Although the fight over the existence and possible
consequences of global warming rages on within the scientific
community, the disagreements over
the possible economic consequences of the Kyoto Protocol of the United Nations
Framework Convention on Climate Change should end. The knockout
punch came from a report issued in October 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. As the Energy Department report
notes, "Because energy-related carbon emissions constitute such a
large percentage of the Nation's total greenhouse gas emissions,
any action or policy to reduce emissions will have significant
implications for the U.S. energy market."
For example, the report estimates that the price of gasoline could
rise by as much as 66 cents per gallon by 2010.
The
study by the Energy Information Administration, Impacts of the
Kyoto Protocol on U.S. Energy Markets and Economic Activity,
analyzes the effects of the Kyoto Protocol on the U.S. economy for
2008 to 2012. According to the report,
"That is when this country is supposed to reach an average level of
net greenhouse gas emissions 7 percent lower than they were in
1990." The Energy Department
study clearly contradicts a July 1998 report issued by the White
House Council of Economic Advisers, The Kyoto Protocol and the
President's Policies to Address Climate Change, which
purported to analyze Kyoto's economic impact. But it also confirms the
conclusion of an earlier study by a nationally recognized
econometric firm, WEFA, Inc., which reports that the "consequences
[of the Kyoto Protocol] would be severe."
The
Energy Department study highlights an obvious fact: Since energy
from oil, natural gas, and coal is a basic part of America's
industrial output and quality of life, restrictions on energy would
have drastic consequences--affecting nearly everything from what
Americans feed their families and how they heat their homes to what
cars they drive. For example, the Energy Department estimates that
under Kyoto's terms, gas prices would run around $1.91 per gallon
by 2010, an increase of 52.8 percent
over the baseline case of $1.25 per gallon in 2010, compared with the CEA's
estimate of $1.31 per gallon. And in 2010, the Energy Department
estimates that the nation's gross domestic product (GDP) would
decline by about $397 billion,
compared with CEA estimates of between $1 billion and $5
billion.
Thus, the Clinton Administration now has
in hand assessments of the economic consequences of the Kyoto
Protocol that are in stark contrast to the study conducted by its
own Council of Economic Advisers. The Administration's rush to
implement the requirements of the Kyoto Protocol will force every
American to sacrifice personal and economic freedoms in order to
protect the world from an unproved environmental threat.
KYOTO PROTOCOL'S UNCERTAIN BASIS BUT
CERTAIN REPERCUSSIONS
The
terms of the treaty to which the Clinton Administration agreed in
December 1997 would require the United States to reduce its
greenhouse gas emissions between 2008 and 2012 to levels that are 7
percent below what they were in 1990. As the Department of Energy
recognized in its recent report:
[T]he introduction of such reduction 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.
Despite this threat of economic decline
and the scientific uncertainty regarding the existence of global
warming, let alone whether it is caused by man-made greenhouse gas
emissions, the Clinton Administration is pushing forward with its
efforts to implement the Kyoto Protocol.
Consider:
- There is no scientific consensus that
the Earth is warming. As the Energy Department
admits:
To date, it has been difficult to note
such an increase [in the average temperature of the Earth's
surface] conclusively because of the differences in temperature
around the Earth and throughout the year, and because of the
difficulty of distinguishing permanent temperature changes from the
normal fluctuations of the Earth's climate. In addition, there is
not universal agreement among scientists and climatologists on the
potential impacts of an increase in the average temperature of the
Earth, although it has been hypothesized that it could lead to a
variety of changes in the global climate, sea level, agricultural
patterns, and ecosystems that could be, on net, detrimental.
Proponents of global warming cite an
increase in global temperature of 0.6 degrees Celsius since 1850 as
evidence that man-made carbon dioxide emissions are heating the
planet's atmosphere to a dangerous level.
Yet an examination of climate history shows that this warming trend
may be the result of natural climate changes. Since the end of the
Ice Age almost 11,000 years ago, six other major warming and
cooling trends have occurred. Three produced temperatures warmer
than the present average of 59 degrees Fahrenheit (15 degrees
Celsius) and three produced cooler temperatures. The 0.6 degrees Celsius
warming that has occurred over the past 148 years is likely to be a
natural phenomenon that occurs over long periods of time.
