[BETA] Fortnightly

Russia resurrects the Kyoto Protocol and the prospect of either mandatory CO ² emissions cuts for U.S. utilities, or the start of a global trade war.

In June 2001, the Bush administration withdrew an earlier campaign pledge to support the Kyoto Protocol, claiming that the treaty was fatally flawed in not requiring China and India to reduce carbon dioxide (CO ₂) emissions and that the science underpinning the treaty was not yet definitive enough to justify the costs of compliance. ¹

The underlying assumption of the administration's decision not to ratify the Kyoto Protocol and to oppose any regulatory efforts to curb U.S. greenhouse gas emissions ² is that the costs to the American economy can be avoided even as some of America's largest trading partners incur the pain of greenhouse gas emissions controls. Regardless of whether one agrees with Bush administration policy on Kyoto, the underlying assumption that America can avoid the costs of Kyoto is flawed. Even if America remains on the sidelines, it is not likely to avoid the costs associated with the global effort to reduce CO ₂ emissions, because it is not in the self-interest of America's trading partners, namely the European Union, to allow the United States to enjoy the competitive advantage of avoided costs of CO ₂ emissions controls.

The Growing Alliance Between the EU and Russia

Until very recently the prospects for Russian ratification of the Protocol were poor. As recently as May 19, 2004, Andrey Illarionov, Economic Adviser to Russian President Putin, told the BBC that Russia would never ratify the treaty because it "does huge economic, political, social and ecological damage to the Russian Federation." However, with Russia now set to ratify Kyoto by the next meeting of the Conference of Parties in December 2004 in Buenos Aires, Kyoto will be an enforceable international treaty with more than 122 signatories. The abrupt shift in Russia's attitude toward Kyoto suggests that Mr. Illiarionov's prior statements were calculated merely to extract additional concessions from the EU in its talks on World Trade Organization (WTO) admission.

In any case, it should come as no surprise that Russia is set to ratify the Kyoto Protocol in exchange for EU backing in its WTO bid. A convergence of EU and Russian strategic interests has been a long time coming since the U.S. became the world's only "superpower." Growing EU-Russian ties are a logical development in the complex relationship of global warming, trade, and security.

The EU-Russian agreement is logical because it achieves both parties' strategic interests. For Russia, it brings closer the prospect of WTO membership, which the Russian Federation has sought since 1993 to secure the benefits of the multi-lateral trading system, namely Most Favored Nation status (MFN). It also provides Russia with access to EU capital to modernize its aging industrial base.

For the EU, the agreement achieves several strategic aims that will make it more competitive with the United States in a CO ₂-constrained global economy. Of paramount concern to the EU, securing Russia's ratification of Kyoto ensures that the treaty will