The decision by President Bush not to continue to work within the framework of the Kyoto Protocol to limit greenhouse gas emissions should not have taken international observers by surprise.
Although the US pledged to reduce emissions by 7 per cent at Kyoto in 1997, the US Senate has never endorsed this commitment. Most informed observers would have been aware that even under the previous administration it would have been impossible to bring the Senate on-side. The last vote taken on the subject in the Senate resulted in 95 out of 100 senators voting against.
The international outcry following President Bush's decision highlights a number of issues: first, the seriousness with which the international community views the threat of climate change; second, the impact any climate change responses will have on economic growth and international trade; and third, the complexity of reaching agreed solutions to global problems of this nature.
Global warming is by definition a global problem and therefore needs global solutions. Growth in greenhouse gas emissions over the past century have been a by-product of economic growth, and the agreement at Kyoto required developed countries in particular to de-couple this link.
However, the main growth in greenhouse gas emissions in the coming decades will be from developing countries as they strive to develop their economies and approach the lifestyles and living standards of the developed countries.
The dilemma, therefore, is that without eventually putting quantitative limits on emissions from developing countries where emissions growth is predicted to be highest, reductions by developing countries will have no perceptible effect on slowing, not to mention reversing, global warming.
There are major concerns that the cost of reducing emissions will result in severe negative economic consequences. And it is these economic concerns which have led the US to pull out of the Kyoto agreement in its present form.
Over the past decade the business community has engaged with other stakeholders - governments, academia, consumers, non-governmental organisations and the media - in the debate surrounding global warming and climate change.
Business has recognised that it has a key role to play by improving its own efficiency and by bringing new technologies to the market that offer more efficient options. However, business is only part of the solution, and policies to reduce greenhouse gases will also have major effects on individuals lifestyles in terms of choice of transport, housing densities and consumption patterns.
Business is opposed to taxation as a measure to combat climate change, as it threatens the competitiveness of energy-intensive industry in Europe and has been shown to be ineffective in reducing industrial greenhouse gas emissions.
Indeed, a study for IBEC last year showed conclusively that while an energy tax on industry would affect the competitiveness of a number of key sectors, it would contribute few environmental benefits.
On the positive side, there are many examples of innovative solutions adopted by companies, both in Europe and the US, involving behavioural change, investment in new technologies, development of new products and technology transfer, which have achieved major successes in emissions reductions.
However, business and industry also realise that reducing emissions of greenhouse gases is not a simple task. Policies to deal with global warming need to recognise the competitive markets in which business operates, and, most importantly, must appreciate the time-scale needed to develop innovative solutions.
An international policy framework which recognises the global nature of the problem is essential, otherwise those businesses which emit large amounts of greenhouse gases will simply relocate to countries which do not impose constraints.
It is precisely for this reason that unilateral ratification of the Kyoto Protocol by the EU would put European business and industry at a serious competitive disadvantage visa-vis its competitors in the US and elsewhere. Global emissions of greenhouse gases would continue to increase, and businesses would relocate to where they could operate most economically.
However, this is not to say that the business community advocates the abandonment of the underlying principles in the Kyoto agreement; rather that the EU should seek to work constructively to encourage the US and others to develop an international policy framework which will open up the potential for a wider range of solutions.
The Kyoto Protocol established what have come to be known as flexible mechanisms, market-based mechanisms to be used by governments and industry to achieve climate change objectives. An overcautious approach by the EU to the use of these mechanisms led to the breakdown of talks in The Hague last November.
From a practical point of view, however, it would have been far preferable to conclude an agreement which accepted emissions trading and the project mechanisms and kept the US engaged in the process. From a business perspective, it would be a pity to lose the momentum built up over the past decade which has put climate change clearly on the business agenda. The increased uncertainty resulting from the current situation puts investment at risk and complicates decision-making for business.
Ratification of the Kyoto Protocol without the US would be rather meaningless in environmental terms, and would compromise the competitiveness of European industry. Cool heads are called for at this time, and a commitment to seeking an international framework as a basis for moving forward.
The US has indicated that it shares a common concern on climate change and that it intends to continue to work constructively with friends and allies on means to address the problem. It will require all the diplomatic and negotiating skills the EU can muster to bring forward a meaningful agreement in time for the resumed Kyoto negotiations in July.
It is clear that Ireland has important trade links with the US. It is thus crucial that climate-change response policies do not undermine the ability of Irish-based business and industry to succeed in these competitive global markets.
Dr Mary Kelly is assistant director of IBEC with responsibility for environment and industrial policy. She is a member of the advisory committee to the Environmental Protection Agency, and a board member of Repak, the industry packaging-recycling initiative
