With UN climate talks in question, serious questions are being asked about the future of carbon trading, while a more detailed survey of new projects and policies shows that carbon markets continue to beat their destructive path.
A postscript to Carbon Trading: how it works and why it fails
It was billed as the last chance to save the climate, but while the UN
Climate Conference in Copenhagen was long on expectation, it was short
on results - with a final Accord of less than three pages of rather
vacuous diplomatic ruminations.
The carbon market received few explicit mentions in this text or the
headlines surrounding it, but remains central to the flows of money and
displacement of responsibility that pass for international climate
policy. So let's forget Copenhagen for a moment and ask ourselves:
"where is carbon trading heading?" Unfortunately, the expansion of such
markets across the world continues on its destructive path with or
without a new global climate treaty.
Let us start, though, with the most significant exceptions to this trend.
Right-wing opponents of climate legislation in the USA and Australia
are attempting to kill cap and trade. Yet it is worth separating
motives from effect. In the US, the Democrats´ compromises to hold onto
the carbon market look set to open a new era to offer massive
concessions to power, heavy industry, off-shore oil drilling and
industrial agriculture. In other words, new climate legislation would
provide a green light for increased emissions, which the market would
serve to outsource and offset. Yet if the bill does not pass it could
"change environmental politics in America and beyond", as The Economist
points out, providing a stimulus for grassroots opponents of trading
schemes, returning the emphasis of climate action to the
"command-and-control techniques", and cutting off the major potential
source of demand for carbon credits.1
In either case, the European Union (EU) is likely to remain the largest
source of demand for carbon offsets in the next decade. Legislation is
already in place for a third phase of the EU Emissions Trading System,
from 2013 to 2020, despite considerable evidence that it is failing to
reduce emissions. The economic downturn, and the use of offsets, could
well lead to such a surplus of permits that the EU might avoid any
domestic reductions until 2020.2
Meanwhile, a series of scandals have spread fresh concerns about the
system - including a VAT fraud that accounted for up to 90 per cent of
trading in some EU countries, and the "recycling" of CDM credits in
Hungary, allowing their "reductions" to be counted twice.3
A different form of double-counting is state policy in New Zealand,
where a new Emissions Trading Scheme initially allows companies to
surrender 1 NZU (New Zealand Unit, equivalent to 1 tonne of CO2) for
every 2 tonnes of emissions. It also allocates free units to heavy
industry (such as aluminium smelting) and agriculture, the main
polluting sectors, on an uncapped intensity basis - in effect,
subsidising them to increase emissions. 4
With such lax and failing schemes, the question remains: who will buy
offsets? The largest direct buyers of CDM credits are all from the
financial sector, with the main demand coming from the power sector in
the EU, where a series of new coal-fired power plants are under
consideration. 5
But political difficulties in Copenhagen, Canberra and Washington have
sown some doubts, which has seen a stagnation in CDM project
development, and has even led some financial speculators to diversify
their strategy and bank less upon the growth of carbon markets. 6
Despite this, the damage that CDM continues to do on the ground should
not be underestimated. On 6 January 2010, the UN's Clean Development
Mechanism (CDM) registered its 2000th carbon offset project. 7
By far the largest share of credits in 2009 come from spurious
industrial gas reductions (of HFC23 and N2O), while four of the five
largest projects registered in 2009 will subsidise the fossil fuel
industry: coal and natural gas in China, and gas flaring in Nigeria. 8
Hydroelectric dams, mostly under construction irrespective of CDM
finance, remain a major source of activity too, seeking CDM credits as
an additional subsidy stream.
Japan and Korea are in the process of setting up new cap and trade
markets. In the latter case, the Chicago Climate Exchange - staffed by
many of the key protagonists for international emissions trading - is
the key advisor. It is also a key actor in the creation of a new
trading scheme in China, seen as a prototype. 9
Brazil, meanwhile, is considering a carbon market that would allow
forestry projects to "offset" the emissions from its new offshore
oilfields, Mexico has a trading scheme under discussion, and even the
Indian government (which does not expect to take emissions targets) may
yet come to view its new scheme for exchanging energy efficiency
permits (called "Perform Achieve and Trade", PAT) as a springboard for
emissions trading.
