ECON 310 Chapter 7 Notes
Global Environmental Changes: Ozone Depletion and Global Climate Change
The
greenhouse effect itself is simple enough to understand and is not in any real
dispute. What is in dispute is its
magnitude over the coming century, its translation into changes in climates
around the globe, and the impact of those climate changes on human welfare and
the natural environment.
Thomas C. Schelling
CHAPTER SUMMARY
Environmental problems considered in this chapter share common characteristics. They are the result of pollutants modifying basic atmospheric chemistry and altering atmospheric processes and function. These problems are caused by stock pollutants that persist in the atmosphere for long periods (up to 100 years) after their emission into the atmosphere. The pollutants are global pollutants in the sense that their contributions to environmental problems are independent of location of the emissions.
It is more difficult to estimate a damage function for these types of problems than for more conventional pollution. This is due to the difficulty in establishing cause and effect relationships. The persistence of these pollutants requires that a damage function include damages imposed on future generations.
The development of policies directed at global environment pollution is complicated. There is no need to account for geographic variability in the effects of emissions. This is complicated, however, by the inability of one country to unilaterally solve problems. International cooperation is required.
The focus of this chapter is on two global problems: global warming and ozone depletion. The ozone layer refers to the presence of ozone in the stratosphere. Figure 7.1 illustrates the three layers of the atmosphere. The troposphere is the lower atmosphere. Here the air becomes colder the further the distance from earth. The tropopause is the middle layer. And the stratosphere is the outer layer of the atmosphere. The lowest level of the stratosphere is warmer than the highest level of the troposphere.
Once pollutants make their way into the stratosphere, they tend to remain there. Pollutants that most adversely affect the ozone layer are fluorocarbons, specifically those containing chloride (chlorofluorocarbons). Chlorofluorocarbons (CFCs) act as a catalyst in a chemical reaction that converts ozone (O3 and O1) into oxygen (O2). The CFCs, as a catalyst, are not consumed in the reaction, but remain in the stratosphere to continue destruction.
Ozone in the stratosphere serves the critical function of blocking the penetration of ultraviolet light and limiting the amount of ultraviolet light that strikes the earth's surface. An increase in radiation could lead to additional cases of skin cancer with potentially bigger problems in the southern temperate countries.
Increased ultraviolet radiation adversely affects plants and agricultural yields. Perhaps the most important nonhuman effect is the negative impact upon the phytoplankton layer, the foundation of the oceanic food web. Ultraviolet radiation also accelerates deterioration of synthetic materials.
CFCs are useful in a variety of applications. These include refrigeration and air conditioning systems, propellant in spray cans and for manufacturing foam products and as a solvent to degrease and clean machine parts. CFCs do not react with other chemicals (inertia).
Peter Bohm constructed a powerful argument for the use of deposit-refund systems to capture CFCs in refrigerator coils. Others argued for use of marketable pollution permits or pollution taxes. They would not have to be modified to take into account the geographic location of emissions. The first policy that the United States adopted towards ozone layer depleting chemicals was a command and control type of policy, a 1977 ban on CFCs.
This ban may be socially efficient because of the number of inexpensive substitutes available. When costs of abatement are low due to availability of substitutes, optimal emission levels are at or near zero and a ban may be much cheaper in terms of administrative costs. Since ozone depletion is a global problem, effective policy must be developed in the context of an international agreement.
In 1987, the Montreal Protocol on Substances that Deplete the Ozone Layer was signed by most countries. This international agreement, which was amended in 1990 to speed up the elimination of CFC’s, required the cessation of emissions of CFC by the year 2000 in developed countries and by the year 2010 in developing countries. The Montreal Protocol was amended again in 1992 to require total elimination of CFCs in developed countries by 1996 and by 2006 in developing countries.
The Montreal Protocol was successful for a number of reasons including a wide-spread acceptance of the science of what causes ozone depletion and the magnitude of the resultant damage. However, the primary reason was that the cost of compliance was low. This was due to the availability of good substitutes for CFCs, which were produced by the same manufacturers of CFCs.