- There is no
scientific consensus that global warming results from man-made
greenhouse gas emissions. For example, in its report, the
Department of Energy states:
The most recent report of the
Intergovernmental Panel on Climate Change (IPCC) concluded that:
"Our ability to quantify the human influence on global climate is
currently limited because...there are uncertainties in key
factors.... Nevertheless, the balance of evidence suggests that
there is a discernible human influence on global climate."
Proponents of the global warming theory
blame the 0.6 degrees Celsius increase in temperature over the past
148 years on the emission of man-made greenhouse gases. If that
were the case, the rise in temperature should have occurred after
1945, the period during which the largest buildup of man-made
greenhouse gases occurred. However, almost two-thirds of the global
temperature variance over the past 100 years actually occurred
before 1945. In addition,
temperature data collected by NASA satellites--the most accurate
measurements in the world--show a slight cooling trend of 0.01
degrees Celsius over the past 20 years,
a period of rapidly increasing greenhouse gas
concentrations. In other words, there
is no conclusive scientific evidence that man-made greenhouse gas
emissions result in the warming of the Earth.
- There is no
evidence that the potential negative effects of global warming
outweigh its benefits. Proponents of the global warming
theory argue that the increase of greenhouse gases like carbon
dioxide will result in devastating floods and global famine.
However, carbon dioxide is an essential component of life. Plants
absorb it; and as they grow and reproduce, they give off oxygen,
which is essential for human existence. Nearly 800 scientific
studies conducted worldwide suggest that plant productivity in a
carbon dioxide-enhanced world would improve, on average, 32 percent
for cereal grains, corn, potatoes, lettuce, and many other
crops. Forests would benefit
as well from a carbon dioxide-rich environment: Trees would put on
more mass, so fewer would have to be cut to meet the demand for
lumber. And as plants increased in size and number, so would
animals: Increased vegetation would improve the numbers of
herbivores and the numbers of carnivores which feed on them, which
means more food for human consumption.
THE KYOTO PROTOCOL'S ECONOMIC
CONSEQUENCES
Unlike the scientific community, which
remains divided on the issue of global warming, a consensus has
developed within the economic community on the likely effects on
the U.S. economy if the Kyoto Protocol is implemented. Many
economists, including those at the Energy Information
Administration, have noted that:
-
Carbon emissions will increase by an
average of 1.2 percent a year between 1996 and 2020. For 2010, this
represents a 34 percent increase over 1990; for 2020, it represents
an increase of 45.3 percent over 1990 levels. (Under the Kyoto
Protocol, the United States would have to reduce its greenhouse gas
emissions by 34 percent below the level otherwise predicted for
2010.)
-
Because energy-related carbon emissions
constitute such a large percentage of the nation's total greenhouse
gas emissions, any action or policy to reduce emissions will have
significant implications for the U.S. energy market.
As
the Department of Energy reports, "The direct impact of higher
prices is a reduction in energy demand, particularly for coal with
its high carbon content. The consequences are reductions in output
from the mining sector and from all services connected to the
production and distribution of coal."
In addition:
Higher energy prices disproportionately
increase the cost of production for energy-intensive industries. As
energy price increases are passed along by industry though higher
prices for their products, consumers will tend to substitute away
from the relatively expensive energy-intensive products to less
energy-intensive products and services. The consequences are
reductions in gross output from the energy-intensive sectors of the
economy, principally, chemicals and allied products; stone, clay,
glass, and concrete; and primary metals....
Finally, because the carbon emissions
restrictions are placed only on Annex I [developed] countries,
industries with high levels of imports, particularly those with
imports from non-Annex I [developing] countries, will see larger
reductions in domestic output than industries with low import
penetration. If imports are already competitive, increasing the
cost of production for the domestic industry and not for non-Annex
I importers will tend to increase imports, leading to a drop in
domestic output. For this reason, output from manufacturing sectors
such as leather and leather products, electronic and other
electrical equipment, and miscellaneous manufacturing will fall by
more than the output for the manufacturing sector as a
whole.
