Kyoto Protocol will not wreck US economy, claims energy group

According to the Energy Information Administration’s report, Impacts of the Kyoto Protocol on U.S. Energy Markets and Economic Activity, released October 9, meeting the U.S. carbon reduction target of 7 per cent below the 1990 level would require a carbon tax to induce carbon savings. The effects of this tax, EIA predicts, would reduce the U.S. gross domestic product in 2010 by 4.2 percent.

The EIA, an independent research unit within the US Department of Energy, claims that a carbon tax of $348 per metric ton would be needed in order to bring US carbon emissions to 7 per cent below 1990 levels. In 2010, this tax would cause coal prices to rise almost eight-fold, natural gas prices to double or triple, electricity rates to double, and gasoline prices to rise 50 percent.

However, the Alliance to Save Energy, a coalition of business, government, environmental, and consumer leaders, claims the report ignores the issue of energy efficiency. The Alliance says the report also omits the potential benefits of emissions reductions; makes no allowance for international permit trading and other mechanisms; and disregards other actions and funding that could help achieve the Kyoto Protocol.

“The EIA study joins the growing list of studies on the impact of the Kyoto Protocol that have serious shortcomings,” says Alliance President David M. Nemtzow. “As a vehicle to guide policy makers, the study fails to take into account likely scenarios that would reduce the negative impacts of complying with the Kyoto agreement.”

The EIA used an economic model to estimate the impacts of achieving various levels of carbon reduction-from 24 percent above to 7 percent below U.S. 1990 carbon emissions. It assumed a carbon tax as the sole mechanism to get consumers and businesses to reduce energy consumption by the required amount in each scenario.