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09.08.2001 · Research Group on the Global Future

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Research Group on the Global Future
Center for Applied Policy Research (CAP)
Munich, Germany


(1) Climate Policies
(2) Noted in Passing
(3) Team
(4) Feedback

Environment Award for George W. Bush? The Complex Economy of Climate Policies

By Sascha Meinert

"The only long-term solution is to decarbonize the energy system."
Bob Watson, chairman of the mitigation working group of the UN Intergovernmental Panel on Climate Change

The bad news: the United Nations' "Intergovernmental Panel on Climate Change" (IPCC) Report, published in March this year, reveals that the first impacts of climate change have already become observable, despite the fact that the Earth's temperature has risen only by 0.6 degrees Celsius over the past 100 years. Now already, a number of ecosystems show changes that are attributable to global warming: glaciers are shrinking, birds are nesting earlier and the vegetation period of many plants has grown longer. In the Mediterranean forest fires have increased in number as the weather has become warmer and drier. The consequences may include shortage of drinking water, flooding, famine and disease. Agriculture in many regions of the world is threatened by a lack of water. In this context the IPCC demands stronger policies to tackle this problem and to avert the worst effects of climate change. Another study, undertaken by the American World Watch Institute and the Muenchner Rueck in 1999, calculated that alone in 1998 the economic damage resulting from natural catastrophes linked to the Global Warming was around 92 billion US dollar. Energy use and transportation are the main contributors to greenhouse gas emissions, as well as to various air pollutants that lead to urban air pollution.

The expected increase of 3 degrees Celsius or even more over the next century will confront both human beings and nature in many regions of the world with enormous difficulties in adapting to the changes which will occur. The impact may be even more drammatic than expected, because standard climate predictions assume steady warming and gradual responses from the Earth's ecosystem. However, this may be completely wrong according to recent studies carried out by various scientific institutes in the framework of the United Nations' "Intergovernmental Panel on Climate Change". Instead the Earth's climate system might suddenly flip from one stable state to another which is very different - with catastrophic consequences. Within 100 years the world's weather could be turned on its head, covering the Sahara in thick forest and making the Amazon a barren desert, according to a study of the Potsdam Institute for Climate Impact Research (PIK) in Germany. This "topsy-turvy forecast" is supported by other findings presented at the conference "Challenges of a changing Earth", which was organized recently by the T. H. Huxley School of Environment, Earth Sciences and Engineering in Amsterdam. It is suggested that human activity could cause sudden and dramatic climate flips. To get an impression of what may occur, we have to take a look at the past: the Sahara was covered with forest 6000 years ago when the world was as warm as it is now. Within just a few decades it switched to desert. Scientists at the Potsdam Institute for Climate Impact Research warn that it could flip back again during the coming century.

The recent published OECD Environmental Outlook has also identified that "climate change as a result of greenhouse gas emissions is, arguably, one of the most important "red light" issues faced by OECD countries." According to the OECD Outlook total motor vehicle kilometers traveled are likely to increase by almost 40% in OECD regions until 2020, and air travel is projected to triple worldwide. As a result of increasing transport and energy use, greenhouse gas emissions are rising and total carbon dioxide emissions are projected to increase by approximately 33% in OECD countries under present policies, far from the overall Kyoto Protocol target of a 5,2% reduction of greenhouse gas emissions from 1990 levels before 2012. "The effects of global warming are increasingly evident, and air quality standards in many urban areas will continue to be exceeded in OECD countries, with adverse effects on human health and ecosystems as a result" the Outlook stated. "Stronger efforts are needed to ratify, implement, and ensure compliance with and enforcement of existing Multilateral Environmental Agreements (MEAs) and instruments." The OECD Report appeales to the OECD governments, "to ensure coherence within, and strengthen, international environmental governance." (A summary of the findings and recommendations of the 2001 OECD Environmental Outlook 2020 is available at http://www.oecd.org/env).

