Kyoto is upon us. Decisions must be made. The President, in his eagerness to negotiate something, anything, has announced a plan that would mandate binding curbs on carbon emissions to bring them to 1990 levels in the next 10 to 15 years. He has given few details, but has mentioned spending $5 billion over the next five years on tax breaks to spur energy efficiency and to develop new non-fossil fuel technologies. The Europeans, who had been critical of the Japanese proposal to cut emissions to 5 percent below 1990 levels by 2010, were even more irate when confronted with Clinton's new position.

Will it Fly?

Whether a treaty can be signed in Kyoto is far from certain. Congress has made it clear that the rapidly developing mega-states of China, India, and Brazil must take steps to curb their emissions before it will agree to any treaty. The President, however, has promised only that "the United States will not assume binding obligations unless key developing nations meaningfully participate in this effort," whatever that means. No matter what comes out of Kyoto, we can safely predict that diplomats, international bureaucrats, and government officials will be meeting in exotic locations for lengthy further discussions.

Clinton's proposal was singularly short on specifics. In effect, the President recommended that we commit to restrictions without considering how to achieve them or what they would cost. According to the White House, under a business-as-usual strategy, greenhouse gas emissions would exceed 1990 levels by 30 percent in 15 years. But no matter how well spent, the President's proposed expenditure of $1 billion annually for five years will not reduce those emissions to their 1990 levels. Nor can that reduction be achieved by installing 20,000 solar panels on the roofs of federal buildings. Achieving such a drastic cut would take stronger measures than merely attempting to make practical new forms of energy, forms that don't depend on fossil fuels.

The President also proposed that reduced regulation of the electricity industry would reduce greenhouse gas emissions while saving consumers billions of dollars. These are likely to be contrary goals. If deregulation leads to lower power costs, elementary economics teaches that people will use more electricity since they will be less inclined to conserve. We'll see net savings in CO2 emissions only if reduced regulation improves efficiency of generation and transmission enough to compensate for the more prolific use of electricity.

Automobiles, trucks, and other vehicles emit about one-third of all U.S. carbon dioxide. The only way to reduce emissions from such mobile sources is to impose higher fuel costs or to require new vehicles to meet more stringent fuel economy standards. With vehicles getting better gas mileage, travel would be cheaper-which would encourage more traffic, resulting in greater highway congestion; consequently higher standards would save much less fuel and produce more CO2 than expected. Moreover, more stringent Corporate Average Fuel Economy (CAFE) standards would require years to convert the existing fleet of autos into a more fuel-efficient one and would probably fail to meet the target. If Clinton is serious about slashing emissions, Congress would have to boost gasoline taxes sharply. Whether the Administration goes the higher fuel cost route or chooses more stringent CAFE standards, it is certain that consumers would be forced to buy lighter, more vulnerable cars, which would increase highway deaths.

Constitutionality-or Lack Of

According to news reports, the Environmental Protection Agency is suggesting that the administration could impose fees without Congress's permission. We are not Constitutional scholars, but we believe the Constitution confers the taxing power on Congress, not the EPA. Fees for entering the national parks are one thing; levying "fees" that would boost gasoline prices by 50 to 60 cents per gallon, double electricity costs, and sharply increase heating oil charges are quite a different matter.

The President's plan also envisions a market system for trading emissions that would require that major energy producers face quotas for carbon dioxide emissions. If a power plant were limited to emitting a given amount of CO2, it would either have to buy certificates that would allow it to exceed that level, change its fuel, or introduce new technology. None of these options would be costless, and the expense would have to be passed on to consumers.

The trading scheme was patterned presumably after the program submitted in January to the international group drafting the Kyoto agreement. That draft protocol would require each country to establish multiyear budgets for greenhouse gas emissions, particularly carbon dioxide. All Organization for Economic Cooperation and Development members-Europe, North America, Australia, New Zealand, Korea, and Japan-(with one significant exception, noted below) plus those countries that were part of the former Soviet empire, including Bulgaria, Belarus, and Russia itself, would be required to limit emissions. The collapse of the economy in Russia and in the former members of the Soviet Union makes their meeting lower CO2 standards easy. Many of their most polluting industries have either been shut down or are operating at a fraction of their former volume. Nevertheless, those countries would be faced with less stringent requirements than the advanced industrialized countries that make up the OECD. The rest of the world, China, India, all of Latin America, and Africa, would be encouraged to become signatories to the agreement, but would not have to meet those standards. It is worth noting that South Korea, which wants to become a member of the OECD, has asserted that it will join only if it remains exempt from these greenhouse gas requirements.

Up, Up and Away

The detailed plan floated by the State Department last January-presumably still government policy-has other costly features: It looks to a regulatory body to restrict emissions. Any scheme subject to bureaucratic control would foster inefficiencies that would make the cost much higher than a tax would, not that a tax would be desirable. In its paper, dubbed the U.S. Draft Protocol Framework, the State Department put forward a singularly opaque scheme that would require all parties to the treaty to adopt by 2005 "binding provisions so that all Parties have quantitative greenhouse gas emissions obligations and that there is a mechanism for automatic application of progressive greenhouse gas emissions to Parties, based on agreed criteria." Perhaps the State Department bureaucrats understand this, but my guess is that they want to ratchet down emissions progressively. With the President now putting forward a date of 2008 to 2012 for a return to 1990 levels, the time frame has changed, but the basic policy remains intact. International regulators would control our most important sector, the energy industry, quite possibly, catapulting us into a massive financial tailspin.

References:

Remarks by the President on Global Climate Change, National Geographic Society, October 22, 1997.

U.S. Department of State, U.S. Draft Protocol Framework, submitted to the Framework Convention on Climate Change, January 28, 1997.