Industrialized, developing nations clash at Kyoto climate change talks

Patrick Crow
Energy Policies Editor

U.S. Sen. Chuck Hagel (R-Neb.) addresses an anti-greenhouse treaty rally in Washington, D.C.

Scientists may disagree as to whether postulated catastrophic global warming is a real threat, but the oil industry realizes that a possible outcome of that debate is a threat to its future prosperity.

Some scientists, environmental pressure groups, and politicians say the buildup of carbon dioxide and certain other gases in the atmosphere will drastically alter the climate-causing more severe storms, droughts, and floods-and melt more polar ice, thus raising sea levels with disastrous results.

During Dec. 1-10 in Kyoto, Japan, representatives of nearly 170 nations that signed a 1992 United Nations climate change convention will try to hammer out binding targets for developed nations to cut greenhouse gas emissions in the next century.

Key nations agree some action is needed but disagree over the details.

The European Union has proposed an ambitious goal for industrial nations of a 15% cut from 1990 levels by 2010. That 15% cut is for the EU as a whole, and critics say it would rely too heavily on cuts in Britain and Germany.

Japan has proposed a 5% cut from 1990 levels as an average during 2008-12, but its proposal would let nations lower targets in certain cases and not require targets to be fully binding.

Both the EU and Japan have said developing nations need not promise to make cuts at the Kyoto conference but should do so later.

The U.S. has proposed that developed countries stabilize emissions at 1990 levels by 2010 and that developing nations also should pledge to make unspecified reductions.

Developing nations argue the industrialized nations are responsible for most of the emissions and should be the first to cut them.

U.S. plan

President Clinton, in announcing the administration's policy Oct. 22, said it would achieve meaningful reductions in greenhouse gases worldwide.

He said, "Most scientists say the process has already begun. Disruptive weather events are increasing.

"Disease-bearing insects are moving to areas that used to be too cold for them. Average temperatures are rising. Glacial formations are receding.

"Scientists don't yet know what the precise consequences will be. But we do know enough now to know that the Industrial Age has dramatically increased greenhouse gases in the atmosphere, where they take a century or more to dissipate; and that the process must be slowed, then stopped, then reduced if we want to continue our economic progress and preserve the quality of life in the U.S. and throughout our planet."

He said the U.S. must act. "The U.S. has less than 5% of the world's people, enjoys 22% of the world's wealth, but emits more than 25% of the world's greenhouse gases."

Clinton announced a three-part plan. Nations would return emissions to 1990 levels during 2008-12 and continue to reduce them thereafter.

"We propose an innovative, joint implementation system that allows a firm in one country to invest in a project that reduces emissions in another country and receive credit for those reductions at home. And we propose an international system of emissions trading."

He said that would keep costs low and help developing countries protect their environment without sacrificing their economic growth.

And he stressed, "The U.S. will not assume binding obligations unless key developing nations meaningfully participate in this effort.

"If the entire industrialized world reduces emissions over the next several decades, but emissions from the developing world continue to grow at their current pace, concentrations of greenhouse gases in the atmosphere will continue to climb."

Tax incentives

Clinton made no mention of higher taxes on fossil fuels to discourage their use.

Clinton proposed the U.S. enact tax cuts and make research and development investments worth up to $5 billion over the next 5 years-targeting incentives to encourage energy efficiency and the use of cleaner energy sources.

"We must urge companies to take early actions to reduce emissions by ensuring that they receive appropriate credit for showing the way.

"We must create a market system for reducing emissions wherever they can be achieved most inexpensively here or abroad-a system that will draw on our successful experience with acid rain permit trading."

He said the U.S. will cut greenhouse emissions produced by the federal government, encourage competition in the electric utility industry, and work with key industries to develop emissions reduction plans.

Clinton said, "In 1970, when smog was choking our cities, the federal government proposed new standards for tailpipe emissions. Many environmental leaders claimed the standards would do little to head off catastrophe. Industry experts predicted the cost of compliance would devastate the industry. It turned out both sides were wrong. Both underestimated the ingenuity of the American people. Auto makers comply with today's much stricter emissions standards for far less than half the cost predicted, and new cars emit on average only 5% of the pollutants of the cars built in 1970. We've seen this pattern over and over and over again."

