Assessing Europe

1
Assessing Europes Kyoto Claims, and Comparative
EU/US ApproachesDebunking the Political
Mythology Underlying the EUs Kyoto Scheme

• Christopher C. Horner
• Rome
• 29th May 2007

2
Summary

• Kyotos rationing scheme is misdirected and
  failing
• Emissions are increasing everywhere, including
  Italy
• The approach continues nonetheless to harm the
  economy
• Additionally, the EU is merely transferring
  wealth
• The Kyoto rationing approach diverts scarce
  resources from addressing solvable,
  here-and-now problems
• Given current and foreseeable technologies, what
  Kyotos champions demand, in order to detectably
  impact climate, would trigger the biggest
  economic crisis ever
• Rhetoric and mythology aside, US emission
  performance is far superior than Europes
  (EU-15), including Italys
• This despite faster US population and economic
  growth
• While paradoxical this makes sense by focusing
  on economic growth the US pulls through new
  technology and capital turnover

3
Key Points

• Europe is not performing, yet remains unrealistic
• Italy is not performing
• This is proving costly (exporting growth, paying
  others for credits)
• The US is doing better, even taking European jobs
• This is due to the different approaches
• Italy will soon be asked to make a promise of
  ever deeper emission reductions, for post-2012
• If Italy agrees this will be remarkably costly
• Right now, politicians are merely delaying an
  unpleasant reality, while making false boasts

4
EU PerformanceHeres what Global Leadership in
Reducing Emissions Looks Like
5
This isnt Actually Necessary

• Of all the effects of the ETS rules, the rise
  in the price of power has aroused the most
  outrage. The chief executive of one utility,
  Vattenfall, which owns a coal plant that is one
  of the continent's biggest carbon emitters,
  defended the decision. Lars G. Josefsson, who is
  also an adviser to German Chancellor Angela
  Merkel, said higher electricity prices are the
  intent of the whole exercise. . . . If there were
  no effects, why should you have a cap-and-trade
  system? But consumers ask why four big utilities
  that dominate the German market got to keep the
  money.
•     --Steven Mufson, The Washington Post, 9 April
  2007

6
Italys emissions, from its January 2007 Report
to the UNFCCC
7
How Does the EU Stack Up with the US?So, Maybe
Name-calling and Rhetoric Arent Enough?
8
Italy Projects Continued Emission Increases
9
Italy Projects 12 by 2020(as of 11/06) Not a
reduction. Regardless this is unrealisticItaly
s emissions are already there (2004), and rising
10
The Whole World is Increasing its Emissions
11
The Post-2012 Promise LoomsWhat Should Italy
Expect?

• 2008-2012, Italy was granted a reduction slightly
  less than its original -8 promise (-6.5 over
  1990 levels) Italys emissions increased,
  however.
• Calculations based on currently agreed burden
  sharing, and public statements of EU government
  officials, indicate that Italy should expect its
  fair share in a -20 by 2020 post-2012 Burden
  Sharing Agreement to be to reduce emissions to
  -20 below 1990 levels by 2020.
• That equates to 415.68 Mmt, which is a 29.6
  reduction from current reported levels.

12
Italys Projection to the EUA Consistent 2020
Burden Massive Reduction or Wealth Transfer
13
Everyone expects that They Will Get a Break
post-2012

• Addressing the need for a post-2012 Burden
  Sharing Agreement that assigns real cuts to
  countries previously given a free-ride, German
  Chancellor Angela Merkel admitted that tough
  negotiations are still ahead. The compromise
  would be a tough task. The beauty is, Merkel said
  smiling, that each member state thinks they're a
  special case. That makes us all equal.
• -- Der Spiegel, 9th March 2007
• This increasingly looks like politicians seeking
  to put off an embarrassment until a later date
  when someone else must admit to it and repair the
  damage.
• This isnt responsible policymaking or
  leadership, this is a game. Meanwhile, EU
  emissions climb and the economy suffers, both
  remarkably as a direct result of this approach.

14
There Is Another Approach

• Growth-oriented approach offers economic growth,
  jobs
• It recognizes that emissions are rising
  everywhere, but also one approach is performing
  far better than another
• Admitting this is responsible policymaking
  stubbornness and name-calling (Brussels path) is
  not
• This does require a little political courage in
  Europes environment of a speech code regarding
  climate change
• Alternative mortgaging Italys future on a Cross
  of Green
• At bare minimum, the government cannot be given a
  free ride to make yet another impossible promise
  that merely means EU exports its wealth and,
  increasingly its jobs
• Challenge that approach as being blindly
  irresponsible

15
What if Were Wrong/What if Theyre Wrong?

• Short Answer
• If we are wrong
• You end up with a wealthier world left to deal
  with that which will always be there
  unpredictable, often severe weather. (Best
  estimate is 1.7 C in 100 years)
• If they are wrong
• You end up with a poorer world left to deal with
  that which will always be there unpredictable,
  often severe weather.

