European Climate PoliciesEuropean Climate PoliciesAn Inconvenient TruthAn Inconvenient Truth

Amsterdam, August 25, 2006Amsterdam, August 25, 2006

Carlo StagnaroCarlo StagnaroDirector, Free Market EnvironmentalismDirector, Free Market Environmentalism

Istituto Bruno LeoniIstituto Bruno Leoniwww.brunoleoni.itwww.brunoleoni.it

Carlo.Stagnaro@brunoleoni.itCarlo.Stagnaro@brunoleoni.it

The Kyoto ProtocolThe Kyoto Protocol

Aims at reducing developed countries’ Aims at reducing developed countries’ greenhouse gas emissions by 5.2% below 1990 greenhouse gas emissions by 5.2% below 1990 levels;levels;

EU’s collective target is 8% below the baseline EU’s collective target is 8% below the baseline year;year;

Europe’s emissions accounted for 19% of Europe’s emissions accounted for 19% of global emissions in 1990, 17% in 2003, 15% in global emissions in 1990, 17% in 2003, 15% in 2010, 13% in 2020, 12% in 2030.2010, 13% in 2020, 12% in 2030.

Where Europe StandsWhere Europe Stands

CommentsComments European emissions have declined with European emissions have declined with

respect to 1990…respect to 1990… ……but not enough;but not enough; According to EEA projections, EU According to EEA projections, EU

emissions will stabilize emissions will stabilize Kyoto targets Kyoto targets will not be met;will not be met;

The overall reduction will be by 1.6% vis-à-The overall reduction will be by 1.6% vis-à-vis an 8% reduction commitment.vis an 8% reduction commitment.

Additional Measures?Additional Measures? ““Savings from Savings from additional measuresadditional measures being planned being planned

would result in emission reductions of 6.8 %, still not would result in emission reductions of 6.8 %, still not sufficient to meet the target. The use of sufficient to meet the target. The use of Kyoto Kyoto mechanismsmechanisms by various Member States would reduce by various Member States would reduce emissions by a further 2.5%, leading to total reductions emissions by a further 2.5%, leading to total reductions of 9.3 %, sufficient to reach the EU-15 target. of 9.3 %, sufficient to reach the EU-15 target. This This would, however, rely on over-delivery by some Member would, however, rely on over-delivery by some Member StatesStates””

EEA, 29 November 2005EEA, 29 November 2005

Who’s Selling Emissions?Who’s Selling Emissions?-20,0% -15,0% -10,0% -5,0% 0,0% 5,0% 10,0% 15,0% 20,0% 25,0% 30,0%

EU-15Luxembourg

UKSweden

Netherlands

GermanyBelgium

France

GreeceFinland

Italy

AustriaIreland

Denmark

PortugalSpain

Flexible MechanismFlexible Mechanism The only way out is Clean Development Mechanism;The only way out is Clean Development Mechanism; Buy quotas or fund low-emission projects in Buy quotas or fund low-emission projects in

developing countries;developing countries; ““Hot air” (Russia);Hot air” (Russia); Wealth transfer to countries that grow as much as 10% (China, Wealth transfer to countries that grow as much as 10% (China,

India);India); It is foreign aid by another name;It is foreign aid by another name; Does it meet real needs of LDCs?Does it meet real needs of LDCs?

Less pollution or more energy?Less pollution or more energy?

ICCF StudyICCF Study

-4

-3,5

-3

-2,5

-2

-1,5

-1

-0,5

0

Germany UK Spain Italy Germany UK Spain Italy

Real GDP - % Difference from Baseline

Kyoto Target 60% Below 2000 Levels by 2050

2010 2020

ICCF Study / 2ICCF Study / 2

-800

-700

-600

-500

-400

-300

-200

-100

0

Italy Germany UK Spain Italy UK Germany Spain

Thousands of Jobs

Kyoto Target 60% Below 2000 Levels by 2050

2010 2020

ICCF Study / 3ICCF Study / 3

Targets:

2010: Kyoto Target

2020: 60% below 2000 levels by 2050

ElectricityElectricity Natural GasNatural Gas20102010 20202020 20102010 20202020

ItalyItaly 13%13% 14%14% 44%44% 54%54%

UKUK 35%35% 34%34% 46%46% 57%57%

SpainSpain 23%23% 27%27% 42%42% 51%51%

GermanyGermany 31%31% 32%32% 30%30% 39%39%

The Flaws Behind KyotoThe Flaws Behind Kyoto Short term solution (vs long term problem);Short term solution (vs long term problem); Regional agreement (vs global problem);Regional agreement (vs global problem); Provides wrong incentives:Provides wrong incentives:

Undermines R&D;Undermines R&D; Disincentives future investments;Disincentives future investments; Economic slowdown result in political uncertainty;Economic slowdown result in political uncertainty; Political uncertainty results in less economic growth;Political uncertainty results in less economic growth;

Scientific uncertainty.Scientific uncertainty.

Scientific UncertaintyScientific Uncertainty

Wrong inference…Wrong inference…

A correlation is not a cause…A correlation is not a cause…

Benefits?Benefits?

Even if ratifying countries could meet Kyoto Even if ratifying countries could meet Kyoto targets, global emissions would decrease by a targets, global emissions would decrease by a mere 2-4%, without even taking into account the mere 2-4%, without even taking into account the growth of non-Kyoto countries’ emissions;growth of non-Kyoto countries’ emissions;

The impact on projected warming, if any, would The impact on projected warming, if any, would be negligible.be negligible.

Economic Freedom and Energy Intensity (2001)Economic Freedom and Energy Intensity (2001)B

tu p

er $

of

Ou

tpu

t

0

10000

20000

30000

40000

50000

60000

70000

80000

3.00 4.00 5.00 6.00 7.00 8.00 9.00

Russia

China

India

Singapore

USA

S. Korea

Spain

Italy

Belgium

Germany

Zimbabwe

Economic Freedom Index

Slovenia

UKUK

Energy Intensity Reductions, EU vs USAEnergy Intensity Reductions, EU vs USA(1997-2003)(1997-2003)

-20.10%

-7.60%

-16.80%

-12.20%

-25.00%

-20.00%

-15.00%

-10.00%

-5.00%

0.00%

CO2/GDP Percent Change

US USEU-15 EU-15

1997-2003 1991-2003

Data: EIA International Energy Annual 2003

Alternative StrategiesAlternative Strategies(Gleneagles, Asia & Pacific Partnership)(Gleneagles, Asia & Pacific Partnership)

Avoid policies which do not meet cost-benefit tests; Remove barriers to developing world’s access to more energy and

cleaner technology by promoting economic freedom and market reforms;

Increase R&D for new technologies to reduce energy intensity; Expand bilateral cooperation with developing countries; Promote a truly global solution such as the new Asia Pacific

Partnership on Development with its focus on growth and technology transfer;

Adopt no regret strategies to address today’s problems that might be made worse by global warming (malaria, hunger, lack of clean & drinking water…).

Cold Blood and Warm Temperatures…Cold Blood and Warm Temperatures…

…is better than the opposite.…is better than the opposite.

Thousands of protesters took to the streets in cities Thousands of protesters took to the streets in cities worldwideworldwide Saturday [December 3] Saturday [December 3] to demand urgent to demand urgent action on global warmingaction on global warming. [Fox News, Dec 5];. [Fox News, Dec 5];

Ski industry optimistic for good season [CNN, Dec 5];Ski industry optimistic for good season [CNN, Dec 5]; Temperatures hit record lows [CNN, Dec 7];Temperatures hit record lows [CNN, Dec 7]; Montreal - tens of thousands of people ignored frigid Montreal - tens of thousands of people ignored frigid

temperatures Saturday to lead a worldwide day of protest temperatures Saturday to lead a worldwide day of protest against global warming against global warming [Canadian Press, quoted by The [Canadian Press, quoted by The Telegraph, Dec 6]Telegraph, Dec 6]

Carlo StagnaroCarlo Stagnaro

Istituto Bruno LeoniIstituto Bruno Leoni

www.brunoleoni.itwww.brunoleoni.it

carlo.stagnaro@brunoleoni.itcarlo.stagnaro@brunoleoni.it

Thank you for your attentionThank you for your attention