Global Warming Policy: Some Economic Implications - Economic Review, Fourth Quarter, 1998 - Dallas Fed

Many analysts believe that adverse climate changes in the form of global warming are— or soon will be—under way as the result of anthropogenic emissions of greenhouse gases. (See the box entitled “What Is Global Warming?”) The largest such source of these gases is carbon dioxide (CO2) resulting from the growing consumption of fossil fuels (petroleum products, natural gas, and coal). Consequently, the conservation of fossil fuels figures prominently in strategies to reduce CO2 emissions. Increasing concerns about the extent of global warming and its potential consequences culminated in a United Nations conference in Kyoto, Japan, in late 1997. Prior to the conference, President Clinton proposed that the United States join with other industrialized countries in setting a target for reducing CO2 emissions in each country to 1990 levels by 2010. By the end of the conference, emissaries from the industrialized countries had agreed to a target 7 percent below 1990 levels by 2010 and to make further reductions in subsequent years. Developing countries would be expected to reduce their CO2 emissions in future years as their incomes rise. As shown in Figure 1, the U.S. Department of Energy has projected that CO2 emissions from the consumption of fossil fuels in the industrialized countries will have increased about 30 percent from 1990 to 2010. Therefore, compliance with the Kyoto accord would represent a sizable reduction in the use of fossil fuels from what could otherwise be expected. My analysis indicates that the developing countries would consume nearly 12 percent of the amount of fossil fuels the industrialized countries must conserve to comply with the Kyoto accord. The net effect Global Warming Policy: Some Economic Implications