Hot Air

EU on Kyoto: not really an "agreement"

2012-01-20T21:11:00.001+01:00

Isn't it funny how, when it comes to determining how to interpret EU emissions trading rules, the Durban Package is insufficient to be defined as an "international agreement"

http://ec.europa.eu/clima/news/articles/news_2012011101_en.htm

The adoption of a second commitment period of the Kyoto Protocol without a legally binding agreement for the period beyond 2012 under which other developed countries commit themselves to comparable emission reductions and economically more advanced developing countries commit themselves to contributing adequately according to their responsibilities and capabilities is therefore not an international agreement as referred to in Article 11a(7) of the EU ETS Directive and Article 5(3)of the Effort Sharing Decision.

Unclean Development Mechanism: How African Carbon Markets are Failing

2011-11-28T18:11:00.002+01:00

The following article was published as part of a debate hosted by the Heinrich Boell Stiftung. To read it in context, click here

Stories of the carbon market’s potential to mobilise billions of dollars in investment for projects to reduce emissions and contribute to sustainable development in the developing world tend to rely on aggregate figures about the value of the global carbon market, which was US$142 billion in 2010. There is a major discrepancy between this headline value and Clean Development Mechanism (CDM) financial flows, however, and this gap has continued to increase. In 2010, the “primary trade” in CDM offsets was worth $1.5 billion, its lowest level since the Kyoto Protocol entered into force in 2005. This is generally taken as an estimate of how much money goes to projects, although a recently leaked World Bank report suggests that the actual financial flows may be five times lower ($300 million) if the real purchase prices of credits are used instead of estimates.

The geographical scope of the CDM is also highly uneven, with over 80 per cent of registered CDM projects (and almost 86 per cent of credits issued) in the Asia-Pacific region. By contrast, Africa hosts 1.9 per cent of projects, issuing 1.3 per cent of credits, according to data from UNEP Risoe. These regional figures mask significant discrepancies between countries as well as regions. The majority of credits issued in Africa so far have gone to Egypt, but South Africa has the largest number of registered projects (19). By contrast, the rest of Sub-Saharan Africa hosts just 31 projects, amounting to 0.9 per cent of the total projects globally and just 0.005 per cent of credits issued to date.

On the north coast of Egypt, Africa’s largest fertilizer factory generates more carbon offsets than the rest of the continent combined, which are sold to coal-fired power stations in Germany’s industrial heartland to help them avoid cutting their greenhouse gas emissions. In 2010, the Abu Qir factory made an estimated US$25 million profit from these offset sales, while the power stations avoided 3 million metric tonnes of carbon dioxide reductions.

The story of Abu Qir is a snapshot of how the carbon offset market under the UN’s CDM has worked to date. Most credits are generated by industrial gas reduction projects, using cheap end-of-pipe technologies that generate far more money from the sale of carbon credits than they cost to buy and run. The largest buyers of these credits, in turn, are European energy producers keen to extend the lifespan of their coal-based power plants.

The fact that such a high proportion of Africa’s credits come from one factory illustrates just how marginal Africa is to the carbon market, and that the carbon market has been largely irrelevant to the continent's efforts to tackle climate change.

Project developers point to a lack of capacity in African states, but the main explanation for these disparities is economic. The largest global investors direct their efforts to the most profitable projects. Economies of scale invariably point to the larger projects, and since offsets represent “avoided emissions”, these involve heavy industries or power sector projects in countries where grid energy already register significant greenhouse gas emissions. Such project opportunities rarely exist in sub-Saharan Africa, which is not dirty enough or does not consume enough to compete successfully within the CDM.

This picture is clearly borne out in projections of how the scheme is likely to look by 2020. African projects already in the CDM pipeline would issue fewer than four per cent of credits by 2020. Almost half of these would come from a handful of gas-flaring projects in the Niger Delta, which looks set to overtake Egypt as the country with the highest number of credits by the end of the decade. The economic fundamentals limiting African involvement in the CDM as it is currently structured remain firmly intact, with project developers gravitating towards large-scale extractives and the industrial sector.

Various rule changes are on the table in Durban, which could exacerbate this trend. The inclusion of Carbon Capture and Storage (CCS) could depress offset prices that have already fallen so low as to be the “world’s worst performing commodity”, according to Reuters. The early beneficiaries would be in South Africa, where Sasol is looking at the possibility for its gas-to-liquids/coal-to-liquids plants; and in Algeria, where BP, Sonatrach and Statoil run the world’s largest onshore CCS demonstration project on their gas fields.

The other major changes could affect agriculture and forestry projects, which advocates for increasing the use of CDM in sub-Saharan Africa have identified as the sectors with the greatest “potential”. The World Bank is hoping to expand CDM to cover carbon storage in the soil as part of its proposals for “climate smart agriculture,” its version of the agricultural deal that the South African presidency hopes to be Durban’s main legacy. The World Bank claims that soil carbon storage will see small holder farmers “benefiting from significant payments for emission reductions.” However, its flagship pilot project in Kenya would see over 40 per cent of the costs spent on monitoring and registering the project, with $1.05 million spent on these “transaction costs”, leaving just over $1 per year for each farmer involved.

This cost profile is fairly typical of agricultural projects, which fetch far lower than average offset prices due to issuance uncertainties, and restrictions imposed on these project types due to difficulties in accounting for forest and agricultural carbon. As a result, the cards in this sector are also stacked in favour of agribusiness, which have better economies of scale. For example, the largest of a handful of CDM “reforestation” projects proposed (but not yet approved) would see the replacement of grasslands in Ghana with large-scale biodiesel monoculture plantations. In response, campaigners suggest that the inclusion of agriculture, forests and soil carbon in the CDM could lead to a “triple lose” for farmers, leaving them dependent on unpredictable carbon prices, increasingly vulnerable to land grabs, and left shouldering the burden of a climate crisis that they did not create.

In summary, the CDM is not failing Africa because of the inertia of policy makers and the CDM Executive Board. The CDM is failing in Africa because the economics of carbon markets create regional imbalances and favour large projects – subsidising the extractives sector and heavy industry, which are generally highly polluting and socially harmful. These same dynamics, if extended to agriculture, would favour agribusiness over small farmers. Various capacity-building initiatives are under way but these cannot alter the market fundamentals, and serve to merely divert scarce public resources away from directly addressing climate change.

MiFID II: carbon trading included, many problems unaddresed

2011-10-21T13:54:00.003+02:00

The European Commission is proposing that trading on the carbon market should be governed by the revised Markets in Financial Instruments Directive (MiFID II), a set of new laws governing financial speculation.

The move comes amidst continued volatility in the $142 billion per year carbon market, most of which is traded in the EU, and follows a series of fraud cases in recent years.

The proposal to classify carbon as a financial instrument would bring the whole market - including “spot” and "derivatives" trades - under a single regulatory framework. These proposals were subject to significant corporate lobbying, as revealed in a report from Carbon Trade Watch and Corporate Europe observatory released last week.

A compilation of the new measures on emissions trading included in MiFID can be found here. I've also compiled a similar document in relation to the Market Abuse Directive.

Treating carbon as a financial instrument is a welcome recognition of the problems in this market, but it is no panacea. Emissions trading has not driven investments in cleaner energy and there is no sign of it meeting environmental goals, as the latest carbon price slump shows.

The inclusion of carbon in MiFID II leaves key exemptions in place, however. For example, MiFID does not cover trading on “own account” and so fails to capture speculation engaged in by energy companies, which are the largest players on the carbon market.

This issue is covered in more depth in
Letting the market play: corporate lobbying and the financial regulation of EU carbon trading

Corporate lobbying and the financial regulation of EU carbon trading

2011-10-16T20:26:00.002+02:00

The European Union is changing its rules on how carbon is traded in response to a series of fraud cases and the financial crisis.

My new report analyses these changes, and looks at how corporate lobbies are trying to influence this process.

It shows that the European Commission initially took a light-touch approach to regulating carbon markets, putting increases in the volume of trade ahead of security concerns. In so doing, it failed to anticipate the specific opportunities for gaming and fraud posed by creating a large market in an intangible commodity. A series of carbon fraud cases, and the role played by “derivatives” in triggering the financial crisis, has made this position untenable and ushered in a new wave of regulation. This brings together measures designed to address fraud and gaming, with others designed to limit the destabilising effects of speculation. These may clean up the market’s image, but they do not address the core problems with carbon trading.

The measures proposed to tackle fraud focus on tightening registry security – in essence, regulating more strictly who can trade in carbon so that it is no longer possible to simply register as a trader from a home computer, steal funds, then disappear without trace. This much is sensible, although the fact that it took a series of fraud cases to bring about these obvious protections casts Commission decision-makers, and the lobbyists who pressured them to avoid regulation, in a poor light.

More controversially, the Commission’s package of security measures manages to include changes that hide serial numbers. The City of London Corporation, not known for its radical pro-regulatory stance, reports surprise at this decision, stating that “It is not understood how this will aid security as it prevents the market from identifying the provenance of the allowances.” Indeed, it is hard to find explanations that do not point towards a cover-up. In making it impossible to anyone except law enforcement agencies to trace individual allowances, the Commission has reduced transparency across the whole scheme, making it harder for civil society to reveal evidence of fraud and gaming, or the perverse effects of the system, and making it impossible to trace the volume of permits re-issued as a result of theft. These reissued permits would, in turn, further inflate the already generous emissions limits that the scheme establishes.

Significant fraud and gaming risks remain, despite these changes. Holes in registry security mean that there is still a risk that carbon trading could be used for money laundering. This is a particular problem across different legal jurisdictions. While the EU is trying to close the door to registry fraud within its borders, it is at the same time attempting to link it’s carbon market to other emerging markets (eg. Australia), as well as allowing offsets to be traded within its scheme – increasing the potential for carbon fraud globally.

Fraud risks, in this narrow sense of deliberate deception for unlawful gain, are potentially less significant than those posed by “gaming” - deliberate deception that is legally sanctioned. As we have shown elsewhere, the lobby pressure to freely allocated large surpluses of emissions permits has resulted in windfall profits for industry and the power sector. The offset markets are notorious for the same practice. CDM credits are issued in relation to “additionality” claims that are impossible to prove. A recently leaked US cable gave dramatic evidence of the scale of this problem, reporting from a meeting in Delhi that “all interlocutors conceded that all Indian projects fail to meet the additionality in investment criteria and none should qualify for carbon credits.” These interlocutors included the Chair of the national CDM authority, as well as some of the country’s largest project verifiers and developers. In a nutshell, carbon trading schemes are awash with paper “reductions” that do not correspond to actual reductions of greenhouse gas emissions in the real world, and this is a systematic problem. Gaming results in windfall profits and undermines efforts to address climate change.

On the side of financial speculation, the key regulatory proposal is to classify carbon as a “financial instrument.” This would bring it under the scope of the Market in Financial Instruments Directive, a key component of EU market legislation that is currently under review. The International Emissions Trading Association (IETA) and other financial sector lobbyists have vigorously opposed this change, fearing that it could limit some avenues for financial speculation on carbon. A leaked draft of the proposed Directive suggests that the Commission may not side with the lobbyists, although some key exemptions remain in place. Most notably, leaving it to national authorities to set “position limits” would be ineffective: the majority of trades pass through the UK, which is opposed to this concept and would not implement it in any meaningful way. The restriction to trading on “own account” fails to capture speculation engaged in by energy companies, which are the largest players on the carbon market.

More fundamentally, though, restrictions on speculation shed critical light on the flawed purpose of the carbon market in the first place: it introduces speculation by design, undermining the stated objective of long-termer clean investment decisions. To really address these issues requires bolder steps to de-financinalise climate policy and move away from the carbon market model.

The CDM's missing billions

2011-10-03T02:14:00.004+02:00

According to World Bank figures, the global carbon market was “worth” $142 billion in 2010. Most of this number relates to financial speculation on permits in the EU Emissions Trading System. The value of the money that goes to CDM projects continues to decrease. The Bank officially claims it was $1.5 billion in 2010, its lowest level since the Kyoto Protocol entered into force in 2005. However, the real figure for 2010 may be closer to $300 million.

The difference between the official and "actual" figure was explained by the Mobilizing Climate Finance report, leaked to The Guardian. It notes that

The value of transactions in the primary CDM market – the largest offset market by far – totalled around $27 billion in 2002-10, which is estimated to have been associated with around $125 billion in low-emission investment. Since the bulk of transactions are forward purchase agreements with payment on delivery, actual financial flows through the CDM have actually been lower, about $5.4 billion through 2010.

The World Bank's official figures can be recalculated with these "actual financial flows" as follows:

Year	WB Official	WB actual
2010	1.5	0.3
2009	2.7	0.54
2008	6.5	1.3
2007	7.4	1.48
2006	5.8	1.16
2005	2.6	0.52

Figures are in $ billions

Wikileaks and EU climate targets

2011-09-05T11:22:00.002+02:00

A cable detailing a 2008 spat between the EU and US on climate change targets sheds light on the EU’s lack of ambition.

In a frank exchange on March 7, U.S. and European principals reviewed work on climate change under the Major Economies and UNFCCC Processes. U.S. principals secured EU Environment Commissioner Dimas' admission that current EU proposals will permit some EU Member States to record absolute increases in emissions by 2020.

Dimas conceded that “some EU Member States will be permitted under the EU's proposals to record an absolute increase in emissions by 2020.”

Jim Connaughton, Chairman of the White House Council on Environmental Quality at the time, further questioned the EU’s achievements in relation to its Kyoto targets:

for Europe, 1990 as a reference year incorporates the early 1990s economic collapse of eastern Europe, which no policymaker would recommend be repeated; the UK's decision to move away from coal to natural gas, long before climate change was a policy issue; and the EU's use of diesel fuel, at the expense of air quality and human health.

Wikileaks and the CDM: no "additionality" in India

2011-09-05T11:15:00.003+02:00

Several of the recently released wikileaks cables discuss the CDM in passing. A cable on the CDM in India is particularly enlightening, however. It reports on a seminar with the US Consulate General Office (Congenoff) and analysts from the Government Accountability Office (which later released a skeptical study on offsets).

