Beyond Kyoto

Environment | As European climate-change policies crumble, the U.S. approach is finding vindication

Issue: "Opium wars," May 12, 2007

European company Arcelor Mittal, the world's largest steelmaker, is a model of environmental care. Since 1990, the manufacturing juggernaut has reduced its carbon dioxide emissions 20 percent, exceeding European targets by two and half times.

Nevertheless, company leaders warn that restrictive government caps on greenhouse gases may soon force the closure of two large factories in France. The resulting dip in production from such a move would press Arcelor Mittal to import steel from far less efficient factories in the Third World, where CO2 emissions restrictions are not enforced.

Hardly an isolated incident, businesses throughout Europe are laying off employees, outsourcing production, and reining in innovation as a luxury no longer affordable. Michel Wurth, president of Arcelor Mittal France, calls the situation "absolutely ridiculous."

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But European Union officials managed to avoid broadcasting such difficulties at a White House summit meeting April 30. Instead, German Chancellor and EU President Angela Merkel and European Commission President José Manuel Barroso were eager to highlight common ground with U.S. climate-change policy. They lauded President George W. Bush for taking the issue seriously-high praise for a man committed environmentalists are supposed to hate.

That conciliatory tone reflects a growing realization that Bush's refusal to adopt emissions restrictions is not the vice once imagined. In past years, EU officials chastised Bush for his stubborn rejection of the Kyoto Protocol, a pact adopted by 169 nations to impose mandatory reductions of CO2 emissions. This year, Merkel and Barroso made no mention of the 10-year-old treaty, a stark reversal that underscores a momentous shift in the debate: As Kyoto sputters, stalls, and ultimately fails, the Bush approach proves increasingly credible.

Substantial disagreements remain over how best to move forward in tackling greenhouse gas emissions, which many scientists believe are to blame for the planet's recent warming trend. But many policy experts now recognize that the Bush administration's strategy to develop new carbon-cutting technologies presents the only real-world approach to reducing emissions. Absent such technologies, hard caps like Kyoto amount to nothing more than empty green stamps for naïve or disingenuous politicians.

Kyoto-supporting nations are learning that lesson the hard way. The Kyoto accord has wrought substantial economic harm for little environmental gain. Its targets have proved unfeasible, its costs debilitating.

Merkel has witnessed the fiasco firsthand in Germany, where initial Kyoto cheerleading has morphed into nationwide grumbling. The country now stands to pay up to $5 billion in fines when it fails to meet emissions goals by next year. Meanwhile, industry leaders are hemorrhaging funds for a cause that holds little to no chance of success. Those companies threaten to retract investments in new energy sources.

Such difficulties threaten Germany's sizable automotive industry, which employs about 15 percent of the country's manufacturing workforce. New regulations from the European Commission require carmakers to reengineer their high-end models for much lower emission levels by 2012. That burden will likely drive up sticker prices, reduce sales, and provoke layoffs.

Similar problems have sprung up throughout Europe. Beyond Arcelor Mittal, other companies, such as Spanish steelmaker Acernex and Dutch silicon carbide manufacturer Kollo Holding, are choking on the continent's skyrocketing cost of electricity. Acernex has transported production overseas and closed several factories. Kollo Holding must shut down its plant for hours each day and has lost customers to competitors in China.

Despite such economic costs, EU emissions levels continue to rise, illustrating Kyoto's failure on both economic and environmental fronts. In the United Kingdom last year, CO2 emissions from power plants, automobiles, and homes increased 6.4 million tons above 2005 levels-pushing total UK emissions to their highest point since Britain ratified Kyoto a decade ago. The embarrassed government, which has already abandoned its aim of a 20 percent reduction by 2010, now must reconsider whether its proposed 30 percent drop by 2020 is realistic.

Many British environmentalists blame politicians for the failures, but recent polling throughout the EU suggests public opinion has turned against overly optimistic Kyoto-like requirements. Benny Peiser, a researcher at Liverpool John Moores University in the UK, expects that greater economic costs will further unravel the continent's once strong green consensus. He suggests that Europe's stubborn unwillingness to admit failure may be the only force preventing an all-out abandonment of Kyoto: "A political failure of the Kyoto process would, without a shadow of doubt, cause incalculable trauma to European pride and standing."

In desperation to meet their targets, European nations adopted a system of carbon-trading two years ago, whereby emissions credits are bought and sold in an international market. The system intends to generate economic incentives for companies to reduce their carbon footprints. But, so far, the artificial market has set the price so low for credits that large-scale emitters can purchase as many as they need without significant financial burden.


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