Thomas Gale Moore
Senior Fellow
Hoover Institution
Stanford University
The United States is in the process of negotiating a protocol to the Convention on Climate Change that even the Chairman of the IPCC, Bert Bolin, says would, if fully implemented, cut warming twenty-five years hence "by less than 0.1 degree C, which would not be detectable." We are plunging into this treaty process without even preparing an evaluation of its costs and benefits. The Congress has demanded that the Clinton Administration provide them with figures on what might be the cost to the American people of this agreement, but no estimates have been forthcoming. Is it any wonder that the AFL-CIO has opposed this proposed international agreement?
The White House, in its eagerness to negotiate something, has tabled a draft protocol that would require the industrialized countries and the countries that used to be behind the Iron Curtain to establish multi-year budgets for greenhouse gas emissions, particularly carbon dioxide. The latter countries, including Bulgaria, Belarus, and Russia itself, will have less stringent requirements than the OECD states. The draft protocol encourages the rest of the world, China, India, all of Latin America, and Africa, to become signatures to the agreement but exempts them from the standards. South Korea, which has applied for membership in the OECD, has asserted that it will join only if it remains exempt from any restrictions on greenhouse gas emissions.
By the start of the budget process, all the Parties to the Convention must have in place a system for measuring manmade greenhouse gases and their removal by sinks, although such a measuring scheme is neither easy nor accurate. Scientists know that sinks absorb more carbon dioxide than can be accounted for. Does anyone really believe that Belarus, Greece, and Romania will have an accurate monitoring system in place by the start of this program, perhaps the year 2000?
Countries not required to establish a baseline budget must "identify and implement 'no regrets' measures for mitigating emissions of greenhouse gases." Those countries must also provide annually an inventory of their emissions. No sanctions are contemplated for states failing to meet these minimal requirements.
The U.S. proposed that any country or group of countries that reduced emission below its budget could either get credit for that advance during the next budget cycle or sell those credits to another country, company, individual or group. If a country exceeded its approved level at the end of its budget cycle, it could borrow from the next cycle but at a 20 percent penalty, that is, the next period' budget would be reduced by 120 percent of that which was borrowed.
The State Department has also suggested that an international group of experts -- let's hear it for UN bureaucrats! -- monitor compliance. As punishment for failing to meet the ceilings, countries could be forbidden to sell any credits (an empty threat since a state that failed to come in under budget would have no emissions credits to peddle) or would lose voting rights in the Convention, a penalty that would certainly keep world leaders up at night. The United State would be likely to abide by any such agreement; compliance by other states is less assured.
Australia and Japan, among others, want different emission reduction requirements for each of the advanced countries. Australia, which relies on fossil fuels for generation of electricity and which exports significant amounts of coal, demands more leeway to emit CO2. Crowded Japan has proposed setting emission limits on a per capita basis, which would adversely affect thinly populated Australia. Of course, oil producing nations, as well as those with extensive coal reserves, such as China, oppose any legally binding constraints on burning fossil fuels.
These budget proposals require forecasts of future greenhouse gas emissions. Energy use, which requires the burning of fossil fuels, depends on economic growth and prosperity which, in turn, requres energy supplies. Economists are poor soothsayers and often over or under estimate growth. Accurate forecasts for a long budget period, such as the United States' plan requires, are impossible. Not only are we unable to predict the future of the economy but technology can change greatly leading to either more or to less demand for fossil fuels. If countries levied carbon taxes, probably the most efficient method of reducing CO2 emissions, the effect on demand for energy and the amount of fossil fuels consumed is uncertain. In all, forecasts of greenhouse gas emissions can only be considered, at best, an informed guess.
No matter the scheme adopted to limit greenhouse gas emissions, the U.S. will be a loser. Restrictions on energy use in the United States will hurt our industries, especially those which are energy intensive, such as coal and oil, steel, auto manufacture, and transportation generally. Every item bought in the supermarket will reflect the cost. Every home in the country will pay more for electricity, for hot water, for heating, and for air-conditioning. William Nordhaus, a respected Yale economist and one of five sponsors of the Economists' Statement on Climate Change, estimated that if the whole world participated it would cost $7 trillion, of which the U.S. would bear over $1.6 trillion, to reduce emissions to 1990 levels. Nordhaus describes the Berlin Mandate, which exempts most of the globe, as "being exactly the opposite of the efficient solution."
The industries particularly vulnerable to higher energy costs will be tempted to move abroad to those parts of the world not subject to controls. Although Ross Perot was wrong when he said that NAFTA would produce a sucking sound as jobs moved South, I hear echoes of sucking coming from these agreements. As the AFL-CIO said in its February 20 statement: "The exclusion of new commitments by developing nations under the Berlin Mandate will create a powerful incentive for transnational corporations to export jobs, capital, and pollution, and will do little or nothing to stabilize atmospheric concentrations of carbon. Such an uneven playing field will cause the loss of high-paying U.S. jobs in the mining, manufacturing, transport and other sectors."
As noted, Bert Bolin, Chairman of the IPCC, in the IPCC Report to the AGBM (Ad hoc Group on the Berlin Mandate) concluded that "no reasonable future reductions by Annex I countries [OECD and countries in transition to a market economy] would stabilize global emissions." Is it reasonable to pay $1.6 trillion, when the best that we could accomplish would be to shave the average global temperature by less than 0.1 degree Celsius?
References:
Bert Bolin, "IPCC Report to the Fifth Session of the SBSTA and Sixth Session of the AGBM," February-March, 1997.
AFL-CIO Executive Council, February 20, 1997 Statement.
William D. Nordhaus and Zili Yang "A Regional Dynamic General-Equilibrium Model of Alternative Climate-Change Strategies," The American Economic Review, September 1996.
William Nordhaus, Managing the Global Commons, Cambridge: The MIT Press, 1994.