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The Trouble with Kyoto

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Minneapolis, MN -- The Minnesota legislature is moving rapidly to put the state on the map by capping its emissions of greenhouse pollution. The House Environment Committee unanimously passed the Global Warming Mitigation Act, which sets greenhouse gas reduction targets from 2005 levels of at least:
  • 15 percent by 2015
  • 30 percent by 2025
  • 80 percent by 2050.
It also requires the state government to develop, by February 2008, a multi-sector plan to reduce greenhouse gas emissions to target levels. If passed, Minnesota would join California and New Jersey -- with Washington also moving in this direction -- as states that have established long-term, scientifically based greenhouse pollution reduction goals.

Meanwhile the European Union reached agreement on its post-Kyoto goals: 20 percent reductions below 1990 levels by 2020, 30 percent if the rest of the world embraces such a goal. Since Minnesota's baseline is 2005, the European goals overall are still more ambitious, but Europe's 20 percent renewable electricity goal for 2020 is significantly less ambitious than Minnesota's new one. So, for the first time, a number of American states are competitive with the EU in their goals for reducing global warming emissions. The US is actually beginning to show some leadership, based on innovative state policies.

So what does the Progressive Policy Institute (PPI), which is fairly representative of the Beltway establishment mindset, have to say about all this? It has put out a major new report on global warming which concedes that,

remarkably, the new global marketplace has moved major investment dollars into the energy markets simply in anticipation of reductions in carbon emissions that will not begin to go into effect until 2008 under the Kyoto Protocol. That is, by creating a cap on carbon emissions based on "business as usual" assumptions, and signaling that reductions will follow, market forces have been unleashed to find and exploit low-cost ways to reduce carbon emissions...

So far so good. But the real thrust of the PPI paper is that the Feds need to jump in and clean up the mess created by this state leadership -- you can almost smell the skids being greased for federal preemption. And, inexplicably, PPI concludes that:

this is not to say that the U.S. Senate was wrong to unanimously reject the Kyoto Protocol in 1997 under the Clinton administration. To the contrary, Kyoto was a badly flawed deal that would have placed a disproportionate share of the obligation for reducing carbon emissions on the United States, while asking little of emerging industrial powerhouses like China and India.

Now many, many things were wrong with Kyoto. One of the worst was that, while it was widely hailed as a "down payment" on the much greater greenhouse pollution reductions ultimately needed, a well-designed down payment comes with a mortgage that pays off the buyer's debt. Kyoto was more like a negative amortization mortgage; in 2012, when it expires, humanity will be in greater debt to the world's carbon sinks, our carbon account even more overdrawn, than when it was signed, with a larger hurdle to climb and a greatly destabilized climate.

But the idea that Kyoto put too much burden on the US is simply fatuous, however typical of PPI. (PPI was last heard from on energy policy suggesting more subsidies for nuclear power, weaker fuel economy standards for cars, and a big effort for misleadingly labelled "clean coal.")

A consistent theme of PPI energy papers is to acknowledge the dimensions of the problem, pay brief obeisance to the availability of solutions, and then, in the name of free markets, call for more subsidies for the energy monopolies who have created the problem, layering even more market distortions onto the existing ones.

The other real problem with Kyoto is that it acted as if US and European energy interests actually owned the world's carbon sinks -- the living oceans, forests and soils that have to clean up the CO2 emitted when we burn fossil fuels. Kyoto gave Europe, the US, and the other industrial nations the right to continue to steal these sinks from the rest of the world. The United States, with 5 percent of the world's population, is using up more than half of the total global carbon sinks. India and China, with about a third of the world's people, use far less. Yet the United States, under Kyoto, would have have been allowed to continue this disproportionate consumption of resources we do not own, and that we are grotesquely overusing.

Europe made this problem worse by choosing to give away to its energy companies the permits it received under Kyoto. It should have auctioned them off, creating at least a vague semblance of a real market in which the fossil fuel producers would pay something for the CO2 pollution they sell. (Remember, CO2 is the oil industry's final product.) This lesson has recently been acknowledged by as conservative a voice as there is -- Deutsche Bank, which says:

Auctioning of permits brings many advantages. ... Without auctions, the market value of the permits is being added to the price of the electricity. An auction could thus reduce the windfall profits of the electricity companies. ... A trading system that is as transparent and simple as possible is an important prerequisite for getting non-EU states interested in joining.

And Kyoto's approach to the problem of Third World emissions -- allow industrial nations to "trade" emission reductions in the developing world and avoid them domestically -- has proved catastrophic, causing Newsweek's Emily Flynn Vencat to conclude that "Current emissions-trading schemes have proved to be little more than a shell game, allowing polluters in the developed world to shift the burden of making cuts onto factories in the developing world."

Meanwhile, California Governor Arnold Schwarzenegger appears to be on the verge of making the same mistake Europe made; that is, giving away the state's limited carbon emission allowances to those who are already polluting and allowing massive trading loopholes even though New York, Deutsche Bank and Newsweek have all made the compelling case for insisting that the polluters must pay.

In response to this debate, the Sierra Club's Board of Directors in Tucson last week came down solidly in favor of what we are calling "cap and auction" -- a system in which the US reduces its own domestic emissions of carbon dioxide by at least 2 percent a year and eventually reaches an 80-percent reduction by the year 2050 by charging those who emit carbon dioxide for the privilege. The Club rejected both international trading and allowing projects like reforestation to be used as carbon reduction "offsets" because we believe that there are currently no mechanisms for permitting such "trading" while still achieving the needed emission reductions. And our board of directors underscored that while setting an economy-wide, price-based cap for carbon emissions is essential, it's not enough. We also need major regulatory and market reforms, such as tougher fuel economy standards for vehicles, clean electricity mandates and incentives, and more innovative and efficient building codes.

This is no silver bullet but rather the "silver buckshot," (as writer Bill McKibben calls it), that we'll need to bring down global warming.