What Makes Greenhouse Sense?

Thomas C. Schelling

From Foreign Affairs, May/June 2002

Summary:  The Kyoto Protocol need not be a partisan issue. Climate change needs to be addressed, but the 1997 pact was never going to pass the Senate. By abandoning it, Bush at least avoided hypocrisy. It might take a century to reach a consensus on solving the greenhouse gas problem, but that is no excuse for wasting time getting started.

Thomas C. Schelling is Distinguished University Professor of Economics and Public Affairs at the University of Maryland.

IN THE LONG RUN

The Kyoto Protocol had a short-term focus. It assumed correctly that developed countries could achieve significant reductions in emissions fairly promptly. As the National Academy of Sciences emphasized ten years ago, there are a number of opportunities to reduce emissions at little or no cost. They are mostly one-time measures that are not indefinitely exploitable. Had they been promptly attempted, they might have made the Kyoto approach feasible. Postponing these steps merely loses time.

But the protocol was embedded in the 1992 Convention on Climate Change, which was oriented toward the long term. So it has been interpreted as heralding the beginning (for developed countries) of a long-term decline in carbon dioxide emissions. But any reasonable trajectory of emissions in the future ought to show a rise for some decades and a rapid decline later in the century.

There are several reasons for such a trajectory. First, the technologies needed to drastically reduce fossil-fuel consumption through alternative energy sources, greater energy efficiency, and sequestration of carbon dioxide or its removal from fuel are not developed. Decades of investment are needed. The necessary investments will not happen by themselves; governmentaction and support, especially in arranging market incentives, will be essential.

Second, it is economical to use durable equipment until it is due for replacement; early scrapping is wasteful. Much capital, such as electric power plants, is very long-lived. Auto fleets can turn over in 15 or 20 years, but most industrial plants cannot. Furthermore, deferring expenses saves interest on loans for capital investment. Finally, the richer countries will almost certainly have higher incomes in the future and be better able to afford drastic changes in energy use.

The economical trajectory for emissions over the coming century will differ substantially among the developed countries. Thus any reasonable rationing scheme should contemplate a timeline of at least a century, not a few decades. But no possible consensus exists on how much total emissions should be allowed for the coming century. That confusion makes any scheme of fixed quotas, including "emissions trading," out of the question.

In short, the Kyoto Protocol's exclusive focus on the short term neglected the crucial importance of expanding worldwide research and development of technologies to make severe reductions feasible later in the century. It also adopted a format incompatible with the most economical trajectory of emissions over time: a rise for some decades followed by a sharp decline.

FREE TO CHOOSE?

The Bush administration has favored "voluntary" measures over "mandatory" ones. But it is not clear whether these terms referred mainly to domestic or to international measures. Domestically, a voluntary approach would make the greenhouse question unique among issues of environment and health, which fall under government jurisdiction. The research of the National Institutes of Health, for example, is universally acknowledged to be essential; leaving such research to the market or to voluntary industrial altruism would not appeal to anyone. The same approach should apply to research on new low-carbon or non-carbon energies or carbon sequestration. Major replacement of fossil fuels or reductions in energy demand, carbon dioxide "containment" efforts, or investment in new technologies to bring them about will not occur without serious market incentives. Domestically, "voluntarism" is an ineffectual approach that would put blame only on firms that have no market support for what they may be asked to do.

An international regime, in contrast, can be only voluntary. Commitments will not be "enforceable." At best they may be honored, because respectable governments prefer to keep commitments. The U.S. government has a strong aversion to any commitments it does not think it will keep. And neither the United States nor the other major developed countries will likely accept serious sanctions for missing emissions targets. There is talk of "binding commitments," as if "commitment" itself was not binding, but there is no expectation of penalties for shortfall.