Conflicting views on the cost of complying with Kyoto

Conflicting arguments over the costs of meeting Kyoto emissions targets emerged in two new studies published this week, with one predicting economic slowdown in Europe and millions of lost jobs, while the other argued that GDP and employment would rise in Canada by adopting policy proposals in the government’s climate change programme.

As 2010 approaches, European governments will have to resort to increasing energy prices to ensure that energy consumption will fall to levels low enough to meet emissions targets, according to research by US think tank, DRI.WEFA. Concentrating on the marginal costs and economic impact of abatement costs for the UK, the Netherlands, Germany and Spain, the researchers predicted that electricity prices in the UK and Germany would have to double by 2010, with road fuel rising by 25% in all four countries.

The knock-on effect for GDP could be falls by as much as 5% in Spain, and even lower in Germany – 6%, if Germany decided to retire its nuclear power plants. This was translated into up to one million job losses in each country apart from the Netherlands where 250,000 jobs could be expected to be lost.

However, this was argued on the basis that low-carbon energy alternatives won’t be available in time, and that there is no intra-state emissions trading or use of other Kyoto mechanisms. A recent test simulation of an intra-state emissions trading system indicated that targets could not be met without emissions trading, and that trading has the potential of reducing costs by €80 billion by 2017. (see related story).

The research is to be unveiled in London at a conference on EU climate change policy organised by the US think tank, American council for capital formation, ACCF. In a new departure, this Kyoto-sceptic body is organising conferences in Europe “in recognition that environmental issues do not stop at national boundaries”.

In contrast, a study assessing the costs and benefits of shifting Canada to a clean energy economy concluded that the benefits would exceed the costs. Researchers at the Tellus Institute forecast a $2 billion addition to the GDP, and cumulative net economic savings of $4 billion across the economy, reaching $1.6 billion per year, or $47 per capita, in 2012. An extra 52,000 jobs were expected over this period, due to the redirection of consumer spending away from fuel and electricity and towards other goods, services, activities and investments.

Tellus said the findings are in line with experience of earlier Canadian energy conservation measures which, contrary to oil industry warnings, did not devastate the economy. Instead, efficiency measures adopted from 1973 to 1997 were quoted as helping to reduce energy consumption per dollar of GDP by 25%, and the economy has continued to grow.

Canada has agreed to achieve a 6% cut from 1990-level greenhouse gas emissions during the period 2008-2012. The government has estimated that this will require a 240 million tonne reduction from projected “business as usual” levels in 2012. Taken together, the policies from the federal government’s National Climate Change Process, selected for review in the Tellus study, would reduce emissions by an estimated 123 million tonnes by 2012, or more than half of Canada’s Kyoto Protocol target. The Canadian government has stated its intention to meet the other half by obtaining credit for organic carbon “sinks”, emissions trading and international activity. Tellus says its research makes it clear, that Canada can also choose to do more domestically to meet its target.

“The federal government is delaying its adoption of the Kyoto Protocol partly because one-sided reports have exaggerated the cost,” said Gerry Scott, Director of the Climate Change Campaign at the David Suzuki Foundation, which funded the Tellus study with the World Wildlife Fund. He said “Canada can enjoy economic benefits and maintain its international reputation by adopting the Protocol as soon as possible.”

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