THE GOOD NEWS is that the Kyoto Protocol aimed at reducing greenhouse gas emissions came into effect last week, legally binding the 34 industrialized countries that have ratified the treaty to cut their greenhouse gas (GHG) emissions by 2012. Good news not because the agreement can do much to affect the rate at which the globe is warming, if indeed it is. But good news nonetheless, and for two reasons.

First, the participants have agreed to adopt America's position that the best way to keep the cost of compliance down is to institute an emissions trading system. Companies are assigned permits to emit a certain amount of GHG, and fined €40 per ton in the European Union if they exceed that "cap." To avoid such a fine, companies exceeding their cap can buy unused permits from firms who have found it efficient to reduce their own emissions and sell off unused "emission credits."

It is ironic that this provision to allow cost-minimizing compliance was included in the Protocol at the insistence of the American delegation to the Kyoto meeting, over the objections of the Europeans. The Europeans have since warmed to the idea of emissions trading, while the Americans have cooled on the idea of any treaty at all. Europeans tend to blame this cooling of concern about global warming on George W. Bush--the source of most of the world's ills, in the opinion of France, Germany, and others. It is true that the president did announce in his direct Texan way that America would not participate. And he repeated last week that Europeans "thought the treaty made sense. I didn't." He was only recognizing the hard fact that Bill Clinton did not submit the treaty for Senate ratification because not a single senator was prepared to consent to it.

The second reason the coming into force of the Protocol is good news is that it is forcing the signatories to re-examine premises and practicality. The pro-Kyoto nations are finding that there is some merit in the American position that compliance with the treaty, at the pace it requires, is simply impossible without doing serious damage to economic growth. Tony Blair, who plans to make the fight against global warming the center-piece of his E.U. presidency, has found it necessary to seek a relaxation of the very ambitious targets he once embraced lest many British industries find themselves at a competitive disadvantage. Japan, the country that played host in 1997 to the Protocol's drafters, saw its GHG emissions rise by 8 percent last year, making it unlikely that it would achieve a 6 percent reduction from 1990 levels by 2012. And Canada, an enthusiastic backer of Kyoto, also finds itself in difficulty: like Japan, Canada agreed to cut emissions to 6 percent below 1990 levels, only to see them rising at an annual rate of 1.5 percent.

None of this deters the greenest greens from insisting that the targets be met, irrespective of the economic costs involved and of the fact that without the participation of rapidly industrializing China (already in 2000 responsible for 15 percent of the world's emissions) and India, the Kyoto agreement is nothing more than, well, hot air. Not to mention the effect of American non-participation: We account for a bit more than 20 percent of world GHG emissions (and 25 percent of world GDP) and our utilities have some 100 coal-burning plants on the drawing boards to meet our growing need for electricity.

While the Europeans are learning the costs of compliance, most serious American policy makers are coming around to the position that the scientific certainty they once demanded is unobtainable, and that the probability that carbon dioxide emissions are warming the earth is high enough to warrant adoption of prudential policies. They therefore now agree that it would be sensible to shape a program consisting of what Harvard professor Bill Hogan calls "many things we should be doing anyhow."

Which brings us back to Tony Blair. The prime minister may be having a problem meeting his extravagant claim that Britain would reduce its carbon dioxide emissions by 20 percent by 2010, and 60 percent by 2050, but he is well positioned to persuade Vice President Dick Cheney, who is in charge of U.S. energy policy, that his support of U.S. policy in Iraq entitles him to a bit of a quid pro quo, to be announced triumphantly during the Blair E.U. presidency.

Bush need not sign on to Kyoto--even those who (foolishly) believe the president will come to Europe laden with substantive olive branches don't expect that. But he can let the prime minister persuade him to adopt Hogan's "things we should be doing anyhow."

Start with the proposal by researchers at Resources for the Future, a widely respected, non-partisan Washington think tank. They suggest that the United States adopt a "cap-and-trade" system like that now operating in the European Union, but include a "safety valve" that limits the price emissions permits will be allowed to reach. Greens who would oppose such a cost limit would be hard-pressed to continue claiming that reducing emissions won't be costly, while critics who claim that reducing greenhouse gasses would be ruinously expensive would be defanged.

The president, who has expressed a desire to "work together" with the European Union on environmental issues, might also be persuaded to encourage other companies to join the U.S. firms (among them Ford, DuPont, and four electric utilities) who have voluntarily agreed to reduce their 2006 GHG emissions to 4 percent below their 1998-2001 average, and will be allowed to sell or bank any surplus emission allowances.

If the Europeans can then be convinced that such an alternative to Kyoto represents an adequate contribution towards their goal of reining in GHG emissions, the United States and the European Union could unite and turn to the more difficult task of developing incentives for India, China, and other developing countries to adopt emission control programs that do not stifle their economic growth circumstances.

Irwin M. Stelzer is director of economic policy studies at the Hudson Institute, a columnist for the Sunday Times (London), a contributing editor to The Weekly Standard, and a contributing writer to The Daily Standard.

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