Devastating Economic Consequences
Reducing the emission of greenhouse gases
to 7 percent below 1990 levels by the end of the next decade would
cause a sharp rise in energy prices. 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. As the Energy
Department report shows, with an increase in the price of energy,
all goods and services would cost more to produce. People would buy
fewer of those products. To cope with smaller product demand, total
output at U.S. industries and businesses would fall, which in turn
would result in millions of lost jobs and a substantial decline in
the average standard of living.
Table 1 outlines, in detail, the severe impact that the Kyoto
Protocol would have on energy prices, as analyzed by the Energy
Department, WEFA, and the White House Council of Economic Advisers.
As a consequence, implementing the Protocol also would have a
devastating effect on America's economic output. For example, the
projected decline in GDP in 2010 would be $397 billion based on the
Department of Energy's estimates,
$301 billion based on WEFA estimates,
and $1 billion to $5 billion based on Administration
estimates. Unfortunately, the
Clinton Administration significantly underestimates the impact that
the Kyoto Protocol would have on the U.S. economy.
What the Kyoto Protocol Means for American
Families
The
cost to Americans of implementing the Kyoto energy restrictions
will go well beyond any tax increase that Washington policymakers
have contemplated. By 2020, according to WEFA's 1998 study, under
the Kyoto restrictions on U.S. emissions:
- Grocery bills will be 9
percent higher;
- Medical bills will be 11
percent higher; and
- Housing costs will be 21
percent higher.
For
example, those who spend $5,200 a year (or $100 a week) to put food
on their tables today would see their grocery bills increase to
$5,668. Their heating bills, automobile fuel costs, housing costs,
and other expenses would rise as well.
A
November 1997 Heritage Foundation analysis of the impact of
stabilizing greenhouse gases at 1990 levels by 2010 (instead of
meeting the Kyoto terms of 7 percent below 1990 levels) shows that
the spike in the price of energy would reduce average household
income by an average of $1,620 per year.
Thus, even with conservative estimates, between 2001 and 2020, the
average household would be forced to make do with about $30,000
less in today's dollars. If this financial cost were imposed as an
income tax, American families would face an average income tax
increase of 14.5 percent.
If
Heritage used the projections in the recent Department of Energy
report instead of WEFA's conservative numbers, the purchasing power
of families in 2020 would be even less. This means that nearly
every American would experience a lower standard of living.
WHAT CONGRESS SHOULD DO
The
Senate has not yet ratified the Kyoto Protocol because of the
greater restrictions it would place on America's economy,
industries, and families. But the Administration is moving forward
with implementation of the terms of the Protocol. To protect
Americans from an immediate decline in their standard of living and
from an increase in the cost of food, goods, and services, Congress
should:
-
Reaffirm and enhance the
principle outlined in Senate Resolution 98. Senate
Resolution 98 expressed the unanimous sense of Congress in
disapproving the terms of the Kyoto Protocol. The United States
should not sign any global climate change treaty like the Kyoto
Protocol that has mandatory emission reduction targets yet fails to
hold all signatories to those same standards and will result in
serious economic harm to the U.S. economy.
-
Prohibit bureaucratic
implementation of the unratified Kyoto Protocol.
Appropriations committees should remove any budget request that
seeks to implement the terms of the Kyoto Protocol without Senate
ratification of the treaty.
-
Hold the Administration
accountable by conducting public hearings on the scientific basis
for the theory of global warming, as well as the economic and
political repercussions of implementing the Kyoto Protocol without
clear scientific consensus. Congress should continue to
hold well-publicized hearings to shed light on the scientific
assumptions behind the global warming theory and the economic
ramifications of its implementation. The Administration should be
made to explain to the American people its rationale for moving
forward with the Protocol in light of the overwhelming consensus on
the costly impact of the treaty on the U.S. economy and the lack of
consensus on the theory, costs, or effects of global warming.
CONCLUSION
Now
that the Administration has reports from the Department of Energy
and WEFA on the economic consequences of the Kyoto Protocol which
are in stark contrast to the study conducted by its own Council of
Economic Advisers, it would be foolish to move forward with
implementation of the treaty. The Kyoto Protocol could impose
hidden costs on Americans 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.
-- Alexander F. Annett is a
former Research Assistant in Domestic Policy Studies at The
Heritage Foundation.