Costs and Benefits of Kyoto Protocol

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While some safety improvement may be wrought through the impact of a given risk-reduction measure such as the Kyoto Protocol, the unintended consequences of the measure can produce countervailing impacts which erase some or all of the perceived benefit.

The following is an outline of the costs and benefits of the Kyoto Protocol.


Contents

Assessing Risk-Reduction Benefits

The belief that fully implementing the Kyoto Protocol by itself is unlikely to provide meaningful risk reduction benefits is widespread among those people cited as experts by proponents of the protocol at the 1997 Kyoto conference on climate change:

Jerry Mahlman, Director of the Geophysical Fluid Dynamics Laboratory at Princeton University, told the Washington Post that, “The best Kyoto can do is to produce a small decrease in the rate of increase.“6 In a - post-Kyoto Science news brief, Mahlman says that “it might take another 30 Kyotos over the next century” to cut global warming down to size.’

Bert Bolin. outgoing chairman of the United Nations Intergovernmental Panel on Climate Change, assessed the impact of Kyoto as a 0.4 percent reduction in greenhouse gas emissions compared to a no-protocol alternative and concluded: “The Kyoto conference did not achieve much with regard to limiting the buildup of greenhouse gases in the atmosphere.“’

Robert Repetto at World Resources Institute acknowledges that the Kyoto accord is little more &an zi i%y step toward a distant end rather than a significant step in itself: “Nobody thought in their wildest dreams that Kyoto would solve the climate problem. . ..lf implemented, the achievement at Kyoto will be to get nations off a business-as-usual trajectory, and onto a path that peaks, and then starts going down.“

As Tom Wigley. a climate researcher at the National Center for Atmospheric Research in Colorado, puts it, “A short-term target and timetable, like that adopted at Kyoto, avoids the issue of stabilizing concentrations [of greenhouse gases] entirely.“‘

In other words, benefits of the Kyoto Protocol, at least in the short term, are described more in political terms-as initiating a shift in energy-use patterns-than in terrm of tangible environmental or risk-reduction benefits.


Assessing Risk-Reduction Liabilities

Accounting for the income-risk relationship:

Although regulatory costs and job losses are not often considered risk-relevant in themselves. they should be. The idea of a linkage between income and risk may be subtle, but it is also intuitive. We know, for example. that people with large families face lower risks of suffering from sevew depression or of becoming homeless due to economic dislocation. Having a large family seems to lessen one’s risk of serious depression or homelessness. We know that people with many friends are in less danger of becoming mentally ill than are “loners.” Thus, having a strong social network lessens one’s risk of mental illness. Likewise. we know that people’s safety is related to people’s income. Those with less income are proportionately less able to take the safety measures that higher-income earners can. Families with high income levels can better withstand shortterm health problems than those with less income. Families with higher incomes eat higher quality foods, drive safer cars, live in safer neighborhoods, train their children for safer jobs, and SO on.

Peer-reviewed studies over two decades have examined the question of such economic risk modifiers and generally concluded that people use their disposable income to weave a personal safety net around themselves and their loved ones. The more disposable income they have, the tighter the weave of their personal safety net. The less disposable income they have. the looser the weave.”

As systems engineer Ralph L. Keeney points out in Estimating Fatalities Induced by the Economic Costs of Regulations:

Regulatory costs are paid by individuals, which leaves them with less disposable income. Since individuals on average use additional income IO make their lives safer and healthier, rhe regulator) costs lead to higher morrali~ risks and farnlities. Based on data from the National Lmzgitudinol Mortality Study relating income lo the risk of dying, approximately each $5 million of regulatory cost induces a fatality frosts are borne equally among the public. lf costs are borne proporrional to income, approximately $11.5 million in regrrlarory costs induces a fatality."

Though environmental advocacy groups and agencies generally dismiss such ideas as being unconventional. the implications of this understanding are stmightforward: less income, less safety. Nor is this relationship inherently unquantifiable. We can estimate the impact by determining how much a proposed action will cost an individual in tams of disposable income and then correlating that loss of disposable income with personal safety The costs of the Kyoto Protocol may be significant. Most moderate economic analyses with modcretc assumptions show economic impacts of around a two percent reductinn in U.S. gross domestic product (compared to a no-protocol scenario) in urdcr to bring U.S. greenhouse gas emissions to 1990 lwcls by the time frame called for in the Kyoto Protocol.”

But for the sake of this analysis, let us make a few more optimistic assumptions. The Kyoto Protocol actually obligates the United States to cut its greenhouse gas emissions seven percent below that of 1990. Moreover, most studies showing a two pcrccnt reduction in GDP estimate costs exceeding $2013 billion annually. However, let us assume that thz full cost of compliance with the Kyoto Protocol might only cost $100 billion annually to present a conservative estimate of impacts.

Using a model of induced fatality developed by Ralph Keeney at the University of Southern California, we can model the impact of taking $100 billion out of people’s own risk-reduction budgets and spending it elsewhere on anticipatory actions such as those needed to reduce the emission of greenhouse gases. Depending on whether one assumes that regulatory costs are borne equally by all households (the high end of the range). or proportionally with household income (the low end of the range), $100 billion (in 1990 dollars) spent each year to comply with the new standards will lead to induced fatalities of 9,000-22,000 Americans each year.”


Opportunity cost of investment: accounting for missed opportunity to save lives through alternative risk-reduction investments:

As Harvard risk-rcscarcher Tammy Tags demonstrated in her study of cost-effectiveness of risk-reduction-regulations, all investments in risk-reduction do not yield equal rcs~lts.‘~ Table l-l shows the median cost of intervention for five regulatory agencies, each charged with reducing risk within its sphere of authority. To date. saving lives through environmental regulations has been. in the aggregate, more expensive than saving lives through other types of safety regulation, though some individual environmental measures may be highly cost-effective ways to reduce risk.

As discussed earlier, the costs of the Kyoto Protocol will likely amount to at least $100 billion dollars per year. The same amount of money spent on some of the demonstrated. cost-effective health and safely risk reduction measures could, hypothetically. save the lives of many people if we would get comparabls return on our investment to historically proven interventions. Of course, such high returns on risk-reduction investments are rare. Furthermore, high returns are not likely to be maintained over time as the low-hanging fruit of any given risk-reduction is plucked and as more marginal risk-reduction measures are pursued. And one should not think of saving lives as one would think of toting up the cost of preserving oranges. Still, even if we break a given risk group into thirds, such as the roughly 41,000 people who die in automobile accidents each year, and assume that saving the second third is five times more expensive than the first, and saving the final third is five times more expensive than that, we could save all 41,000 for about $33 billion, while inducing between 3000 and 7,300 fatalities, for a net benefit of 33,700-38,000 lives saved annually.

If policy makers are unwilling to allow people to retain all their earned resources to procure safety for themselves, they should consider whether we are getting better value for our governmentally administered safety investments than that which can be obtained by people on their own. They should also consider whether we’re getting the biggest risk-reduction available through established intervention pathways.


Balancing the Ledger

When we account for the lack of demonstrable near-term. risk-reduction benefits from the Kyoto Protocol approach to climate change policy, the risk-reduction liabilities of the income-risk relationship, and lost opportunities to use proven risk-reduction interventions. we find that a net-benefit assessment shows considerably higher liabilities than benefits for the near term. And given the long-term uncertainties involved,- even putting the speculative long-term range of benefits into the risk-ledger doesn’t contribute much more information to facilitate evaluating whether we’re on the right track.


References

Green, Kenneth. http://www.heartland.org/custom/semod_policybot/pdf/6760.pdf

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