It is undeniable that the US plays the key role in any implementation of the Kyoto Protocol mechanisms. It is essential for US to participate in actions to reduce GHGs as a country with highest level of GHG emissions. The Kyoto Protocol requires ratification by developed countries representing at least 55 per cent of global GHG emissions to enter into force, and the US needs to represent 38 per cent. However, the US as the first industrialized country in the world to ratify the United Nations Framework Convention on Climate Change in 1992 appears likely to be the last developed country to ratify the Kyoto Protocol (Breidenich, 1998). The main reason and difficult reality that the US and the world face in carrying out the Kyoto Protocol is that most human-controlled GHG emissions are caused by the burning of fossil fuels such as coal, petroleum, and natural gas, and thus GHG emissions are directly result in a huge energy consumption. At the beginning, the problems of global warming that solved by ‘going on an energy diet’ have not been lost on the US energy sector – the petroleum, coal, electric utility, automobile, and relevant industries. The US as the world’s largest producer and consumer of energy and, correspondingly, the largest producer of GHGs due to its heavy reliance on fossil fuels to power its industrial, commercial, residential, and transportation sectors. The population of the US less than 5 per cent in the world, it occupies 22 per cent of global GDP, consumes almost 25 per cent of all global energy, and emits nearby 25 per cent of all global anthropogenic GHG emissions (Cameron & Zillman, 2001). The study shows the Energy Information Administration (EIA), an independent statistical and analytical agency in the U.S. Department of Energy, has estimated that meeting the U.S. targets under the Protocol will call for significant market adjustments (Cameron & Zillman, 2001):
Firstly, the reductions in CO2 emissions will result in between 18 and 77 percent less coal use than projected in the EIA Reference Case in 2010, particularly affecting electricity generation, and between 2 and 13 percent less petroleum use, mainly affecting transportation. Secondly, energy consumers will need to use between 2 and 12 percent more natural gas in 2010 and between 2 and 16 percent more renewable energy, and extend the operating life of existing nuclear units. Thirdly, to achieve these ends via market-based means, average delivered energy costs must be between 17 and 83 percent higher than estimated in 2010. Lastly, it is an uncertainty whether the amount prices will rise. It is not finalized accounting procedures and international trading rules for greenhouse gases. Under various pricing scenarios forecasting technological change and the relevant public response is an inexact science. The more urgent the need for domestic emission reductions, however, the more costly the adjustment process will be (Cameron & Zillman, 2001).
This study analyzed the impacts of the Protocol on U.S. energy use, prices, and the general economy in the 2008-2012 time frames. In order to reduce carbon emissions, EIA assumes that a "carbon price" is added to the price of delivered energy fuels based on their carbon content. For example, coal prices rise more than petroleum and natural gas prices; and the cost of generating electricity from non-carbon-emitting nuclear and renewable fuels is not increased due to the carbon price. Although electricity does not have the carbon price directly added to it, its price is increased due to the higher cost of fossil fuels used for generation. The price increases encourage a reduction in the use of energy services (heating, lighting, and travel, for example), the adoption of more energy-efficient equipment, and a shift to less carbon-intensive fuels. The carbon price reflects the amount fossil fuel prices in the U.S., adjusted for the carbon content of the fuel, must rise to achieve the removal of the last ton of carbon emissions that meets the carbon reduction target in each case. The differences in the cost of energy will affect the position for U.S. jobs, consumer prices, investment, technical change, and economic growth. Whenever use of a factor of production such as energy is restricted, economic performance falls for some period of time, the price of energy and other goods and services rises, and consumption and employment decline (Morlot, 1999). Therefore the various cases affect the national economy to varying degrees. In view of the economic profit, the US just agreed to lower their emission of greenhouse gases 7 per cent below 1990 levels.
Australia has played an active role in responding to evidence of climate change. It ratified the United Nations Framework Convention on Climate Change in December 1992 and signed the Kyoto Protocol on 29 April 1998. Whereas, as the US is thought unlikely to ratify the Protocol, Australian followed by the US also rejected to ratify the Kyoto agreement on Climate Change. In accordance with Australian Environment Minister Robert Hill that the Kyoto Protocol for reducing the greenhouse gas emissions is defunct because the United States will not ratify it. In addition, the US and Australian arguments demonstrate that implementing Kyoto would prove a major threat to jobs and national posterity. Moreover, the Australian Prime Minister John Howard has also indicated that ratifying the Kyoto Protocol would cost their jobs and damage their industry (Paltridge, 2000). Because energy resources are used to produce most goods and services, higher energy prices can affect the economy’s production potential. Since the energy crisis of the 1970s, economic research has led to a better understanding of the potential adverse economic consequences of rising real energy costs, in terms of both long-run equilibrium costs and short-run adjustment costs. Long-run equilibrium costs are associated with reducing reliance on energy in favor of other factors of production—including labor and capital, which become relatively cheaper as energy costs rise. Short-run adjustment costs, or business cycle costs, can arise when price increases disrupt capital or employment markets. Long-run costs are considered unavoidable. Short-run costs might be avoidable if price changes can be accurately anticipated or if appropriate compensatory monetary and fiscal policies can be implemented (Cameron & Zillman, 2001). In terms of these potential economic problems it is no doubt why American and Australian not ratified the Kyoto Protocol.
In conclusion, the US and Australian Governments failed to ratify the Kyoto Protocol mainly because of the influence of short- term business considerations. Since the Kyoto Protocol emphasizes the protection of the global warming and restriction on greenhouse gas emission, which consequently interferes with the industrial development.
References:
, C., Loschel, A. (2003), “Market power and hot air in international emissions trading: The impacts of US withdrawal from the Kyoto Protocol”, Applied Economics, Vol. 35, No. 6, pp. 651-655.
Breidenich, C. (1998), “Kyoto protocol to the United Nations framework convention on climate change”, American journal of international law, Vol. 92, No. 2, pp. 315-331.
Cameron, P.D. & Zillman, D. (2001), Kyoto: From Principles to Practice, Kluwer Law International, the Hague, the Netherlands.
Faure,M., Gupta, J. & Nentjes, A. (2003), Climate change and the Kyoto protocol : the role of institutions and instruments to control global change, Northampton, MA : Edward Elgar Pub.
Hunter, D., Salzman, J. & Zaelke, D. (2002). International environmental law and policy (2nd ed.) New York: Foundational Press.
Morlot, J. C. (1999), National climate policies and the Kyoto Protocol / Organisation for Economic Co-operation and Development, Paris: OECD.
Paltridge, G. (2000), “Limiting greenhouse warming: Is it worth the cost?”, Review - Institute of Public Affairs, Vol. 52, No. 4, pp.16-19.
