Beyond Kyoto

European company Arcelor Mittal, the world's largest steelmaker, is a model of environmental care. Since 1990, the manufacturing juggernaut has reduced its carbon dioxide emissions 20 percent, exceeding European targets by two and half times.

Nevertheless, company leaders warn that restrictive government caps on greenhouse gases may soon force the closure of two large factories in France. The resulting dip in production from such a move would press Arcelor Mittal to import steel from far less efficient factories in the Third World, where CO2 emissions restrictions are not enforced.

Hardly an isolated incident, businesses throughout Europe are laying off employees, outsourcing production, and reining in innovation as a luxury no longer affordable. Michel Wurth, president of Arcelor Mittal France, calls the situation "absolutely ridiculous."

But European Union officials managed to avoid broadcasting such difficulties at a White House summit meeting April 30. Instead, German Chancellor and EU President Angela Merkel and European Commission President José Manuel Barroso were eager to highlight common ground with U.S. climate-change policy. They lauded President George W. Bush for taking the issue seriously-high praise for a man committed environmentalists are supposed to hate.

That conciliatory tone reflects a growing realization that Bush's refusal to adopt emissions restrictions is not the vice once imagined. In past years, EU officials chastised Bush for his stubborn rejection of the Kyoto Protocol, a pact adopted by 169 nations to impose mandatory reductions of CO2 emissions. This year, Merkel and Barroso made no mention of the 10-year-old treaty, a stark reversal that underscores a momentous shift in the debate: As Kyoto sputters, stalls, and ultimately fails, the Bush approach proves increasingly credible.

Substantial disagreements remain over how best to move forward in tackling greenhouse gas emissions, which many scientists believe are to blame for the planet's recent warming trend. But many policy experts now recognize that the Bush administration's strategy to develop new carbon-cutting technologies presents the only real-world approach to reducing emissions. Absent such technologies, hard caps like Kyoto amount to nothing more than empty green stamps for naïve or disingenuous politicians.

Kyoto-supporting nations are learning that lesson the hard way. The Kyoto accord has wrought substantial economic harm for little environmental gain. Its targets have proved unfeasible, its costs debilitating.

Merkel has witnessed the fiasco firsthand in Germany, where initial Kyoto cheerleading has morphed into nationwide grumbling. The country now stands to pay up to $5 billion in fines when it fails to meet emissions goals by next year. Meanwhile, industry leaders are hemorrhaging funds for a cause that holds little to no chance of success. Those companies threaten to retract investments in new energy sources.

Such difficulties threaten Germany's sizable automotive industry, which employs about 15 percent of the country's manufacturing workforce. New regulations from the European Commission require carmakers to reengineer their high-end models for much lower emission levels by 2012. That burden will likely drive up sticker prices, reduce sales, and provoke layoffs.

Similar problems have sprung up throughout Europe. Beyond Arcelor Mittal, other companies, such as Spanish steelmaker Acernex and Dutch silicon carbide manufacturer Kollo Holding, are choking on the continent's skyrocketing cost of electricity. Acernex has transported production overseas and closed several factories. Kollo Holding must shut down its plant for hours each day and has lost customers to competitors in China.

Despite such economic costs, EU emissions levels continue to rise, illustrating Kyoto's failure on both economic and environmental fronts. In the United Kingdom last year, CO2 emissions from power plants, automobiles, and homes increased 6.4 million tons above 2005 levels-pushing total UK emissions to their highest point since Britain ratified Kyoto a decade ago. The embarrassed government, which has already abandoned its aim of a 20 percent reduction by 2010, now must reconsider whether its proposed 30 percent drop by 2020 is realistic.

Many British environmentalists blame politicians for the failures, but recent polling throughout the EU suggests public opinion has turned against overly optimistic Kyoto-like requirements. Benny Peiser, a researcher at Liverpool John Moores University in the UK, expects that greater economic costs will further unravel the continent's once strong green consensus. He suggests that Europe's stubborn unwillingness to admit failure may be the only force preventing an all-out abandonment of Kyoto: "A political failure of the Kyoto process would, without a shadow of doubt, cause incalculable trauma to European pride and standing."

In desperation to meet their targets, European nations adopted a system of carbon-trading two years ago, whereby emissions credits are bought and sold in an international market. The system intends to generate economic incentives for companies to reduce their carbon footprints. But, so far, the artificial market has set the price so low for credits that large-scale emitters can purchase as many as they need without significant financial burden.

The result: Kyoto's goal of reducing the combined emissions of EU nations by 8 percent from 1990 levels by 2012 is highly improbable. In fact, the numbers are likely to continue creeping upward.

Outside Europe, a growing chorus of Kyoto dissent is joining the once isolated Bush administration. Canadian environment minister John Baird announced new emissions targets last month that effectively toss Kyoto to the policy scrap heap. The new standards call for reductions per unit of production, a measuring system that may actually allow emissions to rise amid a growing economy.

Canadian Green Party leader Elizabeth May was furious, describing such backing down from Kyoto as "worse than Neville Chamberlain's appeasement of the Nazis." But the plan won't appease economic pain, costing Canada an estimated $7 billion annually.

Such high costs have prompted nations such as China, India, Australia, and Turkey to join the United States in avoiding Kyoto's top-down carbon-cutting method. To the surprise of many Europeans, the U.S. approach of technology investment and voluntary emissions reductions has proved more effective than Kyoto. Figures from the International Energy Agency (IEA) show that U.S. CO2 emissions from fuel combustion grew 1.7 percent from 2000 to 2004 while European Union emissions of the same kind increased 5 percent.

Furthermore, the U.S. approach presents the only realistic possibility for including the developing economies of China and India in global efforts to reduce emissions. China recently reiterated its opposition to any international pact that would stifle its use of cheap energy to grow its economy. Chinese officials argue that G8 nations got rich by ignoring environmental concerns and that China is due that same opportunity.

If new technologies emerge to reduce emissions without substantially increasing energy costs, China, India, and other developing nations would be able to participate. Such inclusion is critical to global emissions strategies given new estimates from the IEA that China will pass the United States as the world's top emitter of greenhouse gases before the end of the year.

In a meeting last month with Japanese Prime Minister Shinzo Abe, President Bush expressed his desire that Japan contribute its technological capabilities and expertise to the hunt for new carbon-cutting technologies. The leaders discussed the further development and construction of nuclear power plants, an existing technology that could drastically reduce CO2 emissions.

If Bush has his way, such technology-centered discussions will dominate the global dialogue post-Kyoto, elbowing out talk of top-down emissions caps or carbon-trading schemes. The Bush administration wants nations to operate independently in the drive to cut emissions, an affront to the UN's globalist approach.

New strategies will be fodder for the G8 summit next month in Germany, an opportunity for the fallout from Kyoto to take center stage-and for the proven detrimental treaty to rest in peace.