Carbon Trading – the debate goes on…

Many of my friends now that I am not a fan of Carbon Trading. Even though I am

Development Dialogue 48

able and willing to understand the „there is no other way possible right now“-argument, hence being not a radical, I hope for more public criticism. Therefore I loved the book

by the great Larry Lohmann that was published by the DHF. A video of him talking about the issue can be seen as well.

More information on the topic can be found:

The Corner House

Sinks Watch


World Rainforest Movement

Rising Tide

While I  – active and multiplicatory in character – do not see myself able to live up to the demands of Julian Glover who is looking for a new Martin Luther to trike back against the „medieval pardoners handing out unlimited indulgences“, I was writeing a Paper on the topic together with one of the most active young greens from Asia:  Sanka from Sri Lanka. It is the first of a series of „GYG-Diskussion Papers“. It can be downloaded once I figure out how this technique is working. Here’s the text:

Is Carbon Trading really
an Economic Savior?

Georg P Kössler (Sweden/Germany)
Sanka Chandima Abayawardena (Sri Lanka)1

A discussion paper for GYG
New optimism came into the international debate on Climate Change through the implementation of a Emission Trading Approach. The biggest contributor USA is likely to join soon after the General Elections this year and the mistakes of having an over-supply in certificates and the missing of auctioning are not likely to be repeated. Through Offsetting-companies is it possible for ordinary people to make “their” contribution. Now we are on the right track.
Are we really? This article is the view of two young green activists of the GLOBAL YOUNG GREENS who do not think so. They believe that a solution within the capitalistic system of supply-and-demand policy will not solve the general problem of worldwide climate justice. The problem arose in the first place due to increasing demand in the global North while the global South had to give supply. Now it is the same with carbon-credits. But only a halt in destroying policies, only a significant change in lifestyles and only an ordering united worldwide framework can safe us and our unborn children from whom we borrowed this precious earth.

The Kyoto Protocol
The Cap and Trading System – adopted by the International Framework Convention on Climate Change with its commonly known Kyoto Protocol – requests signed countries to cut down their emissions by 5.2% below the base line of 1990 emission level (which is a very advantageous level for Germany, since the East German industry broke down after 1990). The protocol calls for this reduction during the 2008 to 2012 period – meaning now! The most important fact related to the Kyoto protocol is its implementation of a purely market oriented, industry friendly credit trading system to counter carbon mitigation. This mainly facilitates a credit system for „Trading of Carbon“ based on an Assigned Allocation Units (AAUs or just “allowances”) system (1 ton of CO2 equals one credit). Aside this emission trading exists the concept of trading in project-based credits. The US sulfur dioxide market uses only the former, the Kyoto regime, however, makes a hybrid system.
There are three parts to the Protocol: Emissions Trading, the Clean Development Mechanism (CDM) and the Joint Implementation (JI). However, they are all closely linked. The JI means a project to reduce emissions between Annex B Parties (those, who have set goals for emission cuts: a “cap”). Mostly country in Eastern Europe are partners. The CDM means a project of such a country with a developing one. Here, no allowances can be made, but credits. The biggest market is the European Union Emissions Trading Scheme (EU ETS). Further, there are three different kinds of allowances/credits:  removal units (RMU) on the basis of land use, land-use change and forestry (LULUCF) activities such as reforestation – those are not allowed inside the EU ETS; an emission reduction unit (ERU) generated by a joint implementation project – those came by 2008 into the EU ETS; and a certified emission reduction (CER) generated from a clean development mechanism project activity – they make up the bulk of generated allowances.

The Problems
The most prominent one being the fact that the states in the former East bloc had an economic breakdown in the early 1990s and thus already reached their caps. They have “hot air” to sell without doing any mitigation-efforts.
The big problem is also that national governments are in a prisoner’s dilemma since they might weaken their own economy by making harder restrictions (e.g. more auctioning of AAUs). The powerful actors still look exclusively through the national lenses. But this is not all:
CDM and fairness
The biggest slice of credit-earning comes through CDM-projects, mainly in India and China. But there is more than one reason to be skeptical of this way of handling the global crisis:
o    Relatively few companies to the design, validation, verification and certification of projects and credits. They have little reason for high standards – it’s about the price! Further, some consultancies are intertwined with the very companies that invest in the CDM-project.
o    Natural sinks and biomass play a big role in the CDM strategy of most actors. While it is not the topic of this paper to discuss the role biomass could play in the future, the role of natural sinks has to be pointed out as critical and vastly overvalued by most economists and politicians. In May 2006, only 2% of CDM Credits were generated through “renewables” while 72% came from “capture”.1
o    Monocultures and unfamiliar plants are put into ground.
o    CO2lonialism which includes that political contexts are not sufficiently taken into account, exploitive behavior and strenghtening of local power structures, non-transparent ways disadvantage communities and public land is privatized by companies from the global North, taking away the foundation of life for local people.
o    Even if investment goes into decentralized renewable energy projects, they can cause problems if a grassroots approach is not taken.
o    After centuries of extracting resources from the poor countries for the wealth of the developed countries, the ethical question remains: The global South is still subsidizing the North, this time through sequestration.
Allowances are no credits!
While allowances within a cap-and-trade scheme are really reductions, an earned credit (e.g. under the CDM) is just a putative commodity. Today, they are seen as equivalent (under the EU ETS) but it is like Apples and Oranges: they’re maybe similar but not alike. A new windmill in Poland is not the same as a German refraining from flying to Thailand. A solar panel on the White House has to be seen different than making a coal plant in South Africa more efficient. And planting trees in Indonesia is something else than changing  the French government’s vehicles to electricity. Yet they are on one market. (See under the point “Offsetting” for more on The baseline Problem of credits)