16
The Better Political Approach

• Italys government confronts whether to worsen
  this flawed approach by not standing up for your
  interests within Europe
• Yes, much Brussels pressure exists to accept
  their plan
• Costs are now mounting and its time for leaders
  who see the policy has failed, before Italy
  agrees to an even worse deal
• Several EU Member States appear in a mood to
  oppose this
• There are better approaches, encouraging economic
  growth which actually lead to a better GHG
  performance
• No known technologies would permit the real GHG
  reductions Brussels is now demanding only
  economic collapse allows that

17
Its Italys Decision

• The EU particularly in Germany is
  presently investing abhorrent sums in expanding
  natural gas generating capacity and the
  infrastructure. However, the reserves of natural
  gas in Europe (outside Russia) will be exhausted
  within the next 10 years. Thus in 10 years' time
  we will be 100 reliant on the dependability of
  Russia and North Africa as energy suppliers.

18
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19
More Mythology this What if?

• European and (ever fewer) US politicians continue
  to pretend that whats happening with EU climate
  policies isnt really happening, and that well
  all be millionaires from using less energy and
  selling windmills to each other.
• The presumption is also that, somehow, feasible
  efforts under existing and foreseeable technology
  can impact the climate. Science suggests
  otherwise (see, e.g., Hoffert et al., Science
  Magazine, 2002)
• Both represent make-believe thinking and now is a
  good time and opportunity to stop playing
  such games.

20
Amerikanische VerhältnisseOnly 5 of the
worlds population produces 25 of its (Man-made)
GHGs!

• Query does the US pay 5, or 25, of the UNs
  budget?
• Truth be told about this claim, with 5 of the
  worlds population, the US produces somewhere
  below 25 of its emissions and above 25 of its
  wealth.
• Compared to Europe, US produces more jobs with
  higher wages, and enjoys an economy that is 42.5
  percent wealthier per person. Year after year,
  the US leaves Europe farther behind not just
  economically but, now, in rate of C02 increase
  EU-15 emissions rising much faster.
• While the US continues to emit more CO2 per
  person than Europe partly attributable to
  economic, geographic, demographic and climatic
  differences per dollar of economic output, the
  US is improving much faster.

21
Stern and the IPCCEconomic Considerations for
Policymakers

• The Stern Report hints even reveals that
• Humanity would be better off in a high-growth
  globalized Business as Usual (BAU) world with
  climate change (even the worst-case story lines
  he selects) than in a fully-mitigated,
  regionalized world like the Greens seek.
• The social cost of carbon dioxide that Stern
  selected implies that most European countries are
  already raising more than enough from energy
  taxes to account for the externalities.
• But, in short, even Stern acknowledges that the
  2100 world will be vastly richer no matter what
  and therefore better able to deal with what we
  will always face always unpredictable, often
  severe weather.
• The question is therefore why we ought to
  suddenly harm our own wealth creation and
  thereby theirs in the name of expensive
  gestures?

22
A Word About the Stern Report, and its IlkThe
Fatal Flaw

• Every study used to support energy rationing in
  the name of global warming has been revealed as
  assuming the worst case scenario for the effects
  of future climate change, and the least-cost
  scenario for mitigation.
• Even then, as Stern proves, they cannot make a
  compelling case for the Kyoto approach that is,
  intervention over adaptation (wealth creation)
  that survives scrutiny.

23
Assessment Spain and Kyoto

• Kyotos first round is already costly, and will
  only get more so
• The US thanks Spain for our first Kyoto jobs
  (Acerinox moved growth to Kentucky)
• Brussels will soon demand of Spain a deeper,
  post-2012 commitment
• Under any reasonable calculation, this means real
  emission reductions Cf 1990
• This would mean massive reductions (Spain
  projects being 48 gt1990 by 2012)
• Fearing a realistic reassessment by Spain, UK
  emissary Henry Derwint came to Madrid last year
  offering temporary exemptions for
  energy-intensive industries in order to gain
  Spains agreement for a deeper Round II promise
• Key word temporary
• Key message this scheme chases jobs away
• Thesis As you confront this decision, this is
  not a political threat to be afraid of, or simply
  ignore due to political dangers.
• Because Europe is harming itself economically,
  and unilaterally
• Because alternate approaches exist, and
• Because, e.g., the U.S. is vastly outperforming
  Europe on CO2 emissions
• This is a political opportunity you can offer
  salvation, not from harmful climate change but
  from harmful climate change policies