Global warming is linked to the accumulation of a variety of gases in the atmosphere. These gases, which include carbon dioxide, methane, nitrous oxide, and water vapor, trap infrared radiation (heat) that would normally escape into the earth's atmosphere. The injection of more greenhouse gases into the earth's atmosphere upsets the equilibrium between the amount of heat entering the earth's atmosphere and the amount of heat leaving the atmosphere. The temperature of the atmosphere and the temperature at the earth's surface will continue to increase until a new equilibrium is reached.
The debate on global warming centers around whether anthropocentric emissions of greenhouse gases cause a “significant” increase in global temperature in comparison with current temperature levels and in comparison with natural fluctuations in the temperature levels.
In order to properly understand the emissions of carbon dioxide, which is the most important of the green-house gases, it is necessary to understand the "carbon cycle." The carbon cycle refers to the movement of carbon from the atmosphere to the earth's surface. Carbon dioxide is removed from the atmosphere when a plant grows; the carbon dioxide is converted to carbon in the plant's tissue. When an animal eats a plant, the carbon is transferred from the biomass of the plant to the biomass of the animal. When a plant or animal dies, it decays and the carbon combines with oxygen to form carbon dioxide, which is returned to the atmosphere.
Anthropocentric activities, such as burning of fossil fuels (stored carbon) or deforestation, upset the equilibrium carbon cycle and cause an increase in atmospheric carbon dioxide. Combustion of fossil fuel increases atmospheric concentrations of carbon dioxide. Cutting forests produces two effects. Slash and burn techniques result in all carbon in trees being converted into carbon dioxide. Traditionally harvested wood for furniture may not contribute to increase in carbon dioxide emissions, but a loss of trees results in less conversion of carbon dioxide into oxygen and carbon. Planting new forests would reduce atmospheric carbon dioxide. This is known as carbon sequestration.
Methane comes from a variety of anthropogenic and natural sources. Natural sources include wetlands and other areas where anaerobic decay of organic matter takes place. Anthropogenic sources include emissions from ruminants (cattle and sheep), wet rice cultivation, and emissions from coal mines and oil and natural gas wells. Nitrous oxide originates from the burning of fossil fuels and biomass. It also stems from agricultural fertilizers.
Is Global Temperature Increasing? This is a controversial question because it cannot be answered solely in terms of an examination of historic data. Analysis of ice core samples (going back over 160,000 years) suggests a clear correlation between carbon dioxide levels and temperature. However, when temperature changes due to small changes in the earth's orbit are factored out, this relationship is not significant.
Historic data from meteorological stations is suspect because these have tended to be located near urban centers, thus biasing the observations. Skeptics argue that the bulk of global warming that has been measured occurred prior to 1940, while the bulk of emissions occurred after that date. The presence of carbon sinks, which remove carbon dioxide from the atmosphere, may be countering rise in emissions. Plant growth may have increased in response to rising emission levels and created a counter balance to this rise (this is called fertilizer effect).
Since scientists do not fully understand the role of carbon sinks, we cannot assume that the capacity of these sinks to absorb carbon has not been fully exhausted or will be so in the near future.
Particulate emissions particularly sulfate aerosols, block sunlight which has a cooling effect.
The question of whether global climate is changing is a controversial one because it is so highly politicized. Virtually all the available evidence suggests that mean global temperature has increased that it will continue to increase. All scientific evidence also suggests that there will be significant increases in sea level and possible increases in the intensity of storms. Evidence comes from many sources including ice core samples of glaciers, pollen records in lake sediment and modern recordings of temperature and rainfall.
The Inter-Governmental Panel on Climate Change (IPCC) is an international scientific agency designed to share information and encourage cooperation of scientists throughout the world. The IPCC has attempted to calculate the extent of global climate change for 3 different scenarios. The IPCC reports that based on these scenarios, the concentration of CO2 in the atmosphere will increase to between 540 to 970 ppm by 2100. These can be compared to a pre-industrial period measure of 280 ppm. The report also predicts an increase in mean global surface temperature between 1.4 and 5.8 degrees C. The estimates of sea level rise are 0.09 to 0.88 meters by 2100.
