Less costly views of climate pact

Keep your eye on the climate, but your hand on your wallet.

That's the attitude the Bush administration takes in rejecting the Kyoto climate treaty: It will cost American jobs, causing as much as a 2 percent drop in US economic output over the next decade.

But a series of studies in the US, Europe, and Japan released in recent days suggests that if the Kyoto guidelines are implemented, the US and other industrial nations are likely to see only a slight decline of as little as 0.15 percent, or a modest economic boost of as much as 1 percent.

The studies may breathe new life into a global-emissions reduction plan that is in trouble without US participation. The US alone accounts for 25 percent of the world's carbon emissions.

How could such divergent conclusions be reached about Kyoto's impact?

Until now, "the economic debate has not been conducted with a full deck of cards," says Florentin Krause, director of the International Project for Sustainable Energy Paths and a participant in the Intergovernmental Panel on Climate Change (IPCC), a UN working group looking at the economics of climate change.

Dr. Krause, along with Stephen DeCanio, a senior staff economist on the President's Council of Economic Advisers under President Reagan, have tried to gauge the impact of the Kyoto accord on the US economy and on its international trade position.

They find that while some sectors, such as the coal industry, would be seriously affected, the US economy as a whole stands to gain from ratifying the protocol. They arrived at this conclusion by altering five widely cited federal and university economic simulations so that the models take advantage of the full range of approaches the IPCC recommended to soften Kyoto's potential economic blow.

Until now, Krause says, each study analyzed the impact of Kyoto and assumed the US adopts some of IPCC recommendations, but no study shows the effect of adopting all of the approaches. These include a carbon-trading scheme within the US, continued voluntary energy conservation, efficiency, and technology R&D programs, using the revenue from domestic carbon trading to offset cuts in taxes, and participating in international carbon-trading markets.

When these approaches are fully used to offset the cost of implementation in the five economic models, the US economy shows a 0.5 percent to 1 percent gain in gross domestic product, instead of ranging from 0.09 percent growth to a 4 percent drop. President Bush's Cabinet-level task force cited a projected 1 percent to 2 percent drop in GDP in its criticism of the protocol's effect on the US economy.

The new results land in the same ballpark as those the Clinton administration derived when it analyzed the effect of implementing Kyoto, says Ian Bowles, a research fellow at Harvard University's Kennedy School of Government and a top member of Mr. Clinton's negotiating team sent to The Hague last November.

"Our models were pretty brittle," he concedes. "They couldn't factor in technological innovation over time." Overall, the Clinton administration came up with an implementation price tag of about $20 billion a year, about one-third smaller than the annual cost of implementing the Clean Air Act, he says.

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