WASHINGTON, Oct. 9 (UPI) -- Russian President Vladimir Putin's announcement last week that his nation would not be ratifying the Kyoto protocol any time soon has sent environmental alarmists into shock and denial. They appear to have decided that this is merely a bargaining ploy by the Russians, looking for more concessions -- bribes, in other words -- from the West before the inevitable ratification. They could not be more wrong. It makes no economic sense for Russia to ratify Kyoto. The president's comments pay merely lip service to a European obsession. President Putin is no more likely to ratify Kyoto than is President Bush.
The Kyoto-backers' case that the treaty benefits Russia has always rested on flimsy foundations. Kyoto is based on the idea that certain nations would agree to reduce their emissions of "greenhouse" gases (most notably, carbon dioxide) below the levels they were at in 1990. Those who reduce them more than the target requires, however, would be able to sell credits for the extra reductions to countries unable to meet their targets. The baseline year of 1990 is important, because at that time the smokestack industries of the old communist regimes were still belching out vast amounts of carbon into the atmosphere. Since the collapse of the Soviet Union, countries like Russia have closed down those industries, thus putting them well below the Kyoto targets. The theory therefore goes that Russia stands to benefit immensely from selling credits to other counties unable to meet their targets.
That makes economic sense, at first sight. However, there are two major problems with the scenario. First, the countries that Russia would stand to gain the most from by selling credits to are not covered by the treaty. The United States has pulled out of the treaty, and so won't be buying any credits. China, on the other hand, which already emits more carbon than Russia, is classified as a developing nation and therefore is exempt from the process. Russia's main market for credits will be the nations of Europe. Yet there is so little demand for credits there that the continent's own trading scheme has already seen prices for carbon dioxide emission permits open at 10 euros, rather than the initially predicted range of 20-33 euros.
Second, even if Russia was able to bring in a great deal of money from the scheme, the situation assumes that Russia would need to continue to hold her emissions at the current low levels in order to bring in that money. This realistically rules out any chance of economic growth. President Putin's economic plan calls for Russia to double her gross domestic product by 2010, which would necessitate an increase in emissions so that they are four percent above 1990 levels. Far from selling credits, Russia would have to buy them herself. The Kyoto protocol is therefore incompatible with the president's economic plan to revive Russian fortunes.
This might not be an insurmountable obstacle if it were not the case that all the signs suggest that the president's plan is working. Russian industrial output has grown by five percent in the last year and GDP by seven percent. The trends are consistently upwards. This is a much more attractive alternative to turning the country into a national economic rent-seeker, paid by western nations to suppress its economy in order to assuage their fears of climate change.
It is therefore not surprising that President Putin's chief economic adviser, Andrei Illarionov, has gone on record with the press in much more detail than his boss about the likelihood of Russian ratification. He told journalists at the Moscow Conference on Climate Change, "The words of President Putin cannot be interpreted as saying that Russia will ratify the Kyoto Protocol, but that it is just a matter of time. He never said that.... The president said that we are in the process of studying the Kyoto Protocol and all the consequences of it. That will take time. What decision will be taken remains to be seen."
He went on to explain the economic thinking behind Putin's announcement: "It's quite clear that the Russian economy is not going to stop at the amount of carbon dioxide emissions that we have today or that we shall have in 2012. That's why it is necessary to calculate the costs which will have to be balanced against any possible gains.... The United States and Australia have calculated that they cannot bear the economic consequences of ratifying the Kyoto Protocol. If they aren't rich enough to deal with those consequences, my question is whether Russia is much richer than the U. S. or Australia?"
These economic insights seem to have inspired the Russians to take a good hard look at the science behind the Kyoto protocol. Unsurprisingly to those who have studied the issue, they have found it to be flawed. As far as the Russians are concerned, the Kyoto protocol is based on bad science and is harmful to Russian economic interests. The Kyoto process is not flexible enough to accommodate such basic objections. That process has been struggling for life since European intransigence forced America out in 2000-2001. Last week, President Putin read it the last rites.
Iain Murray is a Senior Fellow at the Competitive Enterprise Institute, where he analyzes the international aspects of climate change.
