16 November 2005

Kyoto is dead ...still

This article was published in today’s New Zealand Herald

‘The blunt truth about the politics of climate change is that no country will want to sacrifice its economy in order to meet this challenge.’ Tony Blair, speaking at the G8 Climate Change Conference on 2 November, confirms what many of us suspected: the Kyoto agreement to cut back on greenhouse gas emissions is dead. It is unworkable, hugely expensive, politically divisive and most important, ineffectual. Unlike many who oppose Kyoto I do not think all its supporters are insincere or motivated purely by a wish to secure funding for their research programmes. The evidence that the climate is changing is strong and getting stronger, and there is no question that it could have catastrophic effects on large numbers of people.

It also seems likely that anthropogenic greenhouse gas emissions are a cause. But that doesn’t mean that cutting back on these emissions is the best way of preventing or mitigating climate change. In their efforts to get the absurdly unworkable Kyoto agreement off the ground, its proponents have squandered precious political capital, and set back the cause of those looking for realistic alternatives.

Perhaps some of them, including some in the New Zealand Government, knew Kyoto would never fly, so could support it safely. They’d thereby be demonstrating their immense care and compassion for humanity, knowing all along that Kyoto would come to nothing and they wouldn’t actually have to sacrifice anything themselves. This certainly seems to apply to the European Union: the EU had pledged to reduce its total greenhouse gas emissions to 8 per cent below 1990s levels by 2008-2012, but by 2002 they had dropped only 2.9 per cent – and carbon dioxide emissions had risen slightly. Only four EU countries are on track to achieve their individual targets. And the EU is economically stagnating: any significant growth would probably end its chances of meeting the Kyoto targets.

Given the dimensions of the climate change problem, we should not spend too much time allocating blame for failed policies. Rather we should be looking for practical ways of preventing climate change and mitigating its effects.

Kyoto suffers from the same flaw as many of our other environmental and social policies: it assumes that government knows the best way of achieving our goals. Kyoto if focussed entirely on reducing net greenhouse gas emissions. But with climate change the biological and physical relationships involved are many and complex. Even specialists in climatology disagree about the degree to which the multitude of biological and physical variables cause climate change.

The best way of addressing climate change would not embody the assumption that it knows exactly how the Earth’s climate is changing, what is causing it to change, and what is the best way of dealing with any change. It would not ignore a potentially catastrophic problem, but it would try to be as cost-effective as possible, especially because of the colossal expenditures involved. An ideal policy would stimulate the investigation and adoption of promising new technologies, and be responsive to our fast-increasing knowledge about the causes and effects of climate change. It would most probably seek to mitigate the negative effects of climate change, while doing little to discourage positive effects. Ideally too, it would use markets, the best way yet devised of allocating society’s scarce resources, to channel people’s self-interest into achieving climate stability.

If such a solution could be found, it would be certain to attract more support than Kyoto both from decision makers and ordinary people. Widespread support is essential, because stabilising the climate is going to entail enormous costs and sacrifices.

We need to recognise explicitly that we don’t know all the answers. Achieving a stable climate will mean investigating a wide range of diverse approaches that don’t have anything to do with greenhouse gas emissions - but Kyoto will do nothing to encourage such research. Reducing greenhouse gas emissions or sequestering carbon might turn out to be helpful and cost-effective. But what if new science tells us either that greenhouse gases are not as important as originally thought, or that there are far more cost-effective ways of achieving climate stability? Kyoto would grind on, with its expensive and futile controls on greenhouse gas emissions.

Our problem, of course, is not greenhouse gases; it is climate change. So our objective should not be to cut back on greenhouse gas emissions, but to achieve climate stability. A successful policy would encourage those who help stabilise the climate, however they do it.

My own suggestion is that governments collectively issue Climate Stability Bonds. These would be sold by auction, and redeemed for a fixed sum only when the climate has achieved an agreed and sustained level of stability. In this way there is no need for the targeting mechanism to make assumptions as to how to stabilise the world climate - that is left to bondholders. Climate Stability Bonds would not bear interest and their redemption date would be uncertain. Bondholders would gain most by ensuring that climate stability is achieved quickly.

Once issued, the bonds will be freely tradeable on the free market. As the climate became more stable, so the bond price would rise. Bondholders have incentives to cooperate with each other to do what they can to achieve climate stability, then to sell their Bonds at a higher price. Governments decide only on the degree of climate stability they want - not on how to achieve it. That is left up to investors in the Bonds, who have every incentive to maximise the taxpayer’s benefit per unit outlay. So, in contrast to Kyoto, a Climate Stability Bond regime would stimulate research into finding ever more cost-effective ways of achieving climate stability.

Kyoto is flawed because its focus is entirely on net greenhouse gas emissions. We need instead to look at solutions, such as Climate Stability Bonds, that have as their goal the achievement of climate stability. There is too much at stake to rely on the fossilised science that underpins Kyoto.

2 comments:

Ronnie Horesh said...

Hmmm; I just deleted it. It seems the Herald has copyright....

Ronnie Horesh said...

Sean: no the climate's never been truly stable. My suggestion is that we be very clear what definition of stability we go for. It could include such indicators as temperature range and variability,but it could also embody more meaningful indictators that don't have anything to do with climate as such. So, for instance, a bond regime could aim to reduce the number and severity of adverse climatic events, or the amount that insurance companies pay out, or the numbers of people made homeless by floods etc. The bond concept is a versatile one and it could embody a wide range of meaningful goals simultaneously.