Frontlines

Moscow's ratification of the Kyoto protocol could pose problems for the United States.

It could mark the biggest bungle of the last two administrations-the decision to walk away from the Kyoto Protocol rather than stay and negotiate to U.S. advantage. No one thought Russia would sign and put the treaty in force. But now that Russia's ratification appears imminent, policy wonks in America are scrambling to assess the impact.

In our August issue, attorney Peter J. Fontaine laid out in stark detail what Russia's ratification could mean for energy prices, and how the World Trade Organization (WTO) could force the United States to comply (). And many other analysts now appear to agree, predicting that Kyoto's enactment could prove painful for the United States, owing largely to our discordant state and federal environmental rules.

Frustration with the current administration has caused some state regulators to go it alone on environmental policy. Some states in the last few years have cut their own deals with electric utilities on carbon emissions-deals that go out for years. Or they have developed mandatory portfolio standards for renewable energy, or have sponsored emissions trading regimes with neighboring states or countries, such as Canada.

However noble these efforts, they could undermine America's economic competitiveness. Utilities, for instance, may find themselves obliged to boost rates to pay for emissions reduction equipment forced upon them under the Kyoto plan. The affect of those increased energy costs, experts worry, could render U.S. businesses less competitive.

Evidently, at this point no one really knows how these state environmental programs will mesh with the Kyoto treaty. Only now are experts beginning to ask questions like, "Is New England too restrictive in its reduction of carbon emissions? Does Ohio need to be more restrictive?"

Conversely, others say that some state environmental programs may prove adequate for U.S. participation in a Kyoto plan. A greater problem, they say, may be those states that have not enacted any kind of program and are likely to see more of a dramatic shift in their rates.

All of this has led some to worry that in the absence of a comprehensive national plan, even more states may feel forced to strike out and cut their own sweetheart Kyoto deals or to protect businesses within their borders. It recently was rumored in the international press that California might be working on a carbon-trading scheme linked with the European or Kyoto programs. Now imagine 50 such deals, each with its own peculiarities.

The biggest problem, experts agree, is the lack of any national plan for the environment. Until we have one, America's energy sector could find itself held hostage to world opinion.

 

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