Fall 1996 EXON CORPORATION . )wfywuh Facts abOu who 5 ri turned up mOtO questl warmm a debate that 9 OOS tha? a?swers Global From the chairman Climate change: don't ignore the facts The issue reaches into every ho'hze and pocketbook around the world. by Lee R. Raymond Chairman, Exxon Corporation In the debate over global climate change, one of the most critical facts has become one of the most ignored the undeniable link between economic vitality and energy use. Achieving economic growth remains one of the world?s criti- cal needs, and with good reason. It creates more and better jobs, improves our quality of life and enables us to safeguard the envi- ronment. When economies grow, their energy consumption rises. It?s no accident that nations with the highest standard of living have the highest per?capita use of energy, about 85 percent of which comes from fossil fuels. Today, however, a multinational effort, under the auspices of the United Nations, is under way to cut the use of fossil fuels, based on the unproven theory that they affect the earth?s climate. In July, the U. S. administration, without full public discussion and debate, and to the surprise of nearly everyone, proposed the concept of a binding international agreement requiring developed nations to reduce greenhouse gas emissions after the year 2000, and committed the United States to such an agree- ment. This policy, if implemented, has ominous economic implications that could touch pocketbooks and impair lifestyles throughout and even beyond the industrialized world. Developing nations, which will account for most of the growth in greenhouse gas emissions, are excluded from most emission-reduction proposals, but they?re not immune to their impact. In our increasingly integrated world economy, policies that limit growth in industrialized nations affect trade with developing nations and hinder their economies as well. This would have profound implications since developing nations face real and immediate problems. The World Bank says onethird of the world?s population lacks adequate sanita? tion and more than one billion people are without safe drinking water conditions that inevitably lead to disease and suffering. 'Achieving economic growth remains one of the world's critical Solving these problems as populations increase requires eco nomic growth, which, in turn, requires rising energy use. Politicization stirs fears Proponents of the global warming theory say that higher levels of greenhouse gases especially carbon dioxide are causing world temperatures to rise and that burning fossil fuels is the reason. (See Global Warming What to Thith What to BOP, page 4.) Yet scienti?c evidence remains inconclusive as to whether human activities affect global climate. While the atmospheric concen- tration of greenhouse gases is increasing, 96 percent of the carbon dioxide entering the atmosphere is produced by nature and is beyond our control. Even a small increase in these natural-source emissions could negate any cuts made in the 4 percent of emissions caused by humans. Moreover, forecasts show that even .if developed nations reduced their carbon dioxide emis sions to zero today, the overall level of atmospheric concentra- tions of COZ would continue to rise because of growth in the developing world. Unfortunately, huge economic consequences and scienti?c uncertainty have not prevented activists from politicizing the issue and trying to stir up unreasonable fears. They say the industrialized world should cut back on the use of fossil fuels. and that developed nations should agree to legally binding actions by the end of next year. This stance overlooks the need for longer-term research to determine whether human activity impacts global climate. High costs ignored In advocating this course of action, proponents ignore the sig- ni?cant costs of mandated reductidns in energy use. Every edible forecast predicts continued economic growth and creased consumption of fossil fuels in both industrial and eveloping nations. The International Energy Agency has said at regardless of what assumptions it makes about economic 1 owth, energy prices and energy ef?ciency, it sees global nergy demand growing substantially. Meeting unrealistic targets for reductions in greenhouse gas missions will require extreme measures involving increased ntral government control over energy use. Such measures ould include higher energy taxes, fuel rationing and other :4 eps designed to limit energy consumption. Studies by authoritative organizations such as DRI and harles River Associates show that taxes required to reduce ssil fuel use to 1990 levels would be substantial. They could -. (1 about 60 cents to the price of a gallon of gasoline in the Tnited States, more than quadru- ling the federal excise tax on otor fuel, and could raise the 'ce of residential and commercial '1".poorly conSidered els by 50 percent. The effect of uch taxes could be slower eco- omic growth, job losses and unpaired ability to compete in for- ign markets. orldwide fuel rationing US. administration has also r: ed for the use of ?tradable per- il ?ts? for fuel usage another term '0 rationing. As consumers, we should ask inted questions about how a worldwide rationing program ould work. What international agency would decide how uch of what fuel each nation may have ?permits? to use? 1thin each country, who would decide how much gasoline an dividual or business could use every month, or how much I ating oil one could have for home heating? 