Cost of Meeting Goals Is Still Up in the Air

The global warming agreement reached in Kyoto does not resolve some of the questions that may determine its ultimate success or failure: Who pays? And how much?

The dollars and cents are in the details, many of which will be determined in further negotiations and in steps taken by the nations that agreed to the targets, economists said yesterday.

What the conference did was to "deal with the short-term political problem of setting some goals but not with the process of how to reach them in the long term," said Henry D. Jacoby, an economist who is a co-director of the Massachusetts Institute of Technology's climate program.

If the United States is able to meet its required reductions in greenhouse gas emissions either by buying relatively inexpensive reductions outside its borders or by incentives for research and development, the costs may not be that high. But if those tactics do not work, the United States might be forced to adopt other more costly measures as the deadline for reductions approaches.

Opponents of strong measures to reduce greenhouse gas emissions have warned that doing so could devastate the U.S. economy, shifting jobs overseas, robbing U.S. consumers of the cars of their choice and their mobility, and reducing the amount of money available to invest in increasing productivity and the standard of living here.

Some estimates have even gone so far as to predict that an agreement could quadruple the cost of coal, add a dollar a gallon to the cost of gasoline, result in a 50 percent increase in the costs of electricity and natural gas to residential consumers and increase the cost of fuel to industry even more.

"If the U.S. negotiators are looking for a way to mess up the world's most productive and prosperous economy, this agreement will do it," said Thomas J. Donohue, president of the U.S. Chamber of Commerce.

At the other end of the spectrum, supporters of dramatic reductions in emissions and the Clinton administration have made an optimistic case about how the problem can be solved, with little pain, through technological breakthroughs.

"Obviously the knowledge that there will be these emissions reduction requirements in 10 years will send a signal that people and investors should start to alter their investments now," said Joseph Goffman of the Environmental Defense Fund.

Together with incentives that President Clinton is expected to push for to reward businesses that make early reductions in emissions and a market-based emissions trading system, that will "make the glide path down from business as usual much smoother," he said.

Susan Skerker of Ford Motor Co. said that the ambitious targets in the treaty may not give businesses enough time to bring technological advances to market. For example, the first prototype from an auto industry initiative to develop more fuel-efficient cars will not be produced until 2004. "Then it will take several years" for those cars to make it to market, she said. Even then, it will take many more years for the new generation of cars to reduce significantly overall fuel consumption because of the 12 to 15 years that it takes the nation to turn over its stock of autos.

Although the agreement includes provisions for setting up a system in which industrialized nations will be able to trade emissions reductions, the details of that system are expected to be spelled out over the course of the next year.

Emissions trading means that the nations that are required to shoulder a share of the reductions do not necessarily have to make the cuts in emissions within their own borders if cheaper reductions can be made elsewhere.

For instance, the Unites States might meet its obligation to cut emissions by paying for major industrial modifications in Russia where plants and equipment generally are older and more polluting.

That could be cheaper than paying to reduce emissions further from plants here or in Japan that are already closer to state-of-the-art.

If Russia had not been included in the group of nations where emissions trading will take place, such an agreement would have been virtually meaningless, said W. David Montgomery of Charles River Associates, an economic forecasting group that has done studies for business interests who have argued against dramatic actions to reduce greenhouse gas emissions.

"In general, trading between the U.S., Japan, Canada and Europe makes very little difference in costs because they are so similar," he said.

In the meantime, though, since developing countries are not required to reduce their emissions, they will become more dependent on coal and other forms of fuel that produce large amounts of greenhouse emissions, said Robert N. Stavins, who heads the environment and natural resources program at Harvard University's John F. Kennedy School of Government.

Not including those nations means that the cost of reducing emissions is more costly per ton and creates a disincentive for nations that will be emitting more in the future to then join in the global reduction effort, he said.

"That's why I said prior to the beginning of the Kyoto conference that I would gauge if Kyoto was a success on the basis of how many countries signed on the bottom line, not based on the language above the bottom line," he said.