BROWNER-EIZENSTAT OP-ED ON WORLD ECONOMY, ENVIRONMENT
USIA
30 October 1998
TEXT: BROWNER-EIZENSTAT OP-ED ON WORLD ECONOMY, ENVIRONMENT
(October 28 issue of The Financial Times, London Edition) (1100)
(Carol Browner is the administrator of the U.S. Environmental
Protection Agency. Stuart Eizenstat is U.S. under secretary of state
for economic, business and agricultural affairs. The article,
headlined "Cut-price Emissions," appeared in the October 28, 1998,
issue of The Financial Times, London Edition; however, it is in the
public domain and there are no publication restrictions.)
CUT-PRICE EMISSIONS: PERSONAL VIEW CAROL BROWNER and STUART EIZENSTAT:
Emissions trading is good for the world economy and the environment
On November 2 in Buenos Aires, the parties to the agreement on global
climate change reached in Kyoto last December will gather to pursue
the hard work of filling in the blanks to that historic accord. But a
controversy over how to implement critical market-based provisions
negotiated last year threatens to disrupt the steady progress that
should be everyone's goal.
The Kyoto protocol sets ambitious targets for developed countries to
reduce their greenhouse gas emissions, which most scientists believe
are causing higher temperatures and disrupting the world's climate
patterns. Preserving a stable and hospitable climate will require a
sustained commitment to reduce emissions over time. That it why it is
so important, right from the start, to focus on how countries can meet
their targets at the lowest possible cost.
This link between ambitious environmental targets and low-cost
implementation was central to the success of the Kyoto negotiations.
In the protocol, parties agreed that countries may meet their targets
through a combination of domestic and international actions, including
"emissions trading." This is a market mechanism that promotes
cost-effective reductions by allowing countries or companies to trade
emissions allowances. Without this flexibility, it simply would not
have been possible to take on targets as ambitious as we agreed to in
Kyoto.
Unfortunately, many countries and organizations most passionately
committed to solving the problem of climate change are, in our view,
mistakenly opposed to emissions trading or determined to place
counter-productive restrictions on it. If this view succeeds, it will
dramatically increase the costs of protecting our environment and
imperil many countries' ability to go forward with Kyoto.
Emissions trading is the key to strong targets because it makes
possible the largest greenhouse gas reductions for each available
dollar, mark, pound, franc, or yen. In America's acid rain emissions
trading program, every emitter must have an allowance for each ton of
sulfur dioxide it emits. For some emitters, the cost of cutting a ton
of emissions is many times greater than for others. Those who find the
cheapest ways to cut emissions are tangibly rewarded, because they can
sell any allowance they do not need to others that face higher costs.
The results speak for themselves. U.S. acid rain-causing emissions are
being cut ahead of schedule at 50 per cent of the expected cost,
bringing cleaner air to millions of Americans. Economists of every
stripe agree that the costs of reducing greenhouse gas emissions for
all countries -- not just the U.S. -- will be dramatically lower with
an efficient trading system. Within the European Union alone, measures
to control greenhouse gases are as much as six times more expensive in
some countries than in others, according to European private sector
analysts. The cost differences are even greater when looking at all
industrialized countries, and greater still between developed and
developing countries. Trading gets the incentives right by encouraging
cuts where they can be achieved at the lowest cost.
Of course, emissions trading is not a substitute for an aggressive
national commitment to controlling greenhouse gases. Rather, it is
just one tool for carrying out such a commitment. The U.S. has been
pursuing nearly 50 programs to reduce our emissions and improve our
energy efficiency since 1993, the year after it ratified the original
climate change treaty. In October last year, President Bill Clinton,
proposed a significantly stepped up effort, including $6.3bn over five
years in tax incentives and R&D to cut carbon dioxide through
increased energy efficiency and renewable energy, and to reduce the
other greenhouse gases. In the recently completed budget negotiations,
the president secured a 25 percent increase in climate change
investments over last year's total.
The U.S. plan also includes restructuring of our electricity industry
to provide market incentives for renewables and increased efficiency;
consultations with industry to develop sector-by-sector plans to
reduce emissions; an aggressive plan to improve the federal
government's own use and procurement of energy; and, ultimately, after
U.S. ratification of the Kyoto protocol, a greenhouse gas emissions
trading program based on our acid rain experience.
We recognize that many people have questions about how emissions
trading can be made to work internationally. Some are concerned about
weaknesses in national and international institutions to measure
emissions and ensure compliance. That is why the U.S. is committed to
building an international trading system of the highest integrity,
with strong incentives for compliance. In fact, the U.S. is already
working with a number of developed and developing countries to help
strengthen their capacity to measure emissions and participate in an
emissions trading system with high standards.
Others have argued for limits on how much of a nation's Kyoto target
can be met through international emissions trading. This is a deeply
flawed idea. Limits on trading would greatly increase administrative
costs, be exceedingly difficult to implement, and generally make it
much more expensive to address climate change.
In fact, the adverse impact would be even greater in Europe than in
the U.S.: restrictions currently proposed by some governments could
well double carbon allowance prices in the U.S. and triple those
allowance prices in the EU -- without providing any reductions in
worldwide greenhouse gas emissions beyond the targets established in
Kyoto. Limiting trading will make any given amount of emissions
reductions cost more. It makes little sense to waste resources at a
time of uncertain growth prospects in the global economy, nor to limit
the potential of emissions trading to spur investment and innovation
and to expand job opportunities.
We owe it to future generations to protect them from the damaging
effects of climate change. That is why it is vital that Buenos Aires
build on the momentum generated at Kyoto. The best way to protect the
environment is to provide the right economic incentives and, by so
doing, get the fastest, deepest reductions at the lowest possible
cost. Let us work together, do this right, and take good care of both
the world's environment and its economy.