https://online.wsj.com/article/SB119707332516717873.html

December 8, 2007

Hot Air in Bali

This week in Bali, Indonesia, delegates are considering climate policy after the Kyoto Protocol expires in 2012. We will witness a well-known human response to failure. Delegates will insist on doing more of what is not working: in this case more stringent emissions-reduction targets, and timetables involving more countries. A bigger and "better" Kyoto will be a bigger and worse failure.

The 1997 Kyoto Protocol was a symbolically important expression of concern about climate change. It sought to manipulate a basket of diverse greenhouse gases and all their sources. It required its signatories to show demonstrable progress toward a 5% emissions reduction over 1990 levels by 2005. It did so partly through an international cap-and-trade system, and also by establishing a Clean Development Mechanism that would enable big greenhouse-gas emitters to claim credit for reducing emissions which they secured by buying reductions elsewhere, in developing countries.

None of this has worked. Nevertheless, support for "Kyoto" has become the test by which individuals and nations demonstrate whether they are for or against the planet and its poor.

Kevin Rudd's Australian government just showed this. It will ratify the Protocol to show that it is serious about climate change. But Australia, like other countries already signed up to Kyoto, will produce no demonstrable reductions in emissions or even in anticipated emissions growth as a result of doing so.

Where emissions reductions have happened, notably in eastern Europe, re-unified Germany and the United Kingdom, they were the result of unrelated policies -- such as the collapse of communism, and with it the shutdown of highly inefficient and polluting industries, or Margaret Thatcher's smashing of union power by destroying the British coal industry, which meant the substitution of coal by cleaner North Sea gas.

Strip out Germany and the U.K. from the EU-15, and European emissions actually increased 10% between 1990 and 2005. In five countries, emissions rates rose more than in the U.S. Without the collapse of Russia and Ukraine, the Kyoto Protocol's "all signatory total" registers rises since 1990. Even in Japan, emission levels are rising. Kyoto's supporters blame nonsignatory governments, especially the U.S. and, (until last week) Australia.

But Kyoto was both a technical and a political failure. Fifteen years have been wasted. Kyoto could never succeed. Why? It was constructed by borrowing from other treaty regimes dealing with ozone, sulphur emissions and nuclear bombs -- all problems with straightforward, technical solutions. Climate change, on the other hand, is much more complex: It is a symptom of a particular development path whose globally interlaced supply system of fossil energy forms a complex nexus of human behavior, physical materials and energy technologies.

We understand how such path-dependent systems come into being, but no one has yet determined how to unlock them deliberately. Change, when it occurs, is usually initiated by unexpected factors. Target-driven solutions like Kyoto often end up producing unintended, negative consequences.

Examples of this are the many scams that have enabled profiteers to make big money from the Clean Development Mechanism, without materially reducing emissions or helping the world's poor. Such scams included the making of potent greenhouse gases and then destroying them, selling the credits for doing so at great profit.

Time is not on our side. Some 200,000 megawatts of power alone need to be replaced in Europe by 2020 and, lacking viable alternative base-load capacity (apart from nuclear power), the world will continue for another two decades installing carbon-intensive infrastructure with a further 50-year design life.

If climate change is as serious a threat to planetary well-being as we are told, we must take action now, especially as carbon emissions are increasing at record rates. It's time to ditch Kyoto-like mechanisms in favor of strategies that could actually reduce carbon emissions, instead of just producing hot air.

There can be no silver bullet. But we could assemble a portfolio of approaches that would move us in the right direction, even though we cannot predict which specific action will stimulate necessary fundamental change. This would include creating genuine emissions markets, evolved from the bottom up, some tax-signaling to the markets, more funding for research, and adaptation -- building resilience to climate variability and change.

Adaptation is central to any serious climate response strategy. We have to deal with the amount of change to which the climate system is already committed due to past emissions, as well as the increasing amount of people and property that are already in harm's way. Just as the Dutch built their dikes to survive in a hostile environment, the Bangladeshis need to be protected from storm surges and the Filipinos from flooding today.

For over a decade, adaptation was kept off the policy agenda by those who feared it would attenuate support for reducing emissions. Yet any reduction in greenhouse-gas concentrations would take decades. Adaptation has a faster response time cycle and a closer coupling with innovation and incentive structures. It thereby confers more protection more quickly on more people, especially the poor currently dependent on marginal ecosystems.

Top-down creation of a global carbon market to drive down carbon emissions was never going to revolutionize the world's energy system in time, much less build resilience to climate change. It cannot deliver the escape velocity required to get investment in technological innovation into orbit before mid-century. That calls for something else: wartime levels of public investment in energy technology.

Without major investment in research and development, the technology needed for a viable emissions-reduction strategy will not be available in time. The International Energy Agency predicts a doubling of global demand for energy from present levels in the next 25 years. Yet, as the IEA also documents, government budgets for energy R&D were slashed by 40% since 1980.

The good news is that the political stars are auspiciously aligned. In the U.S., voices as various as Al Gore and the American Enterprise Institute have supported increasing research investments in energy technologies. In 2006, the president of the U.K.'s Royal Society supported the idea that major public investment in R&D should be kick-started in research facilities like the U.S. National Laboratories by a new Manhattan Project of research into new and/or highly improved energy technologies.

It seems reasonable for the world's leading economies (and carbon emitters) to invest as much money in this challenge as they have in military R&D (currently $75 billion-$80 billion annually in the U.S.). This investment program must be designed to avoid government bureaucrats "picking winners" from among the candidate technologies, and "Manhattan II" does not need the agreement of 170 countries. The program would provide incentives, like R&D spinoffs and profits, for the emergent big emitters, China and India, to join the process.

What would be the best outcome from Bali? It would be a post-Kyoto regime that ditches universalism with respect to mitigation efforts: Fewer than 20 countries are responsible for about 80% of the world's emissions. It would make a serious commitment to technological innovation. And it would agree to spend as much time and money on adaptation as on mitigation.

Mr. Prins is director of the Mackinder Centre at the London School of Economics & Political Science. Mr. Rayner is director of the James Martin Institute at the University of Oxford.