The Kyoto Treaty goes into effect February 16, 2005. However, in many respects, one final outcome is already predetermined. Many of the major countries that ratified the treaty, agreeing to reduce their green house gas (GHG) emissions by 6 to 8 percent below 1990 levels, now face "mission impossible."
In the intervening period between 1990 and 2005, the emissions levels of these countries have increased substantially, making reductions to the target levels, in many cases, essentially impossible. The economic and political costs of gearing down the economy to achieve those levels would be horrendous, far beyond the cost estimates for policies that would have been put in place in 1990. For example, Japan's GHG reduction program posits an increase in nuclear power by 30 percent. However, at this point, there is simply not enough time for the Japanese to put such large levels of new capacity on line. This dismal prospect is compounded by the fact that there are no penalties for failure to meet the targets to which a country had committed.
The Kyoto Treaty's "escape clause" was the projected availability of Russian "hot air"- surplus emission credits expected to be available for trading with other countries in the future. While Russia was a substantial emitter of GHGs in 1990, emissions there were estimated at 37 percent below 1990 levels by the time Kyoto was drafted in 1997, due in large part to the country's economic depression. As Russia had already, in theory, greatly surpassed its Kyoto target reduction by 1997, the Treaty authors anticipated surplus levels of credits from Russia by the compliance period of 2008-2012. These, the Treaty went on, could be sold to other countries needing credits to meet their own targets. Although these credits do not constitute "real" emission reductions, this accounting scheme would allow the overall targets to be met and would provide payments to the weak Russian economy as well. While a good theory, this scenario no longer seems likely: since 1997 the Russian economy has been growing at about 6 percent per year. This is due, in part, to the world's appetite for oil, of which Russian is now the number-two producer. If current trends continue, there are serious questions about whether there will be many "hot air" credits available from a Russian economy that will have more than doubled since 1997.
The combination of the rapid increase in GHG emissions in many of the world's major industrial economies after 1990, and the possible absence of significant Russian credits makes the achievement of the Kyoto Treaty targets almost impossible for many major counties, including Canada and Japan. Even the EU, which was particularly well positioned to meet its targets following the restructuring of the former East German energy sector and the conversion by Britain from high-emission coal to low-emission natural gas, still faces substantial challenges to contain emissions at the levels committed to under Kyoto.
However, while Kyoto may be largely a failure in terms of achieving its emission targets, it has also been a huge learning experience for the global community. We have seen the political realities and economic perversities involved in committing a sizable portion of the world (the industrialized countries) to meeting emissions targets while allowing more than half the world (the developing countries) to be unconstrained. Further, not all developed nations have signed on to the Treaty. Despite working on it for more than a decade, the United States, the world's largest producer of GHGs, has not ratified the Treaty. But, this should not have been unexpected. Even before the Kyoto protocol was written, the US Senate had voted 95 to zero to not accept any treaty lacking firm target commitments from the developing as well as the developed world. For the US, the Kyoto Protocol was dead on arrival.
On the economic side the division between countries that have targets and those that do not has created the unintended incentive to relocate emission activities out of countries with targets and into countries without targets. In a global economy, such opportunities are plentiful. A developed country, for example, could move toward meeting its emission targets by reducing its domestic timber harvest, which would reduce its emissions, and then increase its timber imports from developing countries. The resultant emissions from timber harvest in the developing would not affect any country's emissions accounting. Of course, the effects on the atmosphere are identical whether the harvest is from an industrialized or developing nation, to say nothing of the possibilities of increased tropical deforestation in poor countries. While this example may seem fanciful, this approach has in fact been considered by some industrial nations as a means to help them achieve their GHG targets.
In the long-run, the solution to the climate issue will almost certainly be found not in the fine-tuning of restrictions on emissions, but in the development of affordable low-emissions technologies. A general structure needs to be created to provide real incentives for the development and introduction of new low-emissions technologies. Today we see the emergence of the hybrid car. Within decades the hydrogen fuel cell will almost surely power much of our transport. Geological sequestration of carbon dioxide will allow for the clean use of fossil fuels in the form of hydrogen.
There will, no doubt, be a Kyoto II of some type. The experience gained in this first attempt to forge an international agreement, involving a host of industrialized and developing countries, demonstrates the complexities and limitations of such a venture. A reinvented system must acknowledge the futility of politically fashioned accounting systems, which generate perversities and unintended consequences. It must also explore a variety of means to promote reduced emissions even outside the context of formal targets. For example, while cap-and-trade systems to control emission have merit, so too may arrangements that place even modest taxes on energy-based emissions and minimize emission reduction targeting. Above all, one final, critical lesson to be drawn from this experience and considered in the future is the importance of ensuring, from the beginning, that all countries are included as substantive players in any agreement.