1 - er understanding needed 1th these considerations in mind, what?s the est way to manage the issue of potential obal climate change? First, we must understand it better, and at?s why Exxon is conducting its own research 1 supports that of others dealing with elated science, economics and I licy options. In addition, a constructive mproach should consider these ints: Taking drastic action imme- 'tely is unnecessary since any scientists agree I -ere?s ample time to better nderstand climate sys- ms and develop the best ng?term strategies. Mandating reductions in on climate change could inflict severe economic fossil fuel use now is needlessly expensive. It would force replacement of major portions of energy-consuming capital stock, such as power plants and other facilities, before the end of their useful life. It would be far less costly to replace this equipment when it would normally be retired. I Policy proposals should undergo careful analysis and disclo- sure of their economic, social and competitive impacts, and their acceptability and consequences should be tested in thorough and open public debates. I If action is needed, it should come in the form of truly global measures that include developing nations, since they will account for most of the growth in greenhouse gas emissions. I Increased efficiency in energy supply and demand should be encouraged by liberalizing trade, opening world markets and reducing government intervention and subsidies. The world needs more opportunities for tech- nology transfer through market mechanisms such as investment. This Will help to improve energy efficiency and emissions control in developing countries. I Natural means of carbon dioxide absorption should be part of the analysis of the issue and any policy approach. Measures could include slowing deforestation and encour- aging sound forest management practices. I Voluntary, market-based steps, along with a better understanding of how humans and ecosystems can adapt to potential climate change, offer the best hope for setting policies that are rational, scienti?cally sound and cost-effective. Dealing with facts Whatever choices we ultimately make about global climate change, let?s build on a foundation of facts. Perhaps the most important is the worldwide need to achieve continued economic growth while minimizing the impact on the environ- ment. Economic vitality, energy use and environmental protection are strongly interrelated, and the world needs all three. Economic growth improves the quality of life and helps pay the costs of protecting the environment. A strong economy in turn depends on the availability of abundant, competitive, affordable and increasingly cleaner supplies of energy, with price and availability being determined in a freely operating marketplace. Precipitous, poorly considered action on climate change could in?ict severe economic damage on industrialized nations and dramatically change your way of life. Those who say otherwise are drawing on bad science, faulty logic or unrealistic assumptions. We must reject policies that will clearly impose a heavy burden of costs but offer bene?ts that are largely speculative and unde?ned/9? Lee Raymond Is the world getting too warm? Residents of parts of central Texas, Where the mercury hit 100 degrees last February, might think so. Across the Atlantic, the British Meteorological Of?ce reported that 1995 was the hottest year on record. Some say that not only is the earth?s temperature risingneed only look in the mirror. Speci?cally, it?s argued, the burning of oil and other fossil fuels has increased the level of certain gases in the earth?s atmosphere. This has enhanced the natural ?greenhouse Iobal warming effect,? Which in turn has caused global warming. The United Nations issued a summary report, observing in part that ?a pattern of climatic response to human activities face more is identi?able in the climatological . record.? questions than But none of this is as clear-cut answers on almost as itmayseem. While parts of Texas overheated in Of February, the Northeast endured a brutal Winter that dumped more than issue . 75 inches of snow on New York City. (Some scientists say blizzards and droughts are signs of global warming.) The British Meteorological Of?ce?s declaration of 1995 as the hottest year by Jonathan H. Adler on record was based on incomplete data and did not meet universal accep- tance. The designation was founded on mea? surements for only the ?rst 11 months of the year. The ?gures for December were estimates. In reality, temperatures at the end of the year throughout the Northern Hemisphere took the steepest plunge on record. Global weather satellites, which have taken the earth?s temperature since 1979, found that 1995 was actually an average year. In addition, Australian researchers reported that temperature data in the way a greenhouse traps heat. In this way the gases help warm the planet. If they didn?t, the earth would be frigid, desolate and uninhabitable. The concentration of greenhouse gases in the earth's atmosphere is increasing. Atmospheric concentrations of green- house gases have been on the rise. Since the beginning of the Industrial Revolution, carbon dioxide in the atmos- phere has risen by about 28 percent. The earth's temperature has been rising. Since 1881, global average temperatures the moon, have shown absolutely no warming trend over the past 17 years. (See chart, next page.) Finally, most of the recorded temperature rise occurred prior to World War 11. But it was during the postwar economic boom that human activity produced a signi?cant increase in greenhouse gas emissions. Predictions of global warming are based on computer models that have proved to be inaccurate. Most of the predictions