Remember Kyoto?

The Kyoto Protocol (under the auspices of the United Nations Framework Convention on Climate Change, UNFCCC) set binding obligations on its signatories to reduce their production of greenhouse gases (GHGs) across each nation’s economy. The goal of the UNFCCC is the “stablisation of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system.” The Protocol, adopted on Dec. 11, 1997, and effective Feb. 18, 2005, with Russia signing the Protocol, has been ratified by 191 states—189 UN members and the Cook Islands and Niue—plus the European Union (EU). The U.S. has signed but never ratified the Protocol.

Protocol Requires GHG Reductions

Although the calculation methods are complicated, the Protocol requires the industrialized nations (Annex I nations) to reduce their annual GHG emissions an average of 4.2% for the period of 2008–2012, relative to the 1990 base year. The U.S. goal required a 6% reduction in GHGs relative to 1990 levels. On average, Annex I countries are projecting an average annual reduction of 16% over that period, reductions well above the compliance standard. However, the Annex I countries today produce only about a third of global GHG emissions; China and India produce a third, and the remaining nations account for the final third.

Trillions of dollars have been spent by Annex I countries to comply with the Protocol, yet the slowdown of GHG emissions has been miniscule: Global GHG emissions have increased 50% since 1990, 3% in 2011 alone, according to EU data. The return on investment will decrease further in coming years as the easy projects that provide the greatest return have been completed and the reductions are on a smaller contribution. Compare the data: In 1990 the Protocol’s Annex I nations accounted for 68% of GHG emissions. By the end of 2011 that percentage had dropped to 55%, and the percentage will continue to drop in the future.

Digging into the number further reveals that the Annex I GHG reductions were likely caused by external events, such as a disquieted global economy and massive fuel switching to natural gas. For example, U.S. energy-related CO2 emissions fell 2.4% in 2011 (compared to 2010) alone, dipping to 1992 levels. The U.S. Energy Information Administration suggests that “several factors combined to produce this drop, including slower economic growth, weather, and changes in the prices of fuels, which played out differently in major economic sectors. Energy-related carbon dioxide emissions have declined in the United States in four out of the last six years.” In other words, U.S. CO2 emissions from the energy sector tanked because people were buying less electricity and those making electricity used a cheaper fuel source that produces half the CO2 emissions compared to coal per megawatt-hour produced, neither being the result of the government’s attempts at central planning the industry.

Great Expectations

Apologists maintain that the Kyoto Protocol was never expected to have much effect on reducing GHG emissions but was designed more as a “trial run” leading up to much deeper cuts in future emissions. In other words, let’s entice nations to get a little “skin in the game” before introducing the “necessary” enormous GHG reductions thought necessary.

The new treaty includes a global cap-and-trade system that also requires participation of developing countries. It’s hard to imagine China remaining classified as a “developing country” much longer, but expect China to play that card as part of the negotiation process. Don’t forget that Russia (No. 4 emitter) was enticed to sign the Protocol in 2008 (thus making it effective) with very generous emission limits. China (No. 1) and India (No. 3) were not classified as Annex I countries, as was the U.S. (No. 2).

At the end of November, the annual United Nations climate change talks, COP-18, will meet in Doha, Qatar, to begin working on the follow-on to the Kyoto Protocol that is planned to be signed by 2015 and go into effect in 2020. This time, China, India, and other developing countries are being targeted for firm commitments to reduce GHGs. In the meantime, Kyoto 2, essentially an intermediate continuation treaty, takes effect on January 1, 2013, and continues until a new treaty takes effect.

The potential of achieving a consensus agreement, much less Kyoto 2, is unlikely:

  • The EU has met its 2020 goals eight years early and now wants to carry forward “credits” against a new treaty. Recall that the baseline date for Kyoto was carefully chosen (1990): It was the year after the fall of communism and the reunification of Germany—shutting down Eastern European plants was a quick and easy way to bank many emissions credits, overstating the actual emissions reductions.
  • China and India refused to agree to hard emissions reduction goals at the climate change conference last December in Durban, and their position hasn’t publically changed. World attention to China as the largest emitter may only solidify its hardline position.
  • Japan and Russia have refused to sign Kyoto 2. In 2010, Russia was 34% below 1990 levels, far below Moscow’s target under Kyoto of not exceeding the 1990 level in the years 2008–12. With nuclear power crippled in Japan, meeting any emission reductions doesn’t seem probable in the near future.
  • In December 2011, Canada withdrew from the Protocol to avoid large penalties for failing to meet its GHG reduction goals, and it is refusing to sign Kyoto 2.
  • The EU’s emissions trading scheme (ETS) is in shambles because a larger-than-expected drop in CO2 emissions has produced a surplus of more than two billion allowances in 2013 at rock-bottom prices. EU commissioners are considering changing the ETS rules to allow removal of a large block of allowances next year to reinvigorate the failed carbon control system.
  • The U.S. has rejected a carbon cap-and-trade system multiple times (though California recently initiated one), although there is quiet talk of a carbon tax, more as a revenue producer than as a carbon emissions reduction scheme (see carbon tax commentary this issue). The U.S. has rejected Kyoto 2; instead, it is pushing for a nonbinding agreement.
  • Only Australia, the EU, Ukraine, and a handful of developing countries have signed on to Kyoto 2, accounting for around 15% of global GHG emissions. New Zealand has already said it will not follow Australia.

Look at the Data

My data-driven view reveals a similar result, although for different reasons. U.S. consumption of coal is dropping (around one billion tons of coal in 2010) while China burned an estimated 3.7 billion tons (the last data available). The U.S. is decommissioning coal plants, yet China is expected to add as much as 240 GW and India about 70 GW over the next four years—equivalent to the current U.S. installed capacity built over a period of 50 years. Global demand for coal for power generation is expected to grow about 12% through 2016 with China and India taking the largest portion for electricity generation. Negotiating a binding agreement with China or India for substantive reductions of carbon emissions will damage the economy of both countries, where economic development trumps all.

I believe Russia is unlikely to agree to Kyoto 2 or the follow-on agreement because the deal that enticed its signing the Protocol in 2008 isn’t on the table today. Also, Russia’s coal-fired emissions are to a large degree the result of profitable exporting of natural gas to the EU instead of burning it domestically. And the EU will clamor for credit for prior GHG reductions so it can burn some coal in the future instead of the expensive Russian gas, which Russia likes to use as a political tool, usually during the winter months.

That leaves the U.S. and a Senate that can’t muster a two-thirds vote (required to ratify a treaty) even to adjourn early. If the top five emitters can’t agree on specific caps with penalties, then any new agreement remains “best efforts.”

Here’s my prediction: The only tangible result from the Qatar talks will be negotiators finalizing vacation plans for the summer UNFCCC conference in Bangkok.

Dr. Robert Peltier, PE is COAL POWER’s editor-in-chief.

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