EYE ON
AMERICA Getting sensible about global
warming By Peter Morici
Americans are poised to contribute to an
international solution to global warming.
Nancy Pelosi, newly elected Speaker of the
US House of Representatives, is moving the
environment and energy to the top of the
congressional agenda, and several senators have
introduced bills that would reduce carbon-dioxide
emissions in the US. However, the solutions being
offered to save the planet from rising
temperatures will likely hasten the calamity and
inflict harm
on
US industries that could otherwise contribute
importantly to a sustainable solution.
Shrinking global ice shelves and mountain
glaciers offer compelling evidence that global
temperatures are rising, threatening to push back
continental shorelines, submerge island nations
and radically alter global agriculture.
Carbon dioxide accounts for more than
four-fifths of US greenhouse gas (GHG) emissions
and an even larger share of what may be curtailed
by government policies. Carbon-dioxide emissions
are created by processing and burning petroleum,
coal and natural gas, and any meaningful solution
boils down to regulating fossil-fuel use.
Implemented in 2005, without the United
States, the Kyoto Protocol commits virtually all
other industrialized countries to reducing GHG
emissions by 6-8% below 1990 levels. Developing
countries are absolved, though, and industrialized
countries can avoid some reductions by
implementing cleanup programs in developing
countries or creating carbon sinks through
reforestation projects. A private market has
emerged in Europe trading in emissions permits.
Unfortunately, this regime encourages
energy-intensive industries, such as metals and
metal fabrication, to move from industrialized
countries, where they face rising costs for using
fossil fuels, to such places as China and India,
where carbon-dioxide-emission standards remain
much less stringent. Global emissions increase and
gross domestic product (GDP) is reduced, because
developing countries use fossil fuels, capital and
labor less efficiently to make the same
energy-intensive goods.
This madness is
best illustrated by the fact that China, with GDP
less than one-fifth the size, already emits more
carbon dioxide than the European Union and about
as much as the United States.
Every two
years, Chinese emissions growth adds the
equivalent of another country the size of Japan.
It is hard to imagine that two years of China's
growth, which comes to US$500 billion, could
replace Japan's $5 trillion economy, but that's
the kind of economic accounting international
environmentalists advocate.
Bills are
pending in the US Congress that would cap and then
roll back US emissions over the next two decades
by establishing a national limit on carbon-dioxide
emissions, and then allocating that cap among
energy-intensive industries and businesses. Those
plans would allow companies to buy and sell their
permits - a process called cap and trade.
In essence, cap and trade would extend the
Kyoto process into the US economy, and impose the
same kind of bureaucratic management on US
business that has resulted in economic stagnation
throughout much of continental Europe and Japan.
The very process of allocating carbon use among
businesses would create a playpen for lobbyists
and Washington dealmakers that would feed
corruption and exacerbate the economic damage.
The international community has determined
that global warming can be arrested by rolling
back carbon-dioxide emissions and fossil-fuel use.
The economic impact would be best minimized by
pricing fossil-fuel use, and its effects on the
global commons, the same everywhere and letting
markets do the work of allocating industries and
jobs.
Without equal requirements for China
and other developing counties, Kyoto will not
solve global warming. By encouraging energy-using
industries to move to the developing world, it
will only exacerbate the condition and make the
world poorer in the bargain.
The United
States should do its share by implementing a
regime that encourages participation and sacrifice
by all nations. This could be accomplished by
negotiating global emissions standards for
energy-intensive activities such as aluminum and
steel production and carbon use in automobiles,
and quickly building out supplies of alternative
energy such as nuclear power. However, negotiating
emissions standards would be lengthy and difficult
now that Kyoto has its own momentum, and we are
all familiar with the resistance to nuclear
initiatives in such places as Germany and New
England.
More realistically, the United
States could impose a carbon tax on domestic
energy-intensive products and on imports not
subject to comparable levies. The tax could be set
at levels necessary to hit US emissions goals and
would encourage other nations to put in place
comparable policies.
The World Trade
Organization has upheld measures to protect the
global commons if those apply equally reasonable
standards to domestic and foreign producers.
That would accomplish reductions of
carbon-dioxide emissions in the United States
without encouraging US energy-intensive industries
to leave for China and other developing countries
where they make the problem worse, not better.
Peter Morici is a professor at
the University of Maryland School of Business and
former chief economist at the US International
Trade Commission.
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