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June 15, 2001

Kyoto Protocol Becomes New Albatross for Bush Administration 

By Will McNamara
Director, Electric Industry Analysis 

[IMAGE]President Bush and European leaders "agreed to disagree" over a global 
warming treaty, as the president sought to reassure allies that sharp policy 
differences would not hamper relations between Europe and the United States. 
During several closed-door sessions, Bush and his European counterparts 
confronted one of their most contentious areas of disagreement: the 
president's rejection of the Kyoto Protocol on global warming. "We agreed to 
disagree," Swedish Prime Minister Goran Persson told reporters. "The European 
Union is sticking to the Kyoto Protocol. The United States has chosen another 
policy." 

Analysis: It is rather amazing how prominently energy issues have factored 
into the first six months of the Bush administration. In contrast to the 
eight years of the Clinton administration, when energy policy often took a 
backseat to other concerns, President Bush-a result of California blackouts, 
a national shortage of natural gas, sky-high electricity prices, and a 
controversial energy task plan-been comparatively consumed by energy issues. 
Now, in a political legacy from the previous administration, President Bush 
finds himself grappling with another contentious energy problem that has 
global ramifications. Departing from what appears to be an international 
consensus, President Bush has declared the Kyoto Protocol an ineffective 
treaty and has instead decided to further examine the greenhouse gas problem, 
which has raised further questions about the president's commitment to 
environmental issues. 

First, let me provide some background. The Kyoto Protocol developed out of 
meetings held in December 1997 in Kyoto, Japan, during which time the United 
Nations Framework Convention on Climate Change agreed in principle to a 
series of strategies to reduce greenhouse gas emissions. About 170 
governments of various countries, including the United States, participated 
in the Protocol and agreed to reduce their aggregate carbon dioxide (CO2) 
equivalent emissions by at least 5 percent below 1990 levels by 2012. 
Noticeably exempt from the Protocol were developing countries such as China 
and India-of the largest greenhouse gas emitters in the world&#151which 
resisted taking on any sort of formal reduction plan until industrialized 
countries proceeded with their own. This marked the central flaw in the 
Protocol in that participants such as Europe, Japan and the United States 
argued that it would be impossible to reach the Protocol's goals without the 
active and controlled participation of developing countries. Consequently, 
the United States could not garner two-thirds support from the Senate, which 
would be required to ratify the Protocol, despite endorsement from the 
Clinton administration. The United States is the largest emitter of CO2, 
accounting for one-quarter of the world total per year, and thus its 
participation in the Protocol has been considered essential. 

The Protocol's emissions targets include all major greenhouse gases: carbon 
dioxide, methane, nitrous oxide (NOx), and greenhouse gases created by 
industrial processes, which are artificial chemicals called halocarbons 
(CFCs, HFCs and PFCs) and long-lived gases such as sulphur hexafluoride 
(SF6). The Protocol requires the main developed countries to reduce their 
emissions of the greenhouse gases by varying amounts: 8 percent for European 
Union countries, 7 percent for the United States and 6 percent for Japan.  

With the onset of his new administration, President Bush announced last March 
that the United States would not support the Kyoto Protocol, again arguing 
that developing nations were not included and the goals were not realistic. 
Further, Bush has voiced the concern that ratifying the Protocol would 
severely damage the U.S. economy as it would restrict industrial production. 
The president has also pointed out that, although European nations espouse 
support for the Protocol, none of the EU members has yet to ratify the 
treaty. Instead, President Bush has adopted a "go-slow" approach toward 
global warming and has vowed to spend more money to investigate the problem 
and work with other nations to produce a better plan.  

A new report from the National Academy of Sciences, requested by the Bush 
administration, found that global warming is indeed occurring as the result 
of human activity. Specifically, the report found that the Earth's 
temperatures could rise between 2.5 and 10.4 degrees Fahrenheit by the end of 
this century. On the other hand, the report could not reliably establish how 
much of the warming trends result from natural variations, how fast future 
warming will occur or how corrective actions might correct it. Thus, the 
president asserted that these unanswered questions warranted further 
investigation into the greenhouse gas problem.  

The president has come under fire both domestically and abroad for what is 
perceived as a policy that gives preference to business over the environment. 
In addition to his opposition to the Kyoto Protocol, President Bush also 
announced in March that he opposes any domestic restrictions in CO2 emissions 
from the nation's power plants, retracting on a pledge that he had made 
during his campaign. Carbon dioxide is not classified as a pollutant by the 
Clean Air Act, and thus the White House said that Bush's original promise was 
a "mistake" inconsistent with the president's broader goal of increasing 
domestic energy production. Toward that end, the Bush administration has 
focused on the construction of some 1,900 new power plants across the country 
to resolve a growing supply / demand imbalance. On the other hand, business 
groups have applauded the president's approach, echoing his belief that the 
Protocol would harm the nation's economy and that domestic, technology-based 
solutions represent a better solution. 