24
The Argument, In Sum

• Projections of temperature increases are based on
  models with built-in assumptions of global
  population and GHG emissions rising far more, and
  several times faster, respectively, than
  observations support.
• History tells us that the world will be very rich
  in the future under even the most pessimistic
  economic projections underlying climate models,
  so paying extra now to avoid the costs of climate
  change amounts to a regressive tax on the poor
  today to benefit the rich of tomorrow. Thats
  wrong on both a policy and a moral level.
• Mitigation strategies still demonstrably dont
  work.  Every country has seen their emissions
  rise since 1997, when Kyoto was agreed.  In fact,
  since then Europes emissions have risen faster
  than the USs.
• If we must do something about global warming
  now, we should concentrate on affordable
  adaptation policies instead of expensive
  mitigation policies.  Making the world resilient
  to any damaging effects of climate change
  represents better value than trying to change
  future weather.
• In fact, we could do much more of benefit to
  people now instead of wasting money on huge
  bureaucracies designed around a price for
  carbon.  We could eradicate malaria, bring safe
  drinking water to Africa, severely reduce the
  effects of famine and protect against sea-level
  rise.  If we arent willing to do that, weve got
  our priorities seriously wrong.
• Of course there is a massive lobbying effort from
  industries hoping to benefit from mitigation
  policies.  Enron started this in the U.S. Banks
  stand to earn billions from trading carbon
  credits.  Europe has seen energy utilities making
  windfall profits.  Simply because somethings
  good for some big businesses does not mean it
  isnt very bad for the economy as a whole.  We
  used to prosecute people who created cartels, yet
  the carbon trading schemes legally sanction one.
• In short, lets not crucify the poor on a cross
  of green.

25
Are You Serious?Global Warming is the Greatest
Threat!!!

• OK, then how about building nuclear power plants?
• NO!
• OK, then how about sequestering CO2 emissions?
• NO!
• Wellare tree farms an acceptable way to reduce
  concentrations?
• NO!
• And on and on it goes.
• Their demands here are the same as for every
  issue lifestyle change raising questions of
  sincerity.

26
Economic Growth, Not Rationing or Name-Calling,
Improves Ones GHG Profile

• "For example, according to the International
  Energy Agency (IEA), from 2000 to 2004, U.S.
  emissions of carbon dioxide from fuel combustion
  grew by 1.7 percent, during a period when our
  economy expanded by nearly 10 percent. This
  percentage increase was lower than that achieved
  by Japan (2.5 percent), Canada (4.0 percent), the
  original 15 countries of the European Union (EU
  15) (5.4 percent), India (13.5 percent) and China
  (58.9 percent). IEA data also show that the
  United States reduced its carbon dioxide
  intensity (emissions per unit of real GDP, kg CO2
  per 2000 5 US) by 7.2 percent between 2000 and
  2004, better, for example, than Canada (5.6
  percent), Japan (1.4 percent), or the EU 15 (1.1
  percent). " White House Congressional Testimony,
  March 2007

27

• That is to say that Europes approach is driving
  investment away, either into other countries for
  short-term CDM or JI credits under Kyoto, or
  to e.g., the U.S. to avoid the carbon games
  altogether.
• Investment helps improve emissions performance by
  introducing newer capital equipment.

28
US vs. Spain, EU

• 1990 1997 2000 2004
• US 5013.45 5547.9 (10.6) 5815.5
  (16) 5912.21 (18)
• Spain 224.51 262.61 (17) 314.44 (40) 361.9
  (61)
• EU-15 3250.42 3263.13 (.04) 3376.41
  (3.9) 3572.24 (9.9)
• EU-25 4132.79 4059.69 (-1.8) 4039.57
  (-2.3) 4234.86 (2.5)
• This figure is less Estonia, Latvia and
  Lithuania
• 1990 4132.79 Estonia, Latvia, Lithuania
  (working backward est. at 62Mmt)
• 1997 4059.69 18.11, 8.31, 16.21 (42.63)
• 2000 4039.57 16.15, 7.26, 13.19 (36.6)
• 2004 4234.86 18.23, 8.40, 13.23 (40.46)

