Throwing Cold Water on the Global Warming Treaty

Commentary by H. Sterling Burnett

In December 1997, in Kyoto, Japan, the Clinton/Gore administration negotiated a treaty that would require the United States to reduce greenhouse gas emissions by about 40 percent - to 7 percent below their 1990 levels between 2008 and 2012 - in an effort to avert catastrophic human-caused global warming.

In support of its agreeing to the treaty, the administration cited an analysis produced by five research laboratories at the Department of Energy (DOE) that claimed the economic benefits of reducing emissions to 1990 levels by 2010 would roughly equal the costs of the required energy cuts. Many analysts argued that the "five-lab" study was critically flawed. The evidence came from more than 20 other analyses, including one produced by the DOE two months prior to the five-lab study, indicating that merely reaching 1990 levels of emissions would cause massive job losses, steep price increases, and a severe decline in Gross Domestic Product (GDP).

The administration brushed off these claims and has held firm to its position. In late September, however, the General Accounting Office (GAO) released its analysis of the five-lab study. The five-lab study claimed that the U.S. would not have to cut energy use to reduce greenhouse gas emissions since the U.S. could switch to "non-polluting" solar power and wind power. However, the GAO found the study relied on unsubstantiated assumptions concerning solar power and wind power without discussing the specific steps necessary to bring about cost-competitive wind and solar energy. In addition, the study did not consider the full economic costs of the energy taxes that Kyoto proposed. Finally, it relied on implausible scenarios concerning the feasibility of near-term replacement of powerplants and other capital. In short, all of the study's major assumptions were either unrealistic or overly optimistic.

A second blow to the administration came on October 9 when the Energy Information Administration (EIA), the official forecasting arm of the DOE, released its analysis of the proposed greenhouse gas treaty. The EIA found that meeting the Kyoto treaty greenhouse gas limits would lead to a 52 percent increase in gasoline prices, an 86 percent increase in electricity prices, a 4.2 percent decrease in GDP and 2.5 percent decline in personal disposable income.

The EIA's analysis also examines the prospects for significant renewable energy technology breakthroughs, implementation of a cost-reducing emissions trading scheme favored by the Clinton/Gore administration and the implications of fiscal policies like a personal income tax rebate to offset the impact of increased energy costs on individuals. But even accounting for such beneficial technology and policy changes, the EIA's figures make the previous estimates of the cost of Kyoto look optimistic by comparison.

In addition, the proposed treaty would produce little or no benefit to the environment, since a previous international agreement exempts developing countries from greenhouse gas emission cuts. According to the United Nations' International Energy Agency, as much as 85 percent of the projected increase in CO2 emissions will come from developing countries such as China, India, South Korea, Mexico and Brazil that are exempted from the proposed treaty. By 2025, China alone will emit more carbon dioxide than the current combined total of the United States, Japan and Canada. Thus, while developed countries would suffer serious economic harm, developing economies would continue to grow and the environment would not improve.

It is clear is that the energy cuts required to implement Kyoto would hurt people. If the Clinton administration still wants to pursue ratification of the Kyoto treaty it should at least admit that the energy diet the treaty will impose on the U.S. will be "all pain, no gain."