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#714 - Global Warming Opportunity, 20-Dec-2000

by Rachel Massey*

During November, while Americans were preoccupied by questions of
rigged elections, representatives of 170 countries met in The
Hague, Netherlands, to tackle what is arguably the biggest
environmental problem we face -- global warming. The meeting at
The Hague was supposed to fill in the blanks of the Kyoto
Protocol, a 1997 international treaty intended to combat global
warming by ensuring that countries limit their emissions of
carbon dioxide and other greenhouse gases, chiefly by reducing
the combustion of coal, oil and gasoline (so-called "fossil
fuels"). Many scientists consider global warming the biggest
environmental problem of the 21st century because they expect it
to change weather patterns, spread serious diseases like malaria
and dengue fever, and cause droughts, floods, large storms, and
major shifts in water supplies.

The goal at The Hague was to spell out how each country would
curb greenhouse gas emissions to comply with limits established
at Kyoto in 1997. Instead, negotiators left The Hague after two
weeks with no agreement. The negotiations collapsed largely
because of efforts by the U.S. negotiators to get emission
reduction "credits" for existing vegetation, such as trees or
crops growing within U.S. borders.[1]

Trees and other plants remove carbon dioxide from the air and
store it in their tissues. Negotiators refer to them as "carbon
sinks" -- places where carbon is stored in solid form after it is
pulled from the atmosphere. The U.S. negotiators wanted credit
for vegetation "sinks," as a way of minimizing the need to change
how we use energy in the U.S. The U.S. is the world's largest
emitter of carbon dioxide from fossil fuels. And our energy use
is notably inefficient; for example, we emit about twice as much
carbon dioxide per person as Germany does.[2]

U.S. negotiators insist that curbing the use of fossil fuels will
hurt the U.S. economy. But a new study challenges that premise,
showing in detail how we could reduce U.S. carbon dioxide
emissions by increasing the efficiency of our economy.

Fossil fuel companies have worked relentlessly to convince the
American public that global warming is a Chicken Little fantasy.
The insurance industry, on the other hand, knows that global
warming is real because hurricanes, cyclones, and floods between
1990 and 1995 cost the industry about fifteen times as much as
such events had cost in the 1980s.[3, pg. 10] Recently even a few
oil companies have decided to come clean. British Petroleum and
Shell Oil, for example, have now withdrawn from the Global
Climate Coalition, an industry group that tries to dismiss the
science on global warming.[4]

As opportunities to misrepresent the science diminish, opponents
of precautionary action have stirred economic fears, arguing that
curbing greenhouse gases will create economic disaster. But
according to a new study funded by the U.S. Department of Energy
and carried out by five U.S. national laboratories, the opposite
shows how energy use could be reduced in each of four broad
economic sectors -- buildings, industry, transportation, and
electricity -- and concludes that it would help, not hurt, our
economy to make the needed changes.[5]

For each sector, the CEF study examines "market barriers" that
limit our incentives, or our ability, to use energy efficiently.
For example, in the "buildings" sector, which includes household
appliances, they note that:

** Electricity bills do not give any details: we cannot see how
much we are paying to run a refrigerator or a TV set. The authors
liken this to a grocery store where customers receive a total
bill at the checkout counter, but never see the prices of
individual foods.[5, pg. 2.13]

** Switching to an energy-efficient appliance will produce only
small savings for an individual family. For example, reducing the
standby power of a TV set from 7 watts to less than one watt
would save about $5 per year per TV. As a result, most people
won't put much effort into finding an energy-efficient TV. But if
all TVs in the country used less than one watt of standby power,
"the total savings would be hundreds of millions of dollars per
year."[5, pg. 4.4]

** Another market barrier is called "split incentives": the
person buying the equipment is not the person who will pay to run
it. For example, a landlord might buy an inefficient furnace,
letting the tenants pay the high heating bills that result.[5,
pg. 4.5]

One of the important functions of government is to compensate for
market barriers. For example, the U.S Environmental Protection
Agency (EPA) and the U.S. Department of Energy (DOE) jointly run
the Energy Star program, which labels appliances according to
their energy efficiency. This system helps consumers see at a
glance how much money an energy-efficient refrigerator or furnace
will save them during a year. And the government can help
overcome the "split incentives" problem by setting minimum
standards for efficiency in equipment such as water heaters.[5,
pg. 4.7] According to the CEF study, there is enormous
opportunity to achieve efficiencies by such means.

In the transportation sector, the government could promote
investment in alternative fuels; improve air traffic control to
reduce the time airplanes spend circling airports; and create
"pay-at-the-pump" automobile insurance, giving car owners the
opportunity to save on insurance by driving less.[5, pg. 1.10]

Some economists say opportunities to save both energy and money
must be fiction: if they were real, people would already be doing
them. Pointing out such opportunities, they say, is like claiming
there is a $20 bill lying on the sidewalk. If it were there,
someone would have picked it up long ago. But as one commentator
points out, the appropriate metaphor is not a $20 bill lying on
the sidewalk but $20 worth of pennies hidden in the sand. Nobody
wants to sift through sand for a few pennies. But if you make it
easy by giving people a metal detector, they will happily gather
up the pennies. The "metal detector" represents the reforms we
can make in energy markets to help people save both energy and

The CEF study considers three main categories of economic

1. Increasing government research and development (R&D) for
technologies to reduce energy consumption.

2. Government projects to correct economic barriers to efficient
energy use -- like the Energy Star program to help consumers
choose more cost-effective home appliances.