"The lesson here is simple: Environmental initiatives, if sensibly designed, and flexibly implemented, cost less than expected and provide unforeseen economic opportunities."

Clinton conceded that the global warming challenge is larger than any environmental mission the nation has faced previously but contends that it can be dealt with through innovative solutions.

Premeeting

Last month, representatives of 20 major industrialized nations met to narrow their differences on the climate change issue.

Their major disagreements center on binding targets for industrial nations and involvement by less developed nations.

Tim Wirth, U.S. Undersecretary of State for Global Affairs, said, "We're seeing political rhetoric flow away, and we're getting down to reality."

Wirth welcomed a Brazilian proposal to set up a "Green Bank," which he said mirrored in some respects a U.S. proposal for a system of "emissions trading" in which nations could sell carbon dioxide allowances to countries in excess of their limit.

Under Brazil's plan, which was backed by the Group of 77 developing nations plus China, countries that failed to meet binding targets would pay money into the "Green Bank," while others that chose not to meet their targets could have the bank make investments in clean energy elsewhere.

The U.S. Senate, which would have to ratify any treaty, has demanded developing countries agree to cuts in the same timeframe as industrialized nations.

Wirth stressed, "What we do in Kyoto is just to continue the momentum of the world coming together on the issue of climate change. The world is not going to solve the climate change problem in Kyoto. It's not going to solve it if Kyoto were held every 5 years. This is one beginning point of what's going to be a very long and arduous task."

More details

Wirth said the U.S. proposal "is, in real terms, a 28% reduction off of what business as usual would be for us-a very, very significant cut in our greenhouse gas emissions.

"Second, our proposal would include what are called 'all gases' and would include sinks. These are technical terms but very important as we get into negotiations with our colleagues from around the world.

"We think including all greenhouse-forcing gases is important. Neither the EU nor Japan includes all six gases; they include only three. And we include sinks; in other words, forests and agricultural patterns. Neither the EU nor Japan includes all sinks, as well."

Wirth stressed the U.S. "is determined to do what we promise, not to promise to do things that we can't achieve."

He said the U.S. disagrees with the EU plan for a "bubble" covering all their member nations.

He said, "There are two sets of issues in the developing country clump of activities."

One, said Wirth, is how to deal with the issue of whether the more-developed members of the developing nations group should also assume targets.

"The second group of countries are the very large countries with very large emissions but low standards of living, particularly China and India. The U.S. has proposed that they evolve into increasing responsibilities, and that would be part of a negotiation that would follow right on the heels of Kyoto."

Environmentalists react

Fifteen environmental groups recently urged Clinton to attend the talks.

They said, "This would signal to the world your recognition of the seriousness and urgency of the global warming problem and would provide impetus for a successful outcome in Kyoto."

They also criticized Clinton's plan for reducing carbon emissions and urged him to seek bigger cuts in emissions from industrialized countries and to move up the timeframe for meeting goals.

They noted Clinton's plan "would actually allow an increase in industrialized country emissions over the next decade. Such an outcome in Kyoto would be an unacceptable response to the gravity and urgency of the global warming problem."

Oil industry stance

At the recent World Petroleum Conference, Rilwanu Lukman, secretary general of the Organization of Petroleum Exporting Countries, said, "A number of nations, mainly those in the developed world, are acting as if the case against fossil fuels was already proven.

"Yet the scientific foundation on which all this rests is, to say the least, shaky. Scientists are still divided over the evidence which, it is claimed in some quarters, proves that manmade global warming exists and is a real threat."

Lukman said oil consuming nations use environmental concerns to impose "unjust taxes" on petroleum products.

He said the global warming debate has resulted in "considerable uncertainty for oil producers, who cannot accurately forecast the future growth of demand and the likely prices and therefore the profitability of their industry."

The Global Climate Coalition, an industry group, said Clinton's plan would require energy taxes or rationing and damage the U.S. economy while producing no lasting environmental benefit.

GCC said, "American families can expect to pay at least $2,000/year by 2010 if these efforts to reduce energy are implemented." It said the administration's trading and tax credit plans "both must ultimately be paid for by American consumers and taxpayers."