Meanwhile, the EU - largely sidelined in Copenhagen - continues to push
for the creation of new "sectoral crediting" mechanisms, which would
extend the logic of offsetting to whole industrial sectors (such as
steel) and power production in what it lists as "major industrialising
countries (the so-called BASIC grouping: Brazil, South Africa, India
and China; plus other members of the G20, such as Mexico and Indonesia). 10
The development of an international framework for Reducing Emissions
from Deforestation and Degradation (REDD) is also geared, ultimately,
to the continued exploitation of new sources for offsetting. As UN and
World Bank bureaucrats and NGOs argue over certification and "gourmet"
REDD schemes, there is growing opposition on the ground against land
grabs, with this enclosure process severely threatening the lives and
livelihoods of Indigenous Peoples, forest-dwelling communities and
sustainable pastoralists. 11
In this regard, the real world dynamic of carbon trading is more
complex than the binaries of international climate talks - whose
failure rests, ultimately, on the refusal of industrialised ("Annex 1")
countries to take responsibility for their disproportionate historical
and current contribution to accelerating climate change.
Against this backdrop, resistance to carbon markets, including REDD
schemes, remains a crucial element in the struggle for climate justice.
The carbon markets provide a green veneer behind which the big energy
companies, industrial polluters and agribusinesses can hide while
claiming rights to ‘development' in the name of addressing the climate
crisis. To continue to build resistance to this smokescreen requires a
far broader focus than climate summit protests, which form only one
small piece in a vast jigsaw of global struggles to secure energy
production, industry and agriculture in ways that promote and
rediscover locally-adapted knowledge. To really achieve this, there are
no short cuts around political organising - since the struggle against
climate change is part of a larger fight for a more just, democratic
and equal world.
1 'Cap and trade's last hurrah', The Economist, 18 March 2010; http://www.economist.com/world/united-states/displaystory.cfm?story_id=15721597
2 For more details, see Tamra Gilbertson and
Oscar Reyes, Carbon Trading: how it works and why it fails, Uppsala:
The Dag Hammerskjöld Foundation, November 2009; http://www.carbontradewatch.org/publications/carbon-trading-how-it-works-and-why-it-fails.html
3 Marton Kruppa and Ben Garside, 'Hungary sells
“recycled” CERs', Point Carbon, 11 March 2010; Leigh Phillips, 'EU
emissions trading an “open door” for crime, Europol says', EU Observer,
10 December 2009; http://euobserver.com/885/29132
4 Adrian Bathgate and David Fogarty, 'Expanded
New Zealand carbon scheme faces lean trading', Reuters, 25 March 2010;
see also Christina Hood, 'Submission to the Finance and Expenditure
Select Committee on the Climate Change Response (Moderated Emissions
Trading) Amendment Bill', October 2009; http://www.parliament.nz/NR/rdonlyres/6C882B6B-0972-4EFF-A0F6-EB5D5789FB19/
115616/49SCFE_EVI_00DBHOH_BILL9597_1_A14707_DrChristinaHo.pdf
5 UNEP Risoe CDM/JI Pipeline Analysis and Database, 1 March 2010; http://cdmpipeline.org/
6 Stian Reklev, 'CDM withering on the vine', Point Carbon, 19 February 2010
7 UNFCCC, 'Clean development mechanism passes 2000th registered project milestone in less than two years', 6 January 2010; http://unfccc.int/files/pressreleases/application/pdf/ press_release_cdm_passes_2000th_registered_project.pdf
8 Point Carbon, Projects Survey, February 2010, p.22
9 Kate McKenzie, 'Will Chinese emissions trading schemes gather momentum?' FT.com, 11 February 2010; http://blogs.ft.com/energy-source/2010/02/11/ will-chinese-emissions-trading-schemes-gather-momentum/
10 European Commission, 'Communication on
international climate policy post-Copenhagen: Acting now to
reinvigorate global action on climate change', 9 March 2010; http://ec.europa.eu/environment/climat/pdf/com_2010_86.pdf
11 Daniel Zueras, 'Native Peoples Reject Market Mechanisms', Inter Press Service, 1 April 2010; http://www.ipsnews.net/news.asp?idnews=50886
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