Editorials and Opinion Pieces

KYOTO HARMONIZATION LOOMS IN JOHANNESBURG AND THE STATES

BY: Emily Sedgwick and Daniel Clifton
DATE: August 27, 2002
WORD COUNT: 798

It should come as no surprise that the European Union is leading the effort to harmonize global energy policy in Johannesburg this week. But behind the scenes, eleven states are mobilizing to enact their own Kyoto Protocols despite unanimous Congressional and Presidential rejection of EU Kyoto harmonization efforts.

Concurrent to the Johannesburg Summit, the 27th annual New England Governors and Eastern Canadian Premiers (NEG/ECP) meeting will convene in Quebec City to discuss the implementation of Kyoto standards by northeastern elected officials. Despite a policy of opposition to Kyoto by the U.S. federal government, rogue state leaders in the northeast and elsewhere are adhering to treaties with Canadian provinces and forging ahead on the taxpayer's dime.

All six New England Governors will participate in the NEG/ECP conference, and four New England states have already developed Kyoto-style climate action plans. New Hampshire was the first state in the nation to pass legislation enacting CO2 emissions reductions similar to Kyoto, and Massachusetts was the first to issue regulations along the same lines - all within the last year.

Eleven states - Alaska, California, Connecticut, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, and Vermont - support Kyoto-like emissions standards because these states collectively generate only 16% of their energy from coal, compared to an average of 59% for the other 39 states. According to Marlo Lewis of the Competitive Enterprise Institute, the emissions standards recommended by NEG/ECP would increase electricity prices 33% and eliminate 55% of electricity generated from coal. If adopted and enforced, the new standards will force businesses and residents out of states with relatively productive and efficient policies and into the eleven inefficient cartel states seeking to harmonize interstate energy policy.

These eleven states are some of the worst for business at present, and residents pay more than 35% of all state and local taxes combined, nationwide. Controlling for population differences, these eleven states levy an 18% higher tax burden per resident relative to the national average. The eleven states seeking to harmonize U.S. energy policy levy a per-person tax burden of $3,921, on average, compared to $3,054 for the remaining 39 states. The emissions racket supported by these eleven high-tax states will drive population and businesses into their tax jurisdictions, and consequently drive up revenue.

Meanwhile, the worst possible outcome of Johannesburg would be the creation of a World Environmental Organization, such as the European Union apparently prefers, and to enact this year's five-part agenda that includes ratifying the Kyoto Protocol and other environmental treaties and increasing aid to developing nations. Undersecretary for Global Affairs Paula Dobriansky and others have argued correctly that creating additional treaties and bureaucracies fails to address the shortcomings of existing treaties and bureaucracies. Secretary of the Treasury Paul O'Neil earlier this summer outright rejected the tax harmonization proposals backed by the same emissions harmonization EU network.

According to Margot Wallstrom, the European Union Commissioner for the Environment, Kyoto "is about international relations, this is about economy, about trying to create a level playing field." For U.S. states collaborating with Canadian provinces and the 100 heads of state participating in the Johannesburg Summit this week, the issue is harmonization on a massive scale.

Jon Reisman of the University of Maine-Machias compared the Kyoto Protocol CO2 emissions standards to the NEG/ECP standards and discovered remarkable, if unsurprising, similarities. The NEG/ECP model would reduce greenhouse gas emissions to 1990 levels by 2010 and reduce emissions to 10% below 1990 levels by 2020. In addition, NEG/ECP recommends establishing "regional, standardized greenhouse gas emissions inventory" and creating a "regional emissions registry and trading mechanism," much like Kyoto.

The Kyoto Protocol calls for the U.S. to reduce emissions of greenhouse gases to 7% below their 1990 levels by 2012. If the U.S. complies, the Department of Energy estimates that gross domestic product would fall by half.

The data clearly document that the implementation of Kyoto at the international level would have severe economic effects on the U.S. and world economies, while providing minimal benefits to the environment. Less attention has focused on certain states seeking to implement their own Kyoto treaties. Yet, the end result is identical for states in the U.S. that seek to implement Kyoto as for high tax, high regulation countries seeking to do the same: raise the bar to a level playing field and revel in short-term gains.

Kyoto protocols at the international and U.S. state levels will not protect the environment so much as they will reduce the competitiveness of distinct tax jurisdictions. High taxes and tedious regulations at both international and interstate levels have made these jurisdictions less competitive. Rather than working to reduce their own tax and regulatory burdens, these countries and states would downgrade their competitors by imposing their complicated tax and regulatory structures on everyone else.

Emily Sedgwick is state projects manager and Daniel Clifton is federal affairs manager at Americans for Tax Reform.