AN ABSTRACT OF THESIS OF Kweku N. Wilson for the degree of Master of Arts in Interdisciplinary Studies in November 30, 2004 Title: The Underlying Differences in Greenhouse Gases (GHG) Emissions Control and Renewable Energy: Three European Countries Approaches to Policy Abstract approved: Redacted for Privacy Joe Kerkvliet "It appears that the summer of2003 was very likely warmer than any other summer in Europe back to 1500" (Luterbacher, 2004). This was the conclusion of a study about the changing climate of Europe by climatologists at the University of Bern, Switzerland, and published in Science in May, 2004. The study collected and analyzed data across Europe including old temperature, soil core, and tree ring records. This study also found evidence that 50% of mountain glaciers have shrunk in the past century in Europe, and some ice fields lost 10% of their mass last summer alone. Even though Luterbacher's study did not analyze the effects of human activity on earth's warming, other climatologists, including Stephen Schneider, of Stanford University, a prominent advocate of the idea that most global warming is human caused, argue that Luterbacher's study agrees with models that have predicted the impact of burning fossil fuels and the release of greenhouse gases (GHG) on rising global temperatures. The Intergovernmental Panel on Climate Change (IPCC), a group of eminent scientists, unanimously concluded in their reports in 1995 and 2001 that 'there is new and stronger evidence that most of the warming observed over the last 50 years is attributable to human activities' (anthropogenic sources) and predicted between 1.4 and 5.8 degrees Celsius (°C) rise in global temperatures by the end of the century. The IPCC also concluded that steps must be taken to control emissions from a specific basket of GHG emissions, namely, carbon dioxide (CO2), methane (CH4), nitrous oxide (N20), sulfur oxide (SO4), and industrial gases- hydro fluorocarbons (HFCs), per fluorocarbons (PFCs) and sulfur hexafluoride (SF6). This consensus led to the birth of the Kyoto Protocolml997, at the global climate change conference in Kyoto, Japan. Despite the evidence of rising global temperature and its possible effects, some argue for more research to understand this phenomenon. The European Union (EU), conscious of the increases in global temperatures, is taking steps to reduce fossil fuels use, the main source of GHG emissions, and promote renewable energy, a major recommendation of the Kyoto Protocol. This thesis examines the differences in policies of Germany, Poland, and UK towards reducing GHG emissions and promoting renewable energy, and concludes that, even though the countries are pursuing similar policies, their implementation differs primarily because of their different idiosyncrasies and institutional make up. Lucas 1981 reached similar conclusions in his studies. I also found that the "wall fall profits" (German investments in energy efficiency systems in former East Germany after re-unification), the "dash for gas" (substitution of natural gas for coal in UK's fuel mix), and reforms in the Polish coal industry since 1988 have been the most effective GHG emissions reduction policies for Germany, UK, and Poland respectively. The GHG emissions reductions results of Germany, UK, and Poland, and their current GDP growth rates compared to other countries not aggressively implementing the Kyoto Protocol's recommendations, are evidence that the Kyoto Protocol can help reduce GHG emissions without significantly reducing economic development. © Copyright by Kweku N. Wilson November 30, 2004 All Rights Reserved The Underlying Differences in Greenhouse Gases (GHG) Emissions Control and Renewable Energy: Three European Countries Approaches to Policy by Kweku N. Wilson A THESIS Submitted to Oregon State University in partial fulfillment of the requirement for the degree of Master of Arts in Interdisciplinary Studies Presented November 30, 2004 Commencement June 2005 Master of Arts in Interdisciplinary Studies thesis of Kweku N. Wilson presented on November 30. 2004. APPROVED: Redacted for Privacy Redacted for Privacy Coi.jttee Mlmber, representing Political Science Redacted for Privacy ttee Member, representing BusinessAiministration Redacted for Privacy of the Deartment of Redacted for Privacy Dean of t1dduate School I understand that my thesis will become part of the permanent collection of Oregon State University libraries. My signature below authorizes release of my thesis to any reader upon request. Redacted for Privacy Kweku N. ACKNOWLEDGEMENTS "We all live down stream," this statement has over time become even more important to me. As part of living down stream, we all depend on the goodwill of others in many different ways. I would not be what I am today without the invaluable support of family, friends, and the numerous well-wishers I have come to know and personally admire. To all of you who believed in me, I doff my cap to you. Specifically, I thank my uniquely special friend Dilly for her unwavering support and fortitude during challenging times. From the depths of my heart, I thank my mother and the rest of my family both biological and adopted for all the support given me throughout my life. My life story thus far would not be complete without the generous support of Ralph and Wilma Hull. I owe all of you a debt of gratitude. I thank God for giving me the grace and strength to endure all that has come my way thus far. To my advisors Professors Joe Kerkvliet, Richard Clinton and John Moulton, and also Patty Pamell and Dr. Dale Myers, I thank you for your interest in, and enthusiastic support for this study. I must also thank the staff and people of the Economics, Political Science and the College of Business for their support and encouragement during my study. To all the members of my committee, I would like to express my highest gratitude for your willingness to help me through this. May we all in our own small ways strive to make life much better "down stream." TABLE OF CONTENTS Chapter1.Introduction..........................................................................................1 Chapter 2.Literature Review.................................................................................5 Chapter 3.Overview of European Union...............................................................7 Chapter4.Germany..............................................................................................11 4.1-1Overview of Germany.....................................................................11 4.1-2Legal Reforms.................................................................................12 4.1-3Achieving the Objectives at a Lower Cost Comparatively..............14 4.1-4Incentives for Innovation.................................................................15 4.1-5Effects of Policies on Different Sectors of the Economy................18 4.1-6Global Positioning Purposes............................................................19 4.1-7Meeting European Union Membership Requirements....................20 4.1-8National Security Objectives...........................................................21 Chapter5.Poland..................................................................................................23 5.1-1Overview of Poland.........................................................................23 5.1-2Legal Reforms.................................................................................25 5.1-3Achieving the Objectives at a Lower Cost Comparatively..............27 5.1-4Incentives for Innovation.................................................................28 5.1-5Effects of Policies on Different Sectors of the Economy................31 5.1-6Global Positioning Purposes............................................................31 5.1-7Meeting European Union Membership Requirements....................32 5.1-8 National Security Objectives........................................................... 33 TABLE OF CONTENTS (Continued) Chapter 6. United Kingdom..................................................................................34 6.1-1 Overview of the United Kingdom...................................................35 6.1-2 Legal Reforms..................................................................................36 6.1-3 Achieving the Objectives at a Lower Cost Comparatively..............39 6.1-4 Incentives for Innovation.................................................................41 6.1-5 Effects of Policies on Different Sectors of the Economy................43 6.1-6 Global Positioning Purposes............................................................45 6.1-7 Meeting European Union Membership Requirements....................46 6.1-8 National Security Objectives...........................................................46 Chapter7. Analysis..............................................................................................48 7.1-1 Legal Analysis...............................................................................51 7.1-2 Emissions Trading.........................................................................51 7.1-3 Flexible Mechanisms.....................................................................55 7.1-4 Fiscal Policy Analysis....................................................................58 7.1-5 Environmental Politics...................................................................61 Chapter8. Conclusions......................................................................................67