3. Taxing carbon dioxide emissions to motivate people to save
energy. The authors propose such a tax in the form of emissions
permits the government would sell at auction each year.

Using varying combinations of these policies, the authors explore
3 possible scenarios for future energy use: Business as Usual,
Moderate, and Advanced. Under Business as Usual, current energy
policies continue more or less unchanged, with a "modest pace of
technological progress." In the Moderate scenario, some reforms
occur; and in the Advanced scenario "a nationwide sense of
urgency" motivates deeper reforms.[5, pg. 3.3]

By the year 2020, the Moderate scenario sees emissions reduced by
9% to 10% compared with Business as Usual, and the country's
energy bill is 14% lower. The Advanced scenario sees emissions
23% to 32% lower and the energy bill 18% to 22% lower than the
Business as Usual forecast. In other words, even taking into
account the administrative costs of programs like Energy Star,
plus increased costs for research and development, the country
still saves money. And the gains calculated in the CEF study are
ONLY energy cost savings. They do not include other advantages of
more rational energy use, such as improved health from cleaner
air and reduced dependence on foreign oil.[5, pg. ES8]

To be cautious, the authors say some of the gains they describe
might be offset by "indirect" losses in other parts of the
economy, which they do not model in detail. Indirect losses could
conceivably equal direct gains, so instead of making a profit, we
might simply come out even.[5, pgs. 1.40-1.41] O n the other
hand, a recent analysis of the CEF scenarios by the International
Project for Sustainable Energy Paths (IPSEP) concludes that when
we factor in broader economic patterns, the potential gains look
substantially larger, not smaller.[6]

The CEF scenarios are not designed to get the U.S. all the way to
its Kyoto target of reducing emissions to 7% below 1990 levels by
the period 2008 to 2012. But they make it clear that for every
day we delay taking steps toward that target, we are losing

One way to save a bundle would be to stop subsidizing the fossil
fuel industry. A report by Friends of the Earth (FoE) points out
that taxpayers currently provide billions of dollars worth of
unnecessary support to polluting industries each year.[7] This
money could be given back to taxpayers, or redirected to support
clean energy projects and job training for workers leaving the
coal industry.[8]

When U.S. negotiators try to delay U.S. actions to reduce
emissions, they are not protecting the U.S. economy as a whole;
they are protecting a small group of our dirtiest industries.
Given the strong personal ties of both George W. Bush and Dick
Cheney to the oil industry, the U.S. role in follow-up meetings,
expected in May or June, could be even more obstructionist. We
shouldn't let our representatives get away with protecting oil
and coal companies at the expense of the rest of the economy, not
to mention the planet.


* Rachel Massey is a consultant to Environmental Research

[1] Andrew C. Revkin, "Treaty Talks Fail to Find Consensus in
Global Warming," NEW YORK TIMES November 26, 2000, pg. A1. Also
FORESTRY , August 1, 2000, available at

[2] Gregg Marland and others, "Global, Regional and National
Carbon Dioxide Emissions," and "Ranking of the World's Countries
by 1997 Carbon Dioxide Per Capita Emission Rates," provided
through Carbon Dioxide Information Analysis Center, "Trends: A
Compendium of Data on Global Change." Available at
http://cdiac.esd.ornl.gov/trends/emis/top97.cap and

EARTH'S THREATENED CLIMATE (Reading, Mass.: Addison-Wesley,
1997). ISBN 0-201-13295-8.

[4] Associated Press, "DaimlerChrysler Corp. Quits Global Climate
Coalition," January 7, 2000, available at http://www.enn.com/enn-

[5] Interlaboratory Working Group, SCENARIOS FOR A CLEAN ENERGY
FUTURE (Oak Ridge, Tenn.: Oak Ridge National Laboratory and
Berkeley, Calif.: Lawrence Berkeley National Laboratory, ORNL/-CON-476
and LBNL-44029, November 2000) Available at

WITH NO REGRETS (El Cerrito, Calif.: International Project for
Sustainable Energy Paths, November 2000). Available at
http://www.ipsep.org. Click on "Latest Report."

[7] Friends of the Earth and others, PAYING FOR POLLUTION
(Washington, D.C.: Friends of the Earth, 2000). ISBN
0-913-890-82-0. Available at http://www.foe.org/eco/payingforpollution

[8] See Ross Gelbspan, "Opportunity in the Climate Crisis,"
BOSTON GLOBE November 19, 2000, pg. C8.

Thanks to Barbara Haya of the Energy and Resources Group,
University of California at Berkeley, for help developing several
ideas presented in this issue.