At a seminar on CDM in Mumbai, R K Sethi, Member Secretary of the National CDM Authority and the present Chairman of the CDM Executive Board, publicly admitted that the National CDM Authority takes the "project developer at his word" for clearing the "additionality" barriers. Mathsy Kutty of Det Norske Veritas (DNV), a CDM Executive Board-accredited validation and verification organization for CDM projects, told ConGenoff that the designated authorities of host countries approve projects in a cursory manner and do not check to see whether the project meets all the requirements laid down by the CDM Executive Board. CDM projects in India do not have to be validated or verified to get host country approval while both processes are mandatory to get the project registered with the UNFCCC, she continued. For this reason, she pointed out, Indian projects account for 44 percent of the total projects rejected by the CDM Executive Board.

Most Indian CDM projects are initiated without foreign backing, and

For this reason, Santonu Kashyap of Asia Carbon maintains that Indian projects can never fulfill the additionality requirement as no developer will risk investing in a project unless he is certain of a revenue stream independent of the CDM incentive. In a separate discussion with GAO analysts and ConGenoff, Jamshed Irani, Director of Tata Sons and the Chairman of the Tata group's Steering Committee on Sustainability, agreed that no Indian company is brave enough to rely entirely on a CDM-driven revenue stream.

Although all of the CDM project developers spoken to claim that their projects have sustainability benefits, the cable concludes that

Amidst complaints about the "arbitrary" decisions of the CDM Executive Board, all interlocutors conceded that all Indian projects fail to meet the additionality in investment criteria and none should qualify for carbon credits.

Technology Transfer in the CDM: some basic considerations

2011-08-16T12:18:00.007+02:00

“Technology transfer” is often described as one of the key “co-benefits” of the Clean Development Mechanism, but it is a concept that requires further elaboration.

The UNFCCC's CDM Registration & Issuance Unit tried to measure the extent of CDM “technology transfer” at one point by looking at how many projects involved technology imports. It used companies' own reporting of "the use of equipment or knowledge not previously available in the host country for the CDM project." Industrial gas projects (such as those involving HFCs) came out well in this study.

Taking technology imports as a measure is fairly useless measure of the potential benefits, however. Further analysis of the HFC cases have shown that a fairly simple, pre-existing piece of technology was transferred in a massively inefficient manner, as this February 2007 article by Michael Wara demonstrated.

The extent to which HFC projects have contributed to a series of other perverse incentives has since been established in far more detail, with even the European Commission now accepting that they suffer a total lack of environmental integrity.

More fundamentally, though, a better definition of "technology transfer" is needed - and a clearer understanding of the context in which it works, is helpful. Three key points may be raised here.

First, the CDM can serve to disincentivise and delay the passing of environmental regulations.

As the CDM program became active, policymakers realized that the additionality requirement provided incentives to retard the process of creating developing countries’ policy in order to preserve credit eligibility.
-David Drieseen and David Popp

Second, technology transfers through imports by private actors can crowd out domestic industry - as the work of Ha-Joon Chang (eg. the books "Bad Samaritans" and "Kicking away the Ladder") eloquently demonstrates.

Third, the CDM promotes a development model that eclipses local technologies. As Larry Lohmann argues,

'technology transfer' continues to carry the connotation, as it always has, of moving Northern technology into a ‘technology-deprived’ area in the South. In practice, this typically plays out in the degradation, skewing or destruction of one set of technologies in favour of another.

Although Chang and Lohmann appear to be making similar points, the latter engages in a more fundamental critique of the benefits of "development" regimes.

World Bank Partnership for Market Readiness begins push for new carbon markets

2011-07-18T13:40:00.001+02:00

The World Bank is busily encouraging “middle income” countries to create new carbon trading schemes. It hopes that this will lead to a “scaling up” of carbon markets and has created a new Fund, the “Partnership for Market Readiness” (PMR), to meet this aim.

Without much fanfare, the Fund's first meeting took place on 30-31 May in Barcelona, just ahead of Carbon Expo, a huge carbon trading jamboree co-organised by the World Bank and the International Emissions Trading Association (IETA). Representatives of over 30 countries joined the meeting, according to the Bank.

The Partnership approved initial grants of $350,000 to Chile, China, Columbia, Costa Rica, Indonesia, Mexico, Thailand and Turkey. Each of the eight countries will now develop a “Market Readiness Proposal” to detail their plans. Two further countries, Morocco and Ukraine, have been confirmed as participants.

The Bank hopes that the PMR will stimulate two main activities: the creation of new cap and trade-style carbon markets, and engagement in “NAMA crediting.” The latter suggestion pre-empts ongoing debates within the United Nations Framework Convention on Climate Change (UNFCCC), which has yet to agree to this controversial means of “scaling up” carbon finance beyond carbon offset projects.

A range of economic activities might be covered, with the current (non-exhaustive) list including: power generation, iron and steel, transport, construction/buildings/housing, cement, energy efficiency, waste management, and NAMAs for “low-carbon cities”. In Mexico, the PMR will work to set up a carbon offset registry, while in China it is promoting the creation of regional emissions trading pilot schemes.

Funding pledges so far come from: Australia, the European Commission, Germany, Japan, Norway, The Netherlands, Spain, Switzerland, the United Kingdom and United States. These amount to a little under $70 million of the $100 million expected total.

The latest pledges include $7 million from the International Climate Fund (ICF), the UK government's means of channelling climate money through the World Bank. This follows the usual UK-government practice of re-announcing the same money several times: the money can be double-counted as part of the UK's Official Development Assistance (ODA) funding, and this same money also forms the UK's contribution to “fast-start financing.”

For “fast” read “slow” - while the rhetoric suggests that money will be directed towards the immediate needs of people already facing the impacts of climate change, the use of such funds to develop new market-mechanisms is a boost for schemes that are notable for delaying action to address climate change.

The vast majority of the money from the PMR will be directed towards establishing systems for “monitoring, reporting and verification” (MRV) – in other words, technical support for the creation of a system of tradeable carbon credits. However, this remains a small proportion of the total needed to pilot market mechanisms, meaning that the scheme's “beneficiaries” are likely to spend far more on the schemes than the money that the Bank puts in.

More information
Carbon Trade Watch, Partnership for Market Readiness: a critical introduction, January 2011

The case against sectoral carbon markets

2011-07-14T00:13:00.005+02:00

The global carbon market is in crisis. Proposed emissions trading schemes in the USA, Japan and Canada have stalled indefinitely; new markets in Australia and South Korea face significant delays; and climate justice activists have successfully blocked the start of a planned scheme in California. Trading has become ever more concentrated around the EU Emissions Trading System (ETS), which could well see carbon permit prices drop to zero if the 27-country bloc adopts stricter guidelines on energy efficiency. Overall carbon trading volumes were lower in 2010 than in the previous year, and are predicted to stagnate in subsequent years; and the Clean Development Mechanism (CDM) has declined for four years running, with fewer credits purchased from new projects than at any time since the Kyoto Protocol came into force in 2005.

Perhaps confusing these contractions for birth pangs, there is currently a push to create new international carbon market mechanisms in the context of United Nations Framework Convention on Climate Change (UNFCCC) international climate negotiations. The World Bank is offering further encouragement, in the guise of a new Partnership for Market Readiness (PMR) to promote carbon markets in middle-income countries.

I've written a new report new report that critically examines the reasons behind and potential consequences of creating new carbon market mechanisms. In particular, it focuses on “sectoral” carbon markets, which would move beyond the project-by-project basis of the CDM and issue carbon allowances in relation whole sectors of the economy.

Click here to download a pdf of the report

Industry lobbyists gunning for EU climate targets

2011-06-22T11:27:00.003+02:00

Proposals to increase the EU's carbon emissions target from 20 - 30 per cent and the EU's new Roadmap for moving to a low-carbon economy by 2050, have been met by heavy opposition from industry lobbies. Here's a new report (co-authored with Corporate Europe Observatory) which shows how BusinessEurope, the European Chemical Industry Council and Eurofer (Confederation of Iron and Steel Industries) have bullied the European Commission, exploiting tension between DG Energy and DG Clima to weaken the EU's climate targets: Caught in the cross-hairs: how industry lobbyists are gunning for EU climate targets

Carbon Offsets in the EU Emissions Trading System: summary of 2010 data

2011-05-04T11:57:00.002+02:00

The European Commission has released new data showing how many carbon offsets have been used in its Emissions Trading System. Here are some quick notes on what's hidden away in those figures:

* 137 million in offsets were used in the EU ETS in 2010. This includes 117 million CERs (credits from the Clean Development Mechanism), compared to 78 million tonnes in 2009.

* 20 million ERUs (credits from Joint Implementation) were used, compared with 3.2 million in 2009 (a 625% rise).

* The majority of international offsets were used by companies in the power sector: 83.6 million, a little over 60 per cent of the total. Cement, lime and glass used 13 million offset credits, and oil and gas used 12.8 million credits.

* German companies were the largest users of offset credits, handing in 37.6 million tonnes, followed by Spain and Poland (15.7 million tonnes).

* A total of 277.28 million offsets have been used in the ETS phase 2 (from 2008) so far. The top 20 installations using these credits accoung for 59.33 million of these (around 20 per cent of the total).

* The 2010 data are not disaggregated from previous years – but it seems, on initial examination, that HC Energia (Gijon, Spain, ref: ES033301000215) with 3.3 million CERs and US Steel Kosice (Slovakia) with 2.2 million surrendered CERs surrendered in 2010 are the installations that have used the most offset credits this year.

* Overall in phase 2 of the EU ETS, the largest number of CDM offset credits have been surrendered by Elektrownia Belchatow, the largest single polluter covered by the scheme. Its verified emissions were 29.66 MtCO2e in 2010. Most of these were accounted for by free permits: the plant received an allocation of 26.93 million EUAs (European Allowance Units) in 2010. As a result, it had to buy at least 2.72 million permits. In the event, however, it surrendered 4.09 million CERs (CDM credits) in 2010.1

* Glocke Salzgitter (a German steel plant) is an even clearer case of using cheap offsets to delay action to reduce emissions at source. In 2010, it had the fifth largest surplus of permits in the EU ETS (5.26 million in 2010, yielding around €62 million in windfall profits2). In other words, the scheme places no real obligations on the plant in the first place. Yet it saw fit to hand in 1.5 million offset permits (and over 400,000 ERUs.3 in 2010. This appears to be part of a strategy to stockpile surplus permits to delay emissions reductions further into the future. The majority of the CERs used by the company come from HFC projects in China.

* The largest number of ERUs from Joint Implementation were handed in by S.C. Electrocentrale DEVA S.A of Romania (1.7 million), the country's fourth largest polluter. It had not previously handed over any ERUs. This use of such a large volume of offsets is particularly notable, given that the company already had a surplus of 1.99 million permits in 2010 (it had an allocation of 3.6 million permits, and its “verified” emissions required it to surrender just over 1.7 million of these).

* It is likely that (as in 2009) the Swedish energy company Vattenfall was the largest user of offset credits. The majority of the credits that it has surrendered come to date from HFC projects in China (these are industrial gas projects that EU Climate Action Commissioner Connie Hedegaard admits have a "total lack of environmental integrity". The EU will no longer accept these credits from April 2013, and there is some evidence that companies are starting to "dump" their holdings of these worthless credits before that deadline).

NOTES

1The EU offsets data released on 2 May 2011 is cumulative for the 2008-2010 period. In the case of Elektrownia Belchatow, it shows that 7.45 million CERs have been handed in (“surrendered”) to date, with 365,000 CERs handed over in 2008, and a further 3 million in 2009.

2This figure assumes a €13 per ton price of carbon permits (EUAs), and incorporates a 10 per cent downward adjustment to take account of permit transfers relating to waste gases.

3ERUs are credits issued by the Joint Implementation scheme, which is a counterpart to the CDM that operates within countries that have Kyoto Protocol targets.

European Commission “Scaling up climate finance”: what does it actually mean?

2011-04-10T12:19:00.002+02:00

The European Commission says $100 billion a year by 2020 for “climate funding” in developing countries is “challenging but feasible.” But read behind the press release, and what is actually being proposed shifts even further away from the idea that climate finance should form part of an obligation (or “debt”) incurred, alongside other industrialised nations, for playing a disproportionate role in causing climate change in the first place.

What follows are some notes on a new European Commission document prepared as a follow up on the UN High Level Panel on Climate Change Financing (AGF). The report was commissioned by ECOFIN (the Economic and Financial Affairs Council, which is the meeting of EU finance ministers) in December 2010.

Like most Staff Working Documents, its 46 pages are a dry and technical affair, but unlike most such documents it contains some interesting clues as to the direction of the Commission's thinking.

Carbon markets are central to the EU's approach, as are a broad range of other “private financial flows”. Public climate finance is defined in increasingly blurry ways, including promoting the EIB's role, double-counting aid flows, and blurring the boundary between public and private financing (eg. suggesting that more public sector equity be provided for private projects – in essence, because the banks aren't lending so much as a result of the economic crisis).

What are “private financial flows”?

* The general orientation of the document is that “Private financial flows will depend largely on developing countries' capability to create a general business environment which is attractive for domestic and international investment. ” (p.10) However, it is noted that the economic crisis has “severely limited access to private financing worldwide.” (p.45). It suggests, in this context, that MDBs and other IFIs act as “market maker” (p.45), in which the EU could be a partner through ”measures such as co-investments, risk sharing mechanisms, fee incentives, sanction mechanisms, etc. ”

* The boundary between public and private finance is becoming very blurred. For example, the document notes “The blending of grants and loans as well as equity and quasi-equity constitute innovative mechanisms to enhance support to EU external priorities and to multiply the impact of EU external assistance (p.43)

* A number of “innovative” instruments are proposed to enhance private financial flows. These include : “Instruments to improve the risk-return profile include the provision of guarantees, technical assistance or interest rate subsidies to support the issuance of debt for climate projects. Public-Private Partnerships (PPPs) can spread the costs and risks of financing of public goods over the lifetime of the asset which can considerably alleviate the short to medium-term pressure on public budgets. Using public funds to inject equity capital into companies or projects can be another mechanism to mobilise private investment. Public support for the use of market-based insurance schemes covering natural disasters can leverage sizeable amounts of private finance for adaptation. Other examples of innovative mechanisms that could raise private finance for climate actions are Advance Market Commitments (AMCs), tax discounts, access to finance, or standards of corporate social responsibility. ” (p.12) (see also p.39)

Public finance

* The document offers an “indicative table of financial contributions from Annex I states” (p.19) and suggests a central role (esp. in adaptation) could be played by the Green Climate Fund, which it sees as “likely to become bigger than the existing funds under the Financial Mechanism of the Convention ” (p.19)

* On adaptation, it is noted that“donor support for microfinance institutions (MFIs) could also be regarded as climate finance to some extent, ” (p.39)

Carbon markets

* The documents recommendations include the (predictable) suggestion that that the EU “work with other developed countries interested in setting up cap-and-trade systems, ... make progress on the reform of the Clean Development Mechanism, and ... promote a sectoral crediting mechanism; ”

* More interestingly, “Commission analysis shows that with current pledges, allowing the full banking of the Assigned Amount Unit surplus and choosing the Kyoto Protocol target as a starting level for the emission reduction paths for the period 2013-2020 would result in no demand for international credits additional to what has already been enabled.” (p.34) This begs a significant question as to what the use of the EU's proposed market mechanisms would be? In fact, it seems to signal a potential lack of demand that would undermine prices. As such, figures for the proposed “financial flows” that the EU attaches to such mechanisms should be treated with extreme caution, and may leave a large climate financing hole.