What are the consequences of global climate change? A sea level rise will lead to a loss in shoreline. This rise accompanied by increased storm activity will lead to erosion of shoreline and loss of structures, beaches, and wetland habitat. If the rise in sea level is slow, particularly vulnerable areas will be protected by sea walls. Similar adaptation will take place in agriculture and plantation forestry. As temperatures rise, research in agriculture could focus on the development of heat resistant crops. Similar research in forestry could result in planting species of trees more suited to changing environments.
Higher temperature, longer growing seasons, increased atmospheric concentration of carbon dioxide and increased rainfall are generally favorable for plant growth. Distribution of these effects may be such that growing patterns change. For example, the midwest United States may have temperature and rainfall patterns which will not support the production of wheat. The same factors which increase the growth of agricultural production will result in an increase in both weeds and pests. Because of the wealth of resources available to investigate this issue (land grant universities and private research), strategies will be developed to move farmers to more productive varieties of wheat or corn and new farming techniques will be explored. This wealth of support does not exist in developing countries.
Studies have been done on the impact of global warming on GDP. Nordhaus estimated the annual impact of a doubling of carbon dioxide emissions on the U.S. economy. He found an impact equivalent to 0.26 percent of national income. Cline predicted a much greater impact (2 percent of national income). His measure includes a broader definition of damages which includes nonmarket impacts. A separate group of studies examines the economic impact of global change using per ton of carbon measurement. These studies are summarized in Table 7.4.
One aspect of global warming that is likely to be quite costly is the effect of sea level rise on low-lying Third World countries such as Bangladesh and Egypt. Tens of millions of people within these countries live in areas which would be covered by water. Because of the density of the population throughout the country, it would be difficult for these people to move inland. There is also a growing reluctance to accept displaced refugees within developed countries. As such, the cost of relocating these individuals will be very great.
The pace of climate change associated with greenhouse warming is taking place at a relatively rapid pace as compared to natural system changes. Temperature changes are taking place within the lifespan of a tree-much too fast for adaptive change. Animal and plant migration is prevented because of the incursion of man. Jesse Ausabel argues that the most significant damages from global warming may lie in damages to natural systems, particularly those that are already stressed by interaction with human systems.
One final important impact of global climate change is the potential impact on the distribution of tropical disease. Increased temperature and moisture associated with global climate change may increase the geographic ranges of tropical disease.
One of the reasons to be cautious about the impact of global warming is the potential of unpredicted consequences. These can arise because of the existence of thresholds with respect to emissions of any type of pollutant. The first type of threshold is when increases in emissions generate no damages until a threshold is crossed and damages begin. The second type of threshold is when marginal changes in emissions lead to marginal increases in damages, until a
threshold is crossed at which point these same marginal changes in emissions lead to very large increases in damages.
An example of the latter in terms of global warming is where warming leads to the point where the tundra permafrost begins to melt. This in turn leads to anaerobic decay or organic matter and possibly massive release of methane that would intensify global warming. An alternative example is if global warming led to substantial melting of the polar ice cap and a substantial rise in sea level and a reduction in the amount of light reflected from the earth's surface. The result would be a substantial increase in global warming.
Another type of threshold effect would occur if climate changes lead to alterations in ocean currents. If the Gulf Stream stopped flowing this would significantly change the temperatures experienced in western Europe.
There are many characteristics of the global warming problem that make it substantially different from other environmental problems. These include the necessity to deal with many different pollutants simultaneously, the temporal separation between emissions and damages and the high degree of uncertainty underlying both the scientific understanding of physical impacts and the economic understanding of costs and benefits. There is also the relative importance of equity issues, both across generations and across countries and the need to achieve international cooperation.
