Marco Verweij, senior research fellow at the Max Planck Project Group on Common Goods, Bonn, urges abandonment of the Kyoto project and its replacement with a crash program to develop cheap renewable energy technologies.
Marco Verweij is a young, personable Dutch scholar at the newly created Max Planck Project Group on Common Goods in Bonn, Germany. He is not afraid to stake out a position the runs contrary to current opinion. Now teaching a course as a visiting professor at UCLA , he told a seminar on the campus May 20 that the Kyoto Protocol would not only never be adopted, but that this was a good thing for the effort to halt global warming. He acknowledged that this is not how the issue is usually seen: "In Europe if you want to be on the side of the forces of light, then you are for the Kyoto Protocol , and if you want to be on the side of the forces of darkness, of George Bush, you are against it." Verweij's talk was sponsored by the Center for Governance, and cosponsored by UCLA International Studies and Overseas Programs.
The Kyoto Protocol is an addendum to the 1992 United Nations Framework Convention on Climate Change. It was adopted in 1997 with support from the Clinton administration, and has been endorsed by 84 countries. It binds the members states of the OECD (mainly the developed countries) minus Mexico but plus Eastern Europe to reduce greenhouse gases, the main cause of global warming, by 5.2% compared to 1990 levels, during the period between 2008 and 2012. "The greenhouse effect," Verweij reminded his audience, "is that as the sun shines, the rays hit the earth and are transformed into heat, then rise up again. If they were to disappear entirely the earth would become too cold to sustain life. The heat is trapped by the greenhouse gases." But the heat level of the earth is a delicate balance: "The majority of scientists argue that we are adding to the greenhouse gases, thereby heating the earth up, leading to floods, warmer water takes up more space so it would mean a rising sea level. There would be climate change, some areas would be colder and some warmer, trees animals and plants can't migrate as fast as the climate changes, so there could be much environmental destruction."
Worst case scenarios include the possibility that "if the earth got too warm it could divert the Gulf Stream, which could bring the ice age back to Europe. And no one knows for sure whether even a relatively small amount of global warming will not trigger an unstoppable, self-sustaining rise in global temperatures, turning Earth into a sister planet of Venus."
Human additions to the stock of greenhouse gases come mainly, 75%, through fossil fuels--oil, gasoline, and natural gas. A smaller amount comes from methane produced in the stomachs of cattle, sheep, and goats. Deforestation also releases greenhouse gases.
What's Wrong with the Kyoto Protocol?
In face of the enormous potential threats from global warming, European and American environmentalists have been incensed by George Bush's refusal to sign the Kyoto Protocol and his turnabout from the position of Bill Clinton and Al Gore. This is particularly galling as the United States is the largest emitter, especially per capita, and accounts for about 25% of the annual human-caused release of greenhouse gases. "It has become an extremely moral issue," Marco Verweij conceded. Undaunted, he replied that "I would argue that the Kyoto Protocol is nonsense, that it could lead to a lot of corruption and have no appreciable effect." He offered four criticisms:
1. It is entirely insufficient. "Most scientists say we need a 50% reduction of current levels by 2050 to stabilize world climate. But human emissions of greenhouse gases are expected instead to quadruple in the next hundred years. A 5.2% reduction in the next sixteen years would compound to an 8% reduction by the end of this century, i.e., it allows a 92% increase. At this pace we would need another 29 protocols to get where we should be." Apart from the fact that it has not been ratified by enough governments to implement it, its very modest goal has been bargained down still further. "Since 1997 the accepted goal has been cut to an effective 2% reduction. Russia, Australia, and Canada have been making the following argument: we have these extensive forests, if we cut them this would release carbon dioxide, a major greenhouse gas. If we don't cut these trees we should get credit for that against our 5.2%. At every conference Russia finds a new forest in Siberia. What they argue is that modernization leads to cutting trees, and by forbearing they should be credited as much as if they actually did something."
2. The Kyoto Protocol is extremely difficult to implement. "It is costly and involves moral hazards." There are three implementation mechanisms: (A) Trade in permits to emit greenhouse gases. (B) Joint implementation mechanism. (C) Clean development mechanism.
The trading system has allocated permits to some 42 governments among those endorsing the Protocol. "The total value of the permits allocated comes to more than US$2 trillion. If you are not meeting your target, you can go on the market and buy units from governments that have met their targets. The allocation was decided on in the early 1990s, based on the expected industrialization rates of the particular countries. This was very difficult to predict, the future economic growth of particular countries."