* For those with an interest in carbon markets, these projections are also useful to bear in mind (and offer one of the clearer projections relating to demand for sectors outside the EU ETS, ie. those covered by “effort sharing” Directive: “Current EU ETS legislation allows for carbon offsets of about 1.6- 1.7 Gt of CO2 in the period 2008-2020 (i.e. about 130 Mt of CO2 per year). Additional demand for credits will come from the sectors outside the EU ETS amounting up to approximately 700 Mt over the period of 2013-2020, i.e. roughly 88 Mt of CO2 per year until 2020. At the current price for CDM credits of some EUR 13 per tonne of CO2, the demand by the EU could generate roughly EUR 3 billion of financial flows to developing countries per year, not taking into account additional flows triggered by investments underlying CDM projects.” (p.35). Here as elsewhere (p.10 of the report), figures on CDM “investment” treat investment as the same thing as the cost of carbon credits sold (ie. these figures don't try to account for the large sums skimmed off by project developers, etc. ... and other financial transfers – eg. returns on equity borrowed to finance projects; intra-company financial flows from South to North).

MRV (measuring emissions)

* On MRV, it notes that “A new major challenge in the context of long-term climate finance will be the monitoring and accounting of private flows.” (p.20)

Double-counting aid flows

* Double-counting aid flows now seems to be normal Commission practice. Figures on existing climate finance are said to include allocations from the European Development Fund (EDF) (p.20), as well as a proportion of the EU's existing 2007-2013 budget that was allocated to the Instrument for Development Cooperation (DCI). (p.21), including subsidiary thematic programmes such as "Environment and sustainable management of natural resources including energy" (ENRTP) with a total amount of approximately EUR 1.1 billion.” The document notes that “The ENRTP covers the additional budget allocation granted for fast-start climate change funding and the allocation for the Global Climate Change Alliance (GCCA). ” The EU's climate finance figures also seem to include money from “the Neighbourhood Investment Facility (NIF) [which] has approved more than EUR 100 million of grants for climate related projects” since 2008. (p.43)

New EU carbon tax

* The EU is seriously considering new carbon taxes. “The Commission intends to come forward, during the second quarter of 2011, with a proposal for a revision of the Energy Taxation Directive (ETD) to bring it more closely in line with the EU's energy and climate change objectives. The proposal will aim at, on the one hand, integrating an explicitly CO2-related element into the energy taxation system which would be applicable outside the EU ETS and, on the other hand, putting the remaining part of energy taxation on a neutral basis by linking it to the energy content of the products subject to taxation. In doing so, it will ensure consistent treatment of energy sources within the ETD in order to provide a genuine level playing field between energy consumers independent of the energy source used. Moreover, it will provide an adapted framework for the taxation of renewable energies and provide a framework for the use of CO2 taxation to complement the carbon price signal established by the ETS while avoiding overlaps between the two instruments. ” (p.31) More on this is also reported here.

Privatising the commons

The document suggests that “ETS auctions of allowances for greenhouse gas emission sources in energy and industry could deliver revenues of more than EUR 20 billion per year by 2020. According to the ETS Directive, Member States should spend at least half of these amounts on activities related to climate change, energy and low-emission transport, including in developing countries ” (p.8). It should be noted that(1) these funds are not actually earmarked, and many EU Member States would resist such a move; (2) in putting a value on auctioned permits, the EU is creating property rights from pollution which are drawn from a global carbon space (that the EU has already over-used its share of).

EU Emissions Trading System: phase III on course for failure

2011-04-07T17:39:00.003+02:00

Emissions trading is the European Union’s flagship measure for tackling climate change, and it is failing badly. In theory it provides a cheap and efficient means to limit greenhouse gas reductions within an ever-tightening cap, but in practice it has rewarded major polluters with windfall profits, while undermining efforts to reduce pollution and achieve a more equitable and sustainable economy. The third phase of the scheme, beginning in 2013, is supposed to rectify the “teething problems” that have led to the failures to date.

I've written a new briefing which can be found here. It shows that:

- The EU Emissions Trading System (ETS) has failed to reduce emissions. Companies have consistently received generous allocations of permits to pollute, meaning they have no obligation to cut their carbon dioxide emissions. A surplus of around 970 million of these allowances from the second phase of the scheme (2008-2012), which can be used in the third phase, means that polluters need take no action domestically until 2017. Proposals to curtail this surplus were discussed in the context of the EU’s 2050 Roadmap, but have been watered down in response to lobbying from energy-intensive industries.

- Companies can use 1.6 billion offset credits in phases ll and lll, mostly derived from the UN's Clean Development Mechanism (CDM). Over 80 per coent of the offsets used to date come from industrial gas projects, which EU Climate Action Commissioner Connie Hedegaard admits have a "total lack of environmental integrity". The Commission delayed a ban in the use of these industrial gas offsets to April 2013 in response to lobbying from the International Emissions Trading Association (IETA) and others.

- The ETS is a subsidy scheme for polluters, with the allocation of permits to pollute more closely reflecting competition policy than environmental concerns. Power companies gained windfallprofits estimated at €19 billion in phase l, and look set to rake in up to €71 billion in phase ll. Subsidies to energy-intensive industry through the two phases could amount to a further €20 billion. This has mostly resulted in higher shareholder dividends, with very little of the windfall invested in transformational energy infrastructure.

- The third phase of the ETS will still see significant subsidies paid to industry, despite the auctioning of permits in the power sector. Industry lobbying has resulted in over three quarters of manufacturing receiving free permits, which could yield at least €7 billion in windfall revenues annually. Energy companies successfully lobbied for an estimated €4.8 billion in subsidies for carbon capture and storage (CCS), with a smaller amount for "clean" energy that includes agrofuels. In addition, the Commission is undertaking a review of its "state aid" rules which could see the granting of direct financial subsidies to companies claiming that the ETS damages their competitiveness.

- The allocation of permits according to performance “benchmarks” was supposed to encourage a fairer and more efficient division of responsibility for emissions reductions in energy-intensive sectors such as cement, steel, paper and glass. But industry has been allowed to influence the benchmarking. For example, CEMBUREAU (the cement industry lobby) was instrumental in choosing what to measure (“clinker” not cement) and how to measure it. The final agreement saw the adoption of a lax standard that was initially proposed by CEMBUREAU. This will result in a surplus of pollution permits for the cement sector, allocated in a way that rewards the continued use of dirty and outdated production methods.

-Aviation will be included in the scheme from 2012. The sector will receive 85 per cent of permits for free, and the projected carbon cost is far lower than the equivalent tax breaks for aviation fuel. Inclusion in the ETS applies only to CO2 emissions, which obscures the greater impact of contrails and other gases.

Put simply, the third phase of the ETS will continue the same basic pattern of subsidising polluters and helping them to avoid meaningful action to reduce greenhouse gas emissions.

Download EU Emissions Trading System: failing at the third attempt

EU Emissions Trading 2010: analysis of newly released figures

2011-04-01T15:13:00.002+02:00

Once again, the EU Emissions Trading Scheme has awarded massive subsidies to the steel sector and other energy-intensive industries. It has even given out permits to pollute to factories that are partially closed. This has nothing to do with addressing climate change. Emissions trading is being used as an industrial subsidy scheme for polluters....

A provisional analysis of EU greenhouse gas emissions data for industries covered by the Emissions Trading System (ETS) shows that emissions rose by over 3.5 per cent in 2010, compared to 2009 levels.¹

For a fifth time out of the last six years, the “cap” that the ETS is supposed to imposed was set too high. Complete data is only available for 8,833 installations (77 per cent of the total), but this shows that the allocation of permits under the scheme was 3.2 per cent (57.36 MtCO2e) higher than the actual emissions measured from installations covered by it.

These figures make a mockery of the claim that emissions trading reduces emissions. Factories polluted more, and the scheme set no limit on this additional pollution.

The 10 plants with the largest surplus of permits are all from the steel sector, and account for a combined surplus of 54.7 million permits. These 10 plants alone have received a a windfall profit of around €650 million. ²

The plant with the third largest surplus (Teeside steelworks in the UK, which was sold by Tata to Sahaviriya Steel Industries, Thailand's largest producer, in February 2011) has been partially mothballed, yet still managed to accrue a surplus of 5.76 million permits. This amounts to a windfall profit of around €70 million.

The breakdown (in sequence) of the most significantly over-allocated plants is as follows:

Allocation	Actual	Surplus	Owner
19622025	8695288	10926737	ThyssenKrupp Steelworks, Duisburg, Germany
11335573	4583475	6752098	ArcelorMittal Galati, Romania
6953226	1188865	5764361	Tata, Teeside, UK (since sold)
11557631	6227169	5330462	Tata, Ijmuiden, Netherlands
9276102	4011551	5264551	Glocke Salzgitter, Salzgitter, Germany
13255657	8606105	4649552	ILVA (Riva Group), Taranto, Italy
8918495	4386583	4531912	ArcelorMittal, Gent, Belgium
9323815	5291346	4032469	ArcelorMittal, Gijon and Aviles, Spain
8655981	4771369	3884612	Krupp Mannesmann, Duisburg, Germany
5832055	2245809	3586246	ArcelorMittal Bremen, Germany

Notes

1This is based on data from 9579 installations, which account for 83.9 per cent of the total. The rest are excluded because data is not available yet. It is based on a total of 11409 installations (a figure that excludes the “closed” accounts which are listed in the EU database).

2These figures for the steel sector assume a €13 per ton price of carbon permits (EUAs), and incorporate a 10 per cent downward adjustment to take account of permit transfers relating to waste gases.

Environmental Justice Groups Win! California Air Resources Board Forced to Revisit Alternatives To Unjust Pollution Trading System

2011-03-22T22:53:00.002+01:00

SAN FRANCISCO, CALIFORNIA - On March 17, 2011 a San Francisco Superior Court judge ruled that the California Air Resources Board violated the California Environmental Quality Act (CEQA) when it failed to properly consider alternatives to a "cap and trade" program in its plan to implement AB 32, the California Climate Solutions Act. Cap and trade is pollution trading that allows the worst polluters to continue or increase their pollution by buying "reductions." These polluters are disproportionately located in low income communities of color. Instead of reducing pollution and creating jobs in California, dirty facilities, like oil refineries, get to buy credits from often unverifiable projects in other states and countries.

"Allowing the most entrenched polluters to increase pollution violates our environmental rights and is not the way to stop poisoning our air and slow catastrophic climate change," said Bill Gallegos, CBE's Executive Director. “ARB was dogmatic in its focus on cap-and-trade even though it is not effective in reducing greenhouse gases, increases pollution in heavily polluted low-income communities and communities of color, and misses the opportunity to create jobs in California. Now the ARB has a chance to do it right and consider real alternatives to pollution trading. We continue to be willing to work with the ARB to make the whole plan work for everybody."

Environmental justice and air quality organizations have been fighting for years to get ARB to protect low-income communities of color in its efforts to reduce greenhouse gas emissions. In 2009, these groups filed suit to enforce their rights under AB32 and CEQA.

Full press release from California EJ groups is here

Carbon Capture and Storage in the Clean Development Mechanism

2011-01-27T22:53:00.003+01:00

The inclusion of Carbon Capture and Storage (CCS) in the UN's Clean Development Mechanism (CDM) is a boon for the Middle East and North Sea oil industries, which would use the scheme to subsidise the extraction of even more oil from the ground.

What was agreed?

“Carbon dioxide capture and storage in geological formations” is now eligible as a basis for CDM projects, as a result of the UN Climate Change Conference (COP16) in Cancun. This is likely to be of greatest benefit to oil companies, which are hastily rebranding techniques known as Enhanced Oil Recovery (EOR) as a means to store carbon underground.

EOR was originally developed as a means to extract more oil from fields that were reaching the end of their lifespan. This is still its primary purpose, rather than reducing emissions. If included in the CDM, a calculation of “reductions” would be made in relation to the amount of CO2 pumped into old oil wells. The calculation would not consider the far larger volume of CO2 released into the atmosphere through the extraction and burning of more oil. As has been seen with other CDM methodologies, the “lock in” effect of subsidising a fossil-fuel based energy model is not considered relevant to how offset “reductions” are calculated.

Looking further ahead, CCS is being promoted as “clean coal” in the electricity sector, as well as attracting interest from a variety of industrial sectors (notably, steel) that are keen to claim emissions reductions without engaging in a fundamentally cleaner development path or technological overhaul. What all of these technologies have in common is an assumption that the capture, transport and storage of carbon can be viably achieved on a large scale. This has not yet been proven, and there are many reasons to believe that this will be neither technically feasible nor economically viable.

The Cancun decision is not the end of the story of CCS in CDM. Implementing the agreement requires that a series of issues are “resolved in a satisfactory manner.” The decision catalogues a series of pitfalls, including the risk that CO2 storage is not permanent and could leak from underground geological formations. Other environmental and public health risks, and legal liabilities in the case of leaks or “damage to the environment, property or public health” remain to be addressed. The text of the decision also claims that projects will need to make “adequate provision for restoration of damaged ecosystems and full compensation for affected communities in the event of a release of carbon dioxide.” The CDM contains no mechanism to enforce such provisions, and the nature of the scheme (which is primarily a means for subsidising polluting industries) makes it unlikely that such provisions will emerge.

