The dirty secret behind Kyoto

The U.S. chose economic growth over reducing emissions - but so have many of the countries who actually signed on to the Kyoto treaty.

NEW YORK (Fortune) -- The green fundamentalists have never been shy about casting the first stone.

If the world fries because of climate change, they thunder, it will be America's fault. Or, more specifically, George W.'s, because he took the Kyoto Protocol out of the desk drawer where Bill Clinton had stashed it for several years, and definitively binned it.

Indeed, the United States and Australia are the only rich industrial countries that have not signed on to Kyoto, the international treaty designed to slow down the rate of greenhouse gas emissions. (President Bush said that meeting the target of reducing U.S. emissions by 7 percent from 1990 levels would be too much of an economic burden.)

This willful resistance of world opinion, say the Bush administration's many environmental critics, is the classic example of how America is setting itself apart from mainstream thinking.

But is it? Take a close squint at the numbers, and frankly it looks as if many of the countries that did sign Kyoto share Bush's concern that the economic pain might outweigh the green gain.

Look at those nice people north of the border: Canada agreed to cut emissions by 6 percent. Whoops. The country is running 24 percent ahead, a lot more than the United States, which is 15.8 percent above 1990 levels. Japan has the same 6 percent target, and is also missing big, by about 13 percent.

Okay, how about the 15 western European countries that were Kyoto's original members? Sorry, for the second year in a row, according to figures released in late June, emissions rose for the EU-15.

As a whole, the EU-15 was supposed to cut its emissions by 8 percent; just two years before the clock begins ticking (the deadline is the average between 2008 and 2012), it has cut emissions by less than 1 percent.

And even that is not as impressive as it may sound, since much of the reduction dates to the early 1990s, when Germany was shutting down filthy and unprofitable industries in the post-communist east and Britain was dashing for gas, as it scaled back its filthy and unprofitable coal industry. About two-thirds of the reductions they have recorded so far occurred by 1995 - i.e., two years before the Protocol existed.

To look at it another way, from 2000 to 2004, U.S. emissions increased by 1.3 percent; in the EU-15, they increased 1 percent. In both places, the only time since 2000 that emissions actually fell (2002 in the EU, 2001 in the US) have been recession years.

And there's the rub.

The EU-15 has done a far better job of weakening the link between emissions and economic growth - remember, it has in fact cut emissions a teeny little bit, while the regional economy grew 32 percent from 1990-2004. (The U.S. over the same period grew 52 percent and emissions rose almost 16 percent.) But the link still exists. And nowhere is anyone putting climate change ahead of the economy.

The German government, for example, has gone further than anyone to cut emissions (minus 17.5 percent from 1990). But not only does it continue to subsidize its coal industry, but in late June scaled back the requirements for major industrial emitters and exempted new power plants from any limits until 2022. To make up the difference, German motorists will be asked to drive slower. Hah!

And it is telling that one of the major reasons for the rise in EU emissions in 2004 was that high prices for natural gas prompted power producers to shift to coal, which is dirtier. Given a choice, people decided to save money, not the planet.

Canada signed up to Kyoto, but it is still going full speed ahead developing Alberta�s oil-sands industry, which produces millions of barrels of oil - and millions of tons of GHG emissions. Prime Minister Stephen Harper has said flat out that Canada will not meet its target.

Japan didn't manage to reduce emissions when it was in perpetual recession; now that the economy is actually showing signs of life, no one is clamoring to take tough action to meet the requirements of a treaty signed in its own country.

No question: Japan and Europe are more efficient in their use of energy, and a couple of countries (Denmark and Britain come to mind) have been sincere, serious and successful in keeping their promises. With the development of other climate strategies, such as trading and sequestration, the pace of compliance could quicken.

But that is speculative. For now, the bottom line is this: When the choice comes down to growth or Kyoto, the evidence is that the EU, Canada, Japan and the United States all go for their wallets. In this sense, at least, the U.S. is very much in the mainstream of global climate policy.