This is obviously a political story packed with passion on both sides of the 
debate. I won't use this space to criticize or defend President Bush's 
environmental stand. Instead, I think it will be useful to clearly identify 
the two polarized approaches that world leaders are taking toward the Kyoto 
Protocol. European leaders have vowed to enact the Protocol without the 
United States, which may not be possible. The Protocol can only be enacted if 
nations that produced 55 percent of the industrialized world's carbon dioxide 
in 1990 decide to ratify it. Japan could be the wild card in the debate, as 
it is leaning toward the Protocol but has not yet officially ratified it. If 
Japan does participate, proponents of the Protocol would have 57.5 percent of 
1990 emissions (enough for ratification).  

Nevertheless, here is how the two approaches shake out: 

The Bush Approach We were given the best indication of the approach President 
Bush plans to take in his own environmental proposal (expected some time this 
summer), in a recent radio address. "With new technology, sound regulation 
and plain good sense, we can expand our energy production while protecting 
the environment," the president said. The Bush administration's previously 
released energy plan is primarily focused on building the nation's energy 
supply through the expedited construction of new generation (including 
nuclear power plants). Further, the president has said that "energy 
production and environmental protection are not competing priorities" and can 
both be achieved with new technology.  

While the president has not made any specific references to new provisions 
for limiting CO2 emissions from existing or new plants, the new technology to 
which he has referred most likely includes clean-coal technologies that can 
be implemented to reduce emissions from coal-fired plants. As noted in the 
3/27/01 IssueAlert, new, clean-coal technologies are being tested and 
developed by various companies throughout the United States. One example is 
the integrated gasification-combined cycle (IGCC) technology that first 
converts coal into a combustible gas, cleans the gas of virtually all 
pollutants, then burns the gas in a turbine much like natural gas. More than 
99 percent of sulfur, nitrogen and particulate pollutants can be removed in 
the process. Three gasification power plants have been built in Florida, 
Indiana and Nevada. As coal remains the United States' most abundant fuel 
source, constituting 95 percent of our nation's fossil energy reserves, much 
of the nation's plan for reducing emissions will focus on coal-fired 
generation. It is important to note, however, that most of the clean-coal 
technologies currently being developed eliminate SO2 pollutants and NOx, but 
may do little to address CO2 emissions, which is the primary focus of the 
Kyoto Protocol. 

President Bush has also stated that his administration will fully fund high 
priority areas for scientific research into climate change over the next five 
years, and help developing nations such as China and India to match the U.S. 
commitment. 

The Kyoto Protocol Approach European Commission President Romano Prodi has 
said that the 15 European Union countries will proceed with ratifying the 
Kyoto Protocol. As noted, the participation of another large industrialized 
country such as Japan is needed to officially enact the Protocol. If the 
Protocol is enacted, an international conference will be held in Bonn, 
Germany, this July to spell out how the specific goals of the treaty will be 
reached. Toward this end, French President Jacques Chirac recently commented 
that, "Now is not the time to conduct new studies. These studies have already 
been done. We have to set objectives." Specifically, European countries will 
proceed with setting specific and targeted cuts in their emission gases such 
as CO2 produced by power plants powered by fossil fuels. The EU has said 
that, if ratified, it will comply with the Protocol's standards for emissions 
reduction by 2012 and go "significantly further" to reduce emissions beyond 
that date. Yet, interestingly, across the Continent, nuclear power, which 
produces no CO2 emissions, has undergone a resurgence and presently generates 
an increasing percentage of the power in countries such as France and 
Germany.  

However, we have a good indication of the specific measures from negotiations 
that took place during the Clinton administration. Most of the emissions 
targets of the participating countries will be reached through 
emission-trading mechanisms. Trading emission of greenhouse gases allows 
industrialized countries to buy emissions rights from each other at a price 
commonly agreed. In other words, industrialized countries that do not meet 
emissions targets can strike deals with other industrialized nations that do 
better than required. This may encourage reductions to be made where they are 
most needed. However, critics have suggested that the mechanisms amount to 
loopholes that would allow large polluting countries to continue polluting, 
while smaller countries trade credits that do not amount to significant 
reductions. 

Moreover, the two approaches being pursued by President Bush and the European 
Union represent inherently different philosophies regarding the urgency of 
emissions control and methods that should be employed to reduce greenhouse 
gases. There is little possibility that President Bush will change his stand 
and include the United States in the Kyoto Protocol. Without U.S. 
participation, the Protocol may once again be stalled unless another large 
industrialized country such as Japan decides to join. On his own, President 
Bush now moves forward with constructing a plan for the United States that 
attempts to balance the reduction of emissions while aggressively expanding 
the country's generation supply. This will be a difficult balance to achieve, 
but the president remains confident that environmental protection and 
industrial expansion do not need to be mutually exclusive. 

An archive list of previous IssueAlerts is available at
www.scientech.com


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