A princely message on climate change

In a letter to the House Select Committee on Energy Independence and Global Warming, Prince Charles warned of the “serious threat climate change poses to humanity” and advised members to tackle climate change “in a way that does not limit the aspirations for growth of rich or poor countries.” America’s lawmakers are not short of advice on this topic, but the prince makes an important point about how we are to tackle climate change.

Recently in Washington, invitations to a two-day meeting on climate change were extended to 16 countries, including EU members, Australia, Indonesia, Canada, Brazil, Mexico, South Africa and, importantly, China and India.

In all, the major economies responsible for 85 percent of global greenhouse gas emissions participated in the meetings. Some criticized the administration’s opposition to the EU’s mandatory cap-and-trade regulations that attempt to restrict greenhouse gas emissions by law.

But the critics are mistaken. The high costs of such an agreement to major emitting nations, like China and India, is likely to keep them away from the table.

Second, the emissions trading system under the original Kyoto Protocol simply isn’t working, and rising global energy demands make the viability of such a system very unrealistic.

The European Environmental Agency’s latest projections show that without strong new measures, the EU 15’s greenhouse gas emissions will be 7.4 percent above (not 8 percent below as required by Kyoto) 1990 levels in 2010. If the EU were to meet its emission reduction targets under the protocol, the economic costs would be high. The cost of complying with Kyoto for major EU countries could range between .8 percent of GDP to over 3 percent in 2010, according to international research analysts Global Insight.

Why are so many major economies reluctant to sign on to a Kyoto-style system of cap-and-trade? In the U.S., a Kyoto-style fixed cap on emissions would inevitably collide with population growth. The EU 15 countries are having difficulty meeting their Kyoto targets under negligible population growth. Research using a variety of economic models shows that adopting the Kyoto Protocol targets would reduce U.S. GDP by 1 to 4 percent by 2010, costing almost 2 million jobs.

Since none of the developing countries are willing to sacrifice economic growth, an alternative approach to mandated emissions cuts must be explored, which is why incentives to focus on new clean technologies to bring these nations together must be considered.

Partnerships with the major emitters should focus on practical steps to promote technology for reducing emissions at power plants, capturing and storing CO2, and reducing emissions from steel and aluminum production in both developing and developed countries. Increasing energy efficiency for buildings and renewable energy supplies will also promote economic growth and reductions in all types of emissions, including greenhouse gases.

In practical terms, transferring the cleanest, most energy-efficient technologies to countries like China and India will yield significant benefits. According to analysis conducted by the International Center for Capital Formation, lowering the emissions intensity of developing countries to that currently associated with new investment in the U.S. would be roughly equal to what would be accomplished under the Kyoto Protocol by 2012 — if all 39 signatory countries with emission targets were to meet their goals.

Global reductions of greenhouse gases can be done without the heavy hand of regulatory mandates. The U.S. has already seen dramatic reductions in energy use and energy intensity. America’s CO2 emissions fell 1.3 percent in 2006 compared to 2005 despite strong economic and population growth, and energy use fell by 1 percent. Energy intensity — the amount of energy required to produce a unit of output — has fallen by 20 percent over the 1992-2004 period in the U.S., compared to only 12 percent in the EU with its mandatory approach to emission reductions.

Policies that curb emissions without harming growth offer concrete results that cap-and-trade regulations have failed to deliver.

Thorning is managing director of the International Center for Capital Formation.