Kyoto Protocol Assessment

1
Kyoto Protocol Assessment
2
Crisis and Opportunity

• Time to implement easy changes has past (4/5 of
  US generating capacity for 2020 already built in
  2000)
• Trading only way to meet Kyoto caps at reasonable
  cost
• Emission trading
• Joint implementation (JI)
• Clean development mechanism (CDM)
• With trading cost could be reduced by a factor of
  10 in the US
• Trading is keystone of Kyoto architecture

3
Kyotos Political Economic and Technical issues

• Main elements left out of Kyoto protocol
• Compliance
• Reporting
• Independent certification and verification
• Very demanding if not impossible time table
• Credit for carbon sinks have been added (land-use
  change and forestry credits?)
• What after ratification of protocol?

4
Credits Issues

• What counts for credit for sinks of CO2
• Land-use change and forestry
• Difficulty with definitions, methods and data for
  counting sinks
• Credits through CDM
• Rules, investors hesitance, time needed to
  understand use of CDM
• Emission trading
• Difficult technical problems
• Creation of emission permits worth hundreds
  billions

5
Emission regulation

• Kyoto Strict targets and timetables for
  regulating the quantity of greenhouse gases
  emitted
• Emission quantity determined by technological
  changes and economic growth difficult to control
  and anticipate
• Emission permits must be allocated

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Allocation Problem

• Trading magnifies the stakes Emission permits
  are semi-permanent property rights
• Difficult to gain consent of firms and government
  that must pay the cost of acquiring permits
  grandfathering permits accommodation of new
  entrants
• Economic efficiency of trading depends on
  integrity of emission permits strong states may
  impose rule of law
• International diplomacy magnifies difficulty
  long ratification times and potential withdrawal
  from treaty

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Sequence of issues to address

• Allocation problem
• Auctions vs. allocation
• Monitoring of compliance
• Accurate flux measurements
• Possible restriction to CO2 initially
• Enforcement
• Buyer or seller liability ( integrity of
  permits)
• Strong compliance mechanism prohibited by Kyoto
  protocol unless governments formally amend it

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Possible solutions

• If objective to avert catastrophe triggered by
  certain level of emissiongt cap emissions OK but
  what is the threshold value?
• Coordination of emission taxes makes it easier
  to contain cost but difficult to monitor and
  enforce differences among countries
• Hybrid tax and trade system targets for
  emission quantities and emission prices first
  limit quantity then initiate trading system

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Kyoto and the US

• July 1997 Byrd-Hagel Resolution
• December 1997 Kyoto Protocol
• March 2001 Bush pulls US out of Kyoto
• June 2001 Climate Change Research Initiative
• Feb 14, 2002 Bush Climate Proposal
• 18 reduction in GHG intensity, 2002-2012
• RD
• Jan 2003 McCain-Lieberman Climate Bill
• July 2005 new partnership with Australia, India,
  China, Japan and South Korea to deploy cleaner
  technology when possible - Not binding.
• Aug 2005 new US energy policy

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US and Emissions Limitations

• States (Eastern Provinces and western States are
  taking some initiatives)
• Cities are also making plans to cut locally
• Everyone is doing GHG inventory (UCSB etc)