Read the rest of the article here

Two Pluses Don't Make a Positive: REDD and agriculture

2011-01-27T22:47:00.000+01:00

It is one of the first laws of diplomacy: when it is hard to agree on an answer, change the question. Reducing Emissions from Deforestation and Degradation (REDD) schemes are the product of two of these diplomatic back-flips.

First, whereas the Kyoto Protocol included no forestry or land-use emissions targets or mechanisms, such measures are a central feature in negotiations for a continuation or successor climate treaty. The former caution resulted from the complexity and uncertainty of accounting for reductions in these sectors, but the fact that significant measurement challenges remain has not slowed the rush to develop REDD. This new enthusiasm is largely driven by economic calculations. According to cost-benefit analyses like the influential Stern Review on The Economics of Climate Change, reducing tropical deforestation would be far cheaper than curbing fossil fuel use in the industrialised world.

A second switch concerns the framing of the question of how best to tackle deforestation. REDD puts a cash value on forests on the assumption that this will result in their preservation and, in turn, a "carbon saving." In other words, these schemes do not ask "how best might forests be protected?" but presume that carbon pricing mechanisms are the leading solution. Negotiations on REDD are then narrowed to questions of whether it is better to make forest payments through direct financial transfers or to develop forest carbon offsets. These are more often presented as a sequence, rather than a set of alternatives: almost all potential funders view their initial outlay as a means to "kick start" what will eventually be an offset scheme. The eventual extension of REDD to encompass all forms of land use is also under consideration.

The reality of REDD is likely to be far messier, more expensive and damaging than the economists claim. It will also prove fundamentally unjust - a concept that is alien to cost-benefit modelling. Indeed, the very idea that REDD offsets could be used to allow continued greenhouse emissions from industrialised countries turns the ethical responsibility for climate change upside down: it outsources responsibilities that should rest with the very countries and corporations that have disproportionately caused climate change. Such concerns are not simply ethical but practical too. Deforestation cannot be reduced to a question of cost without losing sight of the complexity of social factors and power relations that underlie why it is happening. Agriculture is at the forefront of this debate because its encroachment into previously forested areas is generally presented as the major cause of tropical deforestation.

This article will show that REDD could favour large-scale farming and do considerable damage to the lives and livelihoods of small farmers, who play a vital role in food sovereignty. REDD "readiness plans" already include plantations and perverse incentives for the conversion of forested land for export-led agriculture. As such, REDD will not necessarily reduce deforestation, but can be characterised as a form of "structural adjustment" programme for land use.

Read the rest of the article here

World Bank Partnership for Market Readiness: a critical introduction

2011-01-22T01:46:00.001+01:00

When the World Bank gets busy, it usually spells bad news for people and the planet. The UN Climate Change Conference (COP16) in Cancún was no exception, with the Bank launching a flurry of new climate-related initiatives. Chief amongst these was the Partnership for Market Readiness (PMR), a new Fund which encourages the “scaling up” of carbon trading in middle-income countries. The aim is to develop carbon offsets “beyond existing CDM.” This pre-empts international negotiations on controversial new carbon markets, which made little progress in Cancún. In launching the PMR, it is clear that the World Bank is prepared to push ahead with new carbon markets regardless of the outcome of multilateral negotiations, using bilateral agreements if necessary, and bankrolling its initiative with “fast-start” climate financing. A closer examination of the financial assumptions behind the new Fund reveals that the major costs of the initiative will have to be met by the countries listed as “beneficiaries,” whilst the Bank and industrialised country donors retain significant control over how “market readiness” is implemented.

Read the rest of my article about this here.

Climate Justice after Bolivia

2010-08-12T14:23:00.003+02:00

This new book has just been released:

Space for Movement?
Reflections from Bolivia on climate justice, social movements and the state

Built around a series of interviews, it takes a critical look at the World People’s Conference on Climate Change and the Rights of Mother Earth (CMPCC) in Bolivia that took place last April. More than that, though, it reflects on how climate justice activists can negotiate the relationship between social movements and the state.

Click here to download Space for Movement? for free

New articles on carbon trading

2010-08-12T00:03:00.001+02:00

A bit of cross-promotion here... a series of new articles on carbon trading, from the Carbon trade Watch newsletter

Carbon market “growth” is mainly fraudulent, World Bank report shows
The global carbon market grew in 2009. Far from signalling a success, this reflects a massive increase in fraud, the dumping of surplus emissions permits by industry, and a rise in financial speculation.

Read more...

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Creating new from the old: how the REDD+ Partnership plans to create a REDD market, plus!
The REDD+ Partnership intends to facilitate controversial forest payment schemes in advance of any UN climate agreement on an international framework to tackling deforestation.

Read more...

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Industrial gases in CDM: fixing a hole?
The majority of Clean Development Mechanism (CDM) offset credits issued to date are bogus, according to new research on industrial gas destruction projects.

Read more...

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The UN Boys Club tasked with redefining climate finance
Climate finance is a central element to any future international framework for tackling climate change, but a closed-door UN panel could redefine the terms of the debate away from the responsibilities of industrialised countries and encourage the further expansion of carbon markets.

Read more...

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More on Plantar as the struggle continues
The Plantar project was one of the first to be supported by the World Bank Prototype Carbon Fund (PCF). Some aspects of the project have since entered the Clean Development Mechanism, but the battle continues to keep more of this plantation scheme out of the CDM.

Read more...

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New Zealand's new carbon market: a taxpayer subsidy for plantations and energy companies
New Zealand has a new carbon market, the first national scheme to be launched outside Europe. It looks set to award profits to forest plantation owners, help power companies avoid emissions reductions, and pass the costs of tackling climate change from big business to individual consumers.

Read more...

World Bank State and Trends of the Carbon Market 2010: an alternative view

2010-05-27T04:28:00.005+02:00

The 2010 edition of the World Bank's annual State and Trends of the Carbon Market just came out. It's a useful (if obscure at times) source of info, if you filter through the obvious biases. Here's an attempt to do just that:

* The WB carbon market watchers are worried about the future of the UN's Clean Development Mechanism: demand for CDM credits fell, the development of new projects ground to a near halt, financiers were shipping out of CDM, and the future of demand for CDM offsets after 2012 is unclear.

* "The European Union Emissions Trading System (EU ETS) remained the engine of the carbon market. A total of US$119 billion (€89 billion) worth of allowances and derivatives changed hands." The increased volume of trade in the EU ETS is explained by (I) VAT manipulation, some of which was fraudulent; (ii) a fire sale of surplus permits to raise short term cash, (iii) an increase in speculation

* On "volume of trade" there's actually a massive fudge in the WB's way of dealing with the VAT loopholes - in particular, the purchases of EURs as a way to "legitimately" generate short term financial gain (as opposed to the illegal, carousel fraud stuff). The WB notes a 450% increase in "spot market trades" in early 2009, which is closely related to this (although partly also explained by the dumping of surplus permits by industries in the EU looking for quick cash). So the headline to the WB press release: "Global Carbon Market Grows to $144 billion Despite Financial and Economic Turmoil" overlooks some rather awkward questions about a spike in trade that a result of manipulation (and, in some cases, outright fraud), on the one hand, and an increased volume of trade caused by companies dumping carbon permits, causing the price to collapse (!)

* The EU remains far and away the largest source of demand for Kyoto offsets (mainly CDM). If there's no Kyoto commitment post-2012 or new deal, the EU ETS will restricted purchases to offsets developed in LDCs, and to countries with bilateral deals with the EU (watch this space).

* The vast majority of CDM and JI credits issued now are being bought for purposes of financial speculation or to be “banked” by industrial users (so that they won't need to make changes in their emissions in the post-2012 period). Very few players need these credits in relation to current "compliance" requirements: either for companies to meet EU ETS targets, or countries to meet their Kyoto targets. The exceptions are a few large power producers in the EU (mostly in UK and Germany) who are "short" in ETS. Amongst governments, Spain and Italy account look set to account for almost half of the government purchases of Kyoto offsets (mostly CERs) by 2012.

* The WB estimate for the phase 2 surplus of permits in ETS is 970 million tons CO2. As of 2009, the total ETS emissions reduction for the period 2013-2020 projected by the EU was 2,642Mt CO2e. ie. almost 40 per cent of the claimed reduction would be met by permits banked from phase 2, on these figures.

( This is quite similar to what the UK NGO Sandbag concluded: they talked of up to 700 million surplus permits, plus up to 900 million offsets available in theory... and predicted 950 million tonnes as a likely figure to be carred over). This figure is additional to the 50% limit on CER use - so basically the EU can get away with making very few domestic reductions through to 2020. The picture looks even worse, incidentally, if you factor in secular trends towards industrial outsourcing, emissions that are already outsourced, international aviation and shipping, etc.

* If Bulgaria, the Czech Republic, Lithuania, Latvia, Hungary, and Romania win their ongoing legal cases against the European Commission on phase 2 allocations, this "could add another 164 million tons per year to the market" (ie. increasing the overall surplus)

* The WB also (unintentionally?) identifies a further quirk in the way that the EU will allocate. Although a 50% limit on the use of offsets is the overall figure, there will be far more generous allowances on offset use amongst those who might actually need to buy permits to meet their targets - ie. coal power producers in the UK and Germany, and plant operators in Spain and Italy (see p.63). It is hard to square this circle in a situation where all possible offsets are taken up, but since information in the market is far from "perfect" this is never going to be the case. So it seems the assumption is that the major purchasers can rely on offsets, but this over-reliance will be offset by the companies in the scheme that are over-allocated not buying offsets... so that the overall use of international offsets remains below the 50% claimed threshold

* Lack of confidence in the CDM led to a rise in AAU transactions. These are “hot air” permits, often backed by questionable and unregulated Green Investment Schemes. The main purchases were by Japan from the Czech Republic and Ukraine. (NB. this does not reflect the AAU transfer within the EU, which redistributes from East to West, helping the Western European countries to meet Kyoto targets)

* Carbon leakage isn't happening, despite what EU industry lobbyists claim: " a study that examined import and export data for goods whose production now incurs a carbon cost (i.e., cement and steel) found no leakage. By and large, net import trends prior to 2005 continued unchanged during 2005–07. This is not surprising since the cost of carbon has been just one of many costs that determine industrial production and location; the carbon price alone has not been a determining factor." (The study is referenced as A. D. Ellerman, F. J. Convery, C. de Perthuis, 2010, Pricing Carbon: The European Union Emissions Trading Scheme,Cambridge University Press. This is a pro-ETS and rather flawed book, although their analysis of this point is quite right i think, and consistent with a number of other assessments). For more on carbon leakage, see p.46 to p.48 of Carbon Trading: how it works and why it fails

* Hedging and speculation are now the main uses of the carbon market, rather than "compliance" with caps: (p.16) "The market, which used to be dominated by banks and utilities, witnessed a growing presence of funds, energy-trading firms, and increasingly sophisticated utilities and industrials that used the options market for hedging (both volumes and prices) and profit-making transactions.

The bulk of activity now comes from volatility and other relative value trades rather than asset-backed trades (i.e., financial and technical trades now account for a greater portion of market activity than do trades for compliance purposes)."

* Post-2013 EU industrial benchmarking allocation rules will incentivise “efficient” biomass and CCS

* And finally... some light relief - corruption is now a sign of a successfully "maturing" and "mainstreamed" market, it seems:

"The EU ETS was also marked by controversy during 2009. ... evidence surfaced of “carousel” Value-added Tax (VAT) fraud in countries like France and the United Kingdom and a phishing attempt was made on Germany’s national EUA registry. More recently, the “recycling” of surrendered CERs added to the challenges faced by the European ETS.

Ironically, however, these controversies provide evidence that the emissions market is maturing
and becoming mainstreamed within the European economy. Entities don’t seek out loopholes in
insignificant markets, fraudsters do not focus on small businesses... "

EU Emissions Trading lobbying in 2010: a quick guide

2010-02-04T04:22:00.005+01:00

The following is a geeky digest on what's going on with the EU Emissions Trading Scheme, including what some of the main corporate lobbying efforts are

* Industries are currently lobbying on benchmarking rules
See eg. http://www.eurofer.org/

On past form, the "new entrants" terms are ones to watch - such as the chemicals industry

* Banks are worried about possible effects of Obama proposals on “proprietary trading”, esp. if spread to EU .
(Proprietary trading is where banks make bets with their own money, rather than investing other peoples' - explained here

* EU energy sector lobbies against exclusion of carbon “futures” auctioning

* Ongoing work on proposals to include shipping in ETS, which the EU proposes to do in the absence of a global agreement by the end of 2011

* Industrialists´ lobby wants global carbon market as part of EU-Long Term strategy:

“ERT's vision for a competitive Europe in 2025,” 2 Feb 2010: “Move towards a low-carbon economy: Encourage the continuing development of a global carbon market by taking steps towards linking the EU Emissions Trading System (ETS) with other developed country systems (notably the USA), ensuring broad access to project mechanism reductions and market surveillance conducted at an EU level. ”

This is related to EU's debate on 2020 strategy - which includes many references (in submissions from EU industry lobbies) on carbon market linking and "leakage"

* EU ETS phase 3 rules that will be set this year: absolute allocations (that each country will receive), auction rules, new entrants rules (and reporting), benchmarking

By March 2010: Commission regulation on Auctioning due

By 30 June 2010: Publication of absolute ETS allowances for 2013

By December 2010: Commission to publish estimated amount of allowances to be auctioned

* The rules for allocation of auction revenues from 300 million permits to CCS (and unspecified loose change to "innovative renewables") are now decided and will be handled by the European Investment Bank:

Carbon market fraud is not just a carousel ride

2009-12-10T17:32:00.005+01:00

The European police agency Europol has found evidence of huge volumes of fraud in the EU Emissions Trading Scheme (EU ETS), amounting to a loss of around 5 billion euros in national tax revenues over the past 18 months.

Europol estimates that in some countries up to 90 per cent of the whole market volume was caused by fraudulent activities.

