June 20, 2005

June 20, 2005 | WebMemo on Energy and Environment

Kyoto Lite: A Potential Deal Breaker in the Senate Energy Bill

Since 2001, each effort to get a final energy bill to the President's desk has been held up in the Senate, and some senators are pushing some very questionable additions to the current version. Accommodating their wishes could turn a bill once intended to expand energy supplies into an anti-energy bill that would impose costs of tens of billions of dollars or more per year. In particular, expensive measures to combat global warming do not belong in the energy bill.

 

Carbon dioxide, the ubiquitous byproduct of all fossil energy combustion, has been implicated as a greenhouse gas that contributes to global warming. But reducing carbon dioxide emissions requires costly constraints on the use of coal, oil, and natural gas. These fossil fuels provide most of our energy. Thus, dealing with global warming in any serious way means unprecedented levels of energy central planning.

 

Congress has previously considered measures to regulate carbon dioxide emissions but rejected them as too expensive. These costs loom even larger now that there are growing doubts about the extent of man-made warming and the seriousness of its consequences.

 

The United States has not ratified the 1997 Kyoto Protocol, the multilateral treaty targeting greenhouse gas emissions that went into effect earlier this year. The treaty requires developed nations to reduce their emissions below 1990 levels by 2008 to 2012. The Department of Energy's Energy Information Administration (EIA) forecast the cost of U.S. compliance with Kyoto at as much as $397 billion dollars annually, depending on initial assumptions.[1] Much of this cost would come from the need to move rapidly away from coal, which has relatively high carbon emissions but currently provides half of America's electricity needs. Kyoto would also place constraints on gasoline supplies and increase prices at the pump.

 

Proponents of the Kyoto Protocol have criticized this cost estimate as too high, but the early experience with Kyoto reaffirms that compliance is expensive. Most of the 15 Western European nations that ratified the treaty are not on track to meet their emissions reduction targets due to the unacceptably high impact of compliance on energy costs.[2] This is particularly true of those European nations with an energy mix and emissions history similar to that of the U.S. For example, Spain's environmental minister recently conceded that compliance is very unlikely, citing costs that are proving to be "astronomical."[3] These initial difficulties provide the first real-world confirmation that compliance with the Kyoto Protocol will be very expensive and that America's decision to stay out is based on a solid rationale.

 

The failure of Kyoto has led its Congressional proponents to offer less stringent but still expensive alternatives. The last such standalone global warming bill to come to a vote was the Climate Stewardship Act, introduced by Senators John McCain (R-AZ) and Joe Lieberman (D-CT). That legislation would cap greenhouse gas emissions reductions at 2000 levels by 2010, a less ambitious target than the Kyoto Protocol's. Even so, an analysis by EIA projected that the legislation's provisions would cost $76 billion annually by 2025, adding as much as 35 percent to electricity costs and 19 percent to gasoline costs.[4]

 

The Climate Stewardship Act was defeated in the Senate in a 55-43 vote in 2003, and subsequent changes in the makeup of the Senate suggest the bill would have even less support now. There is little or no possibility for passage of a standalone global warming bill. The only chance to enact such restrictions on coal, oil, and natural gas is to slip them into the energy bill.

 

Despite the House's refusal to put global warming provisions in its version of the energy bill, the Senate is now considering doing just that. One option is to incorporate the Climate Stewardship Act as an amendment to the energy bill. As an alternative, Sen. Jeff Bingaman (D-NM) plans to offer a global warming amendment modeled after a proposal put forth last year by the National Commission on Energy Policy. Its measures are not as stringent as those in McCain-Lieberman and were estimated by EIA to cost $27 billion annually by 2025.[5]

 

Sen. Chuck Hagel (R-NE) has also introduced global warming bills that could be added to the energy bill as amendments. Unlike McCain-Lieberman and Bingaman, Hagel's proposals contain no binding targets on emissions. Instead, they focus on funding research and development of technologies that could help the U.S. and other nations produce energy with less carbon emissions. Though this approach raises concerns about the efficacy of federal energy research, it does not impose significant costs.

 

Politicians and activists who consider global warming to be a serious threat concede that they want far more than either the McCain-Lieberman or Bingaman proposal. Indeed, most considered the much more ambitious Kyoto Protocol merely a first step. If passed, any of the weaker alternatives currently under debate would surely lead to progressively stricter emissions controls.

 

The scientists who support Kyoto believe that it would, at best, avert a temperature increase of less than 0.1 degree Celsius by 2050, too small to matter or even verify.[6] The McCain-Lieberman or Bingaman amendments would do even less-unless their targets and timetables are substantially strengthened at a later date. This is particularly true of the Bingaman measure, which would only slow the growth of carbon dioxide emissions. Both McCain-Lieberman and Bingaman are expensive in their own right but are also considered by their supporters to be just the first of many costly steps.

 

In effect, the McCain-Lieberman or Bingaman amendments would turn the energy bill into an anti-energy bill. Even assuming the rest of the bill contains sensible provisions that would help make energy more affordable-a very charitable assumption[7]-adding either of these global warming provisions would negate those benefits and ensure more expensive energy for Americans in the decades ahead.

 

No energy bill is better than a bill that would make energy more expensive, and either of these amendments to restrict carbon dioxide emissions would surely do that.

 

Ben Lieberman is Senior Policy Analyst in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.



[1] Energy Information Administration, "Impacts of the Kyoto Protocol on U.S. Energy Markets and Economic Activity," October 1998, Table ES 1.

[2] European Environment Agency, "Greenhouse gas emission trends and projections in Europe 2004," p. 3.

[3] Tito Drago, "Spain Lags in Kyoto Protocol Compliance," Tierramerica, February 25, 2005.

[4] Energy Information Administration, "Analysis of Senate Amendment 2028, the Climate Stewardship Act of 2003," May 2004, pp. 5-7.

[5] Energy Information Administration, "Impacts of Modeled Recommendations of the National Commission on Energy Policy," April 2005, p. 41.

[6]Wigley, T.M. et al., "The Kyoto Protocol: CO2, CH4, and Climate Implications," Geophysical Research Letters, Vol. 25, 1998, pp. 2285-2288.

[7] See, e.g., Ben Lieberman, "The Good and Bad of the Energy Bill," Heritage Foundation WebMemo No. 724, April 15, 2005, at http://www.heritage.org/Research/
EnergyandEnvironment/wm724.cfm
.

About the Author

Ben Lieberman Senior Policy Analyst, Energy and Environment
Thomas A. Roe Institute for Economic Policy Studies