The New Environmental World Order
Russia's announcement last week that, pending a vote in the Duma, it would ratify the Kyoto Treaty on climate change clears the final hurdle to putting the treaty into effect. I don't think that the reports of this event have really captured its full significance. Once the Russian ratification is official, the Kyoto Treaty will become international law and theoretically binding on its signatories. This may ultimately extend to anyone wanting to do business with the signatory countries, as well. Without exaggeration, we will be living in a new world, even if the US chooses to continue to ignore it.

The news of Russia's agreement is already affecting the markets for carbon emissions credits. One of the key uncertainties holding down the value of such credits has been removed, or at least drastically decreased. Other large uncertainties remain, however.

Unfortunately, the treaty that will go into effect is not as good as it should have been, largely because the Bush Administration chose to disengage from the process nearly four years ago. Ironically, some of the best features in the Treaty, such as the Clean Development Mechanism allowing a project that reduces emissions in one country to count toward the emissions quota of another country investing in the project, were principally the result of past US negotations and leverage. But as noted by critics on both sides of the argument, the existing Kyoto Treaty is flawed by exclusion of the countries whose emissions will grow the most in the next decade, and barely makes a dent in the scale of the actual problem.

If John Kerry is elected in November, look for an early effort to reengage in the Kyoto process. It's less clear how a returning Bush Administration would address the new reality of a Kyoto Treaty that our major trading partners will regard as law.