Tuesday, October 18, 2005

Green Folly or: Bash Kyoto

The Kyoto accord continues to be routinely bashed by all and sundry in the New Zealand mainstream media. It's described as a "billion-dollar bungle", presented as idealistic environmentalism and "big government" regulation, and opposed stoutly by grandstanding politicians. The Australian papers deride their flaky New Zealand cousins for signing up, and their articles are sheepishly reprinted here, with nary a dissenting voice.

The latest piece of scoffing comes from (who else) Roger Kerr. In a Business Roundtable press release on "Why the Greens Charm Offensive Failed", Kerr dismisses the Green Party's recent attempt to engage business leaders in constructive discussion. Among the policies he gives a once-over lightly critique is "another iconic Green policy, the Kyoto Protocol".

The Greens, says Kerr "seem unwilling to accept that Kyoto is not going to happen - one country after another looks set to ignore its commitments - and that the US approach to global warming, based on research and technology, is likely to carry the day".

Kerr goes on to accuse the Greens of not wanting to engage with "well-documented criticisms of doom-mongering, such as the work of Julian Simon and Bjorn Lomborg". If the Greens want improved dialogue with business, he recommends they put "more emphasis on market-based solutions to environmental problems instead of central planning and regulation".

So, was Kyoto drawn up by a bunch of Luddite, economically naiive, tree-hugging greenies? Actually no--it was negotiated by teams of international scientists and economists, and is exactly the kind of technology-favouring, "market-based solution" that Kerr claims to favour. Moreover, the compromises struck in its development are exactly the kinds that Lomborg argues for in his writings.

The Kyoto accord established a goal of lowering greenhouse gas emissions to 1990 levels, to help hold global warming to the less drastic end of possible scenarios. But rather than set heavy handed, one-size-fits-all regulations, a market-based system was devised, which allowed the trading of emissions.

Greenhouse gas emissions are acknowledged to produce a long-term cost for everybody. So the system was designed to make that cost be factored into economic decisions. This favours technology development, because if you can come up with smarter, cleaner technology to help reduce emissions, you won't have to pay the cost of the excess emissions.

If, however it won't be economic for you to hit the emissions targets just yet, you can buy credits off somebody else--essentially paying them to be more efficient or cleaner on your behalf.

However, most developing countries don't have the flexibility to make these kind of trade offs. As Lomborg points out, for most of them, worrying about global warming is less of a priority than food, clean water, sanitation, proper housing and medicine for their citizens. With much lower per capita emissions than rich countries, they simply need to be able to develop their economies and improve their overall standard of living. To quote National Party environment spokesperson Nick Smith: "if you want to be clean, first you've got to be rich".

So it was agreed that developing countries would be exempt from the Kyoto targets for the "first commitment period" up to 2012. Like most international agreements, the accord was imperfect, pragmatic and provisional. But in 1998 most everyone found it acceptable, including the USA and Australia.

Later, of course, Bush and Howard backed out. Despite the fact that as big, rich economies, the US and Australia are among the best-placed countries to make the necessary changes--such as fast-forwarding new technologies--they decided they couldn't possibly handle the short-term adjustment costs or, God forbid, lose competitive advantage to developing countries.

Recently it was annouced that the US, Australia, India, China, Japan and South Korea had signed a pact to reduce greenhouse gas emissions through technology development and sharing. This is what lies behind Kerr's reference to "the US approach to global warming, based on research and technology". For those who were consistently fed the idea that Kyoto=whacky green Ludditism, this looked like good old George and John goin' it alone and trumping 'em again. Research and technology beats woolly, anti-growth environmentalism.

Except that Kyoto already promotes and incentivises research and technology. And the US-driven pact does not make any commitments or set any targets. Critics say it is mostly an attempt to protect export markets and help the coal industry (pact signatories include the four biggest coal-producing nations). It looks rather like an attempt to gesture at doing something about what is now a univerally acknowledged problem, without playing by the same rules as everybody else.