This is further evidence that carbon trading is not a credible system for tackling climate change. With the ETS consistently failing to reduce emissions, European Commission officials and carbon market advocates have clung to evidence of increasing trading volumes in the ETS are a sign that the market was working. Europol has now revealed this to be a sham.

The ETS is particularly susceptible to carousel fraud because the market is poorly regulated. This hole could in theory be closed with EU-wide legislation, but the regulators are failing in their job. The DG Environment and the Directives that establish the EU ETS make no particular provisions on how to regulate this complex market as a market - simply assuming it works like any other. This needs to be re-examined.

It is certainly possible that VAT-carousel fraud loopholes could be closed with better regulation, but we've seen with the ETS that when one hole is plugged others open. In the third phase of the ETS, all six greenhouse gases will enter the system - whereas now it covers almost exclusively CO2. Such gases were treated as equivalent within the UN's Clean Development Mechanism, and this has been a major source of fraudulent "reduction claims", with companies some companies ramping up production to cream off credits that can then be sold back into the ETS.

The other further, major loophole is the spread of "linking" between ETS systems. The EU is pushing hard to make permits from different markets "fungible" (exchangeable). This will lead to a race to the bottom in terms of environmental integrity, but also offers plenty of new loopholes for fraudsters. If they can't even control a carousel fraud within their own system, what hope have regulators got when faced with large volumes of permits exchanged between multiple emissions trading systems?

Ultimately, though, a system with so many loopholes will always be a fraudsters paradise. Time to tear it up and start again.

A clear graphic explaining how the carousel fraud works can be found here http://www.europol.europa.eu/images/pressreleases/carbon_credit_carousel.pdf

Climate Chronicle - climate justice news from COP 15

2009-12-10T17:28:00.002+01:00

With the climate talks in full swing here in Copenhagen, take a look atClimate Chronicle, a newspaper in which we aim to report all the latest news from the conference and the street.

Here's my article from the last issue:

Copenhagen Plan B: “protect the rich”
Oscar Reyes
Dec 9 2009

A leaked text of the political declaration that could conclude the Copenhagen conference reveals back-room dealings that offer little to the Majority World.

So the rumours were true. For the past week, it was an open secret that the Danish government had already drafted a “political declaration” that could form the major outcome of the UN Climate Change Conference now that a full-blown international agreement is off the cards. The draft text has now been leaked, sparking outrage amongst Southern delegates and civil society organisations.

“The Copenhagen Agreement under the UN Framework Convention on Climate Change,” as the draft is titled, would introduce percentage-based emissions targets for all except the Least Developed Countries, fatally undermining the Kyoto Protocol, which draws a line between industrialised Annex 1 states and the Majority World. The text also suggests that financial and technological support measures in non-Annex 1 countries, an underlying principle of the UN Framework Convention on Climate Change (UNFCCC), should now be made conditional to their ability to meet complex emissions monitoring requirements.

The UNFCCC quickly attempted to limit the damage, putting out a statement from Executive Secretary Yvo de Boer that declared that the draft was a “decision paper put forward by Danish Prime Minister,” while maintaining that it was not a “formal text” of the UN negotiating process.

But the leaked text met with an angry response from many Southern delegates. Lumumba Di-Aping, the Sudanese chairperson of the G77 plus China grouping of 132 developing countries, said that the Danish Prime Minister Lars Lokke Rasmussen had failed in his role as a neutral host and had instead “chosen to protect the rich countries.” The emergence of the draft text was also met by an impromptu protest from members of the Pan African Climate Justice Alliance, who marched through the Bella Centre chanting “Two degrees is suicide, One Africa, one degree.”

Democratic deficit
Concern stems not simply from the contents of the draft text, but also the secretive and biased way in which it came about. The COP Presidency, which is held by host country Denmark, is mandated to craft compromises based on painstakingly negotiated drafts. In this case, the Presidency stands accused not only of overstepping the mark, but of hopping, stepping and then jumping over it, pre-empting UN decisions with proposals lifted in part from text discussed at the Major Economies Forum, an initiative closely tied to the G20 grouping and chaired by US President Barack Obama.

As Meena Raman, Honorary Secretary of Friends of the Earth Malaysia, explains, “The leaked draft Copenhagen Agreement violates the democratic principles of the UN and threatens the Copenhagen negotiations. By discussing their text in secret back-room meetings with a few select countries, the Danes are doing the opposite of what the world expects the host country to do. The Danish government must stop colluding with other rich nations. Instead it must take as a starting point the positions of developing countries - which are the least responsible for climate change, but who are most affected by it.”

Raman Mehta from Action Aid India decried a “betrayal of trust” on the part of the Danish government.

More “hot air” on reductions
The draft text is weak and vague in its overall ambitions. In reiterating the goal of holding global warming to no more than 2 degrees Celsius above pre-industrial levels, the text sets a global reduction target of 50 per cent by 2050, of which 80 per cent should come from the industrialised world. These figures look distinctly unimpressive when tracked back to existing per capita emissions, however, with one estimate suggesting that they would allow Northern industrialised countries to continue outpolluting the Majority World by a factor of 3:5.

The short-term proposals are ostensibly more ambitious, with a suggestion that global emissions should peak by 2020. But the same passage of the text misleadingly claims that this peak has already been reached in “developed countries collectively.” This is based on the latest UNFCCC figures, which show that Annex 1 countries are now on track to meet their Kyoto Protocol commitments, but a closer look reveals that this is achieved on the basis of “hot air” emissions resulting from economic collapse in the former Soviet bloc in the early 1990s. Emissions elsewhere in the developed world have continued to rise. The projections for 2020 are further massaged by counting a large volume of “emissions savings” from carbon offsets made in the global South as part of Annex 1 emissions figures.

Strings attached
Whereas the Bali Action Plan emphasises that developing country actions will be “supported and enabled” by technology, financing and capacity building, the draft suggests that these measures would be “subject to robust measurement, reporting and verification.” This inversion implies that the support measures could be withheld unless monitoring is externally approved. Instead of placing an obligation on industrialised countries to repay and restitute their climate debt, this makes any support measures conditional to a series of complex technical asssessments.
Just as significant is what the text does not include. There are no numbers on long-term financing, and there is no suggestion that these will be forthcoming in Copenhagen. The only figure offered is a projection of $10 billion per year of “fast start finance”, a scaled-down version of a plan first presented by UK Prime Minister Gordon Brown in late November. But Lumamba Di-Aping was dismissive: “Ten billion dollars will not buy developing countries’ citizens enough coffins,” he said.

A growing market
The flip side of this lack of financial commitments is a commitment to scale up carbon markets as part of any agreement. The cap and trade proposals currently passing through the US would allow up to 1.5 billion tonnes of carbon offsets per year to displace the need for domestic emissions reductions, a demand that is over seven times larger than the existing supply of offsets through the UN's Clean Devopment Mechanism (CDM) and Joint Implementation scheme.

Although the language on carbon markets remains vague, talk of “an effective and orderly transition from project based to more comprehensive approaches” signals a framework that would introduce a broad range of new offsets, from “sectoral crediting” through to measures aimed at Reducing Emissions from Deforestation and Degradation (REDD).

“With developed countries offering so little by way of public finance, developing countries are being sent a message that support for offsetting mechanisms is their only real choice to access funds” says Payal Parkeh, a climate scientist with International Rivers.

A coalition of the unwilling
What the “Copenhagen Agreement” leak signals, above all, is a lack of ambition on the part of industrialised countries to make emissions reductions at home or meet their financial and other obligations to the South. “Despite the hype, the talk of ´Hopenhagen´, the supposed political will to ´get it done´, this set of negotiations might be no different than anything that has come before” concludes Rhiya Trivedi, a member of the Canadian Youth Delegation to Copenhagen. “It could be just another round of the North-South divide and power struggle.” Business as usual, in other words.

www.carbontradewatch.org

Story of Cap and Trade: answering the critics

2009-12-04T02:36:00.006+01:00

There's quite a web buzz around the Story of Cap and Trade, including a host of misplaced criticisms.

Here are answers to some of them.

* The problem isn´t cap and trade itself. It is a good system ruined by corporate lobby interests - but they'd ruin whatever policy you try, so best stick with this one.

There's an element of truth in this: the power of corporate lobbying is a huge problem, both in the US (where such a system is currently being debated) and in the EU. But cap and trade as a policy escalates this problem. First, the free allowances are a subsidy for dirty industry. In the EU this happens in two ways (i) because companies bank the free permits as assets, and pass on the “opportunity cost” to consumers – in the case of the EU power sector, estimated to be between 23 and 71 billion euros between 2008 and 2012; (ii) because a number of companies have a surplus of permits which they sell – in the case of ArcelorMittal (the largest steel maker in EU scheme) this has netted an estimated 2 billion euros since start of the scheme for making no reductions (they've used the competitiveness argument to secure an overallocation of around 25 per cent). These kinds of subsidies are not awarded by other climate measures such as subsidy shifts from fossil fuels or taxes.

Second, carbon markets are far more complex and interlinked than regulations based on emissions limits. This means there are more loopholes for the lobbyists to exploit. The “trade” part of cap and trade encourages capital to go after the cheapeast abatements, and the cheapest tend to be those that have been achieved by over-allocation (and offset purchases) rather than any actual reductions.

Third, the ability to trade allowances amplifies the effects of lobby influence. If you have a regulation on factory emissions, and one factory (or even sector) is allowed to pollute too much, you have a problem with that factory (or industrial sector). Under cap and trade, the problem is amplified since this surplus can be sold on to allow other sectors to carry on business-as-usual as well. The same argument could be made as regards banking of permits – namely, that carbon trading is a system that locks in “hot air.”

*Trading doesn't affect the cap, and setting a cap is itself progress. So cap and trade is progress, right?

Actually, trading does affect the cap. Trading is supposed to be about finding the cheapest places to make "reductions." Here in Europe, where we've had cap and trade since 2005, the reductions that are cheapest are the result of over-allocation and offset purchases. Look at the EU's own data on transfers of pollution permits and you'll see that played out.

Lobbying made these holes; cap and trade amplifies their effects. Allocations are routinely applied according to "competitiveness" criteria, which result in massive over-allocations in most industrial sectors (especially cement and steel) which then provide a cheap source of purchasable permits for others (mostly the power sector). But what is purchased are reductions in name only. The interactions of this actual trading system (as opposed to the fiction of a market without distortion) work to spread loopholes in the regulation of certain sectors across all sectors covered by the scheme. This undermines the "cap."

Trading also pushes capital after the cheapest cuts first. But what is cheapest in the short term is not environmentally effective or socially just in the long term. In the real world, stopping coal power is not the same as planting trees or destroying refrigerant gases - yet creating a commodity called "carbon" requires that they be treated in this way. It requires that you create single commensurable emissions reduction units out of incommensurable things.

A further argument is sometimes made that, even after all this, that "the cap is the cap" and so remains fundamentally unaltered. This argument only works if emissions reductions are assumed to be all the same, wherever they take place. That's true in a scientific sense - greenhouse gases mix uniformly in the atmosphere - but is not much help in assessing how industry or power production develops and changes. Cap and trade theoretically encourages all the cheap reductions to be made up front, assuming a gently declining emissions pathway.

But what are these cheap changes actually? They often involve simple retrofits that prolong the life of dirty factories, or workarounds like co-firing coal power stations with biomass. (In practice, the cheap changes are also often a result of the holes from over-high caps and offsets). Such extensions, in turn, delay the kind of infrastructure investments that are needed to really shift to a cleaner economy. So the gently declining emission path way turns out to be a poor reflection of a complex world in which technical changes often require rapid breaks or changes of tack. If you arrange things "cheapest" first, even assuming no holes or cheating, you can end up stuck with patched up technology or marginally-more-but-still-very-inefficient factories that you still need to replace. So what is short-term cheap (according to cost benefit modelling) can end up costing you more. In social science terminology, this is a problem of "lock in" or "path dependency."

* Not all carbon offsets are the same - the film just picks the worst cases and extrapolates from those

The Clean Development Mechanism (CDM) is by far the largest offset scheme globally, and some of the “worst” projects featured in the many critical case studies of it are the most numerous types. As of September 2009, three-quarters of the offset credits issued were manufactured by large firms making minor technical adjustments at a few industrial installations to eliminate HFCs (refrigerant gases) and N2O (a by-product of synthetic fibre production). This picture is unlikely to change dramatically by the time the Kyoto Protocol’s first commitment period expires. By the end of 2012, HFC and N2O credits are still expected to account for the largest share of the CDM (28.5 per cent and 14.4 per cent respectively), followed by hydro-electricity projects (10.8 per cent). By comparison, solar power is expected to account for just 0.03 per cent of CDM credits by 2012.

As Michael Wara of Stanford University puts it, “the CDM market is not a subsidy implemented by means of a market mechanism by which CO2 reductions that would have taken place in the developed world take place in the developing world. Rather, most CDM funds are paying for the substitution of CO2 reductions in the developed world for emissions reductions in the developing world of industrial gases and methane.”

More fundamentally, though, offsets are not in and of themselves reductions. An offset is a compensation mechanism – a way to move the obligation to reduce from one location to another, usually from the global North to the South. This raises serious global equity issues. Any kind of crediting from deforestation (REDD in the UN jargon) would massively exacerbate this.

There's far more to say about offsetting than this – see chapter 4 of our recent book.

Moreover, proposals aimed at linking cap and trade markets – a generally stated intention - would help to circumvent even “fairly stringent measures for policing offsets.” Proposals for a global carbon market mean what is called, in part of the Copenhagen negotiating text, “full fungibility” - the ability to exchange different emisisons reduction units without limit.

If schemes with different rules are allowed to share permits without constraint, carbon traders will tend to reach for the lowest common denominator. So, for example, if the US were to set a limit on certain types of agriculture permit because of measurement difficulties but Australia allowed them, US companies could look to purchase Australian carbon. The net effect would be to displace domestic reductions in the EU.

This is also a problem that the US scheme poses for the rest of the world. It is pretty universally acknowledged, I think, that the US scheme would – like virtually all cap and trade schemes before it – be over-allocated at the outset.

Overallocation means far more permits in circulation than the actual level of pollution (ie. the caps are not “capping” anything). Full fungibility exacerbates this problem, since it allows the surplus of permits in one location to be sold on and undermine the “cap” in another location. In other words, it is a recipe for the circulation of “hot air.”

