Climate control stalled by chilly Russian feet

By BRIAN FALLOW economics editor

It is touch and go whether the Kyoto Protocol on global warming, and with it the Government's climate change policy, will survive the year.

Central to the policy is a carbon tax on non-farm emissions of greenhouse gases planned for 2007 - but only if the Kyoto Protocol is in force.

The Government last year concluded the first negotiated greenhouse agreement - conditional exemptions from the tax for companies whose international competitiveness would otherwise be at risk - with the Marsden Point oil refinery, and has named the next four candidates for such deals.

And it has begun to dole out subsides for climate-friendly projects like wind farms payable not in cash but in carbon credits, the tradeable rights created by Kyoto to emit greenhouse gases.

But the treaty may yet fall over.

Kyoto will come into force and be binding on the nations that have ratified it only if it is ratified by countries responsible for at least 55 per cent of 1990 developed-country emissions.

It has been ratified by almost all of Europe, Japan, Canada and New Zealand, collectively accounting for 44.2 per cent of the required total.

But the United States (36.2 per cent) and Australia (2.1 per cent) have said they will not ratify, leaving Russia's 17.2 per cent as the deciding factor for whether Kyoto comes into force.

Conflicting but as yet inconclusive comments from Moscow have created uncertainty about whether it will ratify and, if so, when.

Policymakers elsewhere are turning their attention to alternatives. Japanese officials are reportedly drawing up proposals for international emissions standards to be adopted on an industry-specific basis instead of the country-specific total emissions targets which form the basis of Kyoto.

But even if it Kyoto does come into force it has been clear ever since the US, the world's largest emitter, pulled out that it would have a negligible effect on the global climate.

The chairman of the United Nations' Inter-governmental Panel on Climate Change, Dr Rajendra Pachauri, said on a visit to New Zealand in May that while the Kyoto Protocol was important it would not be the end of the world if it did not come into force.

With the US and Australia out, the arithmetic of Kyoto had changed to the extent that the remaining countries with commitments could meet their targets by buying hot air and forest sink credits and not reducing emissions of greenhouse gases at all, he said.

"Hot air" is jargon for the carbon credits which eastern European countries will have to sell. Because 1990 is the baseline for Kyoto obligations and because so many smokestacks in the former Soviet Union have gone cold since then, Russian and the other successor countries have credits to sell for the consequent drop in emissions.

Forest sink credits arise under a Kyoto provision that recognises that plantation forests established on land not previously forested, while they are growing, are withdrawing carbon dioxide from the atmosphere. New Zealand expects to have more forest sink credits than it would need to cover the 33 per cent increase in its emissions since 1990.

Kyoto's defenders argue that whatever its limitations it is at least a start and the product of a multilateral negotiating process to address a global problem.

For Kyoto to fail would be a setback to hopes of concerted international action, increase the prospects of beggar-thy-neighbour policies and a tragedy of the commons outcome, they say.

One of Kyoto's limitations is that it does not place any constraints on developing countries, whose collective emissions of greenhouse gases are estimated to overtake those of developed countries within 20 years.

The rationale is that it is the accumulated emissions of industrialised countries over the past century and a half that is doing the damage and rich countries are better placed to incur the costs of reducing emissions than countries still struggling to escape from poverty.

While that policy is understandable it is political poison in the Unites States, says Professor Henry Jacoby who heads the Massachusetts Institute of Technology's joint programme on the science and policy of climate change.

It was unfortunate that US negotiators at Kyoto ignored a clear instruction from the Senate not to come back with an agreement which exempted developing countries. President George W. Bush cited the lack of any commitments by China and other developing countries as one of his reasons for rejecting Kyoto.

While falling far short of what Kyoto would have required of it, the US has adopted some measures to combat climate change. It has adopted the target of reducing emissions over the next 10 years not in absolute terms but relative to economic output, and promised more action in 2012 if that goal is not met "and the science warrants it".

It has stepped up research and development into new technologies like sequestration (the long term storage of greenhouse gases in geological structures) and hydrogen-powered vehicles.

On Capitol Hill, 43 of the 100 senators recently voted for the McCain Lieberman Bill which would impose a Kyoto-style cap-and-trade system for the transport, electric power and industrial emitters, but not households, farms or small businesses.

And a variety of voluntary, awareness-raising programmes are being adopted at the state and municipal levels.

In the US context, Jacoby said, domestic policy would lead international commitment not the other way around.

While the rest of the world waited for the US to decide what it was prepared to do, it was important the Kyoto coalition was sustained, both because the emission reductions arising from policies to give effect to Kyoto commitments were of value, and because of the opportunity to learn by doing things like carbon trading.