The central question raised by the OECD report is what policy-makers can do to tackle these environmental problems. "For a start, they need to look at examples of where improvements have already taken place or are starting to happen. Improvements have often been linked to pricing incentives or regulatory intervention. Recent reductions in water use have been most pronounced in countries that have removed subsidies for water use and applied charges which better reflect the marginal costs of water. Similarly, the main reductions in the energy intensity of OECD economies, while not driven by environmental policy, occurred during the major oil price shocks of the 1970s, when energy prices increased rapidly." But as we are living in an ever closer connected world economy, such a strategy needs a common approach by the community of states. This is the other reason for the necessity of an international approach, next to the fact that climate change is a cross-border phenomenon, and thus a global issue.

At the center of the international debate on reducing greenhouse emissions is still the so called Kyoto protocol, a treaty which was negotiated in 1997 under the framework of the UN Framework Convention on Global Climate Change. The protocol requires industrialized countries to cut greenhouse emissions an average of 5.2% from 1990 levels by 2012. About 30 countries have ratified the pact so far, but it requires at least backing by 55 countries representing 55% of the industrialized world's emissions. The United States alone cause around 36% of the carbon dioxide emissions of the industrialized world. The average emissions per capita are double as high as the emissions caused in member states of the European Union (the EU countries with its 372 million inhabitants cause around 24% of the industrialized world's emissions). While the treaty mandates an U.S. reduction of 7% below 1990 emission levels, the European Union would be required to cut emissions by 8% below 1990 levels. Europe has accepted this slightly higher percentage cutback although the U.S. is far ahead in per capita carbon dioxide emissions.

However, the Kyoto treaty was negotiated with the Clinton administration. In March this year US-President Bush announced that the US was abandoning the 1997 International Climate Treaty negotiated in Kyoto. He said the mandated reductions in industry emissions of carbon dioxide and other gases that many scientists say are warming the globe would disproportionately damage the US-economy in relation to other nations. According to Bush the Kyoto Protocol is based on questionable science and unfair because it exempts big developing countries like China and India. He claimed that the causes of global warming are not yet fully known and require more study before the US commit themselves to mandate reductions in carbon dioxide and other greenhouse gases. Bush also chided European leaders for not having ratified the treaty negotiated in 1997. It is true that even if the US-government would support the Kyoto protocol, the chances to get it ratified by the Congress are around zero. The reason is that such compliance, it is almost universally believed, would increase energy costs enough to harm the US-economy. Another reason is that the lobby of the energy industry is very powerful in the US. (To delve into deeper thoughts on the energy industry's position go to the Web site of the Global Climate Coalition at www.globalclimate.org/climeconomics.htm).

Indeed, while the public in Europe is more and more concerned for the implications of global warming - e.g. according to a poll recently carried out by the German Akademie fuer Technologiefolgenabschaetzung Baden Wuerttemberg, people in Germany are more concerned about climate change than organized crime - public debate in the US is centered around the implications of rising energy costs. (Nevertheless the daily reality also shows, despite of being concerned about climate change, the Europeans are rarely willing to accept higher prices for energy and petrol.) Thus, the political calculation behind Bushs policy approach is that Americans want above all else plentiful supplies of energy and see little that is more important than their own convenience, and the US energy industry - who supported his campaign in 2000 and probably will do so in 2004 - can do very well meeting that consumer demand. And, why should he fight for an international treaty, which would very probably not pass the Congress?

With the United States, the world's biggest economy and largest polluter standing aside, Japan's adoption of the Kyoto approach has become crucial to achieve the 55% of the industrialized worlds emissions (the precondition that the Kyoto protocol can come into force). After days of uncertainty Nippon declared on Wednesday, July 17 - during the climate summit in Bonn, where around 180 governments were trying to rescue the spirit of the Kyoto process - that Japan is willing to support and ratify the Kyoto-Protocol. Nevertheless Japan, Canada, Australia and Russia were pressing demands for wider leeway to seek credit towards emissions for forests that absorb carbon dioxide. Another conflict theme in Bonn was the question of the legally binding character of the Kyoto protocol and possible means to sanction violators of the agreement. These are the reasons for the foreseeable weak compromise of the summit in Bonn - one more example of global governance in progress.

