Ifo President: EU Energy Policy is Useless
It is not Angela Merkel who will determine the pace of global warming but Hugo ChÃ¡vez, Mahmud Ahmadineschad, Putin's oligarchs, the Arabian oil sheiks and a few other potentates.
With this statement, Ifo* president Hans-Werner Sinn places a challenge before Kyoto-protocol advocates and EU ministers who have shown leadership by proposing measures which go beyond Kyoto. Unfortunately, he may just be right.The root of the Ifo argument: reduction in EU demand will only reduce prices, not drop supply. The lower prices will encourage even faster growth of consumption in China and India, and more Americans to drive SUVs. In a terrible paradox, Kyoto and the EU policy may even temporarily drive up CO2 emissions, as oil producers attempt to recover oil faster before an anticipated price drop.
Unlike a lot of Kyoto naysayers, however, Ifo proposes constructive alternatives following a three-pronged approach:
- A worldwide source tax on capital gains and shutting down tax havens so oil profiteers lose investment alternatives;
- A loophole-free emissions trading system so that united action could force the desired results;
- Reforestation to squester carbon dioxide "...because forests are the largest storages of carbon on earth that can be controlled by humans", Sinn emphasises. According to Sinn, currently deforestation is leading to the release of more carbon dioxide than from the whole transportation sector.
Sinn, and Ifo, are certainly correct that unilateral action, such as the EU's Bold Energy Plan, cannot reverse global warming. However, Sinn overlooks the beneficial message of the EU's commitment to tie further reductions to a more broadly applied post-Kyoto treaty. Furthermore, in spite of a praiseworthy attempt to guide policymakers to alternatives, dismissing the EU's leadership risks failing to engage those in government committed to effective action. He thereby leaves his words to be scavenged by those seeking excuses not to act.
*Ifo, an acronym for Information and Research, is behind over 25% of the publications that German economic research institutes publish in international journals.