Transcript Points to Make for Spain

Assessing Europe’s Kyoto Claims,
and Comparative EU/US
Approaches:
Debunking the Political Mythology
Underlying the EU’s Kyoto Scheme
Christopher C. Horner
Rome
29th May 2007
Summary
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Kyoto’s rationing scheme is misdirected and failing
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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 Kyoto’s
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 Europe’s (EU-15), including Italy’s
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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
Key Points
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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
EU Performance
Here’s what “Global Leadership in Reducing Emissions” Looks Like
This isn’t Actually Necessary
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“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
Italy’s emissions, from its January 2007
Report to the UNFCCC
How Does the EU Stack Up with the US?
So, Maybe Name-calling and Rhetoric Aren’t Enough?
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Italy Projects Continued Emission Increases
Italy Projects +12% by 2020
(as of 11/06)
Not a reduction. Regardless this is unrealistic:
Italy’s emissions are already there (2004), and rising
The Whole World is Increasing its Emissions
The “Post-2012” Promise Looms:
What Should Italy Expect?
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2008-2012, Italy was granted a reduction slightly
less than its original -8% promise (-6.5% over
1990 levels); Italy’s 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.
Italy’s Projection to the EU
A Consistent 2020 Burden = Massive Reduction or Wealth Transfer
All sectors
120
114
112
104
103
100
94
80
2010
2005
2000
1995
60
1990
GHG emissions (base year=100)
140
Past trends
Projections with existing measures
Projections with additional measures
Kyoto target
Target with KMs and sinks
Everyone expects that They Will
Get a Break post-2012
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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
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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 isn’t 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.
There Is Another Approach
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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 Europe’s
environment of a speech code regarding climate change
Alternative: mortgaging Italy’s 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
“What if We’re Wrong”/
“What if They’re Wrong?”
Short Answer:
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If we are wrong :
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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:
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You end up with a poorer world left to deal with that
which will always be there: unpredictable, often
severe weather.
The Better Political Approach
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Italy’s government confronts whether to worsen this flawed
approach by not standing up for your interests within Europe
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Yes, much Brussels pressure exists to accept their plan
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Costs are now mounting and it’s time for leaders who see the
policy has failed, before Italy agrees to an even worse deal
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Several EU Member States appear in a mood to oppose this
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There are better approaches, encouraging economic growth
which actually lead to a better GHG performance
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No known technologies would permit the real GHG reductions
Brussels is now demanding; only economic collapse allows that
It’s Italy’s 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.”
More Mythology: this “What if…?”
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European and (ever fewer) US politicians continue to
pretend that what’s happening with EU climate policies
isn’t really happening, and that we’ll 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)
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Both represent make-believe thinking and now is a good
time – and opportunity – to stop playing such games.
“Amerikanische Verhältnisse”
“Only 5% of the world’s population produces 25% of its (Man-made) GHGs!”
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Query: does the US pay 5%, or 25%, of the UN’s budget?
Truth be told about this claim, with 5% of the world’s
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.
Stern and the IPCC:
Economic Considerations for Policymakers
The Stern Report hints even reveals that:
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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 fullymitigated, 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?
A Word About the Stern Report, and its Ilk:
The Fatal Flaw
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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.
Assessment: Spain and Kyoto
Kyoto’s 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% >1990 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 Spain’s 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
The Argument, In Sum
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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.
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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. That’s wrong on both a
policy and a moral level.
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Mitigation strategies still demonstrably don’t work. Every country has seen their emissions rise since
1997, when Kyoto was agreed. In fact, since then Europe’s emissions have risen faster than the US’s.
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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.
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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 aren’t
willing to do that, we’ve got our priorities seriously wrong.
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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 something’s good for some big
businesses does not mean it isn’t very bad for the economy as a whole. We used to prosecute people
who created cartels, yet the carbon trading schemes legally sanction one.
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In short, let’s not crucify the poor on a cross of green.
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!
• Well…are 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.
Economic Growth, Not Rationing or Name-Calling,
Improves One’s 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
• That is to say that Europe’s 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.
US vs. Spain, EU
1990
1997
2000
2004
Spain
EU-15
5013.45
224.51
3250.42
5547.9 (+10.6%)
262.61 (+17%)
3263.13 (+.04%)
5815.5 (+16%)
314.44 (+40%)
3376.41 (+3.9%)
5912.21 (+18%)
361.9 (+61%)
3572.24 (+9.9%)
EU-25*
4132.79
4059.69 (-1.8%)
4039.57 (-2.3%)
4234.86 (+2.5%)
US
* 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)
Here’s What Unofficial Europe is Saying
Merkel comment about every country thinks they’re 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
Here is the Truth
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"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.timesonline.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/2007/01/07/business/ecolaws.php
“The emerging large increases in electricity prices and their potential impacts on international competitiveness are a major concern for energyintensive 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, “forc[ing] 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.html#1416]
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
So, Upon Scrutiny…
• The fact is, almost all of today’s 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.
• Spain’s bill has been trickling in and is coming due.
What if We’re Wrong: Longer Form
• Implement our preferred no regrets policies leaves
us more resilient to climate’s 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.
What if They’re 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.
A Reality Check for Europe
Not Just re: its Own Performance, but re: the US
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Europe insists that Bush is standing between the US and Kyoto
“Bush’s 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 Kyoto’s “first” step)
This cannot be a serious assessment
Bush’s successor certainly could sign another treaty
Like Kyoto it would go nowhere: remember, Bush’s 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 isn’t Bush that’s 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 Europe’s costly failure. It isn’t 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.
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 Europe’s growth in carbon emissions.
US vs. EU
Emissions 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.