So now it is time for the good news: first, toady's people can be happy that energy prices will probably stay low, especially in the US. And, the Europeans do not have to fear extremely rising prices either. So a 1997 Proposal of the European Commission for legally binding minimum standards in taxing energy products within the European single market is still waiting for its approval by the EU council of ministers.

More seriously, the good news are: the state community has the means to introduce a significant change and there are good economic reasons to do so. Europe and Japan could benefit economically and gain a market share in new technologies if they adopted the Kyoto Protocol on climate change, according to two new reports released by the World Wildlife Fund (WWF). The reports conclude that an early start with climate change policies leads to substantial cost reductions for Europe and Japan in the future and thus would serve as an impulse to boost economy and innovation. Climate change policies have in addition significant positive impacts on other environmental problems, meaning that other environmental targets will be easier to achieve. By implementing smart integrated climate policies, substantial cost reductions can be achieved in reaching targets set for tackling problems such as acidification. Thus, unilateral implementation of the Kyoto Protocol would provide a competitive advantage in the development of innovative technologies for reducing emissions of greenhouse gases and sustainable economical patterns in the longer term.

The annual cost of implementing the Kyoto Protocol in Europe ranges from 3-8 billion Euros (according to the estimations of the WWF 0.06% to 0.15% of total gross domestic product in 2010). The lower cost refers to a situation in which there is close European co-operation in implementing least-cost options. Assuming a least-cost approach for the European Union, the analysis shows that between 85% and 95% of the Kyoto reduction target can be achieved without negative effects on the EU's competitiveness. For Japan, according to the WWF, proactive implementation of the Protocol by business could even translate into a 0.9% increase in gross domestic product. Both reports are available at www.panda.org/climate/summit2001/background.htm. The figures of the mitigation working group of the UN Intergovernmental Panel on Climate Change purport similar results: The costs of reducing emissions in the next 10 years would be between 0.1% and 0.9% of the gross domestic product of developed countries. Doing nothing, on the other hand, would damage economies so much that they would lose between 10% and 20% of GDP. According to IPCC, due to the advances in technology, the means were available to reduce the greenhouse gas emissions that produce global warming. What is still lacking is the political will to use them.

So one of the main shortcomings of the Kyoto protocol might be that it is focusing on the costs of cutting greenhouse emissions and do not provide an innovative approach to the benefits of establishing sustainable patterns of economic development. Business should be happy when governments create spaces where it is possible to develop new energy solutions without being fully exposed to the competition with conventional energy production patterns. The so called "California Effect" has shown that stricter environmental standards for strategically important markets can provide an enhancement in competitiveness for corporations which are early meeting the requirements and leads to positive spillover effects for other regions.

Washington's rejection of being part of the Kyoto agreement stimulated the debate more than dozens of declarations by high level summits would ever be able to. The shortcomings of the Kyoto protocol were made clearer: one weak point of the Kyoto protocol is the belief that governments are able to fully monitor or even regulate the patterns of energy consumption within their borders. This is not true for many parts of the industrialized world and definitely not for the developing countries. A mixed strategy of fiscal incentives (which means pricing the positive and negative external effects), promotion of renewable energies and capacity building in the less developed countries is required. Nevertheless, to minimize free rider effects a global approach is necessary and the Kyoto protocol could serve as such a framework. Another point is the in the Kyoto protocol foreseen system of trading emission reduction benefits and emission rights across borders, which is still a conflict theme between the member states of the Global Climate Convention. Despite of weakening the incentives to develop sustainable energy solutions in the industrialized countries (where the capacity to invest in new technologies is the highest), such a system would provide an enormous bureaucracy.

