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Money for Nothing

COPENHAGEN – When it comes to global warming, we have plenty of hot rhetoric but very little cool reason. This matters immensely, because the Kyoto Protocol is already among the most expensive global public policies ever enacted, and the follow-up in Copenhagen in late 2009 promises to break all records. We better get it right, but right now we’re more likely to pay for virtually nothing.

A good example is the European Union’s newly instituted policy of cutting CO2 emissions by 20% by 2020. Of course, it is always easier to promise than to deliver – a concern that is especially relevant in the EU. Yet, even if the promise is kept, will the benefit outweigh the cost? Curiously, but not surprisingly, this is not discussed very much.

A 20% reduction in the EU’s CO2 emissions, vigorously enforced throughout this century, would merely postpone temperature increases due to global warming by two years at the end of the century, from 2100 to 2102 – a negligible change. Yet the cost would be anything but negligible. The EU’s own estimate is about €60 billion annually , which is almost certainly a vast underestimate (its previous estimate was almost twice as much), since it requires the EU to make the reductions in the smartest way possible.

However, the EU doesn’t just want to cut emissions in the smartest possible way, but also to increase the share of renewable energy in the Union by 20% by 2020. This increase has no separate climate effect, since we’ve already promised to cut emissions by 20%. However, it does manage to make a poor policy decision dramatically worse.