Global Warming and the Kyoto Protocol: Implications for Business

The costs of global warming are enormous. The increase in concentration of greenhouse gases, as a result of growth in industrial activities worldwide, is directly related to the increased frequency of natural disasters. United Nations has estimated that the effects of global warming (namely natural disasters, loss of land due to rising sea levels and damages to fishing stocks, agriculture and water supplies) could cost over US$300 billion annually. The Kyoto Protocol is an international agreement setting out legally-binding levels of greenhouse gas emissions for 160 participating nations. The signatory nations approved the principles of the treaty, leaving the operation and enforcement details to be determined. While the intent of the protocol, to reduce worldwide greenhouse gas emissions to the benefit of all countries, is honorable, the impacts of the Kyoto Protocol are difficult to predict and will affect its stakeholder groups (the insurance industry, developed and developing nations, signatory and non-signatory countries, existing and potential industries) differently. Implementation issues, alternate approaches, the challenges of global environmental problems and possible solutions are discussed. The response of governments and businesses to global environmental issues, in general, and to the Kyoto Protocol, in particular, will determine the strengths and weaknesses of this global initiative.