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Hot Air On Global Warming



President Clinton appeared to have lit a time bomb when he promised on Earth Day, Apr. 21, that the U.S. would roll back emissions of carbon dioxide and other gases that may cause global warming--and that he would unveil a plan to do so by early August. Some industry groups braced for the worst: reams of red tape, international regulations, or limits on the use of fossil fuels--the chief culprits in creating the gases. In short, rules that would be costly and hard to implement.

They needn't have worried. As with some other initiatives--including pledges to halve the budget deficit and to overhaul health care this year--Clinton will be hard-pressed to deliver what he promised. In typical fashion, Clinton has given his aides too little time to craft a policy. And staffers have been enjoined from taking measures that could alienate powerful interest groups. As a result, says one government official, the strategy Clinton plans to unveil before an international meeting on climate change in Geneva en Aug. 16 will be a "mediocre" first step. Indeed, an initial draft of the plan obtained by BUSINESS WEEK indicates that the cuts will fall short of Clinton's goals.

NO TEETH. Global warming is an incendiary issue in part because the scientific evidence for it is inconclusive. Still, most climate experts think that emissions of carbon dioxide and other gases help trap heat in the atmosphere. That could eventually warm the earth's climate and alter weather patterns, with potentially disastrous effects. In an international agreement on climate change adopted last year at the Earth Summit in Rio de Janeiro, countries agreed that the best way to avoid this would be to cut back emissions from burning carbon-based fuels.

In Rio, however, the Bush Administration was instrumental in keeping goals and timetables out of the pact. Clinton has reversed that stance by committing the U.S. to roll back emissions by the year 2000 to 1990 levels. That would entail cutting projected output of 1.7 billion metric tons of greenhouse gases by 200 million metric tons by 2000--a gap equal to the emissions of nearly two-thirds of all U.S. motor vehicles. The largest single chunk--25 million tons--was to come from conservation inspired by the Administration's proposed tax on the heat content of fuel. But Congress has scrapped the BTU tax in favor of a small gasoline tax, which will yield only a 5-million-ton cut, and refused to fund $15.3 million in other energy-saving programs. U.S. efforts now in place will yield only half the reductions that Clinton promised (table).

To close the gap, the Administration is expected to rely on low-cost, voluntary measures that encourage individuals and companies to cut energy use. Ideas on the table include allowing buyers of energy-efficient homes to borrow more; supporting ventures that will develop renewable-energy technologies; and using indirect pressure to get companies to cut greenhouse gases, such as asking them to report their emissions voluntarily. Needless to say, business favors such measures. "Voluntary programs offer more flexibility," says John Shlaes, executive director of the Global Climate Coalition, an industry group.

The Administration's own draft of its $672 million plan concedes a drawback to this approach: It would cut emissions by only 50 million to 70 million metric tons. A White House official insists that eventually the U.S. will have a plan that meets Clinton's goals.

Some economists, however, argue that voluntary measures will never yield the hoped-for cuts unless energy prices rise. "If it made economic sense to do these things," says Warwick J. McKibbin, senior fellow at the Brookings Institution in Washington, "people would already be doing them." Economists insist that meeting the year 2000 target will require sterner action: probably a tax on the carbon content of fuels, which would lead to less coal-burning. But a $15-per-ton carbon tax isn't feasible politically now nor is raising auto fuel-economy standards from their current 27.5 miles per gallon. The voluntary measures, counters the White House official, are aimed at removing barriers to conservation, such as lack of information on how to cut residential and commercial energy use, which the official characterizes as significant impediments.

The failure to craft a more comprehensive plan could embarrass the Administration in Geneva. The Clintonites want to draw a sharp contrast between Bush's approach and theirs. "This Administration takes the threat of global climate change very seriously," says Rafe Pomerance, a deputy assistant secretary of state and head of the U.S. delegation to Geneva. But unless the U.S. has a credible plan at home, it will be hard-pressed to exert influence abroad.

HOME FIRES. Oddly enough, the global commitments the U.S. is making may turn up the pressure for domestic action. The U.N. Framework Convention on Climate Change, which will probably take effect next year, requires countries to devise action plans to reduce greenhouse gases. As the world's largest producer of the gases, the U.S. is expected to come up with a major share of the


At the Geneva meeting, meanwhile, there will likely be a sharp debate over what the U.S. should do to help developing nations keep their emissions in check. Today, per-capita emissions of carbon dioxide in the U.S. are nearly 8 times that of China and 25 times that of India. But the emissions of these giants will soar as their economies grow. "If you don't deal with [global warming] internationally, you don't address the problems," says Joseph Goffman, senior attorney with the Environmental Defense Fund.

Some U.S. companies hope to kill two birds at once: to get credit at home for investments that cut emissions abroad. New England Electric System (NES), for instance, pledged in 1991 to cut its carbon-dioxide emissions 20% below 1990 levels, a reduction of 3 million tons a year. In an effort to achieve half of that reduction, it invested $600,000 in a pilot project to promote forestry practices in Malaysia that could help preserve carbon-dioxide-absorbing trees. "A ton of [carbon dioxide] in Massachusetts is no different than a ton in Malaysia," contends Dan C. Delurey, vice-president of New England Electric. And NES says it can cut emissions in Malaysia for 50 to $1 a ton, vs. $8 a ton for similar programs at home.

A global greenhouse-gas bank, fashioned after the NES approach, will be discussed in Geneva. "The Administration supports the potential for this kind of plan," Pomerance says. Still, the Clintonites haven't yet endorsed the idea, because they are reluctant to let U.S. companies off the hook quite that easily. So U.S. industry could still end up on the hot seat--though not nearly as soon as it had feared.Mary Beth Regan in Washington

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