Carbon Reductions Can Make You Money
Your extensive coverage of the Kyoto climate talks (Dec. 11) was generally thoughtful. But the article "What Global-Climate Pact could Mean for your Pocketbook," mistakenly said, "There is little question that there will be some cost to consumers." Here's why that's wrong:
Saving fuel costs less than buying fuel. Therefore, climate protection is not costly but profitable. No matter how the climate science turns out or who goes first, climate protection can save us all money.
So how does the coal lobby's disinformation campaign predict calamitously high costs? By assuming them. Imagine every company in every country is behaving optimally. Assume that choices depend solely on price, so the only way to get people to burn less fossil fuel is to tax it out of reach. Posit that markets I are not flexible and sagacious but rigid and I dumb. Voila - increased economic vitality, jobs, and income turn into frightening hardships.
Forget those stupid modeling tricks. Practical experience tells a different story: America's energy bill could shed $300 billion a year with existing technologies that deliver the same or better services and are profitable at today's prices - yet are held back by scores of obstacles that keep the market from working properly. Barrier-busting policies and management attention can turn obstacles into opportunities.
Just saving energy as quickly as America did during 1979-86, when gross domestic product rose 19 percent while energy use fell 6 percent, could by itself achieve the Kyoto greenhouse-gas reduction goals. But this needn't require repeating that era's high energy prices. Advanced energy efficiency is earning many companies 100 percent to 200 percent annual returns even at today's low and falling prices.
Rapid savings depend less on price than on ability to respond to it: Seattle pays half Chicago's electric rates, yet in the '9Os is saving electrical loads 12 times faster than Chicago - because its utility helps customers find and buy electricity-saving techniques.
The Kyoto debates about carbon-reduction targets are like Congress's equally fierce 1990 debates about sulfur reduction - now long forgotten. What mattered was the trading mechanism to reward sulfur reductions the bigger and sooner, the more profitable. Now sulfur reductions are two-fifths ahead of schedule, at about 5 to 10 percent of initial cost projections. Electric rates, feared to soar, fell by one-eighth.
The Kyoto Protocol and US climate policy rely on similar best-buys-first emissions trading, not carbon taxes. But trading carbon will work even better than trading sulfur: It will rely mainly on energy end-use efficiency (which wasn't allowed in sulfur trading), and saving carbon, unlike sulfur, is profitable.
Kyoto's triumph is this core message to business: Carbon reductions can make you rich. With that starting gun, the global race to an energy-efficient, cost-cutting, lifestyle-enhancing climate-protecting, fair, and sustainable economy is finally off and running.
Amory B. Lovins
Director of research
L. Hunter Lovins
Rocky Mountain Institute Inc.
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