29
Heres What Unofficial Europe is Saying

• Merkel comment about every country thinks theyre
  a special case
• Merkel advisor saying the point is to increase
  the cost of electricity
• Arcelor Mittal, IneoChlorVinyl, Acerinox, UNICE
  (all other comments from my Marlo email)
• Victoriano Muñoz, particularly
• Open Europe Report comments
• What post-2012 should mean for Spain

30
Here is the Truth

• "Tom Crotty, chairman of the chlorine producer
  Ineos ChlorVinyls, said that spiralling energy
  costs had led to the loss of 100,000 job losses
  over the past 18 months. Included in those losses
  were the closure of 13 glassmakers and 11
  papermills. Ineos ChlorVinyls, which had to halt
  production temporarily last year because of
  higher energy costs, has 80 per cent of its costs
  tied up in energy. Mr Crotty said that energy
  policy had failed industry 'The true cost comes
  in lost business, lost jobs and lost income'.
• Times (UK), November 28 2006 http//business.times
  online.co.uk/article/0,,8209-2474749,00.html
•  
• "Arcelor Mittal, the world's largest steel
  company with 135,000 workers in Europe, is among
  several companies that are sending out distress
  signals two years after the EU began capping
  carbon dioxide emissions from 10,000 factories
  and power plants.
• Tougher EU policies to cap emissions 'could
  threaten two of our plants' because they would
  significantly raise costs, Wurth said during a
  recent interview. Instead of battling pollution,
  he argued, the measures were encouraging "less
  production in Europe and more imports from places
  with fewer environmental regulations" a result
  that Wurth deemed 'absolutely ridiculous'."
•  IHT, January 7, 2007 http//www.iht.com/articles/
  2007/01/07/business/ecolaws.php
•  
• "For other industries, the main concern is the
  higher cost of electricity, which was exacerbated
  by the introduction of emissions trading.
• The Norwegian company Hydro has closed two
  aluminum units in Germany since 2005 because of
  high power costs, in part citing tough
  environmental laws in Europe.
• A Norsk Hydro spokesman, Thomas Knutzen, said his
  industry would make new investments mainly in
  countries that 'do not have obligations to reduce
  their CO2 emissions through Kyoto.'
• In the case of Arcelor Mittal, Wurth said the
  combination of high electricity prices and the
  prospect of buying carbon allowances could lead
  to partial plant closures in France."   IHT,
  January 7, 2007 http//www.iht.com/articles/2007/0
  1/07/business/ecolaws.php
•  
• The emerging large increases in electricity
  prices and their potential impacts on
  international competitiveness are a major concern
  for energy-intensive industries.  A full analysis
  of the impacts of the ETS and appropriate
  improvements is critically needed. Union of
  Industrial and Employers Confederation of Europe
  (UNICE), representing more than 20 million
  companies in 33 European countries largest EU
  employer group, November 2005
•  
• The rising costs of reducing carbon dioxide
  emissions by smokestack industries may trigger a
  shift in major investments in such sectors from
  Europe to countries where carbon controls are
  less strict, analysts said. In the future,
  European companies may decide to make big
  investments abroad, say in Brazil, because Europe
  is too expensive, Michael Grubb, chief economist
  at the Carbon Trust, a UK thinktank sic, told a
  European power conference last week. There is an
  option of driving energy-intensive industries out
  of Europe. Reuters, 13 June 2006
•  
• Many energy-intensive companies face the dilemma
  whether to pay the excessive costs of complying
  with Kyoto, or redirect investments to other
  countries, as has Acernox, the world's
  second-largest stainless steel manufacturer
  (sending its growth to the U.S. and South
  Africa). CEO Victoriano Muñoz repeatedly warns of
  Kyoto creating a very grave situation for
  Spanish industry, forcing us into a second
  industrial restructuring. In his opinion, Kyoto
  is one of the biggest problems Spain will have to
  deal with in the coming years. from an op-ed
  yet placed, by Dr. Gabriel Calzada from the
  Spanish press see also "Three Spanish companies
  closed down for violating Kyoto Protocol, Spain
  Herald, August 9, 2005, at http//www.spainherald.
  com/2005-09-08news.html1416

31
Zapatero, Mister Brussels

• Zapatero statement Saturday the "only war to be
  fought is against underdevelopment and climate
  change
• The poor are in deep trouble if he fights them
  both with the same inefficient, bureaucratic,
  ineffective approach.
• Unlike with poverty, it is less wise, less cruel
  to act now
• Still, nothing ever proposed would under any
  scenario have a detectable impact on the climate,
  that is, would act now.
• These are gestures, only, and rewarding some
  interests groups and industrial mandarins, but
  doing nothing for the express target.
• Lomborg/Copenhagen Consensus