However, more important than to uncover that the Kyoto protocol is certainly not the best solution one can imagine is the catalytic effect of Washington's "new old fashioned" energy policy on the public awareness about this issue. Zac Goldsmith, editor of "The Ecologist" even proposes George W. Bush for the magazines first Environmental Steward of the Year Award: "Bush is to the environmental movement what petrol is to the car. He is the catalyst people like me have been waiting for", Goldsmith said in an interview released in the July 8 issue of the British weekly Sunday Telegraph. "Look at the facts. American environmental groups report a large increase in donations since his inauguration. The global environmental crisis is making headlines like never before and politicians of every hue are clamoring, albeit unconvincingly, to present their Green credentials."

When delegates from 178 countries were trying to agree to a deal without the United States in July in Bonn (nevertheless, a US-delegation took part in the talks), George W. Bush launched a summer offensive to sell his energy plan. The strategy of his approach can be summarized in three points: further research on the "real" implications of greenhouse emissions, low prices for consumers and the promotion of responsible behavior in the private sector. In this context Bush is saying his staff should "set an example" by turning off lights when they leave their offices. Thank you Mr. Bush.

Further readings:

  • Official documents of the Kyoto process are available on the website of the UN Framework Convention on Global Climate Change at

  • A comprehensive collection of links on the Global Warming debate is available at NASA's Global Change Master Directory (GCMD) at

  • The United Nations' "Intergovernmental Panel on Climate Change" (IPCC) Report (summary for policy makers) on the mitigation of climate change, released in Accra on March 3rd, 2001, is available at

Noted in Passing

(1) Sustainable employment policy
What are the reasons for high unemployment and on which issues must sustainably successful unemployment policy concentrate? Why is long-term unemployment so much higher in Europe than in the USA? How much success promise often quoted solutions like the deregulation of labor markets and corporate tax reform? What policy recommendations can be concluded for decision makers? Read the Research Group on the Global Future's new Working-Paper "Nachhaltige Beschaeftigungspolitik" (available only in German). A full version of the paper can be downloaded directly from our homepage.

(2) Information overflow
The Internet is growing beyond the wildest dreams of its creators. According to GlobalReach, there are currently 483.8 million Internet users world wide. In the beginning there were bulletin boards, FTP and Gopher servers. The hypertext transfer protocol http - basis of todays world wide web experience - initially was intended to facilitate scientific exchange. However, increasingly, the gigantic flood of published material makes it more and more difficult for users to efficiently target and find needed information. That the WWW's search engines are limited to HTML-documents, only recently starting to include PDF-documents, severes the problem, as most scientific work is still done in Tex or Postscript. An estimate of how serious things really are is given by the study "Network Publishing" from A.T. Kearney: "Lack of efficient publishing capabilities for digital content costs organizations $750 billion annually due to wasted time spent by knowledge workers seeking and capturing information necessary for them to do their jobs."  

(3) Junk mail frenzy
According to a study by the European Comission, Internet users worldwide loose 10 billion Euro per year because of spamming: "The exponential growth of junk mails is a rough reality. Due to modern technology, every Internet-Marketing firm is able to send 500 Million personalized e-mails per day". The full study can be downloaded under http://europa.eu.int/comm/internal_market/de/

(4) Personal security
Do you use Internet Explorer? XML-Stylesheets, used to format webpages, can start Active-scripting programs on the machine of the surfer, even if Active scripting is disabled. In order to secure your computer against this security flaw, install Internet Explorer 5.5 with all new patches and the newest Windows scripting Host 5.5.

(5) New technology statistics
Today, almost 50% of all Europeans use mobile phones. 31% own a personal computer, 19% use the Internet at home, 16% use the Internet at work and 7% use it from mobile devices. Awareness of security issues is still lame: over 60% of all users never encrypt their e-mails. 25% do, but only classified mails. 10% believe that it is secure enough to send e-mails without encryption and only 4% encrypt every e-mail (source: CHIP online). 

(6) Trust in new technologies
89% of the German population believe that the technological developments in telecommunications will bring more advantages over disadvantages, 80% believe the same for the Internet. As for genetics, only 44% share this view, and only 36% have this opinion about nuclear energy (source: DEMO/SKOPIE).


Jügen Turek, Sascha Meinert, Richard Resch
Research Group on the Global Future
Center for Applied Policy Research (C·A·P) 


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