Each greenhouse gas has a different level of radiative forcing (heat absorption potential) and each greenhouse gas has a different atmospheric lifetime. The Intergovernmental Panel on Climate Change (IPCC) developed the concept of a global warming potential index (GWPI) in order to try and measure the equivalency of the different greenhouse gases. The goal was to develop an index which was the ratio between the atmospheric lifetime radiative forcing of one particular gas and that of carbon dioxide. By definition, the GWPI of carbon dioxide is one.
The global warming potential of a hypothetical gas is equal to the integral of the time path for a particular gas (radiative forcing declines through time) divided by the integral of the time path for carbon dioxide. The use of the integral based indices is controversial because it does not have the ability to represent differing time paths for the decline in radiative forcing. Although the total warming potential (the area under the time paths) may be the same for two different gases, the warming associated with one may occur much earlier and will result in larger damages.
Damages may also be a function of the speed at which global warming occurs. At best, GWPI should be regarded as crude approximations of the relative greenhouse effects of different gases.
Three different indices are presented in Table 7.5. They are for 50, 100, and 500 years. Ozone depleting gases have relatively high global warming indices. If the GWPI of a gas increases as the time increases, that gas has a greater atmospheric lifetime than carbon dioxide.
In May and June of 1992, a series of global environmental meetings took place in Rio de Janeiro (The Rio Summit). The United Nations Framework
Convention on Climate Change was created. The main thrust of this convention was to specify a process for arriving at an agreement on emissions limitations. Signatories to the Convention accepted the proposition that anthropogenic
activities lead to the accumulation of greenhouse gases, which in turn lead to greenhouse warming. In addition, the signatories agreed that all nations had a common but differentiated responsibility to solve the problem of global climate change and these nations agreed to take steps to diminish the problem.
The Rio Summit was followed by a series of meetings which culminated in the Kyoto Protocol, which will go into effect when 55% of the nations of the world sign and ratify the treaty and the total 1990 emission levels of the nations that have ratified the proposal must account for 55% of the total emissions. While the first condition has been met, the second will not be met unless the United States or Russia signs and ratifies the treaty.
A major provision of the Kyoto Protocol limits the emissions of “Annex I” countries to approximately 6% below 1990 levels. Annex I countries include high income countries and the former communist countries of Eastern and Central Europe. Another important aspect of the Protocol is the provision of a mechanism for high marginal abatement cost countries to find cheaper opportunities to reduce emissions. These “flexibility provisions” allow the use of trading emission rights.
Three flexibility provisions are contained in the Kyoto Protocol. These include a bubble provision which treats a group of countries that are in a formal union as if they were one country. This option benefits the EU, where former communist members of the EU still employ very inefficient technologies that can be replaced with more efficient technologies and therefore make attainment emissions requirement easier. The joint implementation agreement allows an Annex I country to pay for some emissions reductions in another Annex I country. The paying country then gets credit for the reductions towards meeting its Kyoto restrictions. The clean development mechanism allows for limited trading opportunities between Annex I and Annex II countries. This mechanism allows an Annex I country (or a firm or NGO) to pay for a project that results in a reduction in an Annex II country that would not otherwise of occurred.
There are two reasons why the Kyoto Protocol will be ineffective in slowing the onset of global climate change and reducing its magnitude. First, freezing emissions at 1990 levels does not stabilize atmospheric concentrations of carbon dioxide, since these emissions remain in the atmosphere for centuries. Stabilizing concentrations of carbon dioxide would require that emission levels be frozen at a level substantially less than those of 1990 and that emissions be reduced thereafter. Second, the Protocol only requires a stabilization of emissions from Annex I countries, not Annex II countries. As these countries develop, it is possible that emission levels will rival those of Annex I countries.
There have been many studies conducted that have measured the cost of reducing greenhouse gas emissions to 1990 levels. These studies are synthesized in two Inter-Governmental Panel on Climate Change reports and can be classified as falling into either a “Top-Down” study or a “Bottoms-Up” study.
Top-Down studies are based on aggregate macroeconomic models, such as the computable general equilibrium models discussed in Chapter 6. According to two IPCC reports, the impact of stabilizing greenhouse gas emissions at 1990 levels that is forecast by the Top Down models is to reduce GDP of OECD countries by 0.5% to 2% of the level it would otherwise attain. If full emissions trading were allowed, the impact on GDP would be substantially lower.