Studies

The American Automobile Manufacturers Association (AAMA) said Clinton's plan would cut the U.S. gross domestic product by 1% in 2010 and by 2.7% in 2030.

AAMA said total U.S. spending on environmental protection has been 1.8% of the GDP in recent years.

AAMA released a study that concluded that limiting use of fossil fuels would require switching to more-expensive and less-satisfactory substitutes, and this would have a ripple effect in reduced worker efficiency and less mobility and comfort for consumers.

U.S. energy-producing industries, energy-intensive industries, and the automobile industry would be hardest hit sectors under Clinton's plan to reduce U.S. carbon emissions to 1990 levels around 2010, it said.

The study also predicted steep jumps in household energy prices and a $1,250/year drop in average household income by 2010. By 2030, the annual drop would be $4,250, it said.

WEFA Inc., an Eddystone, Pa., economics consulting firm, released a study that said limits on fossil fuel use would be a blow to energy producing states.

It said mandatory emissions goals could result in a loss of GDP equal to $227 billion (1992 dollars) in 2010 alone, assuming that 2010 emissions are held at 1990 levels.

Canadian thrust

Canada also is struggling with the global warming issue.

Last month, its environmental and energy ministers agreed to a new, lower national goal to take to Kyoto to cut total greenhouse gas emissions in Canada back to 1990 levels by about 2010 (OGJ, Nov. 24, 1997, Newsletter). That is short of Canada's commitment at the 1992 Earth Summit in Rio de Janeiro, which would have stabilized the total of Canada's greenhouse gas emissions at 1990 levels by the year 2000.

Environmental groups had asked Ottawa to seek a 20% reduction from 1990 emission levels.

Federal Environment Minister Christine Stewart noted, "Canada has very particular circumstances-our climate, our geography, our dependence on fossil fuels."

Prime Minister Jean Chretien also pledged the government will not propose a carbon tax to meet greenhouse gas emission limits.

The Canadian Association of Petroleum Producers warned that reducing greenhouse gases to 1990 levels could be devastating for Canada's petroleum industry and other economic sectors.

CAPP released a study that concluded there could be a loss of 56,000 jobs in petroleum and related sectors alone. Costs would rise for all energy users, and jobs would be lost. There could be an $8 billion (Canadian) drop in annual oil and gas revenues and Canada's GDP could fall by $17-31 billion.

The study, prepared by DRI/McGraw-Hill, was based on Canada reducing greenhouse gas emissions to 1990 levels by 2000 and further by 2010.

Meanwhile, Petro-Canada reports good success with carbon dioxide emission reductions.

Jim Stanford, president and CEO, said energy efficiency investments at thirteen refineries and oil and gas production facilities in 1996 eliminated greenhouse gas emissions equivalent to 230,000 metric tons/year of CO₂.

In 1996, the company reduced its greenhouse gas emissions per unit by 12.9% upstream and 6.3% downstream. It reduced the energy used to produce each unit by 10.9% upstream and 3.9% downstream.

Stanford said, "Potential consequences of climate change are worrisome. While continuing scientific research will improve our understanding of the impact of rising greenhouse gas levels, we believe it is only prudent to take responsible action now to reduce emissions.''

Industry suggestion

Brian Baker, a Mobil Corp. vice-president, recently noted that 85% of U.S. energy use is from fossil fuels and that total U.S. energy demand is projected to grow by about 30% by 2010.

Baker said meeting the administration's goals could have major economic consequences, and "clearly, the general population is unwilling to take a step backward in its standard of living."

He suggested that the Kyoto talks should be based on sound science and that more scientific and economic research is needed to better understand greenhouse gas effects.

"The real science involves all greenhouse gases and not just CO₂." He noted that a single pound of chloro-fluorocarbon 12 has the global warming equivalence of more than 5,000 lb of carbon dioxide.

He said the Kyoto agreement should be flexible. "We must not forget that mandates often cause unnatural things to happen, which could inflict economic pain. It should encourage voluntary initiatives rather than binding targets, and it should allow for changing goals as scientific and economic understanding improves."

Most of all, Baker said, "We shouldn't rush into a solution before we fully understand the dimensions of the problem. A measured approach-one that relies on businesses, consumers, and governments-gives us time to clear up the uncertainties surrounding climate change."