This is in fact a far from universal attitude in the countries in question. A number of American states, counties and cities have set themselves emissions targets, and groups of businesses have even been lobbying the federal government to set clear regulations (no, really!). They figure there will be regulations at some stage (maybe when we get a Democractic administration), and they would like some certainty.

With respect to future outcomes, Kerr may well be right--if the US and Australia don't formally sign up, Kyoto may not fly. There are also some principled arguments about flaws in the emissions trading system, or the particular Kyoto-related measures the NZ government has tried to implement here--the doomed "fart tax" on animal methane, and the current carbon tax.
But it's utterly misleading and disingenuous to present Kyoto as idealistic green-ism, in opposition to technology and market-based approaches. And it's lamentable that the media lazily allowes this to become the received wisdom, so the likes of Peters and Dunne can can gain votes by their grandstanding.

Kerr could express qualified enthusiasm for the kind of law-governed market system of which Adam Smith would have approved, and suggest ways to make it work better. Instead, he and his ilk simply choose to bash and obsfucate. So, rather than being engaged in a genuine debate about our alternatives, the public is pushed back into the good old Kiwi attitude of "she'll be right". Which effectively translates as: "let somebody else deal with the problem; we'll freeload".

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Vince said...

There is still considerable uncertainty about the nature and likely causes of climate change. The principal fault of the Kyoto Protocols is that they address only one of the scenarios, namely, that anthropogenic greenhouse gases are the cause of climate change. A proper risk analysis would consider all the scenarios and then recommend appropriate action.

The Kyoto Protocols provide for one kind of economic instrument, exchange of carbon credits, which also has additional inefficiencies because of the bureaucratic costs. An alternative is to pay directly for any economic effects, such as protecting coastal cities from sea level changes, whatever the cause of climate change (if it does occur).

We can already see some of the faulty "reasoning" induced by Kyoto Protocol thinking, in New Zealand. For example, we are very reluctant to use our coal for energy production but still export coal to China. Isn't China on the same planet?

Anonymous said...

No one can argue with certainty concernig the real cause of global change, however, their is founded suspicion that the greenhouse gases are at least a significant contributor. Therefore, it does behoove us, as world citizens, to make every effort to reduce such emissions and not take the chance. The fact that bureaucratic inefficiencies just gobble-up resources needed to address the real problem is no small matter in the kyoto fiasco as is historically true with all these "world government" efforts. But worse is the fact that ALL the money paid in purchasing carbon credits is lost to correcting the emission problem and in fact is probably counter-productive by providing the recieving parties with resources to purchase and burn more fuels. There is a saying in the US that may come from old England and may be shared there in NZ as well. It is a little crude but is appropriate to paying for carbon credits. The saying is "pissing into the wind".

We, in industrial countries, have a problem and we have to address and solve that problem. Intelligent conservation and finding and applying efficent technologies is the only way to do that. Intelligent conservation is not turning the thermostat down once again, but it is adding insulation and multipane windows and using efficient heating systems such as heat pumps. This requires capital. Sending that capital to the third world isn't very helpful.

There are really (my opinion for what it is worth) three major problems regarding the world's ecology. The first is that communities with wealth are overconsuming to extreme, the second is world over-population, and the third is globalization. The US is in the first category and so is NZ. People can sit on their high-horse and point to the US and say there's the problem, in reality the problem is all the industrialized countries. The US is undoubtedly the most guilty but from a moral standpoint, one must realize everybody is doing it in proportion to their ability i.e. everybody is being as bad as they can be. High taxes on fuels in some countries may be exhorted to be for the purpose of decreasing consumption for environmental reasons but an honest assessment may result in the realization that tax is about 1) revenues to pay for government and its programs and 2) curtailing imports that have a drag on a country's economy and balance of trade. This is not to say high fuel taxes have not worked to good effect for reducing consumption. The US should possibly shift the tax structure toward that end also to work the conservation side of the equation.

