Dr. Thorning Questions Wisdom of Climate Bills
in Washington Times Op-Ed

In her Oct. 28, 2003, Washington Times Op-Ed titled "Flawed Environmental Policy," ACCF Chief Economist Dr. Margo Thorning challenges the wisdom of recent legislative proposals to reduce GHG emissions. Dr. Thorning also questions the appropriateness of these proposals given recent international climate policy developments in key countries like Russia and Australia.

"Flawed environmental policy"

Washington Times
October 28, 2003
By Margo Thorning

Policy-makers in Congress, as well as several state legislatures, are considering legislation to reduce carbon dioxide (CO2) emissions. For example, the bill introduced by Sens. Joseph Lieberman, Connecticut Democrat, and John McCain, Arizona Republican, would require the United States to reduce greenhouse gas emissions to 2000 levels by 2010 (a 14 percent reduction compared to current emission trends). The same bill would require utilities to reduce CO2 emissions by nearly as much as required by the Kyoto Protocol. In 1997, the last time it voted on a similar issue, the Senate voted 95-0 to oppose any constraints on emissions that could harm the economy. One state, California, has also mandated reductions in CO2 from cars and trucks. Legislators need to ask themselves whether these proposals are appropriate in light of recent international climate policy developments in key countries like Russia and Australia.

For example, at the recent World Climate Change Conference (WCCC) in Moscow, a marathon five-day gathering of climate scientists and policy experts from all over the world in which I participated, top Russian policy-makers questioned the benefits to Russia of signing the Kyoto Protocol. Dr. Andrei Illarionov, President Vladimir Putin's economic adviser, made it clear that Russia's priority is to double its Gross Domestic Product by 2010. Achieving that goal will, according to Mr. Illarionov, require a doubling of carbon emissions, due to the strong correlation between energy use and economic growth. Looking out past the first commitment period (post-2010), when the target for Russian carbon emissions could be 60 to 70 percent below 1990 levels by the year 2050, Mr. Illarionov stated that Russia would have to buy emission credits and curtail its economic growth. At an Oct. 3 press conference in Moscow, Mr. Illarionov asked rhetorically, "The United States and Australia have calculated that they cannot bear the economic consequences of ratifying the Kyoto Protocol. If they are not rich enough to deal with these consequences, my question is whether Russia is much richer than the U.S. and Australia." He concluded, "Considering that the Kyoto Protocol is restricting economic growth . . . it means dooming the country to poverty, backwardness and weakness."

Russia's apparent decision not to ratify the Kyoto Protocol will likely shift the terms of the debate at the upcoming meeting of the Conference of the Parties in Milan this December. Pro-Kyoto forces, who lobbied Mr. Putin aggressively to say "Da" during the opening session of the WCCC meeting in Moscow, had hoped to move forward on implementing the treaty and planning for the further greenhouse emission cuts in the post-2010 period. Targets of 60 to 70 percent below 1990 levels have been suggested by European Union (EU) policy-makers. The recent developments in Russia, as well as in Australia, where Prime Minister John Howard again stated that his country would not ratify the protocol, suggest that few agreements on the nitty-gritty of reforming the EU emission-trading system will occur in Milan. In the end, this may be the best outcome, for it may encourage the EU to consider alternative approaches. These could include a long-term strategy for developing new technologies for energy production.

These approaches are likely to provide a surer way to gradually stabilize greenhouse gas emissions, while allowing for economic growth in both the developed world and countries like China, India and Mexico. Nuclear power expansion could also play a valuable role in reducing carbon emissions, while allowing for the increased energy consumption necessary for economic growth.

In light of the increasing probability that the Kyoto Protocol will not go into effect, defeated by the growing recognition of its impracticality, it seems especially unwise for U.S. policy-makers to try to pass "Kyoto-like" targets for the United States, such as those in the Lieberman-McCain bill. Shackling ourselves to meaningless targets (in the sense that U.S. emission reductions will have virtually no impact on the growth in global emissions) will only slow productive investment in the United States, reduce job growth and hinder U.S. competitiveness.

Dr. Margo Thorning is a senior vice president and chief economist of the American Council for Capital Formation.