* The film indulges in populist scaremongering about markets - and, as a whole, it is too simplistic.

Carbon markets now are miniscule compared to Wall Street projections of $2 trillion or more by 2020, so it is true that some of the evidence isn't yet in. But we need to look at what financial products are being created, learn from analagous experiences, and make plausible future projections. On the first of these points, it is clear that a whole line up of new carbon derivatives are being created – on the risks of these, see Larry Lohmann´s writing.

Steve Suppan of IATP also makes an important point about the potential impact on food commodities: “index funds controlled about a third of all corn futures contracts from 2006–2008", but now, carbon derivatives are expected to be "bundled into commodity index funds. Depending on how traders formulate the mix of commodities in the fund formula, it is likely that carbon emissions could become the dominant 'commodity' in some fund formulas, displacing oil. ... Wall Street forecasts at least a $2 trillion market in carbon derivatives within five years. The current estimated value of all agricultural and non-agricultural commodity derivatives traded under Commodity Futures Trading Commission authority is $4–5 trillion. ... Agricultural commodity prices, and to a lesser extent global food security, could be vulnerable to a swing in carbon derivatives prices, as carbon dominant index funds roll over to take profits."

These are complex and technical arguments, and to accuse an introductory film of being simplistic seems rather mean-spirited.

* The argument that cap and trade is a "distraction" has no proof to back it up

Again, it may be possible to take issue with how this complex point is simplified – but there certainly is evidence.

First, emissions trading is a distraction because it can undermine other regulations.

When the EU was discussing a renewable energy target, the UK argued that this should be weaker because a strong target would undermine carbon prices, as this leaked document shows.

The intersection between the Integrated Pollution Prevention and Control (IPPC) Directive, the main EU legislation to control air pollution, and the EU ETS is another case of this. The IPPC sets energy efficiency requirements and gas concentration limits on a range of installations, some of which were also covered by the EU ETS. To make the two systems compatible, the terms of the IPPC were relaxed - as the European Environment Agency reported: “[O]perators of large sources might be obliged to reduce their emissions (in order to comply with the IPPC Directive) when it could be more economically efficient to increase emissions further and buy additional allowances instead.” The result of this conflict was that the IPPC Directive was amended to exclude “CO2 emission limits for installations which are covered by the EU ETS.”

An analagous problem exists with offsets: to generate offsets, there's a need to show “additionality” (that a project wouldn't have happened anyway). If a country tightens environmental regulations, it cuts off this additionality. Governments tend not to see this as in the economic interests of companies based in their territory (and in the case of China, where there's a hefty tax on HFC project credits, such regulations would also put a dent in the state coffers).

In the debate on the expansion of Heathrow airport in the UK, meanwhile, one of the most common defences from the government was that it didn't matter if emissions increased from the airport because “ETS would cover it.”

The second form of distraction has to do with “locking in” pollution (related to what social scientists call path dependency). In chasing after the cheapest short-term cuts, cap and trade tends to encourage quick fixes to patch up outmoded power stations and factories – delaying more fundamental changes. Our book, cited above, goes into more detail on this – as does a recent Friends of the Earth UK report.

The Story of Cap and Trade

2009-12-03T23:17:00.003+01:00

If you haven't seen this already, check out the great new video by Annie Leonard (I should admit a little bias, though - Carbon Trade Watch were among the advisers.) Several members of the Durban Group for Climate Justice and Climate Justice Now! were also involved.

New book on carbon trading

2009-11-29T06:06:00.003+01:00

I've been a bit neglectful of this blog - but one of the best (of many) reasons is that I've been finishing a book. Co-authored with my colleague Tamra Gilbetson, it is now available for free download. Right, here's the blurb:

CARBON TRADING – HOW IT WORKS AND WHY IT FAILS
by Tamra Gilbertson and Oscar Reyes

"Anyone who still thinks that creating a carbon casino can solve our climate crisis owes it to themselves to read this book. The most convincing and concise challenge to the green profiteers yet." - Naomi Klein, author, the Shock Doctrine

"This book is an invaluable contribution to understanding the pitfalls of relying on the carbon markets to save the world's poor and the planet." - Meena Raman, Third World Network

“The transition to a post-oil model is inevitable but instead of starting this process, it is delayed by barriers and traps such as the carbon market. This book teaches us how this barrier works and what there is behind this new trap of green capitalism. It is obligatory reading for all who fight for a post-oil civilisation.” - Ivonne Yanez, Oilwatch South America

Carbon trading lies at the centre of global climate policy and is projected to become one of the world’s largest commodities markets, yet it has a disastrous track record since its adoption as part of the Kyoto Protocol. Carbon Trading: how it works and why it fails outlines the limitations of an approach to tackling climate change which redefines the problem to fit the assumptions of neoliberal economics. It demonstrates that the EU Emissions Trading Scheme (EU ETS), the world’s largest carbon market, has consistently failed to ´cap´ emissions, while the UN’s Clean Development Mechanism (CDM) routinely favours environmentally ineffective and socially unjust projects. This is illustrated with case studies of CDM projects in Brazil, Indonesia, India and Thailand.

UN climate talks in Copenhagen are discussing ways to expand the trading experiment, but the evidence suggests it should be abandoned. From subsidy shifting to regulation, there is a plethora of ways forward without carbon trading – but there are no short cuts around situated local knowledge and political organising if climate change is to be addressed in a just and fair manner.

* Chapter 1 »

introduces carbon trading, how it works and some of the actors involved.

*Chapter 2 »

explores the origins and key actors involved in building the architecture of emissions trading.

*Chapter 3 »

examines the performance of the EU ETS and finds that it has generously rewarded polluting companies while failing to reduce emissions. Many of the scheme’s flaws, from the over-allocation of permits to pollute onwards, are found to be fundamental to the cap and trade approach more generally.

*Chapter 4 »

outlines the performance of the CDM and looks at four case studies of CDM projects in Thailand, India, Indonesia and Brazil; it argues that offsets projects, even those that promote renewable energy, will not be a solution to climate change.

*Chapter 5 »

outlines what could work and ways forward for political organising around questions of climate change.

Copenhagen Climate Negotiations - latest EU, G20, African Union positions

2009-09-11T19:19:00.005+02:00

The EU this week released its latest negotiating positions for the Copenhagen climate talks - including on the controversial aspects of climate finance. For a clear report, take a look at the EU Observer. To get into the geeky detail, take a look at the Communication 'Stepping up international climate finance: A European blueprint for the Copenhagen deal'"(an EU Communication is a non-binding statement of intent from the EU Commission, the Brussels-based bureaucracy charged with initiating discussions that are subsequently taken up by the EU Parliament and Council of Ministers).

One of the key aspects is that public financial commitments are further squeezed (or retreated from as an idea). Instead, the EU claims that financing for tackling climate change should be built around carbon market revenues and private finance (aka investment opportunities for EU-based corporations).

A second key aspect (as I've mentioned earlier in this blog) is the proposed "sectoral crediting mechanism." Although the EU talks this up as an improvement upon the discredited Clean Development Mechanism, it is suspiciously silent on the fact that the shift from "project based" to "sectoral" crediting means that the last, inadequate lines of environmental impact assessment would be circumvented. This is mainly in the interest of "unblocking" the CDM bottleneck - the complaint from financial institutions that they can't grow this market quickly enough.

Further info can be found in this background "staff working document, this Q+A and press release

While the EU has set out figures in the region of €2-15 billion for climate financing, the African Union is suggesting a figure of $200 billion by 2020.

The US, meanwhile, has yet to come up with a proposal at all.

Finally, a series of position papers for the forthcoming G20 summit in Pittsburgh reveal are distinctly worrying (and predictable) in their emphasis on private sector market openings and various means to expand global carbon markets

Tar-sands protest in UK

2009-09-02T18:18:00.004+02:00

(an anti-tar sands protester, "sludged up" and expressing his revulsion outside BP's London office)

I've taken an involuntary summer/book writing blogging hiatus... but in the meantime, it is worth checking out the Indigenous Environment Network's launch of an anti-tar sands campaign in the UK. Yesterday's protest at BP and Sell was just the start...

Nuclear energy is not a clean alternative

2009-06-22T16:16:00.006+02:00

Here´s one more graphic from the UNEP/Grid-Arendal, which is topical given the push to promote nuclear energy as a "clean" source (in the face of much evidence to the contrary).

Geeky carbon trading related fact: Lithuania had the largest surplus of carbon credits in the first phase of the EU´s Emissions Trading Scheme, exporting 33% of its credits to other countries in the EU. The underlying reason for its surplus was the planned closure of Ignalina, a nuclear power plant with a similar design to Chernobyl, which is taking place by phases. Lithuania claimed that the replacement power generation capacity will come from dirty coal plants instead. As a result it gained a large surplus of credits, which have been sold on and treated as “emissions reductions” elsewhere - including the UK (which was the largest purchaser of credits in the first phase of the EU Emissions Trading Scheme). They are, of course, nothing of the sort.

Animal farts and burps and climate change

2009-06-22T15:35:00.005+02:00

Source: UNEP/GRID-Arendal

Apparently the above diagram was commissioned for a UN study on carbon neutrality. The UNEP/GRID-Arendal project is a mine of weird and wonderful climate change graphics.

Jonathan Pershing on the outcome of the Bonn climate talks

2009-06-17T18:55:00.000+02:00

Jonathan Pershing is the US Deputy Special Envoy for Climate Change, and was the lead US negotiator at the Bonn climate talks. Here´s what he had to say, and a few comments to decode its significance:

Bilaterals
Asked about the bilateral meeting held between the US and China during the talks, he said that the US is “working for a conclusion not just here but in other forms – perhaps most notably the MEF [Major Economies Forum]”. The emphasis in these bilaterals is on a “foundation of shared understanding”. Pershing left Bonn to join Todd Stern´s delegation in Beijing for “an engaged conversation” that was “very fruitful” (Stern is Special Envoy for Climate Change, the US lead negotiator).

The timing of these bilaterals was not arbitrary - it served to keep key Chinese negotiators in Beijing, which can help to isolate them from the rest of the G77 (developing countries) grouping. It might also serve to set up a media blame game in which the US looks to China for greater commitments, despite the fact that US per capita emissions remain three times higher than those of China and are historically on a wholly different scale.

A new agreement?
“The US is of the view that we need a new agreement... we need to frame what comes next.” The US has proposed an “implementing agreement of the Convention, to which we are a party.... we are of the view that all Parties must take action, including the US, but that doesn´t excuse countries like China or Korea.” [The United Nations Framework Convention on Climate Change was signed in Rio in 1992, and is the legal basis for the Copenhagen talks later this year]. The US submission is “framed as a complete agreement... which frames a vision of how we might move forward.” He also noted that “we are not a party to the Kyoto Protocol.. so our intention is using the Convention structure going forward”

The key political point here relates to fears that the legal form of a new agreement could undermine the Kyoto Protocol. The latter has many negative aspects to it - most notably, it is the basis for carbon offsetting under the Clean Development Mechanism (CDM). But the intention is not to scrap this, but rather something called "differentiation" - dividing up the grouping of developing nations. Such a move also absolves the US of its failure to ratify Kyoto.

Pershing also emphasised a “long term strategy” in which developed countries set a quantitative limit in relation to a baseline year while for developing countries “the actions are binding but not the outcomes.” He also stated that the US plan requires that developing countries “state when they would take on these kinds of commitments” to a quantitative reduction in relation to a baseline year.

Some “additional resources” are anticipated by the US especially for the “less developed” countries, and technology is a “central part” of this discussion.

Historical Responsibility
On historical responsibility, he drew attention to remarks by Stern at the last meeting in Bonn, summarising in these terms: “we recognise as a matter of fact that the US has historical responsibility for the largest share of emissions going back” and recognising also that the US has a “significant capacity” to take action.

Redefining "finance" within a private investment framework
The “vast majority” of the money for tackling climate change is private finance, Pershing said. The aim is to “leverage the various tools at our disposal to shift these investments” so we need a “marginal shift” to do this. He explained that the money concerned is not the whole cost of projects but, for example, the difference between regular coal power and CCS, or between “low till and no till agriculture.”

On public finance, he noted that public finance is generally emphasised in the UN context and said that “we´d like to change that debate”. In this regard, he highlighted offsets as a means to “provide substantial streams of money” if they are “scaled appropriately.”

Instead of paying the US climate debt, the proposal here is to reframe the issue in order to open new markets for the private sector.

Divide and rule: the politics of climate negotiations

2009-06-14T17:43:00.004+02:00

Want to know how global treaties get stitched up? You could do far worse than read this new briefing by Oilwatch International. It outlines the following tactics to force a treat in the interest of the developed countries at the expense of a just climate deal:

Controlling the discourse. Shape the narrative and expectations of negotiators and the public about what constitutes success and failure – including misleading the media.

Ambush and push. Seeking a sudden deal before developing countries have time to assess the implications.

Mischaracterizing policy as science. This is a way to depoliticise the claims of the powerful – for example, by arguing that IPCC reports make recommendations about the north/south balance of action to tackle climate change.

Obscuring the details. Setting goals and expectations in different statistical terms, making the implications difficult to evaluate and compare

Building a Trojan Horse. The inclusion of developed country officials or consultants in developing country delegations, who then mischaracterise their positions.

Carving out special deals. Splitting up developing countries by offering special deals to sub-groups – for example, in relation to market access in trade negotiations, or in relation to aid provisions.

Establishing new groupings of countries. Breaking the ties between developing country groupings by championing new groupings – normally, by developed countries defining that sub-grouping in relation to “favourable treatment” offered in the form of a special deal

Setting up the blame game. Characterising larger developing countries as “reluctant” while championing the unambitious efforts of developed country governments.

Divide and rule narratives. For example, seeking to juxtapose a “right to survival” narrative of some developing countries with a “right to development” narrative of others – shifting attention from developed country obligations.

Forum shopping. Larger developed countries and country groupings – such as the European Union – coordinate actions across a number of different forums – eg. in negotiations outside the climate arena, where officials who do not know the issues are encouraged to ratify positions that circumvent negotiating stances in the climate talks.
Establishing other forums. New forums are also created to circumvent the UNFCCC process – the Major Economies Forum being a notable example. This is also part of agenda-setting and media messaging for the formal negotiations

Inappropriate chairing and biased texts. Circumventing the proper channels to advance biased negotiating texts, which are ordered to reflect industrialised country interests – for example, by using developed country proposals as the basic structure, while lumping developing country submissions together in a single block.

