Inconsistent chatter from a Sacramento-based 'Sconi attorney.

Wednesday, June 29, 2005

Anti-Kyoto Treaty

If you ever wanted to know why the U.S. did not join the Kyoto Treaty on the reduction of greenhouse gases, here is a great post by Todd Zywicki, of an article by Robert Samuelson. Best part:

Europe is the citadel of hypocrisy. Considering Europeans' contempt for the United States and George Bush for not embracing the Kyoto Protocol, you'd expect that they would have made major reductions in greenhouse gas emissions -- the purpose of Kyoto. Well, not exactly. From 1990 (Kyoto's base year for measuring changes) to 2002, global emissions of carbon dioxide (CO2), the main greenhouse gas, increased 16.4 percent, reports the International Energy Agency. The U.S. increase was 16.7 percent, and most of Europe hasn't done much better.

Here are some IEA estimates of the increases: France, 6.9 percent; Italy, 8.3 percent; Greece, 28.2 percent; Ireland, 40.3 percent; the Netherlands, 13.2 percent; Portugal, 59 percent; Spain, 46.9 percent. It's true that Germany (down 13.3 percent) and Britain (a 5.5 percent decline) have made big reductions. But their cuts had nothing to do with Kyoto. After reunification in 1990, Germany closed many inefficient coal-fired plants in eastern Germany; that was a huge one-time saving. In Britain, the government had earlier decided to shift electric utilities from coal (high CO2 emissions) to plentiful natural gas (lower CO2 emissions).

On their present courses, many European countries will miss their Kyoto targets for 2008-2012. To reduce emissions significantly, Europeans would have to suppress driving and electricity use; that would depress economic growth and fan popular discontent. It won't happen. Political leaders everywhere deplore global warming -- and then do little. Except for Eastern European nations, where dirty factories have been shuttered, few countries have cut emissions. Since 1990 Canada's emissions are up 23.6 percent; Japan's, 18.9 percent.

It is all a big game, and the prize is always the almighty $. Why and How? Competitive advantage:

Kyoto is nominally an environmental treaty--although the effect on global warming is thought to be very small, perhaps on the order of a reduction in temperature of 0.15 degrees C in 2100, or putting off the same warming trend by 6 years. But once you look into the details of the treaty, at this point it seems clear that its primary purpose as drafted (and why Europe is so keen on ratification by the U.S.) is economic, and, in particular, for Europe to gain economic advantages versus the United States.

Many scholars have discussed the costs that the United States would incur in order to achieve these modest results. But there is an additional cost that is often ignored--the rent-seeking costs of self-interested actors using collective decision making processes to redistribute wealth to themselves.

Collective action, whether by national or international bodies, has both benefits and costs. The potential benefit is that the jurisdiction of the regulatory body can match up more closely with the scope of the problem to be regulated. The problem is that any collective decision-making process is subject to rent-seeking, meaning that well-organized interest groups can travel under the banner of the regulatory body in order to tap into others' pockets in order to enrich themselves. It has been long recognized that within the United States alone, environmental regulation has been used by rust belt states to impose competitive disadvantages on growing states in the South and West through a variety of regulations that disproportionately impact new businesses in less-developed regions of the country.

As Bruce Yandle has observed, rent-seeking explains many of the details of Kyoto, which have little to do with environmental improvement and much to do with economic advantage (including such seemingly mundane issues of the choice of 1990 as the baseline for emissions targets). Yandle notes that these rent-seeking pressures are reflected in a variety of provisions in the treaty that would provide European countries with competitive economic advantages versus the United States. In other words, its not just that the costs of the treaty may exceed the benefits, the treaty is written in such a manner that the costs will be larger for the United States relative to Europe, giving Europe a comparative economic advantage.

Moreover, this assumes that both the U.S. and Europe are equally committed to complying with the treaty. In fact, one reason the United States has probably been reluctant to enter into Kyoto is because it would probably actually abide by its terms, unlike the Europeans. As Samuelson suggests, the "sophisticated" Europeans by contrast, probably do not intended to comply with Kyoto, and it is questionable whether they ever intended to meet their targets from the very beginning.

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