NEW YORKOne would expect some diversity of opinion at a gathering of heads of government, CEOs and nonprofit organizations from different sides of the political spectrum. That was not the case at the Clinton Global Initiative meeting last week, devoted mostly to climate change. From the CEO of Duke Energy Corp. to the president of the Natural Resources Defense Council to Al Gore, everyone agreed on the need for draconian limits on carbon emissions worldwide. The proposals varied from taxes on carbon to a cap and trade system, but the assumptions on which they were all basing them were the sameand they seem somewhat premature. No one was too concerned with the costs that a blanket limit on emissions worldwide could inflict on millions of desperate people trying to pull themselves out of poverty.
The main assumption was that most of the warming has been caused by rising levels of carbon dioxide. But scientists have not yet reached a consensus on that. The average temperature has risen a bit less than 1 degree Celsius in the last 100 years. While greenhouse gases have risen substantially since the 1950s, half of the warming took place in the early half of the 20th centuryaccording to professor Phil Jones of the School of Environmental Sciences at the University of East Anglia, in a study titled Global Temperature Record.
The second assumption is that all CO2 is poison. Actually, about 40 percent of it is reabsorbed by plants and trees, as a paper by Stephen Pacala in the journal Science has shown. The statistics on carbon emissions usually disregard the percentage that is reabsorbed.
The third assumption is that the climate-change models used to predict global warming are consistent. Actually, as a recent pamphlet by the National Center for Policy Analysis demonstrates with the use of clear graphics, those predictions have varied widely in recent years.
Finally, everyone seemed to assume that government imposition works better than voluntary action. They kept citing the case of the European Union, where a cap and trade system establishes a general limit on carbon emissions and allows companies to exchange carbon rights. However, in the last 10 years the rate of growth of carbon emissions has been much lower in the United States, where there is no federal limit, than in Europe. There was even a reduction of 1.3 percent in carbon emissions in the United States last year.
There are those who argue that even if these assumptions turn out to have been premature, there is no harm in protecting the environment. That, of course, is a comfortable position to take if you happen to live in a prosperous nation where you can afford to make costly mistakes. But developing nations are already being hurt. According to the International Monetary Fund, the price of food worldwide went up by an average 23 percent in the last 18 months because of the rising demand linked to biofuels. It is true that biofuels will eventually create business opportunities for developing countries too, but for that to happen, Europe and the U.S. will need to scrap their protectionist policies. Brazilian sugar cane ethanol is the obvious example. The U.S. imposes a 54 percent tariff in order to protect corn farmers in Iowa, Kansas and other states. Corn is a much less efficient source of ethanol than is sugar cane.
Private companies are well ahead of the politicians with regard to the environment. They are investing in new technologies, making more efficient use of energy and beginning to develop financial instruments that will provide liquidity to nascent ecological markets. For instance, Jeff Bortniker, the CEO of Equator Environmental, is creating financial assets and carbon credits linked to reforestation in Brazil that can then be traded internationally. The market is by far a better solution, he tells me, and we are already showing that without bureaucratic interference we can create value and at the same time protect the environment. Brazilians will appreciate itthey have lost nearly 150,000 square kilometers of Atlantic forest since 2000, not to mention the hundreds of thousands of Amazon rain forest lost in recent decades because no one felt the need to protect land that was nobodys property.
Governments need to look at the science more closely before taking actions that could have damaging consequences. We also must remember that, when it comes to protecting the environment, private enterprise can be more successful than governments.
Alvaro Vargas Llosa
Alvaro Vargas Llosa is Senior Fellow of The Center on Global Prosperity at The Independent Institute. He is a native of Peru and received his B.S.C. in international history from the London School of Economics. His weekly column is syndicated worldwide by the Washington Post Writers Group, and his Independent Institute books include Lessons From the Poor: Triumph of the Entrepreneurial Spirit, The Che Guevara Myth and the Future of Liberty, and Liberty for Latin America.
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