Today's lead editorial in the Wall St. Journal (subscription required) is entitled "Kyoto Capitalists". It criticizes firms such as Cinergy (see my blog of December 7, by scrolling down this page) for committing to reduce greenhouse gas emissions, on the grounds that these reductions are motivated by a thirst for profits, and that they will be too small to prevent global warming in any case. Along the way, the Journal displays a fundamental misunderstanding of the chemistry behind greenhouse gas emissions. While I often find the Journal's views compelling and well-reasoned, their arguments here seem mostly mean-spirited and wrong-headed.
Let's start with the profit motive. In fact, the whole impetus behind market-based emissions reduction tools, such as cap-and-trade and the Clean Development Mechanism built into the Kyoto Treaty is that more reductions will be achieved if they benefit the parties making them. This used to be called "doing well while doing good." So of course companies like Cinergy want to make reductions in the most profitable way possible. The Journal's assessment that these profits will come out of the hide of consumers and taxpayers is no more or less true than for any other type of profit. The real issue is whether the economic activity associated with greenhouse gas reductions is a zero-sum game or an increasing-pie game, and I see no inherent reason why it must be the former and not the latter.
Another charge the Journal levels at these companies is that they are seeking to get paid for greenhouse gas reductions that will happen anyway, as a consequence of meeting stricter rules on emissions of sulfur and nitrogen compounds. This may be true to a small extent, but it misses the basic distinction between sulfate and nitrate pollution and the emission of CO2 and other greenhouse gases. The former results from either fuel impurities (sulfur) or the amount of nitrogen present when combustion takes place. This pollution can be managed with a variety of strategies, including fuel treatment, stack gas scrubbing, lean burning, and oxygen-firing. But CO2 emissions are not pollution; they are the principal product of combustion, along with water vapor. Reducing them significantly means either using much less fuel in the first place, or separating CO2 from exhaust gases and storing it underground. Either approach requires not just a little scrubbing and tweaking, but a major redesign of process hardware, at enormous cost. The alternative is buying reductions from other sectors of the economy that can make them more cheaply, and that is the whole point of cap-and-trade.
Ultimately, the Journal's sarcasm reflects their skepticism that climate change is real. While this is still a legitimate viewpoint, it is increasingly out of step with mounting evidence to the contrary. But even if one remains skeptical, the potential consequences of global warming are serious enough that they justify buying some insurance, and I believe that is precisely what the companies in question are wisely doing. Whether their actions will matter in the event of major climate change is really beside the point. Action must begin somewhere, if it is to happen at all. For the rest of the developed world, like it or not, that start is the Kyoto Treaty and its modest emissions reductions, as a downpayment on broader and deeper cuts later.