Opinion pieces and speeches by EPI staff and associates.
by James P. Barrett
It should not come as a surprise that environmental representatives from around the world were unable to achieve any substantial progress in Buenos Aries, Argentina in November 1998 – the follow-up to the historic conference held fifteen months ago in Kyoto, Japan. The Kyoto Protocol agreement calls on the developed nations of the world to accept legally binding goals meant to reduce emissions of carbon dioxide and other greenhouse gases, but set no targets for developing nations. The surprise came when two developing nations, Argentina and Kazakhstan, volunteered to accept emissions targets.
Without greenhouse gases, the earth would be too cold to sustain life as we know it. However, according to reports from the United Nations Intergovernmental Panel on Climate Change, human activities in the industrial sector have already accounted for the release of greenhouse gases that will raise average global temperatures from 3 to 5 degrees within the next 40 years. Although this may seem insignificant, just a few degrees’ increase in the global temperature can diminish soil moisture, leading to both a reduction in plant growth and the quantity of arable farmland. Additionally, higher temperatures will likely melt polar ice caps resulting in increased soil erosion and the potential to contaminate the fresh water supplies that coastal cities and farms depend on.
Acknowledging the fact that developed countries are responsible for the vast majority of current atmospheric concentrations (as well as current emissions) of greenhouse gases and the fact that developing countries, for economic reasons, are least able to control emissions, the Kyoto Protocol does not direct developing countries to adopt binding emission targets. Furthermore, even though emergent economies in the developing world may eventually play a greater role in elevating global emission levels, a recent study released by the World Resources Institute shows that developing countries’ contributions to atmospheric concentrations of carbon dioxide will not equal those of the developed world for approximately 40 to 60 years.
Given these facts, it shouldn’t be surprising that developing countries, led by China, blocked attempts to put their emissions on the bargaining table in Buenos Aries. The Kyoto Protocol does however make provisions for a ‘Clean Development Mechanism’ (CDM) under which companies in developed countries can undertake projects in those countries to reduce greenhouse gas emissions. The company would be able to take credit for these reductions and either use them to offset emissions at home or sell these credits on a world market.
One major problem with the CDM is that it offers industries substantial opportunities to manipulate the system and get valuable credits for emission reductions they themselves did not achieve. For example, if a U.S. company purchases an old inefficient steel mill in India, shuts the plant down, and then replaces the mill with one infused with state-of-the-art technology, the American company can take credit for the emissions reduction and sell these credits in the U.S. or in other industrialized countries. However, it is possible that the steel mill would have been replaced anyway, so that carbon emissions would have been lessened even without U.S. involvement. The fact that this process would generate valuable permits at a low cost provides the incentive for multinational corporations to seek out such opportunities throughout the developing world.
Fortunately, there is an alternative that could close the loopholes in the CDM, create emissions reductions in developing countries, and offer these states real and immediate benefits for taking early actions to reduce greenhouse gas emissions. The basic idea is to include developing countries in the world market for emissions reduction credits. While the Kyoto protocol assigns an initial stock of credits to industrialized nations based on their reduction targets (the US target is to reduce emissions to 7 percent below their 1990 levels), developing countries could be assigned a stock of credits based on their projected ‘business as usual’ emissions (i.e., what their emissions would be if they took no actions to reduce them).
Under this system, developing countries could, if they chose, continue on their present path with no obligation to undertake any emissions reductions at all. However, if they were to reduce emissions below their projected levels, this would generate emissions credits that they would then be able to sell on the world market. Rather than jeopardizing economic development, emissions reductions using this arrangement would actually help promote the economies of developing countries by providing a stream of hard currency, while allowing for the differentiated responsibilities recognized in the Kyoto Protocol.
Whether or not other developing countries will follow the example of Argentina and Kazakhstan remains to be seen, but if U.S. negotiators continue to push for the CDM, we can expect to find ourselves in the same position at the next meeting – except perhaps that we’ll be a little bit wetter and a little bit warmer.
[ POSTED TO VIEWPOINTS ON FEBRUARY 22, 2002 ]
James Barrett is an economist at the Economic Policy Institute. He specializes in environmental issues.