The IPCC studies report that the Bottoms Up studies show a much lower cost. Bottoms Up models look at engineering cost estimates of implementing the type of technologies that are necessary to achieve the target emissions levels. The reason for this is that the initial capital costs of purchasing and installing more energy efficient capital are more than offset by the energy savings which result. Because these policies would result in an increase in social welfare, independent of the benefits of reduced global climate change, Nordhaus refers to these types of policies as “no regrets” policies.
If, as these studies indicate, there is a modest cost of attaining the 1990 emissions levels, why is there so much concern about the costs? First, some people anticipate that actual costs will be much higher than anticipated by the models. Second, costs are incurred up front to replace inefficient capital with more efficient capital. Cost savings are realized over time. Finally, some sectors of the economy will be hurt more than others. The fossil fuel industry is a certain loser.
A successful international treaty on global warming must result in greater reductions in emissions, and yet, not be too costly, either in total or for any particular country. In order to achieve greater reductions in emissions without the associated higher costs, it is critically important that the methods used to reduce emissions allow the maximum flexibility in choosing the lowest costs abatement strategies. Chapter 3 introduced the concepts of marketable pollution permits and pollution taxes. In order to minimize global abatement costs, would either require a marketable carbon permit system that included all countries, or all countries would have to charge the same carbon tax. Both are unlikely to occur.
Developed countries are unlikely to agree to either a cap on their emissions, or a tax equal to that of developing countries. Developing countries would oppose such measures because they believe the global warming problem was created by the industrialized countries, and so believe that the solution to the problem lies with industrialized countries. The fact that developing countries will not accept a limit on emissions renders a global trading system unworkable.
An alternative approach would be to build an agreement on a tax level rather than limits on emissions. Kahn and Franceschi suggest building a tax-based system with a set of differential taxes. As long as there is a tax, there is an incentive to look for technological innovation and reduce the level of taxes. In order for the tax to continue to be effective, it must be inflation-proof. In addition, if aggressive reductions in emissions are desired, the real value of the tax should increase over time. An advantage of the tax would be that the costs of attaining emissions reductions would be no higher than the tax multiplied by the emissions levels. If it were greater, the firm would pay the tax instead of reducing emissions further.
Why would countries choose this option for limiting emissions over the options proposed earlier? The pollution tax could be used to reduce taxes on income, corporate income or support education. For developing countries, the tax revenue could be used for general development purposes. Overtime, the emission taxes that the various countries faced could be adjusted to try to equalize emission per capita.
Stock Pollutants - pollutants for which the environment has little or no absorptive capacity.
Ozone Layer - refers to presence of ozone in the stratosphere.
Troposphere - the lower atmosphere.
Tropopause - the middle layer of the atmosphere.
Stratosphere-the outer layer of the atmosphere.
Chlorofluorocarbons (CFCs) - an inert chemical which acts as a catalyst to convert ozone into oxygen.
Montreal Protocol on Substances that Deplete the Ozone Layer - An international agreement, signed in 1987 and amended in 1990 and 1992, which required the cessation of emissions of CFCs in developed countries by 1996 and by 2006 in developing countries.
Global Warming - an injection of greenhouse gases into the earth's atmosphere which results in the temperature of the atmosphere and the earth's surface increasing.
Anthropogenic emissions (activities) – emissions or actions related to human activity. Anthropogenic emissions could be from burning fossil fuel or deforestation.
Carbon Cycle - refers to the movement of carbon from the atmosphere to the earth's surface. Carbon dioxide is removed from the atmosphere when a plant grows and is converted to carbon in the plant’s tissues. When an animal eats the plant, the carbon is transferred from biomass of plant to biomass of animal. When plant or animal dies, it decays and the carbon combines with oxygen to form carbon dioxide, which is returned to the atmosphere.
Carbon Sinks - environmental areas which remove carbon dioxide from the atmosphere. Includes things such as oceans and rainforests.
