With the Right Incentives, We’ll Kick Our Carbon Habit

World leaders could take a big step toward containing the climate change problem when they meet at the environmental summit beginning today in Kyoto. But they may miss that opportunity if near-term emissions reductions stay atop the agenda.

The risk posed by global warming is real, but great uncertainty remains. Will an altered climate be the dominant environmental problem of the 21st century or will the changes be small? We do know that if climate change turns out to be a serious problem, over the course of the next century society will have to largely replace the fossil fuels that produce greenhouse emissions. Many advocate binding targets for cutting back these emissions as a key first step to reduce the risk. But others--industry, labor and most developing countries--oppose targets as too costly.

The intense political debate over emission targets threatens to derail agreement over more effective and less contentious first steps: focused actions to generate alternatives to fossil fuels.

There are three reasons why targets, while moderately useful if everyone agreed to and implemented them, should not be the centerpiece of our climate change policy. First, the reductions proposed for adoption at Kyoto will do little to slow the environmental consequences of climate change. The climate is sensitive to the total amount of carbon dioxide in the atmosphere, and the carbon we emit stays in the atmosphere for centuries. Thus, even the toughest targets offered--for example the European proposal that the developed countries reduce their emissions 15% by 2010--will make only a trivial change in the magnitude of the problem we may pass to future generations.

Second, any reductions level agreed to at Kyoto is likely to be the wrong level. Emissions a decade or two hence depend on a variety of unpredictable factors, including the rate of economic growth, the price of oil and the type of technology people use to conserve and produce energy. Any targets are virtually certain to be either so lax that they do little to promote alternatives to fossil fuels or so stringent they end up being ignored.

Most important, the key steps we can take now to reduce the risk of climate change may have little impact on near-term emissions. History is full of examples of old technologies whose use actually grew until the eve of their extinction. For instance, steamships replaced sailing ships over the course of the 19th century, but the sailing ship business boomed for 50 years after Fulton’s first steamer. A growing world economy demanded ships of all kinds. Sail technology even improved, peaking with the clipper ships of the 1850s and ‘60s. But steam technology improved much faster and, by the 1880s, sailing ships began a precipitous decline.

Similarly, greenhouse emissions may go up or down over the next few decades. What really matters is how fast the alternatives to fossil fuels improve and how readily they are adopted throughout the world economy.

At Kyoto, conferees could agree to concrete steps that would create and promote alternatives to fossil fuels. For instance, developed nations could pledge specific financial commitments to energy-related research and development as well as subsidies, tax credits, mandates and direct purchases that would give technologies such as renewables, fuel cells, biomass and perhaps nuclear increased market experience in the developed and developing world over the next decade.

The Clinton Administration’s proposal for a $6-billion, five-year package of research and tax incentives for renewable and energy efficient technologies is a step in the right direction. The immediate goal of these policies should not be emissions reductions. Rather, it should be to perfect these technologies, reduce their costs and provide suppliers and consumers the information they need to facilitate a decisive move away from current fossil fuel systems, should this prove necessary.

In addition, alternatives to fossil fuels will spread faster through well-functioning markets. Leaders could commit to specific steps for domestic reform, such as deregulation, tax and legal changes so that prices better reflect environmental costs, as well as better enforcement of current environmental laws.

These actions should be widely acceptable even if binding targets are not. They require commitments by the developing countries that should help their economies rather than hurt them. They entail financial undertakings by the developed countries, but much smaller ones than targets might involve. They offer industry opportunities for new markets and products. Finally, they provide our best chance of achieving change on the scale that may be needed to avoid catastrophe.

It is not too late to make these actions the real legacy of Kyoto.