move toward the use of cleaner fuels."
Cato analysis
Meanwhile, a Cato Institute study claimed that global warming forecasting had been "an astounding failure," making the Kyoto Protocol a "useless appendage to an irrelevant treaty."
Climatologist Patrick Michaels said a forecast of global warming made a decade earlier by National Aeronautics and Space Administration scientist James Hanson "was an astounding failure" that should not have been accepted by the United Nations Intergovernmental Panel on Climate Change.
Michaels, senior fellow in environmental studies at the Cato Institute and professor of environmental sciences at the University of Virginia, told the House Committee on Small Business that scientific findings undermined the global warming forecasts.
He said observed climate change was several times below the amount predicted by the climate models used for the U.N. Framework Convention on Climate Changes.
Michaels said CO2 in the atmosphere was increasing at a lower rate than in the U.N.`s most conservative scenarios because it was being increasingly captured by vegetation and that the direct warming effect of CO2 was overestimated.
Michaels concluded that the Kyoto Protocol would have no discernible impact on global climate within any reasonable time frame.
He said even if every nation met its obligations under the Kyoto Protocol, the earth`s temperature in 2050 would be 0.07° C. lower, "an amount so small that it cannot be reliably measured by ground-based thermometers."
Uncertain future
Cato`s Taylor argued the science supporting the global warming theory, and the treaty itself, were in question.
"Treaty supporters say that just about all of the scientists engaged in global warming research now accept that the problem is real and must be addressed. Well, yes and no.
"Most (but by no means all) scientists engaged in the field agree that industrial emissions are probably affecting the climate. But the evidence is circumstantial.
"As the U.N. International Panel on Climate Change noted in its most recent (1995) report, the evidence thus far `cannot be considered as compelling evidence of cause-and-effect link between anthropogenic forcing and changes in the earth`s surface temperature.`"
Taylor said, notwithstanding the misleading public characterizations of the global warming debate, the case for the Kyoto Protocol was threadbare.
"Of course, the Senate is unlikely to ratify the treaty, a fact conceded by the administration in its decision not to send it up for a vote until at least 2001. If the past is any prologue, the case for ratification will continue to weaken."
Independents` fears
Clairborne Deming, president and CEO of Murphy Oil Corp., warns that U.S. approval of the Kyoto Protocol would be "devastating" for smaller oil firms like his.
Murphy, of El Dorado, Ark., is an integrated oil company producing 110,000 b/d equivalent of hydrocarbons, 65% oil and 35% gas. It operates two refineries in the U.S. and has a 30% interest in a Welsh refinery.
Deming told a congressional hearing that an emissions trading system would cost between $25 and $225/ton of carbon equivalent. He said assuming $125/ton, the cost would be $15/bbl.
"Besides the obvious, and intended, impact of more than doubling the price of our commodity to the consumer, in itself crippling, the trading system imposes an additional cost to refining crude oil into products.
"Approximately one fifteenth of every barrel in the refining process is consumed as a refinery fuel. If the price of crude is arbitrarily increased by $15/bbl, this will add almost $1/bbl to our manufacturing costs.
"Last year Murphy`s cost (excluding crude costs) to manufacture crude oil into products was around $3/bbl. This trading system therefore will effectively raise our direct manufacturing cost by approximately 33%."
Deming said Murphy has survived since 1907 despite large oil price swings and government price regulation.
"We are adaptable and hold our own against the largest companies on the face of the earth. This threat is different. The major oil companies, because of sheer size and geographical diversity, will make it.
"You will cause smaller players, like Murphy, needed to maintain a level, competitive, dynamic, interesting energy field to go out of business.
"All because of a problem, that if it exists, cannot possibly be solved by this clumsy, heavy-handed treaty."
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