Great column by Robert Samuelson today captures the continuing debate over Kyoto and greenhouse gas emissions:
Almost a decade ago I suggested that global warming would become a “gushing” source of political hypocrisy. So it has. Politicians and scientists constantly warn of the grim outlook, and the subject is on the agenda of the upcoming Group of Eight summit of world economic leaders. But all this sound and fury is mainly exhibitionism — politicians pretending they’re saving the planet. The truth is that, barring major technological advances, they can’t (and won’t) do much about global warming. It would be nice if they admitted that, though this seems unlikely.
Europe is the citadel of hypocrisy. Considering Europeans’ contempt for the United States and George Bush for not embracing the Kyoto Protocol, you’d expect that they would have made major reductions in greenhouse gas emissions — the purpose of Kyoto. Well, not exactly. From 1990 (Kyoto’s base year for measuring changes) to 2002, global emissions of carbon dioxide (CO2), the main greenhouse gas, increased 16.4 percent, reports the International Energy Agency. The U.S. increase was 16.7 percent, and most of Europe hasn’t done much better.
Here are some IEA estimates of the increases: France, 6.9 percent; Italy, 8.3 percent; Greece, 28.2 percent; Ireland, 40.3 percent; the Netherlands, 13.2 percent; Portugal, 59 percent; Spain, 46.9 percent. It’s true that Germany (down 13.3 percent) and Britain (a 5.5 percent decline) have made big reductions. But their cuts had nothing to do with Kyoto. After reunification in 1990, Germany closed many inefficient coal-fired plants in eastern Germany; that was a huge one-time saving. In Britain, the government had earlier decided to shift electric utilities from coal (high CO2 emissions) to plentiful natural gas (lower CO2 emissions).
On their present courses, many European countries will miss their Kyoto targets for 2008-2012.
Kyoto is nominally an environmental treaty–although the effect on global warming is thought to be very small, perhaps on the order of a reduction in temperature of 0.15 degrees C in 2100, or putting off the same warming trend by 6 years. But once you look into the details of the treaty, at this point it seems clear that its primary purpose as drafted (and why Europe is so keen on ratification by the U.S.) is economic, and, in particular, for Europe to gain economic advantages versus the United States.
Many scholars have discussed the costs that the United States would incur in order to achieve these modest results. But there is an additional cost that is often ignored–the rent-seeking costs of self-interested actors using collective decision making processes to redistribute wealth to themselves.
Collective action, whether by national or international bodies, has both benefits and costs. The potential benefit is that the jurisdiction of the regulatory body can match up more closely with the scope of the problem to be regulated. The problem is that any collective decision-making process is subject to rent-seeking, meaning that well-organized interest groups can travel under the banner of the regulatory body in order to tap into others’ pockets in order to enrich themselves. It has been long recognized that within the United States alone, environmental regulation has been used by rust belt states to impose competitive disadvantages on growing states in the South and West through a variety of regulations that disproportionately impact new businesses in less-developed regions of the country.
As Bruce Yandle has observed, rent-seeking explains many of the details of Kyoto, which have little to do with environmental improvement and much to do with economic advantage (including such seemingly mundane issues of the choice of 1990 as the baseline for emissions targets). Yandle notes that these rent-seeking pressures are reflected in a variety of provisions in the treaty that would provide European countries with competitive economic advantages versus the United States. In other words, its not just that the costs of the treaty may exceed the benefits, the treaty is written in such a manner that the costs will be larger for the United States relative to Europe, giving Europe a comparative economic advantage.
Moreover, this assumes that both the U.S. and Europe are equally committed to complying with the treaty. In fact, one reason the United States has probably been reluctant to enter into Kyoto is because it would probably actually abide by its terms, unlike the Europeans. As Samuelson suggests, the “sophisticated” Europeans by contrast, probably do not intended to comply with Kyoto, and it is questionable whether they ever intended to meet their targets from the very beginning.
Of course, the fact that rent-seeking is an inherent part of any collective decision-making does not mean that particular collective decisions should not be taken. Instead, it simply means that we should recognize the omnipresence of rent-seeking in all collective bodies, and take that into account not only in designing institutions ex ante, but in evaluating the decisions produced ex post. The goal should be to design policies that solve the collective action problems while minimizing the rent-seeking costs. I have called this the trade-off between “environmental externalities” and “political externalities,” (an insight that I first drew from Buchanan and Tullock’s analysis in the Calculus of Consent).
So it seems perfectly appropriate to me to say that global warming can only be addressed through international collective action, but that as a result of poor institutional design, poor bargaining, or the poor enforcement (i.e., the unlikeliness of Europe’s compliance with the treaty), the rent-seeking costs of Kyoto exceed the small environmental benefits the treaty might generate. It is also perfectly appropriate to conclude the opposite. Different people can reasonably disagree about how to trade off these costs and benefits, as well as the trade-off between political and environmental externalities. (This, of course, focuses just on the wisdom of pursuing an emissions-reduction policy, as in Kyoto, rather than a completely different policy, such as adaptation and amelioration of the effects, or providing compensation for any harms caused by emissions.) And if the costs of international collective action become too high, it is perfectly appropriate for individual countries to act unilaterally or bilaterally to bring about constructive results with lower economic and rent-seeking costs.
Samuelson concludes:
What we have now is a respectable charade. Politicians and advocates make speeches, convene conferences and formulate plans. They pose as warriors against global warming. The media participate in the resulting deception by treating their gestures seriously. One danger is that some of these measures will harm the economy without producing significant environmental benefits. Policies motivated by political gain will inflict public pain. Why should anyone applaud?
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