All Pain and No Gain

All Pain and No Gain
November 1, 1998



Saying the Kyoto Protocol on global warming is “all pain and no gain,” the chairman of a key congressional subcommittee warned that the yet-to-be ratified treaty “could significantly harm our economy and standard of living.”

Republican Congressman David McIntosh of Indiana made the charge before the House Government Reform and Oversight Committee’s subcommittee on national economic growth, natural resources, and regulatory affairs. Putting aside their usual differences, representatives from business and labor echoed McIntosh’s concern that the treaty would be detrimental to the interests of ordinary Americans.

The Kyoto Protocol mandates the United States to reduce greenhouse gas emissions 7 percent below 1990 levels within the time frame 2008 to 2012--a reduction of about 550 million tons. “Even if we stopped operating every car, truck, boat, train, and airplane in this country,” McIntosh told his subcommittee before Congress adjourned, “the energy savings would not be enough to meet the requirements of the Protocol.”

Chairman McIntosh took issue with White House economic adviser Janet Yellen, who on may 19 assured his subcommittee that the costs to Americans of complying with the Kyoto Protocol would be “modest,” and Yellen asserted that the treaty would likely have little impact on US trade competitiveness or US jobs.

As McIntosh noted, however, those optimistic assumptions are at odds with calculations made by other economists, including Mary Novak of WEFA Inc., who testified before his panel in April that the Kyoto target for the US could not be met without significant increases in energy prices. Novak predicted that the Kyoto Protocol would result in a 3.2 percent decline in Gross Domestic Product, or $300 billion. McIntosh also pointed to a study by Data Resources International Inc. which concluded that even with the use of flexibility mechanisms to achieve emission reduction commitments, the US could expect to lose between 1.1 and 1.6 million jobs for the period ending in 2012.

Those fears were echoed by numerous witnesses before McIntosh’s committee. Noting that the Kyoto Protocol will reduce US energy use by one-third within a decade, Dean Kleckner of the American Farm Bureau Federation warned that the US will be forced to implement highly expensive measures, including taxes, regulations, and mandates, to achieve the Kyoto goals. For agriculture, he said, this could mean new taxes on fuel and fertilizer, mandated mileage standards for light trucks and other motor vehicles, and limits on the number of livestock per acre.

Paul Wilhelm of the U.S. Steel Group of USX Corp. and George Harad of Boise Cascade Corp. both slammed the treaty’s arbitrary time frame, which they said ignores technology development and capital investment timetables essential to the well being of their respective industries, steel and forest products. Wilhelm added that the economic crisis gripping Russia and Asia is already causing those countries to increase exports to unprecedented levels in the US market, a trend likely to accelerate once the Kyoto Protocol starts slowing down the US steel industry.

Yet, despite the enormous price the US would have to pay in complying with the treaty, the Kyoto Protocol would accomplish almost nothing environmentally, the witnesses agreed. They pointed out that developing countries, many of which are major emitters of greenhouse gases--China, India, Brazil, Mexico, and South Korea, for example--are completely exempt from the treaty’s mandates. In fact, they noted, the treaty will result in greater emissions from developing countries by giving them a competitive advantage and by shifting production from US factories to overseas facilities.

Worse yet, McIntosh said, those developing countries have inadequate environmental and health standards.

Pursuing the same theme, Ande Abbott of the Boilermakers Union projected that low-priced cement from China could well flood the US market, costing the American cement industry its competitive position and thousands of jobs without any offsetting environmental gains. His industry counterpart, Melvin Brekhus of Texas Instruments, agreed, saying that so long as developing countries are not a part of the treaty’s emission reduction scheme, “US cement companies practicing energy efficiency, employing US workers, with lower greenhouse gas emissions per ton of product than the overwhelming majority of their (foreign) competitors will be forced out of business. The environment, the US economy, and our national security will be the worse for it.”