Is Greenhouse-gas Treaty D.O.A.?
Economic And Political Hurdles May Be Too High

by Claude R. Marx and Laura M. Litvan
Copyright 1997 Investor's Business Daily, Inc.
Reprinted with permission of
Investor's Business Daily (December 16, 1997)


When world leaders last week agreed to a global pact to control greenhouse gases, one delegate called the 11 days of tense talks "negotiation by exhaustion."

But drafting the treaty may have been the easy part.

Economists and business lobbyists say actually enforcing its rules would cost U.S. consumers and the economy plenty. One big reason - technologies to cut emissions of greenhouse gases cheaply are still on the drawing boards. That leaves energy taxes as one of the only short-term ways to trim emissions.

What's more, lawmakers on both sides of the aisle are highly skeptical. Their key gripe: the pact sets no targets for poorer nations. The GOP leadership in Congress says it won't pass a "flawed" treaty.

Even the White House wants to put off a congressional vote on the deal until after the next election.

Business lobbying against the treaty will be intense, and will be buttressed by labor unions - which fear the tough targets will cause U.S. firms to ship factories and jobs to developing nations. And polls show the public largely opposed to a treaty that costs them jobs and money.

Under the accord, hammered out in Kyoto, Japan, the U.S. will have to cut emissions of six "greenhouse" gases to 7% below 1990 levels by 2012. Thirty-seven other countries also agreed to make the cuts, which are supposed to delay global warming.

Carbon dioxide will be the big challenge. Emitted when cars are driven, factories burn fossil fuels and when animals breathe, it makes up about 85% of all greenhouse gas emissions.

The U.S. is the source of about one-fourth of all CO2 emissions worldwide, according to the U.S. Energy Information Administration.

For the U.S., one of the toughest aspects of meeting the deal's terms stems from its growing economy, which tends to boost energy consumption. The EIA last year projected that economic growth and other factors will push up CO2 emissions sharply. Under current trends, emissions will climb to about 32% above '90 levels by 2010.

In other words, to meet the treaty, the U.S. will have to cut expected emissions by nearly 40%.

Industry critics say meeting that goal will hit consumers hard - a point echoed by many economists. Some say consumers will need to cut energy use by 25% or more.

"This will fundamentally change the way Americans live their lives," said Fredrick Palmer, general manager of the Western Fuels Association in Washington, D.C.

The surest way to cut CO2 emissions is to scale back fuel consumption, said Martin Zimmerman, chief economist at Ford Motor Co. "It's the burning of fossil fuels that is the man-made contribution to carbon dioxide emissions," he said.

The problem is that, up until now, CO2 has not been regulated - since it doesn't pose any direct health problem. So there has been little effort by industry to develop technologies to curb emissions.

As a result, the kinds of advances needed to help comply with the treaty are years away, Zimmerman said. For instance, Ford is working on new cleaner-burning fuels and engines that need less fuel to drive the same distance. But, he said, it's doubtful these will be in new cars by 2010.

"The year 2010 is almost here from a technology standpoint," Zimmerman said.

Without those breakthroughs, Congress will have little choice but to impose new energy taxes to trim consumption, he said.

Environmental groups say these concerns are overblown.

Ashok Gupta, an economist with the Natural Resources Defense Council, says consumers could help curb emissions to 1990 levels and save $600 per capita a year by buying energy-efficient technologies for their homes.

"There are many new technologies that can help you reduce your use, be more efficient and introduce fewer emissions into the environment," he said.

And President Clinton has pledged to commit $1 billion a year over the next five years to boost energy efficiency and clean-technology programs.

Backers add that an emissions-trading plan will help countries cut emissions more cheaply. The trading program would let nations buy and sell rights to pollute, adding some flexibility. But details of that plan won't be worked out until next November, when countries meet in Buenos Aires to iron out the details.

Even with better technology, the economic effects could be severe.

Simply curbing U.S. emissions to '90 levels by 2010 would cut GDP to 2.4% below baseline forecasts, says a study by economic forecaster WEFA Inc. for the American Petroleum Institute. That's equal to $227 billion in '92 dollars.

WEFA assumed that advances in new energy-efficient technologies would grow three times as fast each year as their annual average over the past 10 years, said Mary Novak, senior vice president at WEFA. She also assumed that key energy-using industries, like electric utilities, would make major improvements.

The Kyoto pact can't be enforced in the U.S. without consumers greatly curbing energy use, probably by around 25%, Novak said.

"There's no way a few industries can take up all the effort," she said.

Politically, the treaty is already in deep trouble.

Democratic senators told Clinton that there are nowhere near the 67 votes required for ratification. Last summer, the Senate voted 95- 0 urging Clinton not to come back with the treaty that exempts developing nations from emissions curbs.

And the pact has been panned by members of both parties, including Majority Leader Trent Lott, R-Miss., and Minority Leader Tom Daschle, D-S.D.

Daschle, for instance, said it "does not meet the standards established by the Senate" on a wide range of economic and environmental issues.

Lott wants the Senate to vote on the treaty next year, so the GOP can paint Clinton and Vice President Al Gore as extremist tree- huggers who want to ruin the economy and raise gas prices.

"It could be a second-term version of health care," said a staffer close to the leadership.

Some Democrats think they can paint Republicans as anti- environment and lapdogs of big smokestack industry.

"The Republicans could be depicted as protecting their supporters at the expense of the greater public good," said Walter Rosenbaum, a University of Florida political scientist.

Both parties are taking political risks because the public's views aren't settled.

Polling data show the public wants action on global warming. But it becomes more leery when told of the costs.

A Rasmussen Associates poll of 1,000 adults, taken two days after the treaty was announced, showed 39% backed it, while only 26% opposed it. When told that gas and electricity costs could rise, 54% opposed it and only 29% backed it.

A recent Gallup poll found that more than half said the U.S. shouldn't try to cut emissions if it costs jobs. Only a third said it should.

Karlyn Bowman, a polling analyst at the American Enterprise Institute, said the public's opinion on the subject is "mushy at best, and probably nonexistent."


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