Kyoto Economics: The Costs and Follies of Eco-Energy Planning

Full Briefing available in PDF format.


If ratified and implemented, the Kyoto Protocol would inaugurate an era of international eco-energy planning. Under UN auspices, industrial nations would cooperate to “decarbonize” their economies. Kyoto itself would have little effect on atmospheric levels of the greenhouse gases alleged to cause global warming. But supporters hope Kyoto will be the first of many agreements restricting mankind’s use of fossil energy.

There’s just one small problem. According to the prestigious International Energy Agency, world energy demand is expected to grow by 65 percent between 1995 and 2020, and fossil fuels are expected to meet 95 percent of that additional demand. During the initial 2008-2012 Kyoto compliance period and beyond, fossil energy will become more important to the wealth of nations, not less. Kyoto conflicts with one of the broadest and deepest trends in the global economy.

In the lecture reproduced below, technology analyst Mark Mills reveals that the Kyoto crusade is very much a case of deja vu all over again. Many of the same people and organizations that today warn of an impending climate catastrophe, warned in the 70s and 80s of imminent energy shortages and oil depletion. Their earlier predictions flopped. Far from the earth running out of oil by the year 2000, proven reserves are at record levels; far from topping $100 a barrel, petroleum prices fell to under $17 a barrel. Now as then, the gloomy forecasts are based on computer models. The big difference is that whereas oil depletion was supposed to occur in 20 years, catastrophic warming is supposed to occur in 50 or 100 years. But, asks Mills, why should we trust the 100-year forecasts of those whose 20-year forecasts were so spectacularly wrong?

Mills also notes that today’s global warming policies are a replay of 1970s “energy crisis” policies. Now as then, “saving the planet” means enacting energy efficiency and fuel economy standards, mass transit programs, energy taxes or rationing, and subsidies for wind and solar power. Whatever the crisis du jour whether the problem is suppose to be a world running out of oil or a world a wash in fossil fuels, the “solutions” remain the same.

The 70s’ regulatory assault on America the “fuelish” produced gas lines, stagflation, and “malaise.” Kyoto’s costs would go much beyond higher fuel and energy prices, Mills cautions. Regulating carbon dioxide would require an enormous bureaucracy and impose significant legal and paperwork burdens on over 1 million small firms.

Would federal investment in renewable energy technologies make Kyoto feasible and affordable? Not even remotely, says Mills. Just to meet 30% of the expected growth in U.S. electricity demand over the next 20 years, wind and solar power would have to expand output 37,000-fold! No combination of tax preferences, outright subsidies, or Apollo-style R&D programs could accomplish such a miracle. Kyoto can’t be “done smart.”

Marlo Lewis, Jr.Vice President for Policy & Coalitions