In December 1997, the Clinton Administration agreed
to the terms of the Kyoto Protocol, a global climate agreement
negotiated by more that 160 countries in Kyoto, Japan, under the
United Nations Framework Convention on Climate Change. The Kyoto
Protocol mandates that the United States reduce its greenhouse gas
emissions in the 2008 to 2012 period to levels 7 percent below 1990
levels. The United States Senate has not ratified the Kyoto
convention, yet the Administration is rushing to implement its
severe terms, which would force Americans to pay more for basic
goods and services while sacrificing their personal freedoms to
address an unproved environmental threat.
Although the fight over the existence and
possible consequences of global warming rages on in the scientific
community, the debate over the possible economic consequences of
implementing the Kyoto Protocol should subside quickly. The
knockout punch came from a recent report issued by the U.S.
Department of Energy, which effectively refutes the Clinton
Administration's claim that the Kyoto Protocol will have few, if
any, negative consequences for the U.S. economy. To the contrary,
the report estimates that, in 2010:
- Gasoline prices would likely increase about 66
cents per gallon, from an anticipated baseline price of $1.25
without the Protocol's restrictions to $1.91 a gallon; and
- Electricity would cost 86.4 percent more than
it would otherwise.
The
study by the Energy Information Administration, Impacts of the
Kyoto Protocol on U.S. Energy Markets and Economic Activity,
analyzes in depth the effects of the Kyoto Protocol on energy
prices and the overall U.S. economy for 2008 to 2012. It states
that:
[T]he introduction of such reduction [7
percent below 1990 levels] would affect both consumers and
businesses. Households would be faced with higher prices for energy
and the need to adjust spending patterns. Nominal energy
expenditures would rise, taking a larger share of the family budget
for goods and service consumption and leaving less for savings.
Higher prices for energy would cause consumers to try to reduce
spending not only on energy, but on other goods as well. Thus,
changes in energy prices would tend to disrupt both savings and
spending streams. Energy services also represent a key input in the
production of goods and services. As energy prices increase, the
costs of production rise, placing upward pressure on the nominal
prices of all intermediate goods and final goods and services in
the economy, with widespread impacts on spending across many
markets.
The
Energy Department study clearly contradicts an analysis by the
White House Council of Economic Advisers in a July 1998 report
outlining Kyoto's potential economic impact. In The Kyoto Protocol
and the President's Policies to Address Climate Change, the CEA
estimates that gasoline will increase to $1.31 a gallon in 2010 and
that electricity will increase by about 3.5 percent to 5.1
percent.
The
Department of Energy study more closely mirrors the conclusions of
a 1998 study conducted by a nationally recognized econometric firm,
WEFA, Inc., which concludes that the consequences of the Kyoto
Protocol would be severe. According to WEFA, meeting the terms of
the Kyoto Protocol would nearly double the cost of energy and
electricity prices, raise gasoline by about 65 cents per gallon,
cost 2.4 million U.S. jobs, harm America's competitiveness, reduce
state tax revenues by almost $100 billion, and reduce family income
dramatically.
Both
studies show that restrictions on energy use or production will
have drastic consequences for Americans, from affecting what they
feed their families and how they heat their homes to determining
what cars they will drive. In addition, these restrictions will
affect economic output. According to the Energy report, for
instance, if the terms of the Kyoto Protocol are implemented,
America's gross domestic product (GDP) in 2010 will decline by
about $397 billion--far more than the Administration's estimates of
$1 billion to $5 billion.
Now
that the Clinton Administration has received the studies on the
economic consequences of the Kyoto Protocol from the Department of
Energy and WEFA, it would be foolish to move forward with
implementation of the treaty. The Kyoto Protocol could impose
hidden costs on every American that amount to at least an
additional 14.5 percent income tax. Until it can be proved that
global warming in fact occurs and is caused directly by human
activity, the United States should not ratify any environmental
treaty carrying such drastic consequences.