cited in the news have been generated by complex What to think? What to do? Southern Hemisphere did not support the hottest-year conclusion. As far as the UN. declaration goes, the full underlying report acknowledged great uncertainty about climate change. It stopped short of blaming human activ- ity for any recent trends. So what should we think about global warming? Let?s start with what?s known and agreed on. The greenhouse effect is real. The natural greenhouse effect is unques- tionably real and de?nitely a good thing. It?s what makes the earth?s atmosphere livable. Certain atmospheric gases, such as water vapor, carbon diOXide ((302) and methane, trap solar radiation in the same have risen approximately half a degree centigrade. Both sides in the debate agree on these three points. The arguing begins with the search for cause and effect. Here are the issues: Increases in global temperature may or may not be a sign of global Warming caused by human activity. The rise in temperature since the late 19th century could be part of the natural ?uctuations that occur over long peri- ods of time. Such ?uctuations took the earth in and out of ice ages for millennia. Satellite measurements, which can record tiny temperature ?uctuations caused by the re?ection of sunlight off computer programs known as general circulation models, or GCMs. Scientists use these models to simu- late the earth?s climate and the factors that affect it. These factors range ?om contours of the planet surface and ocean circulation to the hydrological cycle and albedo (a measurement of sunlight re?ected by the earth). Some scientists point out that com- puter-based models have been unable to represent current temperatures and climate accurately and are therefore a questionable guide to the next 50 to 100 years. The world has not warmed nearly as much as the models say it should have by now. The greatest dif?culty has been pro- gramming the models to accurately Taking the world's temperature Contrary to computer predictions, precise satellite measurements Show no warming trend. ?walk a E: 3 E. i g. Temperature change (degrees centigrade) include the many variables affecting climate. Modelers have had a particularly hard time accounting for the effects of two critical variables clouds and precipita? tion. Clouds can have both warming and cooling impacts, and most models sig- nificantly underestimate precipitation. Dr. David Legates, a Climatologist at the University of Oklahoma, adds that computer simulations of precipitation are ?exceptionally poor,? in part because they are unable to replicate actual weather. As models have improved, predicted temperatures have fallen. Computer models are becoming more consistent at estimating current tempera- tures. In the process, they?ve begun fore- casting less extreme temperature rises caused by the accumulation of green- house gases. For example, computer simulations have only just begun to estimate the impact of sulfate aerosols dispersed particles that could mitigate warming caused by increases in carbon dioxide. When this is added to the models, the result is the lowest projected tempera- ture change generated by a computer model to date. . . The model upon which the UN. based its most recent report predicts a warming of 0.9 to 3.5 degrees by the year 2100. The lower~bound warming estimate is approximately half that predicted just four years ago. We need to know more about the effect of solar cycles on global temperature. Although they?re getting better, current computer models may still overestimate observed warming. One possible reason for this is the sun. As Science magazine reported earlier this year, several recent studies have found a correlation between temperature changes and solar cycles. According to Science, ?the sun could have been responsible for as much as half of the warming of the past century. It so, the role of greenhouse gases would dwindle as would estimates of how much they will warm the climate in the future as they continue to build up.? To date, solar cycles have not been incorporated into global climate com? puter models. ls global warming good or bad? Let?s say human activity does contribute to warming the planet. What would that warming mean? I Hi Comqu at trend. gradient)?! - . :Igs?l. - '1 - The earth?s climate has changed dramatically over the course of history, and one should not assume that any climatic change is inherently bad. ?What matters is how the climate changes,? notes University of Virginia climatolo gist Patrick Michaels. If warming is focused in the summer, we could certainly expect worse droughts and more heat waves. But warming that occurs mostly dur- ing the Winter would reduce extreme cold, increase cloud cover and moderate temperature ?uctuations. This sort of warming is more likely to raise soil moisture levels than to produce severe droughts. To the extent that questions about the effects of global warming have been answered, the indications are that a warmer world would be far more benign than many imagine. Nighttime warming should expand growing seasons, at the same time that higher levels of carbon dioxide accentuate the growth of plants, accord- ing to the research of Sherwood Idso at Arizona State University. Thus, an enhanced greenhouse world would be one with more agricultural productivity. Research at Stanford University?s Hoover Institution suggests that a moderate warming would reduce mor- tality rates in the U.S., so a warmer climate would be more healthful. Some claim that global warming will increase the number and severity of tropical storms. On a worldwide basis, precipitation could