The kyoto fiasco was never anything more than a political ploy. It was a way to redistribute wealth from the rich to the poor. A more dignified way to give a handout. But it accomplishes little for the purported purpose of decreasing greenhouse gas emissions. This cynicsm is the core reason the US rejects Kyoto. And the US sees such a world government effort as the slow ceding of sovereignty. I could be wrong about this but my intuition is that NZ signed-on to Kyoto because you believed you were middle or average with respect to per capita emissions and the impact wouldn't be too great. And I believe there was some political hay being raised there as well. Just speculation, but maybe something to think about.

As world ecology goes, the real hell-holes on this so called green earth are all in places of high human over-population e.g. China and India. The air, landscapes, and waters in these countries are all the evidence reasonably intelligent people need in this realization. Take a deep breath in Delhi or a swim in Shanghai harbor for a little cognitive experience. These effects may seem local but it causes people to move to unspoiled places to repeat the process. Until all the unspoiled places are gone. I put a few signs up in Jakarta telling people how beautiful and unspoiled NZ is. We need a Kyoto for population credits for the countries with low or no population growth. Then we can use those credits to buy carbon credits and except for the inefficiency of the transaction we will all be so very happy.

Globalization, only furthers the problem of over-population. It enables poor countries to increase their industrial base and in a vicious circle enables further population concentration and growth. Additionally, globalization fuels immigration from poor to more affluent nations where groth is otherwise under control. The paradigm of many countries today is that immigration is needed to maintain vitality and economic growth. This should be questioned.

I got a kick out of the bit about NZ exporting coal it won't use itself because of carbon tax. So you pay China for carbon tax credits so China can buy your coal with your money and keep their children warm while NZ people freeze their own children because they can't afford the coal they need. Pissing in the wind.

Don't take me too seriously, just having some fun.

Simon Bidwell said...

Uncertainty about anthropogenic greenhouse gases being the cause of climate change--obviously, I'm not qualified to give an opinion on this, merely to note the growing consensus within the climate science establishment that they are an important factor.

Trading emissions "has additional inefficiencies because of the bureaucratic costs". True--so does the stock exchange.

Paying directly for economic effects: Given that these will include things like effects on food production, e.g. African drought, freezes in the Andes, how do we assign the costs of doing so? Is it everybody for themselves?

If in fact anthropogenic gases *are* agreed to be the cause, how fair is it that developing countries, which mostly aren't responsible for the cause, bear the costs? What kind of system would we set up to ensure that the "clean-up" costs are allocated fairly?

One of the main accusations being made by the Kyoto-bashers is that the accord is "just wealth transfer" and "socialism in disguise". If it turns out that we are already beyond the pale and nothing we can do will significantly slow down climate change, we may have to move to your suggested cleaning-up model, and these kinds of issues will be relitigated.

Exporting coal to China: no one is saying we shouldn't burn any coal. It's about providing the incentives to consider the real cost of doing so. If you are cold in an old house with a coal stove, the human benefits of burning coal far outweigh any environmental cost of doing so--and the 5% or so price increase assigned by a carbon tax or whatever is relatively unimportant.

However, when NZ as a county is thinking of building a new power station, there are significant incentives to find alternative ways to meet energy needs other than by burning coal.

China is currently not subject to the same targets as NZ. However, it is likely that the next agreement will hold China et al to some kind of commitment, after which their demand for our coal will probably drop.

Such apparent anomalies are the result of having an incentive-driven, market-based system. Yet it's those who are most eager to point out these anomalies as a knock-down objection to Kyoto that in the same breath will accuse it of being a "regulate and tax" system.

Finally [and here I am effectively quoting from my colleague Tony], Kyoto is not supposed to be the solution to everything, merely a starting point which we would expect to be iteratively improved. It’s also an attempt to model the kind of rule-governed international co-operation that will increasingly be needed to address environmental and other issues. In twenty years time it’s likely will be look back and see Kyoto as a flawed but necessary first step.