Europe, Japan Face $46 Billion Global-Warming Penalty (Update1)
By Alex Morales and Jeremy van Loon
Nov. 14 (Bloomberg) -- Twenty nations including Japan, Italy and Australia may be releasing more greenhouse-gas pollution than they agreed to under the Kyoto treaty to curb global warming.
They're failing to rein in carbon-dioxide output enough to meet their pledges signed in 1997 in Kyoto, Japan, according to reports by individual countries. As a penalty for missing their goals under the treaty, the nations are required to buy permits for every excess ton of the heat-trapping gas released through 2012. That will total 2.3 billion permits for 20 nations, New Carbon Finance, a research firm in London, has estimated.
The potential penalty, 36 billion euros ($46 billion) for the group based on current permit prices, and the fact that only a minority of 37 Kyoto signatory nations may meet their pledges bodes poorly for international efforts to limit global warming.
``This shows there's a lot more interest in promising stuff than actually keeping those promises,'' Bjorn Lomborg, author of the book ``The Skeptical Environmentalist,'' said in a telephone interview from Copenhagen. ``What you should be doing is investing in research and development to make much more dramatic emissions cuts much cheaper in the future.''
In three days the UN will publish a report on emissions data for 2006, compiling figures from national reports already released. Analysts have been using that data to estimate emissions for Kyoto's 2008-2012 measurement period because a nation's CO2 output from factories, power plants and vehicles varies little year to year. It takes about 10 years, for example, to build a low-emissions nuclear plant to replace several dirtier coal-fired power stations.
Cost-Sharing
Kyoto's binding targets are a cornerstone in the international effort to limit global warming. The U.S. is the only developed nation not to ratify the pact.
Under the treaty, countries that are unable to meet targets must buy permits from nations that have a surplus. The government must pay the bill, and some such as Italy and Spain are requiring industry to share in the costs.
Alternatively nations may buy credits representing greenhouse-gas reductions made abroad through investments in clean-energy and forestry projects. That comes at a cost. UN- Certified Emission Reduction credits, or CERs, which double as a Kyoto permit, today traded at 15.80 euros for a 2008 contract.
The U.K., Sweden and several eastern European nations are headed to meet their Kyoto obligations, according to carbon analysts. Others are set to miss by a wide margin, with Canada, Japan, Italy and Spain the worst transgressors.
Canada, facing the biggest emissions overshoot, has already said it won't meet its Kyoto target, even by buying permits. It wasn't included in New Carbon Finance's forecast.
`Impossible Goals'
In Italy's case, ``It's obvious the goals are not possible,'' Corrado Clini said today at an energy conference today in Rome. Italy will need 421 million permits over the five-year period, and Spain, 405 million, the research firm said. That would cost each country more than 6 billion euros, using the current price of CERs, though both governments have said they may share the costs with local industry.
Point Carbon, an Oslo-based emissions-market analysis company, estimates Italy will need 325 million permits and Spain 395 million.
Italian government and corporate officials are increasingly criticizing the Mediterranean nation's looming emissions costs. Kyoto is ``pure folly,'' Paolo Scaroni, chief executive of Eni SpA, the nation's largest oil company, said Nov. 10 on an Il Sole 24 Ore Radiocor report.
Canadian Route
Italy is among countries that may go the Canadian route of choosing not to buy the permits they need to meet their targets, said Steven Knell, a London-based energy analyst at the economic consulting and research firm Global Insight Inc.
``It is unlikely that Italy would formally drop out of the Kyoto, however non-compliance is a distinct possibility,'' Knell said. ``The cases of non-compliance may well pile up as many states are well off the mark.''
Italy's Clini said the government and industry would purchase the permits together and not withdraw from the treaty. ``We won't pull out of Kyoto,'' Clini said. ``At this point, we're in it.''
Australia, which only ratified Kyoto in 2007, will need credits to cover 20.6 million tons a year, at an estimated annual cost of 325 million euros, based on the CER price. Japan, which New Carbon Finance predicts will need 587 million credits, says new energy-efficiency policies will help the nation meet its target.
`Exaggerated Burden'
``We are going to strengthen the energy-efficiency standard for buildings and factories,'' Hiroaki Takiguchi, director of Japan's office of international strategy on climate change, said in an Oct. 28 interview from Tokyo. ``We are promoting renewable energy such as solar, wind.''
Improved energy policies mean Japan will only need 100 million credits, or less than one-fifth of New Carbon Finance's estimate, over the five-year period, Takiguchi said.
``More and more countries are improving energy efficiency and promoting alternative fuels,'' said Claudia Kemfert, head of energy at the DIW economic research institute in Berlin. ``The fear about how much of a burden this will be is exaggerated.''
The UN Framework Convention on Climate Change, which guided the Kyoto talks, aims to negotiate a new treaty for the post- 2012 period at a meeting next year in Copenhagen. Failure by countries to meet their Kyoto targets suggests there's no point in agreeing to a new deal, said Lomborg.
``It questions the whole idea of getting together in Copenhagen next year and making even more ambitious promises when we haven't even been able to fulfill our promises so far,'' said Lomborg, an economist and director of the Copenhagen Consensus Center, an economic advisory body.
Europe, Japan Face $46 Billion Global-Warming Penalty
