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Reinventing Kyoto

The international treaty for cutting greenhouse gases is a bust, and Bush's approach will do little to help.

June 11, 2007

AS PRESIDENT BUSH sat across the table last week from European leaders steamed about his approach to global warming, he could at least bask in the knowledge that even though the compromise he engineered isn't exactly the right thing to do, it's less wrong than usual.

Bush, the former Texas oilman who is as beloved by environmentalists as Nero was by Christians, has been under pressure from a Democratic Congress and fellow world leaders in the Group of 8 to change course on climate change. And he did, sort of. The final communique from the G-8 summit in Germany commits the U.S. to "seriously consider" cutting its greenhouse gas emissions in half by 2050 and to work with the U.N. to come up with a successor to the Kyoto Protocol, the international treaty on climate change that the Senate refused to ratify in 1998. That's not the deal for mandatory cuts the Europeans were seeking, but it's further than Bush has been willing to go before.

Bush is correct about one thing: Kyoto is a mess. The president has rightly forced other world leaders to address one of the major flaws of the pact, which is that it doesn't apply to emerging economic giants such as China and India. Yet he also seems to think that these developing countries should be held to the same standards as the U.S., and is unwilling to do anything unless China does the same. That's unrealistic and unfair.

A better approach would be to fix what's really wrong with Kyoto.

What's so magical about 1990?

The Kyoto Protocol's main mechanism for saving the world is a cap-and-trade system. Individual countries or confederations set caps on emissions of greenhouse gases based on where they were in 1990 -- in the European Union, it's 8% below 1990 levels -- and pass out credits to power plants and industrial polluters, dictating how many tons they can emit. Polluters that fall below their allocations can sell their "carbon credits" to those that can't reduce emissions as easily.

A carbon-trading market for these credits has emerged in Europe, but the scheme so far has done nothing to reduce emissions because, thanks to the power of the energy lobby, the initial credit allocations were set too high. But that barely touches the surface of Kyoto's problems.

The choice of 1990 as a base year simply rewards countries whose economies have shrunk since then and punishes growth. Russia, Eastern Europe, Germany and Britain are strong backers of Kyoto, and if one looks at the costs and benefits of the pact, it's no wonder. Today, these countries emit either less than they did in 1990 or just a little bit more. In Britain, that's because the privatization of the coal industry led to a decline in coal-fired power plants in favor of natural gas; elsewhere, it's because the collapse of the Soviet Union was followed by the closing of filthy Soviet-era industrial plants, while economies in Russia and much of Eastern Europe stagnated.

The U.S. economy, meanwhile, has grown significantly since 1990, with a corresponding rise in power demand that, according to the Energy Information Administration, has caused carbon dioxide emissions to jump 20.4%. What a global carbon-trading scheme boils down to, then, is a massive wealth transfer from the U.S. to Russia. U.S. polluters would pay billions of dollars to buy carbon credits from other countries -- mostly Russia, because it would have the most to sell. Why should we inject huge sums into a country with a rotten human rights record, rampant corruption and opposing geopolitical views? And what did Russia do to earn the cash, other than shrink?

Further, because there is no world body that polices greenhouse gas emissions, countries and polluters are on the honor system -- we have to trust them to be honest about how much they're polluting. Governments in Russia or Ukraine aren't capable of monitoring emissions from every pollution source even if they wanted to, and under Kyoto, there's no reason for them to want to. After all, if Ukraine claims to be cleaner than it really is, rich countries such as the U.S. and Japan will shower it with money for carbon credits. And corrupt governments will tend to distribute credits unfairly, using them to reward political supporters and reducing the market's effectiveness.

Meanwhile, an even bigger problem than the ill-considered carbon-trading scheme is figuring out what to do with those nations that don't have to take part in it.

Cars, coal and China

Just 40 countries are required to reduce emissions under Kyoto, and because the U.S. and Australia didn't ratify the pact, it's only 38. Those countries aren't necessarily the world's richest, nor the biggest emitters; they include many poverty-ridden former Soviet-bloc countries such as Estonia, Lithuania and Ukraine. The pact excludes wealthy Asian and Middle Eastern nations such as South Korea, Taiwan, Qatar and Kuwait.

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