Predicting economic growth rates is often a guessing game. But countries that grow faster than predicted and outrun their allocation can be charged hundreds of millions of dollars for the overrun, while countries that suffer recessions can make hundreds of millions selling their unused permits. In neither case is anything really being done to control any emissions. Contrary to the predictions of the UN plan, "the Russian economy imploded, so that Russia has a very large number of permits to sell. The Japanese government wants to buy them. This will pump hundreds of millions of dollars into the Russian state, which can have a very corrupting influence. But it achieves no actual reduction of any real greenhouse gas. If your economy grows faster than expected, you are punished and have to buy additional permits. If you economy grows slower, you are rewarded, and can make lots of money."
Given the tremendous monetary stakes, it is not possible to negotiate last-minute adjustments in this system to take account of divergences from inaccurate predictions. This system "creates problems at both ends, in the inability to predict the future accurately, and in the inability to get accurate measures of performance at the end of the period for which the permits are issued. There are about 8 greenhouse gases. Only the most prevalent one, carbon dioxide, can be measured with any accuracy. And this ill-defined system is compounded when, as in the European Union and Japan, they are also creating internal markets for these permits. That entails that each individual firm needs to know how much greenhouse gas they are emitting, and how much they are reducing that amount."
At each stage of this trading system there are opportunities for "endless conflicts among governments." There are also very large administrative costs. "In the internal markets there is a very significant cost involved in calculating the emissions of each firm and its reductions. The government must monitor how much each firm is polluting, estimating its prospective growth, and then measure its amount of reduction at a future date."
Joint implementation mechanism: means that a single country can meet its goal by financing a project in some other country. "Say Britain finances a project in Brazil," Verweij suggested. "Say it helps a Brazilian energy company to switch from coal to natural gas, then Britain get credits toward its Kyoto goal. The problem is 'baseline establishment.'"
Credit, worth a lot of real money, is awarded by the permit system, provided your contribution does not parallel something the other country would have done anyway. "The problem is how you are going to know what the Brazilian energy company would have done if Britain had not given them the money. Every time there is an effort to set baselines, all the participating experts disagree on everything. You are also inviting moral hazard. You are telling energy companies not to cut pollution now, but wait until the World Bank or Japan comes around and let them pay to get credits toward their Kyoto requirements."
Thus far, although not yet enforced, the Kyoto provisions apply only to developed countries. How well will this system work, Verweij asked, when it is extended into the undeveloped countries of the planet? "It is argued that poor countries are poor because there is no rule of law and there are corrupt governments. Who is going to monitor this process in which large amounts of money or credits worth money change hands?"
There May Not Be a Second Step
3. It is unlikely the Kyoto Protocol will be expanded. The defenders of the Protocol, Verweij said, "have always argued that it is only the first step. The problem is that there may not be a second step. There may not even be a first step. A leading Brazilian civil servant has told me that there is no chance there will be a second Kyoto Protocol. The second step would have to bring in the United States as well as the developing countries, which are not included in the first Kyoto Protocol. The developing countries argue that they did not create the problem in the first place. They say, we have much more important problems to deal with, such as drinking water, polluted cities. We don't contribute much to the problem.
"The U.S. Senate doesn't like that argument. The Bush government says that China is the second biggest emitter and that the U.S. will not participate if the developing countries do not."
There are serious obstacles to getting the first Kyoto Protocol from the planning to the action stage. Even should all the governments get together and agree on what the problem is and what needs to be done, this does not put the Protocol into force. "This solution would have to be taken to the parliaments of each country. Government change, as in the change from Clinton to Bush, and the agreements fall apart. This does not make this a reliable vehicle to solve this environmental problem."
4. The Kyoto Protocol does not do much to reduce the costs of combating climate change. "One estimate is that it will take $550 trillion dollars minimum and perhaps twice that as a maximum."
There are no mechanisms under the Kyoto Protocol to make this cheaper. "The trading system was advocated by the Clinton administration and the Europeans rejected it. When Bush pulled out, the Europeans agreed to accept the credit trades. There is very mixed evidence that trading systems are an effective way to achieve goals."
If We Could Make Renewable Energy Cheaper
What is a better solution? "A better solution comes from the realization that climate change will only be prevented if we develop energy sources that do not cause global warming, and that are cheaper than fossil fuels." Of course, most people, with the possible exception of large energy companies and oil producers, would like to see cheap, nonpolluting energy. Marco Verweij offered a few specific reasons as well:
"Even if the opposing scientists are right and humans do not contribute to climate change, the money spent would not be wasted." (There is an argument by some scientists that 90% of our greenhouse gases do not contribute to the warming, which has other causes.) He added that we would not be "pumping money into corrupt Middle East regimes, which could prompt democratization in the Middle East." The Saudi government claims they are victims of the Kyoto Protocol and demand money for any potential reduction in the use of their oil.