An US-concept without the US
The whole idea of market mechanism usage to safe the climate was brought up in the 1990s by the US administration against the opposition of the global South, the Europeans and most NGOs. But the US had an information as well as a power advantage and used it. “A little-tested idea spearheaded by a small US elite was now perceived as the a global consensus and the ‘only show in town’ writes Larry Lohman2. In the end, even the greenest actors where fiercely in favor of this market concept and ended up with a US-concept – without the USA.
The best system available?
Experts repeat over and over that the trading scheme leads to the most efficient reduction measures and sparks investments. But what is “efficient” if climate change has to be stopped and then reverted as fast as possible? Emission trading can also slow the whole process down, as happened in the US in terms of leaded gasoline (23 years to elimination) compared with command-and-control in China and Japan (3 and 10 years respectively). From what we see now, the prices on the market for carbon are too low but have the high probability of getting or too high. This instability is not a good incitement to invest!
In addition it is said, that mitigation is done where it is the cheapest at the moment (meaning: the most profitable for the ones which have to reduce their emissions). Yet, a reduction of 1 ton of CO2 in Berlin or of 1 ton CO2 in Budapest or of 1 ton CO2 in Bujumbura is not the same. While it would have been a routine efficiency measure in Budapest, it would have been a new implementation in Bujumbura. In Berlin, the reduction would have meant a revolutionary new concept of, let’s say transportation. Where will the company likely to be investing? Not all emissions are the same! There are survival-emission and luxury-emission. Usually the latter are not touched that quickly as it is (politically and economically) more expensive. Therefore, the much hailed “cheap innovations” are not what we need for the necessary Green revolution to safe earth.
To whom belongs the atmosphere?
One has also to keep in mind that you need to own something, before you can trade it. A special system of property rights is needed to have an emission trading. This brings the following points to view:
o    It is always risky to mention terms like “property”, this doesn’t mean that it is about this matter.
o    A company that has a binding cap is not only obliged to reduce emissions to that, it is legally entitled to emit up to this amount. Pollution is legal.
o    Since governments want to reduce the cap, the property rights have to be less than absolute. Still, right now the private industry holds rights to pollute the earth by far more than is healthy – with state approval.
o    If you have a property on something, you have the right to benefit from it somehow – for example through trading.