increase if the world warms up, but tropical storms are still a question mark. Recent climate modeling suggests that the number of hurricanes and their average wind speed will decline. warmer winters will also mean that Winter storms may be deprived of the frigid polar air masses upon which they depend. Finally, although changing weather atterns could mean disruption, the human capacity for adaptation has been stablished throughout recorded time. at adaptability should be taken into account in considering the potential ffects of global warming as well. Clearly, considerable uncertainty xists about future climate change. We are faced with more questions than answers on almost every aspect of this 'ssue, including whether possible hanges could be both good and bad. 1991 1992 1993 unit-iff- tampeat 3 5 -03 1994 1995 I, -- 0.5 (epei?giuao seei?ep) e?ueuo einteisdwei . -0.5 1996 What steps should we when? Global questions about global warming When facing a clear and obvious dan- ger, most citizens expect their govern- ment to pursue a course of action that assures their safety and security. But does this mean governments should adopt policies now aimed at dramatically reducing greenhouse gas emissions at huge economic costs to society? There is still a tremendous amount of uncertainty about how the climate will change in the let century. More certain is the fact that seeking to achieve dra- matic reductions in greenhouse gas emissions will require steep cuts in the use of energy ?om fossil fuels and greatly disrupt the world economy. Given this uncertainty, what, if any, policy steps should governments take to address global warming? Some considerations: Most of the future growth in green- house gas emissions will come from developing countries, not the industrialized world. Although the United States is the world?s largest emitter of greenhouse gases, this will change as the economies of China and India expand. Over the next century the US. will account for only 10 percent or so of global greenhouse gas emis- sions. Yet in 1992 the United States and more than 150 other nations accepted a non- binding aim for industrial nations to reduce their greenhouse gas emissions to 1990 levels by the year 2000. A very limited number of countries will meet this aim. Nevertheless, at a follow-up conference in Berlin last year, delegates nom around the world agreed to develop more rigid policy goals for industrial nation emissions beyond the year 2000. Certain political represen- tatives heralded this as an important step toward addressing global climate change. In July 1996, most delegates at a confer- ence in Geneva reaf?rmed this objective, as well as their desire to achieve a legally binding international agreement at a meeting in Japan in December 1997. However, if predictions of future emissions are right, this agreement will do little about the problem since most of the growth in emissions will occur in the developing world. ?Unless the developing countries participate, it would be impossible to hold global emis- sions to current levels even if the United States and the [other industrial nations] were to be removed from the picture entirely,? says economist W. David Montgomery, an expert on climate change policy. Developing nations, intent upon growing their own economies to improve living conditions for their citizens, are unwilling to commit to any emissions reductions. 1990 The cost of reducing greenhouse gas emissions could be staggering. If model predictions are accurate, extreme measures would be necessary on a worldwide basis to prevent global warming. Researchers at the Worldwatch Institute argue that nations will have to cut emissions to ?60 to 80 percent below today?s rate? to change the course of pre- dicted global warming signi?cantly. The cost of doing so would be enormous. For example, a Department of Energy 6 billion tons C02 emissions Source: Intergovernmental Panel on Climate Change 2100 19.8 billion tons C02 emissions study estimates that reducing carbon dioxide emissions by only 20 percent from 1990 levels within 10 years would eventually cost the United States $95 bil- lion annually. Another study concludes that applying a carbon tax of $200 per metric ton could raise gasoline prices as much as 60 cents a gallon and boost residential and com? mercial fuel prices more than 50 percent. Drastic measures now will not yield significant benefits. Cutting the emission of greenhouse gases can be viewed as a form of insur- ance against a potential greenhouse world. But what exactly would these costly premiums buy? Studies show the projected tempera- ture in the middle of the next century will scarcely be affected whether policies are - ans growth enacted now or 20 years from now. In any case, the prestigious journal Nature published a recent study that suggests dramatic action now may be premature. Technological advances will make greenhouse emissions reductions easier in the future if the developing science con?rms that such steps are in fact needed. Notwithstanding the tremendous uncertainty surrounding global warming, delegates from around the world have scheduled several U.N.-sponsored meet- ings to chart a course for taking drastic action. Speci?cally, they will seek to negotiate targets and timetables for reducing greenhouse gas emissions in developed countries. Then they will try at the December 1997 meeting in Japan to agree on those plans. The biggest remaining question is which will we begin to feel ?rst: the pos- sible heat of global warming or the weight of global warming policy? I Exxon Corporation - 5959 Las Colinas Boulevard - Irving, Texas 75039?2298 -