THE recently announced American alternative to the Kyoto plan to reduce greenhouse gases (GHGs) has not only been welcomed by many but it has also spurred many developed countries to reconsider whether to ratify the Kyoto Protocol. They believe that the Protocol is worthless as far as its effectiveness in reducing total GHG emissions or even in slowing their growth is concerned. At the same time, they know that achieving their commitments under the Protocol entails huge economic costs and therefore many of these countries are assessing whether the US approach might be the right one to address potential climate change.

Saudi Arabia is not only joining other countries in welcoming the US-proposed alternative to Kyoto, but we also think it is the right approach to deal with the potential problem for the following reasons:

It acknowledges the fact that sustained economic growth is crucial and that environmental protection can be achieved through it and not vice versa. Therefore, the proposal sets a target for GHG intensity in every unit of the gross domestic product (GDP), allowing the total GHG emissions to grow as long as the economy grows. It calls for an 18% improvement in GHG intensity over the next decade and uses tax incentives as a means to encourage industries and individuals to achieve this target. This will not only allow the US economy to grow but also greatly reduce the economic impact of emission control measures.

The voluntary nature of this target is consistent with the state of climate change science. The world community recognizes the huge area of scientific uncertainties that continue to surround the issue of potential climate change. A number of scientists from the US and Europe recently pointed out, the Intergovernmental Panel on Climate Change (IPCC) failed in the conclusions of its three assessment reports “to convey the underlying uncertainties that are important in policy considerations,” adding that they had “become politicized.” They continued: “The IPCC simulation of surface temperature appears to be little more than a fortuitous bit of curve-fitting rather than any genuine demonstration of human influence on global climate.” (See the European Science and Environment Forum, and the American George C. Marshall Institute Reports, 2002.)

It is true that the world community applied the precautionary principle by initiating action to address climate change through the adoption of the United Nations Framework Convention on Climate Change (UNFCCC) in 1992. However, the Convention states very clearly that policies and measures to deal with climate change should be “cost-effective so as to ensure global benefits at the lowest possible cost.” We think that the US proposal is consistent with the UNFCCC in this regard, and in its calls for modifying the long-term trends in emissions, taking into account differing national circumstances.

The US proposal calls for a review of the implementation of its soft target in 2013, with further action — if necessary based not only on the progress made but also on the level of scientific certainties of climate change prevailing at that time. So it is no surprise that we hear intensive national debates going on these days in the industrialized countries, especially in non-European countries since they are:

— preparing their parliaments to consider ratifying the Kyoto Protocol,

— worrying about trade competitiveness with the US and other trading partners once they implement the required policies and measures under the Protocol.

They know that these policies will affect domestic energy prices and consequently the prices of many goods and services, in particular, their energy-intensive commodities. This may result in the migration of some industries to other countries in their region (carbon leakage), and affect their trade competitiveness through a series of spillover impacts resulting from these policies and measures.

Australia has already indicated that it might not ratify the Kyoto Protocol and we would not be surprised to see other industrialized countries such as Canada, New Zealand and even Japan doing the same.

The Kyoto Protocol is a political and economic game and it has very few, if any, environmental benefits. This may explain the EU insistence on getting the US back to Kyoto since economic leverage could be achieved over the US and other industrialized countries whose economies are heavily dependent on the export, processing and consumption of fossil fuels.

The Kyoto targets are political and they have been negotiated and adopted without a full assessment of costs and benefits. It has been discovered subsequently that they are very difficult to achieve since they require a structural change in all economic sectors and in particular the energy and industrial sectors. Shifting from fossil fuels will be extremely difficult since they will continue to dominate the world energy mix and there seems to be no replacement in the foreseeable future.

Canada, on the other hand, appears to see great economic difficulties in agreeing to the Protocol. This is why it is initiating a process of conditioning its ratification with the approval of an added provision that would allow it to get credit for its GHG emissions associated with its energy exports, including natural gas, to the US. Canada’s move is one that many countries are likely to reject since it opens the door to more amendments, and most important of all, it adds to the already major loopholes in the new version of the watered-down Protocol after the Marrakesh agreement.

Russia may also be reviewing its stance since it sees little advantage in joining the Protocol. It previously looked at Kyoto as a way to achieve economic gains through selling its “hot air”, but now with the US out of the Protocol, the price of the emission permits will be very cheap. At the same time, accepting Kyoto while its economy is flourishing, or at least on the right track, means that it will gradually have very little hot air to sell, and the situation will be even more difficult in the second commitment period beginning in 2013 when it will need to implement stringent measures to reduce its growing GHG emissions.

One might ask: Where do developing countries stand? They supported Kyoto Protocol for two reasons:

The Protocol exempts developing countries from any new commitments other than those stated in the Convention (UNFCCC).

It is a potential window for financial assistance and transfer of technologies through its established funds.

Developing countries in the coming years will not accept commitments other than those in the UNFCCC, especially with the absence of the US. They may propose in the eighth session of the Conference of Parties (COP8) in New Delhi later this year that Parties should concentrate in the future on efforts to promote the adaptation programs in developing countries, particularly the least developed ones, and that industrialized countries meet their financial obligations under the Convention. COP8 may also answer the question of whether to stick to the Protocol or adopt the US approach in addressing climate change, especially if by that time the Protocol has not entered into force.

In their bid to reduce their GHG emissions, whether under the Kyoto Protocol or not, oil exporting developing countries such as Saudi Arabia call upon industrialized countries to do the following:

— Remove the existing direct and indirect subsidies provided to their domestic energy producers, especially coal and nuclear producers. An OECD study shows that removing these subsidies alone would greatly help in reducing GHG emissions and achieving the Kyoto targets.

— Initiate measures to reflect the right GHG content in the existing taxes in all GHG-emitting sectors through restructuring. Building on the already heavy taxes on petroleum products will not only have few environmental benefits, but also greatly impact our oil revenues. Kyoto provisions commit industrialized countries to minimizing the negative economic impact on developing countries that are highly dependent on the exportation of fossil fuels (See Articles 2.3 and 3.14 of the Protocol).

— Explore and develop CO2 sequestration technologies to make them economically viable since it is one of the win-win options that allows the world to continue and sustain economic growth and meet future energy demands by having clean fossil fuels.

— Support oil producing developing countries to diversify their economies by being less dependent on income generated from exporting crude oil. More investments and technology transfers from industrialized countries are needed to achieve this goal.

(Dr. Mohammad S. Al-Sabban is Senior Economic Advisor to Saudi Arabia’s Minister of Petroleum and Mineral Resources and Head of the Saudi Delegation to Climate Negotiations.)