Beyond Kyoto

John Browne

From Foreign Affairs, July/August 2004

Summary:  Global warming is real and needs to be addressed now. Rather than bash or mourn the defunct Kyoto Protocol, we should start taking the small steps to reduce carbon dioxide emissions today that can make a big difference down the road. The private sector already understands this, and its efforts will be crucial in improving fossil fuel efficiency and developing alternative sources of energy. To harness business potential, however, governments in the developed world must create incentives, improve scientific research, and forge international partnerships.

Lord Browne of Madingley is Group Chief Executive of BP plc.

There are examples of such collaborative work already underway. In November 2003, a ministerial-level meeting held in Washington, D.C., began the process of building international partnerships for research on the potential of the hydrogen economy. The United States has already pledged $1.7 billion over the next five years for work in this area. A similar collaboration -- the International Carbon Sequestration Leadership Forum -- is built around the concept of capturing carbon and storing it geologically. Again, this scheme complements programs in the United States, such as FutureGen, a $1 billion public-private partnership to promote emissions-free coal-fired electricity and hydrogen production. These research efforts are a good start, but they must go hand-in-hand with the creation of credible caps on emissions and trading systems, which will create the incentives to transform the energy system.

DEVELOPING SOLUTIONS

It would be morally wrong and politically futile to expect countries struggling to achieve basic levels of development to abandon their aspirations to grow and to improve their people's living standards. But it would be equally wrong to ignore the fact that by 2025, energy-related carbon dioxide emissions from developing countries are likely to exceed those from the member states of the Organization of Economic Cooperation and Development. Instead of being daunted by the scale of this challenge, policymakers must recognize the scale of the opportunity: developing countries have the potential to leapfrog the developed world's process of industrialization, thereby providing an enormous opportunity to improve energy efficiency and reduce emissions.

So far, most international efforts to engage developing countries have focused on the Kyoto Protocol's Clean Development Mechanism (CDM) -- a scheme that would encourage investment by awarding emission credits for the quantity of emission reductions flowing from a particular project. In principle, the CDM was a good idea. In practice, it has become tangled in red tape and has required governments and investors to do the impossible: estimate the level of emissions that would have occurred in the absence of a project and then to calculate the marginal effect of their actions. The only projects that can meet this test are small and discrete: a steel mill that uses sustainably grown wood instead of coal for coke, for example, or a tiny hydroelectric dam that averts the need to build a coal-fired power plant. Such efforts are important, but they are hardly the stuff of radical transformation.

There is no neat, off-the-shelf solution for engaging the developing world. But there are encouraging signs of the process of economic development acting as a force for modernization. In China and India, infrastructure necessary to substitute natural gas for coal is already being put in place. And in many of the oil-producing regions of the world, the spread of international technology is making it possible to capture and reinject the natural gas that is often associated with oil, rather than venting or flaring it into the atmosphere. Efforts to change the incentives that govern land use in the developing world are also encouraging. From the Congo Basin to the Amazon and the forests of Southeast Asia, practical partnerships of governments, nongovernmental organizations, and businesses are showing the way. Small amounts of money and skillfully designed incentives are stemming the tide of deforestation by creating a stake in protecting the forests.

These and other efforts reflect the determination of publics, governments, and business to transcend the harsh and unacceptable trade-off between the desire to improve living standards and allow people the freedom to use energy for heat, light, and mobility on the one hand, and the desire for a clean environment on the other.

UNFINISHED BUSINESS

The appropriate response to the faltering Kyoto Protocol is neither dismay nor fatalism. A complete international agreement on a subject of such complexity and uncertainty is still a long way off. But as those who championed the cause of liberal trade found after that first meeting in 1946, great causes acquire lives of their own. Consolidated political agreements often follow, rather than lead, the realities on the ground.