The View of the South
One participant of a GYG-Workshop on Carbon Trading raised the point that this is an “ethical question.” Just selling the problem doesn’t help. The emissions worldwide and everywhere have to be reduced. The idea of mitigating in places where this is cheaper first leads to the fact regions that are already quite ‘clean’ become even less CO2-intensive while the ‘dirty’ ones stay with a high level. But even though climate change is the biggest threat facing the planet, the poor countries have a “Right to develop” and – other than the people of the global north – have this constantly in mind. Of course, wind power and bio gas can create jobs, but on the more general level, many participants from developing countries stated that raising their emissions first is somehow crucial.
Of course, the young greens present did not speak in favor of a right to pollute, but “it would be unfair if we are told to be clean” while others keep their standard of dirty living. Participants from the global north added to this, that much of the (in comparison still little) pollution in developing countries is actually part of the north’s ecological backpack.
Asked what they think about the possibility of buying offsets for their flights and other climate-worsening behavior at institutions like atmosfair©, the participants spoke of “greenwashing”, “symbolic policy” and “selling of indulgences”. Everyone agreed that the real solution can only be to change our way of live (e.g. in terms of traveling) radically in the global north and to some extend in the developing countries. Nevertheless, a discussion arose on the fact if offsetting is “just nice – better than nothing” or “not advisable at all” from a green perspective.
As a start, the story of Future Forests was told. The offsetting company was founded in 1986 and is now called The Carbon Neutral Company. It has major clients like the Rolling Stones for who’s UK-Tour in 2003 it planted 2800 trees. Yet, it was shown that the money collected from green-conscious concertgoers was either too much (when taking into account that the price of a tree was just 43 pence compared with 8 pounds collected) or way too little (when taking into account that Future Forests said it maintains the planted forest for at least 99 years). Further it was not clear if the trees would not have planted without Future Forests doing so. It was reported that actually existing forests were just bought off their carbon rights by the company; hence no additional tree was planted.
When thinking about offsetting, there are three problems that have to be kept in mind: the complexity of the carbon cycle, the base line problem and future value accounting.
Complexity of the carbon cycle
Nobody can say exactly how much CO2 is saved through mitigation efforts. Too many factors play in. One example is the current biofuel-crisis, which also shows how a once ‘clean’ technology becomes ‘dirty’ when all factors are included (the burning of biofuels sets emissions free as well!). The building of a solar panel in India also causes emissions that have to be calculated.
Further, one has to keep in mind the two carbon cycles on the world. The cycle encloses the carbon-storages in the soil like oil or gas  – the by far biggest amounts of carbon are here – as well as in the oceans, the atmosphere and the biosphere. But while it takes millions of years to produce for example oil, the extraction takes only little time. The carbon that the human is getting out of the ground stays in one part of the carbon cycle, the one above the ground (plus in the oceans). With offsetting the carbon cannot be brought back! Solar panels might stop the great hunger for fossil energy and planting trees might let those absorbe carbon for the amount of their lifetime, but as long as there is not a general stop of extracting carbon from the soils of the earth, the problem is increasing no matter how much is “offsetted”.
In addition to this comes the problem that research by the Carnegie Institute has shown that trees planted outside of the tropic regions have little to no impact on global climate change. And with the global average temperatures rising around 2° to 3°C – which is sure to come within the next 100 years – it remains unclear which plants can survive and serve as offsetting tools. So much can happen within the 99 years Future Forests promised to maintain its woods.
The baseline problem
If you want to know how much CO2 you saved by a certain action, you need to know two numbers: how much CO2 was in the atmosphere after your action and how much would be in it without your action. Then you can do the math! The second number is called the “baseline” (or “business-as-usual scenario”) and is subject to intense discussion. For CDM projects, special (private) consultants come up with baselines. These are more a political decision. The higher the baseline the better. Theoretically, a company can get credits for emitting even more if they were good enough in “creative accounting” – but only in theory? The UK Emissions Trading Scheme provided four companies with GBP 100 million for keeping emissions at a level already reached. Of course, nobody knows all the factors that have to be taken into consideration – but you should be careful!
Future value accounting
This refers to the fact that offsetting-projects are meant to go over a period of time. If you plant tree for your emissions of 1 ton, the mitigation capacity for the lifespan of the tree (for example 20 years) is calculated. Your emissions are not balanced immediately, but about 20 years later. So every year, 1/20th of your emissions, about 0,05 tons, is reduced. Either you wait 20 years or you plant 20 trees at once (which costs 20 times more!). If you emit regularly 1 ton a year and you plant a tree every year for this, you will still never offset your emissions. After 20 years you will have added 20 tons to the active carbon cycle. Of this, not even half of it will be taken up by the trees you planted. The table below shows, that with the planting of 20 year-trees you can never reach your actual emissions (blue line) and there will be a constant amount of 10,5 tons CO2 in the atmosphere due to your 1 ton a year activities (this could be a flight for example). The only way to let the amount of mitigated carbon reach the amount of emissions is to stop doing this activity – and wait 20 years. Do we have this time? Even worse: For most trees, a lifespan of 100 years is calculated. This would mean that you will very likely never offset your climate sins! Subsequently one can follow, that not offsetting is the solution to your climate-sins, but stopping to emit CO2 at all. Thus, a change in lifestyle is needed.

Carbon trading, including all forms of it like CDM or private Offsetting do not help to adequately tackle the problem of Climate Change. It is not efficient (=fast) enough, it cements the current system of exploitative capitalism and it creates new problems. The GYG have to think about alternatives to the whole current climate regime. An approach that focuses more on Carbon Taxation, Cap-without-trade and aggressive investment-pushing seems logically the alternative – and radical greener – policy. Nevertheless, the aim of this paper was to show the downsides and misunderstandings about Carbon Trading.


Über GYGeorg

Global. Young. Green. Drei Eigenschaften von Georg, der lange u.a. bei den Global Young Greens (GYG) aktiv war und mittlerweile für den Kohleausstieg in Deutschland kämpft.

Veröffentlicht am März 6, 2009 in Carbon Trading und mit , , , , , , , getaggt. Setze ein Lesezeichen auf den Permalink. 3 Kommentare.

  1. Ok, I cannot figure that out. But if anybody wants to have the PDF, send me a mail. georg 1 2 2 1 -ät- yahoo. d e

  2. Kennst du schon das „more“ Tag beim Bloggen?

  3. Hi Georg,

    great to see some greens refraining from cap-and-trade. It makes me sick that all NGOs keep believing in this system. By the way, there are theoretically 3 alternative ways. Cap-and-trade, taxation and direct regulation. Cap-and-trade and taxation are market-based. Why on earth would we want a market-based solution?

    And yes, please send me the .pfd, thats easier to read than a white-on-black-screen. Would you want me to comment?

    Johan Steunenberg

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