Carbon Trading

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Book: Carbon Trading. A Critical Conversation on Climate Change, Privatisation and Power. by Larry Lohmann (editor). Published by Dag Hammarskjold Foundation, Durban Group for Climate Justice and The Corner House, October 2006

Available for free at http://www.thecornerhouse.org.uk/pdf/document/carbonDDlow.pdf

Description

"The main cause of global warming is rapidly increasing carbon dioxide emissions -- primarily the result of burning fossil fuels. Some responses to the crisis, however, are causing new and severe problems -- and may even increase global warming. This seems to be the case with carbon trading -- the main current international response to climate change and the centrepiece of the Kyoto Protocol.

Carbon trading has two parts. First, governments hand out free tradable rights to emit carbon dioxide to big industrial polluters, allowing them to make money from business as usual. Second, companies buy additional pollution credits from projects in the South that claim to emit less greenhouse gas than they would have without the investment. Most of the carbon credits being sold to industrialized countries come from polluting projects, such as schemes that burn methane from coal mines or waste dumps, which do little to wean the world off fossil fuels. Tree plantations claimed to absorb carbon dioxide, in addition, often drive people off their lands and destroy biological diversity without resulting in progress toward alternative energy systems.

This exhaustively-documented but highly-readable book takes a broad look at the social, political and environmental dimensions of carbon trading and investigates climate mitigation alternatives. It provides a short history of carbon trading and discusses a number of 'lessons unlearned'. Detailed case studies from ten Third World countries -- Guatemala, Ecuador, Uganda, Tanzania, Costa Rica, India, Sri Lanka, Thailand, South Africa and Brazil -- expose the outcomes on the ground of various carbon 'offset' schemes.

The book concludes that the 'carbon trading' approach to the problem of rapid climate change is both ineffective and unjust. The bulk of fossil fuels must be left in the ground if climate chaos is to be avoided." (http://www.thecornerhouse.org.uk/summary.shtml?x=544225)


Introduction

By the author:

"OF ALL the schemes under discussion to stop or limit catastrophic climate change, one of those getting most attention is pollution trading. This popular but little-tried idea lies at the heart of some of the most prominent international approaches to the problem, including the Kyoto protocol and the European Union's Emissions Trading Scheme (EUETS). The trouble is, it won't work.

Pollution trading was developed in the US in the 1980s and 1990s to make reducing emissions cheaper and more palatable for heavy polluters. The idea is that if business A can reduce emissions more cheaply than business B, then B can pay A to make reductions for both of them. Moreover, by putting a price on emitting greenhouse gases, trading is meant to encourage businesses to invent new technologies to replace fossil fuel use.

This approach is misguided. Arguably, the US sulphur dioxide trading programme of the 1990s helped businesses save money in meeting modest short-term reduction targets for a single substance. But global warming requires a more radical solution: nothing less than a reorganisation of society and technology that will leave most remaining fossil fuels safely underground. Carbon trading can't do this. It just encourages the industries most addicted to coal, oil and gas to carry on much as before. Why bother making expensive long-term structural changes if you can meet your targets by buying pollution rights from operations that can cut their carbon cheaply?

What's more, carbon trading schemes have tended to reward the heaviest polluters. Heavily polluting industries and nations are being granted roughly as many free pollution rights -- which they can trade lucratively -- as they need to cover current emissions. Under the EUETS, some of the worst greenhouse offenders, such as the German utilities group RWE, have earned hundreds of millions of euros in windfall profits just for pursuing business as usual. Meanwhile ordinary citizens suffer higher electricity prices, and renewable energy developers must beg for funds.

The EUETS and the Kyoto protocol are further weakened by loopholes that allow big polluters to buy cheap "offset" credits from abroad. A British cement firm or oil company lacking enough EU permits to cover its emissions can make up the shortfall simply by buying credits from, say, a wind farm in India, a scheme to destroy HFC refrigerants in Korea, an energy efficiency programme in South Africa or a project to burn landfill gas to generate electricity in Brazil.

Such projects are merely supplementing fossil fuel use; they are not replacing it. The institutions most eager to set up offset projects - from the World Bank to Tokyo Power - are precisely those most committed to burning up more and more fossil fuel. Covering the land with windmills and biofuel plantations will be of little use unless fossil fuel extraction is stopped.

The damaging effects of carbon trading schemes are felt severely in poor countries. The Durban Group for Climate Justice has documented that almost all the carbon credits are generated by polluting companies, while communities that follow climate-friendly practices such as preserving local forests or defending their lands against oil exploitation are ignored. Only big firms can afford to hire carbon accountants, liaise with officials and pay the costs of getting projects registered with the UN. Yet these are often the companies that local people battle hardest against in defence of their livelihoods and health.

The US wrote carbon trading into the Kyoto protocol before abandoning the treaty to its fate. The sclerotic market apparatus that resulted does not serve anyone's best interests. It helps keep an oppressive, fossil-centred industrial model going at a time when society should be abandoning it.

There are better ways of tackling climate change than by privatising the Earth's carbon-cycling capacity. Public investment, shifting subsidies away from fossil fuels and toward renewables, conventional regulation, support for the work of communities already following or pioneering low-carbon ways of life, requiring that businesses pay the costs their competitors incur in developing green technologies - all these are stronger and more direct ways of bringing about the structural change required.

Historians of science tell how scientists who supported the old European astronomical model that placed the Earth at the centre of the universe had to add more and more elaborate, ad hoc refinements or "epicycles" to their calculations in order to account for planetary movements. Carbon trading is like one of those epicycles. It's time it was replaced." (http://www.thecornerhouse.org.uk/item.shtml?x=546606)