Kyoto Agreement Could Be Boon to Global Climate and World Economy

6:00 PM EDT
Saturday, November 22,1997

Kyoto Agreement Could Be Boon
to Global Climate and World Economy

Worldwatch issues report card on policies that hold
promise for stabilizing the climate and spurring economic development

Surprisingly modest shifts in policy can significantly reduce greenhouse gas emissions and produce real gains for the global economy, Worldwatch researchers announced today.

Overturning the conventional wisdom that aggressively reducing emissions may be difficult and costly, the new Worldwatch report, Rising Sun, Gathering Winds: Policies to Stabilize the Climate and Strengthen Economies, reveals that "If all nations were to take up the most effective policies already adopted one at a time by individual countries, global emissions might already be falling. Far from harming economies, as many officials fear, the new measures have already created billions of dollars of business in solar energy, micro-power, and low-emissions vehicles-in turn raising incomes, lowering energy bills, and adding new jobs. The need to reduce emissions could very well set off a competition among nations to see who will dominate the energy markets of the twenty-first century."

"Despite the broader failure to control emissions in the five years since the Rio Climate Convention was signed, specific policies adopted by several individual nations have exceeded expectations: rapidly introducing new technologies and practices, and in a few cases driving emissions down. If any one country were to adopt a 'Dream Team' of best energy practices-Danish tax policy, U.S. appliance standards, German renewable energy incentives, and Dutch industry covenants-it would be able to surpass even the toughest goals being considered for the Kyoto protocol."

In their review of the new policies adopted in 10 leading industrial nations, authors Christopher Flavin and Seth Dunn found that Denmark, the Netherlands, and Germany have the best track records so far, though even they are not doing all they could. The weakest policies to date are those of Australia and Canada, with the United States faring only slightly better. The authors point to a clear correlation between the negotiating positions of individual countries in the lead-up to Kyoto and the strength of their domestic climate policies.

The Worldwatch study cites over a dozen examples of national policy shifts with striking results. The near-elimination of coal subsidies in Great Britain has helped that country to cut coal burning dramatically and hold its carbon dioxide emissions below 1990 levels in 1996. In Germany, renewable energy incentives have allowed it to surpass the United States as the world's leading generator of wind power. In Japan, a program to promote the use of rooftop solar power systems in homes has quickly made it the world's largest market for solar cells.

"Among the policies that have proved most effective so far are cuts in energy subsidies, increases in energy taxes, incentives for the development of renewable energy and the expansion of forests, and stringent covenants between government and industry for the reduction of emissions. These policy shifts are all economically beneficial, frequently saving energy consumers money in addition to lowering greenhouse gas emissions."

The study notes that policy changes in the European Union have enabled the region to hold emissions to less than 1 percent above the 1990 level in 1996, whereas U.S. emissions rose 9 percent during that period. If the E.U. achieves its goal of a 15 percent reduction in emissions by 2010 while the U.S. holds emissions to the 1990 level as President Clinton has proposed, this would have major implications for the trading regime the U.S. government favors. The United States might end up spending billions of dollars purchasing emissions credits in Europe, allowing the Europeans to end up with a more efficient energy system as well as some extra cash they can invest in additional climate-friendly technologies.

"Experience in the past decade shows that one of the easiest and cheapest ways to reduce emissions is to slash fuel subsidies, which currently amount to roughly $200 billion per year worldwide," the Worldwatch researchers found. "Subsidy reductions in eastern Europe have helped spur reductions in carbon emissions by 30 percent or more in some countries. China has cut its coal and oil subsidies by $14 billion just since 1990, slowing carbon emissions growth by 20 percent. Still, many countries, including heavy emitters such as Australia and Germany, continue to provide large fossil fuel subsidies-which if phased out would likely cut their emissions substantially and lighten the burden such supports place on taxpayers."