Carbon sequestration – the process of planting new forests or increasing the organic component of the soil to reduce atmospheric carbon dioxide concentrations.
Global Warming Potential lndex - an index which is the ratio between the atmospheric lifetime radiative forcing of one particular gas and that of carbon dioxide.
The Rio Summit - a convention which took place in Rio de Janeiro in 1992, the main thrust of this convention was to specify a process for arriving at an agreement on emissions.
Kyoto Protocol – an international agreement which attempts to establish emission levels relative to 1990 levels across developed countries. It contains flexibility provisions which would allow for the development of emission trading rights. The agreement has not been ratified by the US or Russia and therefore has not been put in effect.
Chapter 7 Short-answer questions
1. What characteristics do global warming and ozone depletion share in common?
· Both are the result of pollutants modifying the upper atmosphere.
· Both are problems caused by stock pollutants.
· Both are global pollutants.
· Both have potential for significant global environmental change and resulting impacts on social, economic and ecological systems.
2. What are the general causes of ozone depletion? How do the three layers of the atmosphere play a role in this process?
· The atmosphere has three layers, the troposphere, the tropopause, and the stratosphere. The lowest layer of the stratosphere is warmer than the highest layer of the tropopause. As a result any chemicals which make their way into the stratosphere tend to remain there. In the case of fluorocarbons such as chloride and bromide, this results in depletion of the ozone layer.
3. What are the consequences of ozone depletion on humans and non-humans?
· Ozone depletion allows a greater level of ultraviolet radiation to strike the surface of the earth. Ultraviolet radiation causes cells to mutate, leading to increasing cancer rates in humans, decreased crop yields, and the potential for destruction of the phytoplankton layer in the ocean, which is the foundation of the oceanic food web.
4. What is the Montreal Protocol on Substances that Deplete the Ozone Layer and why was it so successful?
· This was an international agreement which banned the use of chemicals which deplete the ozone layer. The implementation of a ban on CFC’s was successful because low cost alternatives were available which created low abatement costs and the companies which produced CFC products also produced the safer alternatives.
5. Define greenhouse warming and discuss the possible causes of this phenomenon.
· The accumulation of a variety of gases such as carbon dioxide, methane, and nitrous oxide which traps radiation (heat) that would normally escape into the earth’s atmosphere.
6. What are natural activities which contribute to greenhouse warming? How are these different from anthropogenic?
· Natural sources include decaying animals and plants and wetlands.
· Anthropogenic sources include burning fossil fuel, deforestation, emissions from ruminants, wet rice cultivation, and emissions from coal mines, oil and natural gas wells.
7. What are the various components of the carbon cycle?
· Carbon is stored in the biomass of every organism and dissolved in surface water. Carbon dioxide is removed from the atmosphere when a plant grows, and it is converted into carbon in plant tissue. When an animal eats the plant, the carbon is transferred to the biomass of the animal. When the plant or animal dies, the decay releases carbon that combines with oxygen and returns to the atmosphere.
8. Is there evidence of global warming?
· Historical data from ice core samples suggests that global warming is occurring but temperature changes due to carbon dioxide are small compared to those due to small changes in the earth’s orbit.
· Pollen records found in the sediment of lakes provides some evidence of global warming.
· Computer models have been developed to examine the relationship between the concentration of different gases and global temperature. These models indicate that global warming is occurring.
9. What are the economic consequences of global warming? What factors might make these consequences more severe?
· Possible effects include a rise in sea level, possible increase in the intensity of storms, effects on forests and other ecosystems, biodiversity, agricultural effects, and effects on comfort level. These consequences are more severe for lesser developed countries. The ability to adapt to these changes will also be linked to the magnitude of the change.