Green rooms. “In the context of the WTO, small group settings – or “green rooms – have been used to cut deals between small groups of powerful countries, with participation (often largely symbolic) by “representatives” of other countries. Green rooms have provided a means for isolating “problematic” countries, advancing negotiations with relatively inexperienced ministers, or excluding key negotiators (on the basis of insufficient seniority). ”

Green men. Another WTO trick, through which Chairs appoint individuals to “facilitate” consensus on specific issues the development of consensus on specific issues.... forcing the agenda to a biased conclusion.

Moving up the ladder. Ministerial-level meetings and Summits are sometimes used to marginalizes and overturn the positions of developing country negotiators who “know too much” and are therefore seen as obstacles by developed countries to achieving their interests.

Use of non-governmental organizations. NGOs cane be useful, but can also be used to do the dirty work of gathering intelligence and lobbying of the developed country governments who fund them

Climate Camel

2009-06-13T21:26:00.006+02:00

As if the world of UN climate talks weren´t surreal enough, Avaaz brought camels to Bonn. Their presence was meant to highlight how climate change exacerbates the threat of desertification. Given the under-representation of those at the frontline of desertification in these talks, it just looked a bit crass.

2009 International Climate Calendar: Diversions in the Road to Copenhagen

2009-06-11T12:19:00.008+02:00

The Pew Center has produced a useful overview of the major events in the negotiations for a global climate treaty between now and Copenhagen. It is worth comparing with this earlier effort:

Although it was not the point of the Pew Center´s exercise, this clearly shows how the formal UN climate talks going sit within a larger structure of inter-governmental meetings driven by the major industrialised countries - with the Major Economies Forum, initiated by George Bush and revived by Barack Obama, taking an increasingly crucial role. This, in turn, overlaps with the G8.

One of the notable facts about the "one bracket and comma at a time" snore-fest that is the Bonn climate negotiations is how the US lead negotiator Todd Stern skipped the session to go to China instead, with senior negotiators from there held back too. This is a fairly transparent divide and rule game, which aims to isolate China from the rest of the G77, the grouping of developing nations - thereby decreasing their influence. It also plays to a domestic audience, where the US government is setting up to blame China for failures in the climate talks, despite the massive historical and present gap between the two countries when it comes to their contribution to climate change.

Alden Meyer of the Union of Concerned Scientists had this to say about the record: "The G8 summit before Kyoto was when President Clinton redoubled US efforts on Kyoto which led ultimately to Al Gore coming to Kyoto to help negotiate a final deal." And we all know how that worked out.

Punch and Judy on the Climate: Bonn negotiations

2009-06-09T15:59:00.004+02:00

Oh yes you did! Oh no you didn´t!

The regular Punch and Judy show that is the UN climate talks is currently underway in Bonn. As ever, everyone is talking up the need for emissions reductions made by someone else – with the industrialised nations seeking out every opportunity to avoid their historical responsibility for tackling a problem that they were overwhelmingly responsible for causing in the first place.

This debate is currently being played out in a working group on the Kyoto Protocol, the existing global climate treaty. The aim is to reach new targets for emissions reductions by industrialised countries (called “annex 1” countries in the jargon) but few commitments are on the table. Broadly speaking, there is a split between developing countries, which want the industrialised nations to commit to deep cuts in carbon emissions domestically, and developed countries which want to discuss the issue within a broader framework for “offsets”.

These discussions are currently in some trouble – with developed countries leading moves to “kill” the Kyoto Protocol. The US and others hope that this will revert the discussion to one in which the developed/developing world divide will be weakened, forcing the latter to take on further commitments. These are likely to take the form of voluntary “nationally appropriate mitigation plans” (NAMAs) and a variety of “sectoral” approaches. The language comes from the Bali Action Plan, but the developed countries are pushing an interpretation that stresses market-based approaches – for example, allowing NAMAs to generate carbon credits that can be sold back to developed countries as a means for them to avoid meeting their commitments at home.

Another key trend is the move towards more secretive and selective negotiations. As noted in a previous post, there are numerous meetings to shape a global climate agreement that are happening outside the UN framework. These are being accompanied by move towards a WTO-style Green Room process. This means that powerful countries will hand pick negotiators for particular aspects of the treaty, with a view to locking in their favoured outcome. With Ministers and Heads of State, rather than professional climate negotiators, sitting around the table – a bad (and somewhat absurd) deal would be a likely result.

That´s not the way to do it!

Carbon Trading: From Washington to Bonn

2009-06-05T19:16:00.004+02:00

With a new President in the White House there's a fresh approach to climate change and energy policy in the US. But the Energy bill currently going through Congress is based on the widely-criticised "Cap & Trade" system and has been weakened further by a massive corporate lobbying campaign. How does this feed into the UN talks in Bonn in June which prepare the way for the critical meeting in Copenhagen in December? I recently spoke to the 300-350 climate radio show about this very topic. Listen online

Stepping around the UN: how and where is a global climate agreement being made?

2009-06-04T18:19:00.006+02:00

All sorts of misplaced hopes are currently being pinned on a global climate agreement, due to be reached at the UN climate conference in December. As things stand, the negotiating texts are fairly dire as regards action to tackle climate change, since they are framed around expanding market mechanisms and displacing action onto Southern countries. A key part of this has to do with how the debate is framed around "least cost" action rather than what is environmentally effective or socially just.

So while the talks currently underway in Bonn set out negotiating texts, working these over in excruciating detail, the framework they adopt is set out elsewhere. What follows here is a quick sketch of some of the key initiatives shaping the global treaty that exist outside of the formal UN process.

Global

* G8. The Group of Eight remains a key body for setting the global climate agenda in a business-friendly manner, even though it may eventually be eclipsed by the G20. A first tier of corporate lobby influence includes the participation of the World Business Council on Sustainable Development (WBCSD) and World Economic Forum (WEF). The World Bank and various Regional Development Banks also play a vital role. Second tier initiatives include Globe (currently chaired by Steven Byers MP, the former UK Trade and Industry Minister); and the Club of Madrid and UN Foundation (the former is a group of ex-Presidents, the latter a private organisation), which have advanced various principles at the G8 which have then found their way into the formal climate negotiations. The G8´s work to shape a global climate agreement started in earnest during the G8 summit in Gleneagles, Scotland, when Tony Blair launched the Gleneagles Dialogue.

* Major economies forum. Started by Bush and revived by Obama, this club of industrialised nations is now holding monthly meetings of representatives from: Australia, Brazil, Canada, China, the European Union, France, Germany, India, Indonesia, Italy, Japan, Korea, Mexico, Russia, South Africa, the United Kingdom, and the United States. Denmark (as chair of COP 15) and the UN also participate. A heads of state meeting of this grouping will convene at the G8 in Italy in July.

* World Business Summit on Climate Change: for a quick report, see here. This was hosted by the WBCSD, Copenhagen Climate Council, 3C, World Economic Forum (WEF), the Climate Group and the UN Global Compact.

* World Economic Forum hosts its own Climate Change Initiative, as well as carrying forward proposals at regional meetings. A "World Economic Forum Business Expert Task Force on Low-Carbon Economic Prosperity" which partners the WEF with the UK government will deliver recommendations in autumn 2009.

* Global business groupings: WBCSD and the International Chamber of Commerce (ICC) are the key bodies. The WBCSD, in particular, has been instrumental in pushing "sectoral carbon markets", which would expand the use of carbon offsets - as well as undermining attempts to waive intellectual property rules so that low-carbon technologies can be developed more quickly.

* Climate specific business grouping.

Project Catalyst is crucial here. With support from the consultancy McKinsey, its working groups include "a total of about 150 climate negotiators, senior government officials, representatives of multilateral institutions, business executives, and leading experts from over 30 countries." The UK government is heavily represented amongst these.

The Climate Group is also influential, with a task force on the climate agreement led by Tony Blair. As Henrey Derwent, CEO of the International Emissions Trading Association, IETA (and formerly the head of climate policy for DEFRA, in which role he played a crucial role in G8 negotiations in 2005) puts it: “PricewaterhousCoopers and the Climate Group have done a lot of work on scaling up the CDM [Clean Development Mechanism].” Their recommendations can be found here.

3C is an initiative of CEOs of major companies, hosted by Swedish energy giant Vattenfall.

IETA is an associating that promotes a global carbon market, as well as suggesting business-friendly rules for how those markets are governed.

Regional, national and sectoral

* Below this lies a far broader network of sectoral, regional and national lobbying - far too exhaustive to list here.

* USCAP is key in the push for carbon markets in the USA. It lines up alongside more powerful industry bodies that oppose or seek to water down all climate legislation. A good breakdown can be found here.

* The EU climate and energy package, passed in December 2008, was lobbied hard by numerous industry sectors. Avril Doyle MEP, the centre-right Irish MP who was rapporteur on carbon trading for the EU Parliament, suggests that German coal power and chemicals producers were loudest lobby voices.

* There are also a plethora of inter-governmental and inter-regional meetings to shape the agenda - including EU-US, US-China and EU-China bilateral meetings. US and EU carbon markets are not dependent on a global agreement, while the EU is pushing plans to link these together across the OECD (industrialised nations) by 2015.

* Most industry sectors are preparing their own plans on the climate agreement too. The head of the International Air Transport Association (a private industry body), for example, effectively pre-announced the International Civic Aviation Organisation (UN body) plan on climate at the World Business Summit - suggesting that the latter is captured by corporate interests.

Specific companies

A lot of the usual suspects are involved, but amongst the most active - either on their own or, more typically, through broader associations, are: BP, Shell and Vattenfall. PricewaterhouseCoopers and McKinsey are also very active as advisers.

Business as usual on the climate

2009-06-02T16:59:00.005+02:00

(An edited version of this article was published by The Guardian on 28 May)

When Sir Crispin Tickell had the temerity to suggest that "the business community needs to re-examine the fundamentals of economics" at the recent World Business Summit on Climate Change in Copenhagen, his discordant tone was drowned out by a chorus of over 800 delegates singing the praises of unfettered markets as a means to tackle climate change.

The commitment to carrying on with business as usual took an almost surreal form at times. Indra Nooyi, CEO of PepsiCo, proudly proclaimed "The fact that I flew here for 1 1/2 hours to sit on a panel them I´m flying straight back to the US is an example of our commitment to environmental sustainability."

More worryingly, plans for low-carbon technology give the expansion of high-carbon coal power pride of place. The promotional rhetoric is of Carbon Capture and Storage (CCS), yet those from the power sector are blunt about its shortcomings. "One of the plants we are building is CCS ready, although to be quite frank no one really knows what that is at the moment" claimed Steve Lennon, Managing Director of South Africa´s Eskom. James Rogers, CEO of US-based Duke Energy, added that CCS is at best 15 years off and is likely to prove unfeasibly expensive if it even works at all.

The underlying problem is that business adjusts the problem of climate change to neoliberal economics, which judges value according to financial cost rather than environmental sustainability or social justice. This manifests itself in a promise to massively expand carbon markets. The idea is that governments give out a limited number of permits to pollute; the scarcity of these permits should encourage their price to rise; and the resulting additional cost to industry and power producers should encourage them to pollute less.

Jos Delbeke, Deputy Director-General for the Environment at the European Commission, was in Copenhagen claiming that this is how the EU Emissions Trading Scheme (ETS) is now working. Yet his department´s own data for 2008 shows more international "offset" credits circulating than the level of claimed reductions, while lobbying pressure has resulted in a twin-track system from which every business wins.

On one side, heavy industry like the steel sector has more credits than would be needed to reduce its emissions, so it sells them. Delbeke shared a panel on carbon markets with a representative of ArcelorMittal, which alone gained an estimated subsidy of over €1 billion between 2005 and 2008 by this means.

On the other side, power companies pay less for pollution permits than the cost they pass on to consumers, generating windfall profits that could reach up to around €70 billion by 2012. The circulation of these permits does nothing to help new investment in renewables, as Zhengrong Shi, CEO of Chinese firm Suntech Power, admitted in a second session on carbon markets: "All European investment in renewables, in our sector [solar] is based on a feed-in tariff not the Emissions Trading Scheme or Clean Development Mechanism."

Carbon markets might be used to help polluting sectors avoid other obligations that are placed on them, however. As Giovanni Bisignani, Head of the International Air Transport Association (IATA), put it, "If some governments still want to implement taxes [on aviation emissions], we should get carbon credits to compensate every penny of these taxes."

Other measures to avoid business obligations displace the problem of tackling climate change onto the global South. The Summit´s final Copenhagen Call talks of a crucial role for forest protection in developing countries, with the co-organisers´ Business Case for a Strong Global Deal suggesting that such measures should represent around half of the action needed to limit climate change by 2020.

These figures are taken directly from Project Catalyst, an initiative bringing together "climate negotiators, senior government officials... and business executives", whose presentation (marked confidential) more straightforwardly emphasises the "the size of the prize for business" and, in particular, the opportunities for "companies in forest management, pulp and paper, or construction" to access a "€20-30bn value chain" in developing countries.

Strikingly similar assumptions have found their way into negotiating texts on Reducing Emissions from Deforestation and Degradation (REDD), which will be discussed when UN climate negotiations resume in Bonn next week. Yet the whole idea that deforestation can be stopped by simply putting a price on forests is flawed, with forest communities and Indigenous Peoples warning that it will encourage further land grabs by large companies. They point to evidence that the real drivers of deforestation are the major construction, mining, logging and plantation developments whose owners stand to be rewarded by REDD funds.

These are the voices that the world should be listening to as it seeks to tackle climate change - for, as things stand, even the self-proclaimed "progressives" of big business seem to be putting profit margins above environmental need. Without a more fundamental re-examination, to paraphrase one panellist, they look more like the back end of a horse that is galloping in the wrong direction.

World Business Summit on Climate Change... quote, unquote

2009-06-02T16:57:00.001+02:00

I have a whole notebook from the summit, which will feed a report at some point. In the meantime, here´s a selection of the "finest" quotes from day 1 of the summit...

