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Kyoto's Statute of Limitations?

Is the Kyoto Treaty meaningless without a follow-on agreement?

February 17, 2005

Is the Kyoto Treaty meaningless without a follow-on agreement?

Remember these headlines? "Kyoto Dragon Slain." "Kyoto Treaty Killed." "Russia Kills Kyoto." Ever since its adoption in 1997, there have been rumors of the Kyoto Protocol's death.

But despite close calls and premature obituaries, the Kyoto Protocol on February 16, 2005, took effect in 141 nations — almost as many countries as there are members of the World Trade Organization (WTO).

What led to this dramatic turnaround? And what are Kyoto's prospects going forward?

Kyoto has its roots in the 1992 UN Framework Convention on Climate Change (UNFCCC), part of the Rio Summit.

That treaty's objective is to stabilize the concentration of the gases in the atmosphere at a level that will avert dangerous climate change — in a time frame that will allow ecosystems to adapt naturally, and development to proceed sustainably.

Kyoto, which caps the global warming pollution of some 35 industrialized nations for the years 2008-2012, takes a vital first step.

The challenge of treaty-making is to design rules that sovereign nations will want to obey. To create economic incentives for nations to join Kyoto's emissions caps, Kyoto establishes a global emissions trading market.

This market is built largely on a template designed by Environmental Defense chief economist Dan Dudek.

Every country with caps on emissions is required to ensure that — at the end of the 2008-2012 period — its actual emissions do not exceed its allowable levels.

If a country has emitted more than it is allowed, it may purchase excess emissions allowances from another nation that has emitted less than allowable amounts.

And anyone in any Kyoto country, by cutting global warming pollution, can earn emissions credits that are tradable in the Kyoto marketplace.

The framework thus gives countries, companies and communities powerful economic incentives to search for better, faster ways of reducing global warming pollution.

U.S. President George W. Bush's March 2001 rejection of Kyoto commenced a period in which the treaty seesawed from near-death to near-life — and back again.

Prior to Mr. Bush's announcement, European nations — leery of a cap-and-trade system — had sought rigid Kyoto implementing rules that the Americans opposed.

Following President Bush's announcement, many commentators declared Kyoto dead. In a bid to win the United States back, the EU jettisoned many of its demands.

Not to be swayed, President Bush in February 2002 made it clear that he wasn't coming back to Kyoto. Even so, he reaffirmed America's commitment to the 1992 Rio treaty and its "central goal" — stabilization of concentrations at a level that would avert dangerous climate change.

But rather than underpin this commitment with any concrete steps, President Bush then announced that America's climate policy for the next ten years would be one of further study of scientific uncertainties. He also spoke out in favor of voluntary aims to reduce "greenhouse intensity" — that is, emissions per dollar of GDP.

With the United States out, the treaty could take effect only if Russia joined. In December 2003, Kremlin adviser Andrei Illarionov announced that Kyoto ratification would bankrupt Russia's economy. Russia thus would not ratify — and the treaty was once again dead.

This time, it was other Russians who breathed new life into the treaty. Environmental Defense senior economist Alexander Golub and other Russian environmentalists saw that Kyoto's cap-and-trade framework could help Russia cut not just global warming emissions.

They argued that it could also finance the clean-up of Soviet-era factories — an important public health issue.

And, in early 2004, Mr. Golub and colleagues published a paper outlining a package that could enable the EU and Russia to agree on Russia's entry into the WTO.

At a May 2004 Russia-EU summit, the EU agreed to back Russia's WTO bid on essentially the terms outlined by Environmental Defense — and President Putin announced that he would accelerate the Kyoto process.

Russia's November 2004 ratification of Kyoto set the stage for the February 2005 entry into force of the accord. Will Kyoto's new emissions trading market provide the competitive energy to boost production of clean technologies?

Or will the treaty's industry-backed opponents succeed in killing the "son" or "daughter" of Kyoto — and thus torpedo Kyoto as well?

The countries that ratified Kyoto will meet in Montreal, Canada, in November 2005 to start discussions on a follow-on agreement.

The question of Kyoto's fate post-2012 is important for a range of reasons. For starters, follow-on agreements to reduce total emissions reductions will be needed if the world is to avoid locking future generations into dangerous climate changes.

Also, companies need greater regulatory certainty from governments with regard to global warming policies to make long-range decisions.

Perhaps most crucially, Kyoto's emissions trading market needs a follow-on agreement to provide a credible incentive to countries that participate in the cap-and-trade system. If there is no follow-on agreement, this compliance incentive is undermined.

Lastly, many of the 35 nations with caps on emissions for 2008-2012 are concerned about competitiveness. They look to large-emitting nations that have no Kyoto caps — in particular the United States, China, India and Brazil — to join post-2012.

At a December 2004 diplomatic conference in Buenos Aires, other nations urged the United States to discuss the need for a follow-on treaty. The Bush Administration responded by saying that if Kyoto nations wanted to discuss such targets, they were welcome to do so.

The United States, however, would not participate, since it was not a party to Kyoto.

When other nations responded that the United States still has an obligation — under the Framework Convention on Climate Change — to avert dangerous climate change, and that post-Kyoto cuts will be needed to meet that objective, a U.S. spokesperson called such discussions "premature."

The United States also maintained that President Bush's February 2002 announcement had set U.S. policy for the next decade. Discussions would not be ripe until sometime after 2012, they said.

The United States was then asked whether it might participate in a seminar simply to look at the latest science on dangerous climate change.

The State Department's response was that the United States might participate if the seminar was backward-looking, took no more than one day — and resulted in no written or oral report.

Other nations were shocked at this stonewalling. In part, this was because many other countries see signs of global warming appearing in their neighborhoods — and they understand that much of it is human-induced.

They also recognize a growing vulnerability to the impacts of climate change. And they are concerned that if inaction by the United States gives large developing countries an excuse not to start cutting their greenhouse gas emissions.

The resulting standoff could lock the whole world into a future of dangerous, irreversible climate changes.

But why is the Bush Administration so adamantly opposed to caps on global warming pollution? There are probably several reasons.

One reason is likely the administration's close ties with a few fossil fuel companies. A second appears to be an ideological opposition to multilateral approaches.

A third reason may pertain to Vice President Cheney's influence in the White House.

Mr. Cheney's opposition dates back at least to his Halliburton days, when he wrote then-President Bill Clinton that Kyoto was "a level of self-delusion unmatched since the Kellogg-Briand Pact of 1928," which aimed at the renunciation of war as an instrument of national policy.

The result of the hard-line U.S. position on the Kyoto Treaty is a rather ironic role reversal. The United States, starting with the administration of George W. Bush, had championed the cap-and-trade framework of market-based environmental policy.

Meanwhile, the Europeans had preferred technology prescriptions, which America had eschewed as costly and stifling of innovation and competition.

Now, it's Europe that has embraced the market approach, while the United States maintains that if it simply pours enough money into companies, the right technologies will materialize — and will be adopted by the United States and developing countries.

So far, however, it seems that the rest of the world finds the broad multilateral market of Kyoto more attractive that the pseudo-solution advocated by the United States.

Already, Kyoto has spurred evaluations in several nations that are not part of the cap-and-trade system to see whether they might use Kyoto to boost economic growth while driving down pollution.

Kyoto's ultimate test will be whether the power of its market mechanisms can induce the United States and other large emitting nations to join follow-on agreements that bring the whole word together in the race to avert catastrophic climate changes.

Will Kyoto meet that test? Or will it simply become meaningless after 2012? At the dawn of this new treaty, it's too soon to tell. But with Kyoto rising, the world — fortunately — still has a chance to get it right.

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