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News Analysis

With a nascent emissions market, U.S. companies may not be so grateful they're out of the club.
Fortnightly Magazine - February 15 2002

in Kyoto, "there's a risk that easier, cheaper projects will be gone" by the time the country joins any worldwide emissions reduction agreement, says Milmoe. There is a further risk that at least some U.S. energy companies will lack necessary skills, knowledge, and patents to compete effectively in such a changed market, according to Alex Farrell, executive director of the Carnegie Mellon Electricity Industry Center.

Both Palmisano and Farrell raise the specter of potential World Trade Organization (WTO) actions against the United States, since it is not bound by Kyoto emissions standards. Subsidies are frowned on generally by the WTO, Palmisano notes. Under treaties such as NAFTA, the absence of strong environmental standards is considered a type of subsidy. If Kyoto embeds greenhouse costs, a.k.a. carbon costs, and those carbon costs consequently add to the price of cars via increased electricity costs to produce tires and steel, there may be an argument that not adhering to Kyoto is an indirect government subsidy of U.S. automakers, he explains.

The year 2001 went down as the warmest year ever recorded. Global climate change is an issue that's here to stay-the main challenge appears to be how, not whether, to implement changes that will slow or reverse global warming in the coming decades. U.S. energy companies may not need to comply with the Kyoto protocol, but it would profit them to keep an eye on their counterparts abroad who do have to meet emissions standards. Otherwise, they may find themselves lead-footed when they need to get quickly into the global emissions marketplace.

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