10. Why should policy makers be cautious about the potential consequences of global climate change?
· There is the potential of unpredicted consequences which result from the possible existence of threshold effects. There are two types of threshold effects. The first is where no damages are generated until the threshold is crossed. For example, a rise in summer temperatures may lead to a small increase in average temperatures which may lead to a large increase in the length or frequency of severe hot spells, which could lead to the demise of heat-sensitive plants. The second type of threshold is when marginal changes in emissions lead to marginal increases in damages until a threshold is crossed and then marginal changes lead to very large increases in damages. An example of this is if global warming progresses to the point where the tundral permafrost begins to melt. This will lead to anaerobic decay of organic matter on such a scale that there will be a massive release of methane. This will intensify global warming.
11. The Intergovernmental Panel on Climate Change developed the concept of global warming potential index. How is this index derived and what are the potential uses of this index?
· The concept behind this index is to compare the radiative forcing over the atmospheric lifetime of one particular gas with the radiative forcing over the atmospheric lifetime of one kilogram of carbon dioxide, which serves as a benchmark. It is possible to compare the relative impacts of the various gases which contribute to global warming.
12. Describe the agreement developed at the Rio Summit in 1992.
· The United Nations Framework Convention on Climate Change was created. The main thrust of this convention was to specify a process for arriving at an agreement on emissions limitations. Signatories to the Convention accepted the proposition that anthropogenic activities lead to the accumulation of greenhouse gases, which in turn lead to greenhouse warming. In addition, the signatories agreed that all nations had a common but differentiated responsibility to solve the problem of global climate change and these nations agreed to take steps to diminish the problem.
13. What is the Kyoto Protocol and when will it take effect?
· The Kyoto Protocol was an agreement developed after the Rio Summit which will go into effect when 55% of the nations of the world sign and ratify the treaty and the total 1990 emission levels of the nations that have ratified the proposal must account for 55% of the total emissions. While the first condition has been met, the second will not be met unless the United States or Russia signs and ratifies the treaty.
· A major provision of the Kyoto Protocol limits the emissions of “Annex I” countries to approximately 6% below 1990 levels. Annex I countries include high income countries and the former communist countries of Eastern and Central Europe.
14. What are the “flexibility provisions” of the Kyoto Protocol?
· A bubble provision treats a group of countries that are in a formal union as if they were only one country. This is important for the European Union because some of the former communist members of the EU still employ inefficient technologies.
· The Joint Implementation provision allows an Annex I country to pay for some emissions reductions in another Annex I country. The paying country gets credit for the reductions towards meeting Kyoto restrictions.
· The Clean Development Mechanism allows for limited trading opportunities between Annex I and Annex II countries. It allows an Annex I country (or a firm or NGO) to pay for a project that results in a reduction in an Annex II country that would not otherwise have occurred in the Annex II country.
15. Will the Kyoto Protocol be effective in limiting global warming?
· There are two reasons why the Kyoto Protocol will be ineffective in slowing the onset of global climate change and reducing its magnitude.
· First, freezing emissions at 1990 levels does not stabilize atmospheric concentrations of carbon dioxide, since these emissions remain in the atmosphere for centuries. Stabilizing concentrations of carbon dioxide would require that emission levels be frozen at a level substantially less than those of 1990 and that emissions be reduced thereafter.
· Second, the Protocol only requires a stabilization of emissions from Annex I countries, not Annex II countries. As these countries develop, it is possible that emission levels will rival those of Annex I countries.
16. If “Top Down” models predict a modest cost of attaining 1990 emission levels and “Bottom Down” models show that benefits of implementing new technologies will outweigh costs, why is there still concern about the costs of implementing the Kyoto Protocol?
· First, some people anticipate that actual costs will be much higher than anticipated by the models.
· Second, costs are incurred up front to replace inefficient capital with more efficient capital. Cost savings are realized over time.
· Finally, some sectors of the economy will be hurt more than others. The fossil fuel industry is a certain loser.
15. What are the benefits associated with the development of an agreement based on tax levels rather than emission levels?
· Taxes provide an incentive to look for technological innovation and reduce the level of taxes, but do not limit the options available for reducing emission levels.
· The pollution tax could be used to reduce taxes on income, corporate income or support education.
· For developing countries, the tax revenue could be used for general development purposes.
· Overtime, the emission taxes that the various countries faced could be adjusted to try to equalize emission per capita.