BeyondGenius.com

The Kyoto agreement; a way to allow market forces help us clean up the environment by buying and selling credits to cover a country’s ability to pollute.  There’s a certain genius in the concept; it creates revenue centers for things that were previously part of the tragedy of the commons, but there are also pitfalls.  The big pitfall of course is that it only really works if everyone is involved.  The US and China are not part of the accords, despite the fact that they account for most of the greenhouse gas emissions (and really almost everything else) on earth.

Businesses (everywhere really, but especially the ones with powerful lobbies in the US) don’t really like the whole “cut your emissions or pay the price” thing.  Cleaner-burning fuel may be ultimately a win for businesses (they need less to start with and thus are able to achieve operational savings), but the process of getting there is costly and requires large capital and research and development outlays.  Cleaner-burning fuel is one of those things where there are big benefits to everyone except the company who really goes full bore and develops it.  In the meantime, there’s a lot of attention to having to use filters to just cap emissions from smokestacks and whatnot, which doesn’t offer the same kind of operational savings.  It’s really best for businesses if they don’t have to worry about it.  Thus, Bush pulled us out of Kyoto.

Beyond the additional costs in developing nations on capping emissions, there’s the whole “developing country” thing: the other reason we’re not in Kyoto.  Developing nations aren’t held to the same standards as industrialized nations, and China, despite its economic power, is still considered to be a developing nation.  This puts the US at a perceived disadvantage (since energy costs for American firms will be higher under Kyoto, due to the emissions fines and fixes), so the stance is held as “if they won’t do it, we won’t either.”

It’s in the interest of other places in the world to make Kyoto attractive; curbing the small-time polluters elsewhere will help matters, but even curbing emissions from the US and China a little will reap larger rewards (environment-wise).    In purely competitive terms, there’s also the fact that China and the US being outside of the accords is a bonus for them and a detriment to firms in countries that have been working to reduce emissions.  The same increase in energy costs that keep the US out of Kyoto will affect European companies. 

Enter France, ever the provocateur.  France wants to institute a tariff on products imported from non-Kyoto countries.  It plays well to the businesses who feel “hurt” by having to clean up their acts, and de Villepin is still mulling over a presidential bid.  France alone wouldn’t be enough to force anyone’s hand, but it does also potentially pit some US industries against others.  It creates a (minor) incentive to do the right thing.  I think the WTO won’t go for it and even if they did I don’t see it working, but in theory it’s a good strategy.