32
So, Upon Scrutiny

• The fact is, almost all of todays popularized
  solutions to global warming would do little more
  than allow us to congratulate each other for
  doing something.
• Actually doing something, however, would be
  neither easy nor cheap if it is even possible.
• Policymakers must remember that, as is always
  true, wealth diverted to, e.g., making the
  environment cleaner is no longer available for
  other purposes.
• Access to abundant, inexpensive energy has
  enabled prosperity, good health, longevity,
  comfort, and convenience.
• Even if the 0.6 C warming over the last 150
  years is entirely due to mankind a dubious
  scientific claim dare I ask if that would be
  such a terrible price to pay for our prosperity,
  improved standards of living, increased life
  spans, decreased disease and child mortality?
• How much prosperity are you willing to give up in
  order to prevent some (likely unmeasurable)
  portion of future global warming?
• Everyone considers himself an environmentalist
  until he gets the bill.
• Spains bill has been trickling in and is coming
  due.

33
What if Were Wrong Longer Form

• Implement our preferred no regrets policies
  leaves us more resilient to climates negative
  effects.
• Sufficient global growth means we'll even be
  resilient to catastrophe (which is a relative
  term high winds are a catastrophe to someone
  living in a house of straw, merely bad for
  someone in a house of sticks, and an
  inconvenience to someone living is a house of
  brick.
• The policy objective should be to make sure as
  many people as possible live in brick houses.

34
What if Theyre Wrong Longer Form

• We'll have condemned millions of people in the
  Third World to death by treating affordable
  energy as a curse, rather than the blessing it
  really is.
• And ultimately without making a bit of
  difference, climatically -- so really, if we
  follow the alarmist agenda we'll be killing those
  people regardless of whether the alarmists are
  right or wrong.

35
A Reality Check for EuropeNot Just re its Own
Performance, but re the US

• Europe insists that Bush is standing between the
  US and Kyoto
• Bushs successor will certainly join up with
  Europe
• After all, a couple of candidates in both parties
  support a domestic (only) version of Kyoto-style
  rationing (that is a fraction of Kyotos first
  step)
• This cannot be a serious assessment
• Bushs successor certainly could sign another
  treaty
• Like Kyoto it would go nowhere remember, Bushs
  predecessor signed Kyoto
• And made clear he had no intention of asking the
  Senate to approve it
• Because the Senate unanimously made clear it
  wants no part of this
• It isnt Bush thats blocking Kyoto, et al
  treaties require 2/3 of the Senate
• Sure, the Democrats love having the issue, if to
  treat it less than honestly
• However, they controlled the Senate in 2001-2002
  when the issue was very hot. You notice even
  then they did not seek vote they could vote
  tomorrow.
• The Senate is aware of Europes costly failure.
  It isnt a secret.
• Neither are the tricks that Europe is playing
  tricks that the US could not pull.
• No policy leader in the US wants a Kyoto-style
  pact. Europe is misinformed. The US has made
  clear what it will do, and what it will not do.
  Details may change. The big picture will not.

36
Is This Really a Fight Europe Wants to
Pick?Ultimately, you have to stop talking about
since 1990!

• The Environmental Protection Agency estimates
  that U.S. carbon-equivalent emissions rose by 1.3
  percent in the five most recent years for which
  we all have data (2000-2004). During the same
  period, the U.S. population grew by 4 percent,
  and our economy grew by 19.5 percent.
• In the 25 European nations reporting under the
  Kyoto Protocol, carbon equivalent emissions rose
  by 2.2 percent during the same period (and by 2.4
  percent in the 15 Western European nations). The
  EU-25 population, meanwhile, grew by 1.6 percent
  and their collective economy grew by just under 7
  percent.
• So, between 2000 and 2004, America had more than
  twice the population and economic growth of
  Europe and a little more than half of Europes
  growth in carbon emissions.

37
US vs. EUEmissions Intensity

• At 0.55 metric tons of carbon per thousand
  dollars of GDP (our carbon intensity) in 2004,
  the United States fits right in with Europe,
  somewhere between the Netherlands (0.63 tons) and
  Belgium (0.54 tons), well below Estonia (0.81
  tons) but well above France (0.26), which
  generates much of its electricity using
  carbon-free nuclear power.
• More importantly, we have been reducing our
  emissions by this measure. Our carbon intensity
  has decreased by 7 percent since 2000 larger
  than the EU-25 reduction of 4.5 percent during
  the same period.