Climate control stalled by chilly Russian feet

By BRIAN FALLOW economics editor

It is touch and go whether the Kyoto Protocol on global warming, and with it the Government's climate change policy, will survive the year.

Central to the policy is a carbon tax on non-farm emissions of greenhouse gases planned for 2007 - but only if the Kyoto Protocol is in force.

The Government last year concluded the first negotiated greenhouse agreement - conditional exemptions from the tax for companies whose international competitiveness would otherwise be at risk - with the Marsden Point oil refinery, and has named the next four candidates for such deals.

And it has begun to dole out subsides for climate-friendly projects like wind farms payable not in cash but in carbon credits, the tradeable rights created by Kyoto to emit greenhouse gases.

But the treaty may yet fall over.

Kyoto will come into force and be binding on the nations that have ratified it only if it is ratified by countries responsible for at least 55 per cent of 1990 developed-country emissions.

It has been ratified by almost all of Europe, Japan, Canada and New Zealand, collectively accounting for 44.2 per cent of the required total.

But the United States (36.2 per cent) and Australia (2.1 per cent) have said they will not ratify, leaving Russia's 17.2 per cent as the deciding factor for whether Kyoto comes into force.

Conflicting but as yet inconclusive comments from Moscow have created uncertainty about whether it will ratify and, if so, when.

Policymakers elsewhere are turning their attention to alternatives. Japanese officials are reportedly drawing up proposals for international emissions standards to be adopted on an industry-specific basis instead of the country-specific total emissions targets which form the basis of Kyoto.

But even if it Kyoto does come into force it has been clear ever since the US, the world's largest emitter, pulled out that it would have a negligible effect on the global climate.

The chairman of the United Nations' Inter-governmental Panel on Climate Change, Dr Rajendra Pachauri, said on a visit to New Zealand in May that while the Kyoto Protocol was important it would not be the end of the world if it did not come into force.

With the US and Australia out, the arithmetic of Kyoto had changed to the extent that the remaining countries with commitments could meet their targets by buying hot air and forest sink credits and not reducing emissions of greenhouse gases at all, he said.

"Hot air" is jargon for the carbon credits which eastern European countries will have to sell. Because 1990 is the baseline for Kyoto obligations and because so many smokestacks in the former Soviet Union have gone cold since then, Russian and the other successor countries have credits to sell for the consequent drop in emissions.

Forest sink credits arise under a Kyoto provision that recognises that plantation forests established on land not previously forested, while they are growing, are withdrawing carbon dioxide from the atmosphere. New Zealand expects to have more forest sink credits than it would need to cover the 33 per cent increase in its emissions since 1990.

Kyoto's defenders argue that whatever its limitations it is at least a start and the product of a multilateral negotiating process to address a global problem.

For Kyoto to fail would be a setback to hopes of concerted international action, increase the prospects of beggar-thy-neighbour policies and a tragedy of the commons outcome, they say.

One of Kyoto's limitations is that it does not place any constraints on developing countries, whose collective emissions of greenhouse gases are estimated to overtake those of developed countries within 20 years.

The rationale is that it is the accumulated emissions of industrialised countries over the past century and a half that is doing the damage and rich countries are better placed to incur the costs of reducing emissions than countries still struggling to escape from poverty.

While that policy is understandable it is political poison in the Unites States, says Professor Henry Jacoby who heads the Massachusetts Institute of Technology's joint programme on the science and policy of climate change.

It was unfortunate that US negotiators at Kyoto ignored a clear instruction from the Senate not to come back with an agreement which exempted developing countries. President George W. Bush cited the lack of any commitments by China and other developing countries as one of his reasons for rejecting Kyoto.

While falling far short of what Kyoto would have required of it, the US has adopted some measures to combat climate change. It has adopted the target of reducing emissions over the next 10 years not in absolute terms but relative to economic output, and promised more action in 2012 if that goal is not met "and the science warrants it".

It has stepped up research and development into new technologies like sequestration (the long term storage of greenhouse gases in geological structures) and hydrogen-powered vehicles.

On Capitol Hill, 43 of the 100 senators recently voted for the McCain Lieberman Bill which would impose a Kyoto-style cap-and-trade system for the transport, electric power and industrial emitters, but not households, farms or small businesses.

And a variety of voluntary, awareness-raising programmes are being adopted at the state and municipal levels.

In the US context, Jacoby said, domestic policy would lead international commitment not the other way around.

While the rest of the world waited for the US to decide what it was prepared to do, it was important the Kyoto coalition was sustained, both because the emission reductions arising from policies to give effect to Kyoto commitments were of value, and because of the opportunity to learn by doing things like carbon trading.