Europe, Japan Face $46 Billion Global-Warming Penalty

Wednesday, Nov 19, 2008

Twenty nations including Japan, Italy and Australia may be releasing more greenhouse-gas pollution than they agreed to under the Kyoto treaty to curb global warming.

They're failing to rein in carbon-dioxide output enough to meet their pledges signed in 1997 in Kyoto, Japan, according to reports by individual countries. As a penalty for missing their goals under the treaty, the nations are required to buy permits for every excess ton of the heat-trapping gas released through 2012. That will total 2.3 billion permits for 20 nations, New Carbon Finance, a research firm in London, has estimated.

The potential penalty, 36 billion euros ($46 billion) for the group based on current permit prices, and the fact that only a minority of 37 Kyoto signatory nations may meet their pledges bodes poorly for international efforts to limit global warming.

``This shows there's a lot more interest in promising stuff than actually keeping those promises,'' Bjorn Lomborg, author of the book ``The Skeptical Environmentalist,'' said in a telephone interview from Copenhagen. ``What you should be doing is investing in research and development to make much more dramatic emissions cuts much cheaper in the future.''

In three days the UN will publish a report on emissions data for 2006, compiling figures from national reports already released. Analysts have been using that data to estimate emissions for Kyoto's 2008-2012 measurement period because a nation's CO2 output from factories, power plants and vehicles varies little year to year. It takes about 10 years, for example, to build a low-emissions nuclear plant to replace several dirtier coal-fired power stations.

Cost-Sharing

Kyoto's binding targets are a cornerstone in the international effort to limit global warming. The U.S. is the only developed nation not to ratify the pact.

Under the treaty, countries that are unable to meet targets must buy permits from nations that have a surplus. The government must pay the bill, and some such as Italy and Spain are requiring industry to share in the costs.

Alternatively nations may buy credits representing greenhouse-gas reductions made abroad through investments in clean-energy and forestry projects. That comes at a cost. UN- Certified Emission Reduction credits, or CERs, which double as a Kyoto permit, today traded at 15.80 euros for a 2008 contract.

Source: Bloomberg