Comment: A group of EU environment ministers recently called for the adoption of sweeping new cuts in greenhouse gas emissions after the 2012 expiration of the Kyoto Protocol.
Their statement advocates the reductions "in the order of 15-30 per cent by 2020 and 60-80 per cent by 2050 on top of the levels envisaged in the Kyoto Protocol". The EU Commission, supported by 12 member states, is resisting new targets in the absence of scientific evidence on Kyoto effectiveness.
The renewed EU activism echoes the recent attempts to insert an environmental charter into the French constitution. The amendment would establish a precautionary principle in the French law, requiring that any development proposal be accompanied by indisputable evidence that a project does not present risk for environment, reversing the burden of proof currently in place. The EU constitutional treaty contains a similar clause.
The recent G8 meeting of energy and finance ministers did not go as far as adopting the precautionary principle or setting the targets beyond 2012. The US has made it clear that energy efficiency, and not a radical shift to a low carbon economy, should be the key approach. Instead, the key topics for the roundtable participants will be clean coal, carbon capture and storage technologies.
Yet the escalation of environmental activism in the EU remains a reality. But expanding prohibitive emissions controls is a costly and inefficient way of achieving environmental objectives, and is detrimental to the development of markets for green technologies and consumer goods.
Since the early 1990s, environmentalists have assumed that the demonstration of human effect on global temperatures justifies prohibitive interventions.
However, despite predictions of climatic meltdown, the global warming trends are modest. In 2001, the US National Academy of Sciences stated that "additional warming in the next 50 years [ will reach] 0.75°C, plus or minus 0.25°C".
This forecast is supported by the evidence on the natural climatic changes from Canada, USA, Scotland, Norway and Iceland. The only threat to this trend comes from China and India - the countries exempt from Kyoto restrictions and the leaders of the G77 group of developing states resisting the imposition of controls.
Under UN assumptions, the Kyoto restrictions, if fully implemented by all countries, will reduce the world surface temperature by 0.04°F by 2050. By 2100, the savings will add up to 0.11°F, so the Kyoto-generated savings are unlikely to register on the radar. Yet Kyoto restrictions may result in annual economic losses of 1.1-2.3 per cent of global GDP growth.
This analysis assumes that the polluting Western industries will not be exported to the Kyoto-exempt developing world. Today, China emits 50-70 per cent more pollution than the US per unit of output. This means that every unit of greenhouse gases saved in the West may result in a gain of 1.5-1.7 units elsewhere if the industry migrates in search of lower costs. The irony is that far from reducing emissions, the restrictions may actually raise the growth rate of global pollution.
Kyoto's only tool for curbing emissions outside the developed world, the clean development mechanism (CDM), has so far proven to be grossly inefficient. The CDM was designed to allow rich nations to earn emissions credits through investment in green projects in the poor countries. Due to bureaucratic barriers and lack of proper markets for insuring long-term risks, the CDM has been able to attract only three minor schemes since its inception in 2001.
The Kyoto sceptics such as the US and Australia are emerging as leaders in environmental technology and management innovation, using a market-driven approach. For example, the EU refusal to accept credits on forestry-generated emissions was contrasted by acceptance of such credits in Australia and the US.
Likewise, the EU Emissions Trading System (ETS) is suffering from the lack of accounting guidelines. EU governments impose CO2 limits on some 12,000 industrial installations.
The ETS lets companies trade their allowances to meet these requirements. The system lacks methodology under which each state can assess historical emissions and the required caps. The UK, Poland, Italy and Germany are already embroiled in a battle with Brussels over acceptable levels of emissions. Germany has filed a court action against the EU, while Poland is considering one.
These problems would not have occurred if the EU had a comprehensive system of CO2 emissions registry, like the one that has emerged in California under the voluntary Climate Action Registry (CAR). In fact, California, a state that does not have an emissions trading system, has put in place a voluntary, depoliticised system of emissions accounting. The CAR includes all of the objectives of the EU policies, plus conservation-based forest management and reforestation.
In a nutshell, the Kyoto and similar prohibitive measures will reduce the growth rate of world economies while shifting pollution to the countries where international community has no control over emissions. The EU's activist policies may also reduce incentives for development of greener alternatives, while doing nothing for stimulating environmentally sensitive investments in the developing world.
The renewed push for more environmental activism is a worrisome reflection of Europe's failure to think beyond the standard "tax-and-charge" policies.
Constantin Gurdgiev is lecturer in economics at Trinity College Dublin and a director of the Open Republic Institute (www.openrepublic.org).