Further, it would at a stroke solve all the diplomatic concerns and problems: "The European Union says it is only morally right that we clean up the problems we have created. Cheap nonpolluting energy would do this without the trading system. The developing countries who do not want to be billed for the costs of greenhouse gas pollution would be off the hook because of the spread of cheap nonpolluting energy."
One advantage to competitively priced solar panels would be that for once the poor countries of the South would be in a better position than the wealthier North:
"Solar power will actually be cheaper in sunny southern countries than in the higher northern hemisphere. It will be cheaper in poor countries than in rich countries, by and large. Many of these countries do not have an electricity grid, so they can leapfrog to solar without building the grid, and save a lot of money."
If, instead of the Kyoto regulatory system, there were sales on the market of cheap energy-producing technologies this would obviate the need for treaties and parliamentary approvals. There would also not be the need for the very expensive predictive surveys, measurement of reductions, and the credit trading system.
"You need to invent the technology and distribute it. You don't need to have every country involved in regulation and measurement. A single company can have a big impact, whereas in Kyoto every country in the world has to create a major bureaucracy to administer the Kyoto standards. and costs."
But Is It Possible?
This all sounds good, but if electricity generated by solar panels and windmills simply costs much more than gas- and oil-fired plants it will not be adopted on a large scale. The most common argument against renewable energy is that it is too expensive and not at all competitive with fossil fuels. Verweij disagrees. "The energy firms completely overestimate the costs of renewable energy," he said. "It was not that long ago that IBM said it was impossibly costly for everyone to have a computer on their desk."
He cited a study by British Petroleum in 1996 reporting that solar energy would be cheaper than fossil fuels if production of the panels was on a large enough scale. "If you just scale up production the unit costs drop. And that study was with 1995 technology."
Fossil fuel production costs have been very stable over 25 years, he said, while renewable energy costs have fallen tremendously. "Wind energy is now competitive with fossil fuel energy. This line was crossed in the last 2 years. In a few more years it is expected to drop by 30%, which will make it cheaper than fossil fuel energy. This can be a major source of energy in Europe, from offshore winds."
Hydro energy has always been competitive, but it has only worked where there are large dams. "Now they are developing very small dams and even small devices that can be placed in the river."
The market price of photo voltaic, that is, solar collection panels, has dropped 17 times in the last 25 years, and is down to 4 times the cost of fossil fuels. "It is now competitive in remote areas, or in the construction of new homes. There are amazing technological developments on the way. The panels used to be rigid. Now you can roll them out and there is your panel. They are working on a spray can where you can spray your solar panel on the wall." There are plans to build panels in north Africa and transport the electricity to southern Europe.
Support Still Lagging from Corporations and Most Governments
Still today much more money goes into research and development of fossil fuels. Since World War II, 60% of R&D money in energy has gone to fossil fuels, with renewable energy getting only 12%. A large part of the difference went to nuclear energy. "Nuclear is the most expensive form of energy," Marco Verweij says. "And," he added, "that is not counting the costs of disposal or the hot wastes or the risks that a terrorist will fly an airplane into a nuclear plant."
The big energy companies have been generally hostile to investment in renewable energy sources. "The basic reason the energy companies won't do it," Verweij suggested, "is because they are over invested in fossil fuels, and because the new markets will be very decentralized. There won't be room for all these big companies in the new energy market."
In addition, however, the energy companies have greatly underestimated the potential competitiveness of renewable energy sources. "Today they are building wind farms all over Europe. BP [formerly British Petroleum] invests 1% in renewable energy, but 99% goes into nonrenewable energy. They are not very green. Greener than the Texas companies, but not very much."
Marco Verweij remains optimistic that the funding will be found to boost the new technologies. One source is government spending. While the Bush administration has not been supportive of investment in solar and wind technologies, the governments of Japan, Germany, and the United Kingdom have very ambitious renewable energy programs. "In the United States the Republicans are allied to the fossil fuel industry through ties to the energy companies; the Democrats, through their ties to the auto workers." As Germany, Japan, and Britain break through, Marco Verweij foresees that they will put the U.S. companies at a competitive disadvantage that will overcome the alliance of the American political parties with pro-fossil fuel producers.
Among private sources of investment funds, Verweij said that many banks are reluctant to put their money into renewable energy startups because of their heavy portfolios in the existing energy industry. "You need to look for pension funds and other sources of financing that have no stake in the energy companies. as they are now."
Marco Verweij concluded by saying that the Kyoto Protocol is a bureaucratic technocratic approach. "You need some libertarian, competitive process to produce renewable energy."
Published: Thursday, May 23, 2002
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