Higher taxes on energy and carbon emissions, as well as on road use, are beginning to rein in emissions while being recycled to lower taxes on incomes and wages and to support energy efficiency, public transportation, and tree-planting. Five European countries already have carbon taxes in place, and several countries have raised gasoline and road taxes in recent years. Sweden's levy on carbon emissions has stimulated a 71 percent increase in the use of biomass since 1990-primarily for the combined use of heat and power, or cogeneration.

Energy efficiency standards have driven down emissions and fuel bills, the study shows. While relatively meaningless today, U.S. automobile fuel economy standards helped double fuel efficiency between 1974 and 1988, and could do so again if strengthened. Nearly all countries have recently tightened their building codes, in some cases supplementing them with incentives to construct efficient buildings that surpass the requirements. Several efforts are under way to set and strengthen appliance standards, some of which have demonstrated impressive results: over twenty standards have been set in the U.S., where they have tripled refrigerator efficiency and are projected to save the country $56 billion in energy costs between 1990 and 2015.

"Industry covenants with governments have been shown to motivate firms to seek out innovative means of improving their efficiency and reducing emissions. While most of the covenants adopted to date are relatively weak and ineffective, they could be strengthened to follow the ambitious lead of the Netherlands. Dutch industry covenants now cover more than 1,000 companies, aiming for an average efficiency improvement of 20 percent by 2000. So far, most of the Dutch companies appear to be on course to meeting or exceeding those goals."

Some of the most innovative climate policies adopted in recent years are incentives for the commercial use of renewable energy and cogeneration, Flavin and Dunn observe, with the strongest initiatives found in Europe and Asia. Germany's "electricity-feed law" has spurred the addition of 2,000 megawatts of wind since 1991 and created some 10,000 new jobs in the wind industry. Thanks to tax incentives as well as generous purchase prices, wind power already provides 6 percent of Denmark's electricity, while cogeneration comprises another 40 percent.

"Using a combination of high purchase prices and tax incentives, Japan has already installed 9,400 homes under its ambitious solar rooftop program, which allowed it to claim one third of the world solar cell market in 1996. Additional solar rooftop programs can be found in Denmark, the Netherlands, Switzerland, and Germany. Some developing countries are also moving aggressively to increase their use of the new technologies. India has become the world's fourth-leading wind power user. Cogeneration accounts for 12 percent of energy use in China, which now requires that all industrial boilers be converted to use waste heat efficiently."

Several governments are increasing forest area and sequestering carbon-at a cost as little as $4 for each ton stored. Germany, the United Kingdom, Denmark and the Netherlands are among the nations now offering incentives for planting trees. Leading the way is Costa Rica, which is already involved in nine internationally funded forestry projects and provides "carbon credits" to companies that invest in tree-planting programs within its borders. One such project will sequester over its lifetime five times as much carbon as Costa Rica emits each year.

"Some progress has been made in addressing other greenhouse gases as well, often at net economic gain," the study finds. "The United States expects to cut methane emissions by 60 percent by 2000 via regulations and incentives for capturing the fuel from landfills and burning it to generate electricity. The United Kingdom plans to reduce nitrous oxide emissions by 95 percent by 2000 through improved farming and industrial practices. Government-industry partnerships in the United States are projected to reduce emissions of hydrofluorocarbon and perfluorocarbon gases by the equivalent of some 23 million tons of carbon by 2010."

"The failure to control emissions adequately in the past five years represents a failure of policy-not of technology," say Flavin and Dunn. "Emissions have risen in many industrial countries because of the tendency to adopt measures piecemeal, rather than to mount comprehensive reforms. Only a coordinated package of complementary policies can bring emissions down in the next decade."

"Ironically, the longer the world waits to begin reducing greenhouse gas emissions, the more difficult and expensive the ultimate transition to a low-carbon energy system will be," concludes the Worldwatch report. "The world is poised to, in the years ahead, build vast numbers of fossil-fuel-burning power plants, motor vehicles, and buildings-many of which could be producing pollution for many decades to come. But if policies are changed now, we can install a new generation of clean-burning, economical technologies. It is therefore essential for industrial nations to demonstrate leadership in Kyoto, and to show the way forward for developing countries, where most of the new growth in energy demand will be centered."