5. “Tom Burke of [E3G, also of Rio Tinto, also of the UK Foreign Office.” - Tom Burke, overselling himself somewhat whilst proving that conflict of interest is alive and well. His registration badge said Rio Tinto.

4. “We are perhaps the only company using windfarms to generate the electricity powering our oil platforms.” - Fu Chengyu, Chief Executive Officer, China National Offshore Oil Corporation provides some Greenwash, Chinese-style.

3. “Like other industry we should pay only once. If some governments still want to implement taxes [on aviation emissions], we should get carbon credits to compensate every penny of these taxes. ... we can make aviation the first global industry to achieve carbon neutral growth and I hope it will be a model for others to follow.” - Giovanni Bisignani, Head of the International Air Transport Association (IATA), presents the true reason for his industry´s promise of “carbon neutral growth” by 2050.

2. “Sustainable next generation biofuels could increase our carbon footprint by 80 per cent. We are already flying test flights with biofuels of the next generation and we will be able to certify those by 2011. For the first time aviation could have a sustainable alternative to fossil fuels.” - Giovanni Bisignani of IATA, again.

1. “The fact that I flew here for 1 1/2 hours to sit on a panel them I´m flying straight back to the US is an example of our commitment to environmental sustainability." -Indra Nooyi, Chairman [sic] and CEO of PepsiCo.

Copenhagen, 24 May

Welcome to the Bella Center

2009-06-02T16:47:00.005+02:00

The Bella Center is in the Copenhagen equivalent of London´s Docklands, and will be site of the main UN climate conference in December. Vestas have erected a wind turbine in the car park in the front, which will be dismantled again when the UN climate conference is over. The car park is full of police vans.

I arrived by metro, walking around a building site to get there. Hardly any of the delegates to the World Business Summit on Climate Change take this route though - it is all taxis and limos.

On first arrival, the staff at registration are from the World Economic Forum and from the World Business Council on Sustainable Development - two of the six co-sponsors of the summit. I was refused a copy of the participants´ list but acquired one by other means... it is a list of men from North America and the EU, headed up by a range of dignitaries including the Queen of Denmark, UN Secretary General Ban Ki-Moon and Al Gore. Most participants are CEOs or senior executives, with a significant proportion of government officials too.

My first “networking” experience involved being approached by a Californian with a Willy Loman personality trying to sell me hydrothermal vents as “the greatest new source of energy since nuclear”. For the most part, though, the CEO club is too inward looking to bother me so I can slip by unnoticed for most of the three days of the Summit.

Copenhagen, 24 May

Update: Taking a page of the participants list at random, the ratio of men to women was 4:1. Four of the 43 participants named on the page were from outside of the "annex 1" industrialised countries. (I counted four other pages, where this ranged from 4 to 6 - mostly from Korea, China, South Africa and the Middle East).

The official press pack states that "The World Business Summit on Climate Change gathers more than 800 participants from 47 countries including 500 business leaders, 137 government representatives and 43 NGOs" as well as 261 journalists.

Climate Greenwash: Vattenfall win

2009-05-24T11:30:00.000+02:00

On arriving in Copenhagen, I went straight to the Climate Greenwash Awards ceremony. Swedish energy company Vattenfall won, with 39 per cent of the votes. The company was nominated for “its mastery of spin on climate change, portraying itself as a climate champion while lobbying to continue business as usual, using coal, nuclear power, and pseudo-solutions such as agrofuels and carbon capture and storage (CCS).”

A special award also went to the Danish government, for its role in helping establish the World Business Summit on Climate Change, which starts today.

Someone had the bright idea to serve "greenwash" as a drink - good concept, but it tasted like mouthwash with alcohol added to it.

Boat Train

2009-05-24T11:14:00.001+02:00

I had a 6am start from Lüneburg to connect with the Hamburg to Copenhagen train. It is literally a boat-train, as you can see from the above picture.

Carrots for Copenhagen

2009-05-23T20:37:00.000+02:00

Zapatista coffee, vegan pay-as-you-like food and a 56-page brochure of workshops... welcome to Buko 32 - a congress of international solidarity movements - being held in Lüneburg, Germany.

The event also marked the start of "The Road to Copenhagen" tour, which will see Carbon Trade Watch traverse Europe in advance of the December climate summit to expose the failings of carbon trading, and highlight alternatives that advance climate justice - or klimagerechtigkeit, as it is called here. I´ll be blogging that on this site.

I was at Buko to give a presentation on Carbon trading from Kyoto to Copenhagen, which can be found here.

The most memorable moment, though, involved Morgan Ody, formerly of Via Campesina and now "happily unemployed but still following the peasant way", inciting the audience to start community gardens and bring the resulting vegetables to protests at Copenhagen in December.

An army of German autonomists brandishing home grown carrots? Bring it on ...

UN Climate Negotiations: analysis of latest positions

2009-05-08T01:49:00.000+02:00

The US has played its hand, finally, if rather tentatively in the negotiations leading to a new UN climate treaty to be signed in Copenhagen this December. You can find them, with a range of other submissions, on the UNFCCC website. In fact, the US position remains thin on detail - other than to reiterate Obama´s previous statement that the US will reduce emissions to 1990 levels by 2020. To put this in some context, the Clinton administration had agreed to a 7% reduction on 1990 levels by 2012 - before renaging on its promise. The cost extracted for this "generous" concession to binding targets at the time was a system of carbon offsetting, put on the table by Al Gore (the chief negotiator at Kyoto) that still plagues the talks today.

The EU and sectoral carbon markets
There is some admission that these offsets are not working. The European Commission, in particular, now claims that it wants to see "substantial reform" of the Clean Development Mechanism, the controversial system that allows credits from a serious of dubious corporate projects in the global South to be treated as equivalent to "reductions" in industrialised countries.

The EU acknowledges the failings of this system, but its actual proposals for reform currently take the worst aspects of the scheme and exacerbate them. In particular, it advances a proposal for sectoral carbon markets, which is presented as a move away from controversial offset projects. Yet these proposals for ´sectoral crediting´ are being made within the framework of the Clean Development Mechanism, and have the potential to massively increase its scope. At the same time, they would lower the already inadequate checks on environmental sustainability and social justice, bypassing the current requirement to assess each project individually. This has been the dream of dodgy offset developers the world over.

The EU is proposing that CDM offset credits can be generated by any practice that alters ´business-as-usual trends´ in particular sectors - but this is not the same as a reduction. In most sectors, for example, the trend since 1990 (the usual baseline) has involved enormous increases, while the recent growth trends are slower. Depending on the baseline that is chosen, a baseline target could allow for continued increases over and above those that are currently being witnessed.

Another problem is that the existing data is often extremely poor - which means that assessments of business-as-usual are in the hands of the companies active in those sectors themselves. There is a clear incentive here for companies to talk up current emissions levels, in order to then maximise the number of carbon credits they would receive as a result. The over-allocation in the first phase of the EU Emissions Trading Scheme is a clear precedent for just such a practice.

The EU is proposing a separate "sectoral trading" scheme alongside this sectoral crediting - which is as confusing a mess as that sounds. One of the major failings of carbon trading has been this mix-and-match approach, where a finite "cap" is set with one hand, only for that to be lifted with the other hand by "offsets" that increase undermine it.

Since these credits can be sold on an international market, there is a very serious change they would further undermine the integrity of the EU ETS as well.

More new carbon market proposals
There are a serious of other proposals on the table too. These include a whole paper from Korea advocating a National Appropriate Mitigation Actions (NAMA) "crediting mechanism," ie. carbon market credits in relation to emissions benchmarks, which would be set in non-binding national action plans. Norway has a proposal on NAMA carbon credits that ostensibly looks quite similar.

The South Africa delegation, which appears to have swallowed an acronym dictionary, suggests that "NAMAs may comprise individual mitigation actions, sets of actions or programmes. Developing countries may choose from a variety of forms of action, including SD PAMS, REDD, programmatic CDM, no lose sectoral crediting baselines and others"

These are mostly market-mechanisms, although Sustainable Development Policies And Measures (SD PAMS) and REDD can be market-based or regulatory.

By contrast to all the above, Brazil seems to suggest that NAMAs should not generate offset credits.

Watering down EU ambition
Another new and re-iterated aspect of the EU´s proposals relates to its emissions reduction target of 20 per cent to be achieved irrespective of the agreement - although most of this could, if the EU wanted, be met with reductions from abroad - and 30 per cent in the context of an international agreement.

In a joint submission with Australia, Belarus, Canada, Norway, Switzerland and Ukraine, it is reported that the EU defines the 30 per cent as "including Land Use, Land Use Change and Forestry." These emissions are notoriously difficult to verify, for which reason they are currently excluded from the EU´s Emissions Trading Scheme. They also don´t count towards the 20 per cent target.

Including LULUCF "reductions" would help the EU to meet its "more ambitous" target without making that task more ambitious, as a result of which they are included. To give a sense of scale of the difference that might make, the current figures on LULUCF from the European Environment Agency are as follows (countries can choose whether or not to count these towards their current Kyoto Protocol reduction target): "Overall, activities under Articles 3.3 and 3.4, thirteen EU‐15 Member States are projected to remove 57.5 Mt CO2 per year of the commitment period. This is equivalent to 17% of the EU‐15 reduction commitment of 341 Mt CO2 per year of the commitment period, or 1.3 of the 8% reduction target."

That needs decoding. Articles 3.3 and 3.4 relate to aforestation and reforestation (tree planting). 341 Mt is how much CO2 per year the EU is commited to reduce. This means that LULUCF changes accounts for a net decrease of around 1.3 per cent of the EU´s overall emissions, but this is almost one-fifth of the action needed to make a reduction.

In other news: binding reductions for China?
The emergence of a US negotiating position of sorts has been reported with a flurry of excitement about how it has, in turn, pushed China closer to a position from whichit could strike a deal. In fact, the Guardian report names an unofficial source, who floats a potential commitment to "intensity targets." These are not emissions reductions, but relate to the proportion of emissions per unit of GDP. If the economy grows, emissions will be carried along with it.

REDD plus
On deforestation, various countries make proposals for REDD plus. According to the Bali Action Plan of December 2007, which kicked off the current negotiation round, this means: “Policy approaches and positive incentives on issues relating to reducing emissions from deforestation and forest degradation in developing countries; and the role of conservation, sustainable management of forests and enhancement of forest carbon stocks in developing countries”.

REDD-Monitor explains some of the drawbacks here

The best of these positions is from Bolivia which argues for this to be directly funded rather than tied to the carbon market. It says:

"1. A fund based mechanism allows for equitable distribution of funds.
2. It will not allow for off-set mechanisms.
3. Is more likely to ensure environmental integrity.
4. Is able to protect the rights of indigenous peoples and local communities as there is no transfer of rights of carbon ownership to the market.
5. Ensures sovereignty and national as well as local control over REDD-plus activities. Where the REDD plus activities must be framed under the national laws and policies and to not affect the national interests.
6. Forest conservation can be funded, including adaptation activities related to forests."

Climate finance
Some of the key debates concern financing. China, amongst other things, restates that:

"The developed country Parties shall fulfill their financial commitments under the Convention in a measurable, reportable and verifiable manner; any funds pledged outside the UNFCCC shall not be regarded as the fulfillment of commitments by developed country Parties for the implementation of Article 4.3 of the Convention and the Bali Action Plan."

The implication of this is that it still does not accept that controversial World Bank Climate Investment Funds would be counted as financial commitments from developed nations. These funds have the backing of (and funding from) the EU and US, amongs others.

EU Commissioner Stavros Dimas recently let slip that climate financing for development"will have to be both brand new funds and existing development monies." He then stressed that "mostly it should be new," but the fear lingers on that a lot of this money will be a repackaging of previous commitments, topped up by revenues from carbon markets.

UK Carbon Budget: more cynicism about offsets

2009-04-23T21:13:00.000+02:00

The UK government has set "the world´s first carbon budget" which includes a worthy, if tautological, aim to meet its domestic emissions reductions obligations domestically.

We are told that it will "Aim to meet the carbon budgets announced today through domestic action alone, and consistent with this, setting a zero limit in the non-traded sector on offsetting through international credits for the first budget period."

The Department of Energy and Climate Change (DECC) had previously commissioned an "impact assessment" of the EU Climate and Energy Package. It is written in dull economese, and with lots of questionable assumptions. But on the use of these carbon offsets it makes an interesting point:

101. Analysis of the effort required in the non-traded sector presented in Section 3.3 shows that under the projected emissions scenario modelled there is sufficient negative-cost abatement potential available to meet the anticipated shortfall. This suggests that there would be no requirement to use project credits, as sufficient abatement at lower (negative) cost is available. Therefore, under this, there would be no need to use project credits, and subsequently no additional cost of constraining their use

(emphasis mine)

In other words, the UK government is spinning "a restriction on the use of offset credits in non-traded sectors" as something pro-active, but its own study finds that "there would be no requirement to use project credits" anyway.

Why? The impact assessment talks of cost-neutral efficiency savings or those that result in net gains - and it is certainly true that many such possibilities exist (which begs the question: why are business decision makers so sclerotic that they don´t even make climate change measures that would make them money?)

There are also a couple of more basic reasons. The "first budget period" for the UK carbon budget runs to 2012. The UK is well below this target - and European Environment Agency data shows that the main reason for this is basically that energy production saw a shift from coal to gas in the early 1990s as a result of coal mines closing.

Second, it is also worth noting that offsetting is still very much a practice within sectors that are included in the EU Emisions Trading Scheme. As the National Audit Office explains,

UK installations can buy allowances from participants in other EU Member
States and may also utilise up to 91 MtCO2 of project credits over the five year period, which represents 60 per cent of the emission reduction effort required in Phase II.

Project credits are offset credits. Loosely translated, more than half of the UK´s emissions reductions obligations can be met outside the EU, and the remainder could be met elsewhere within the EU (where surplus credits are plentiful thanks to post-1990 economic restructuring in Central and Eastern Europe, and the current recession). These figures also need to be viewed in a context of a changing industrial structure, where the tendency has been towards de-industrialisation (meaning that more of the UK´s emissions are "outsourced" to the global South), and in a context where international aviation (although this is finally changing, in part) and shipping are simply excluded altogether from the figures.

So while the UK talks of a "revised target to reduce emissions to at least 34% below 1990 emissions by 2018-22," the actual figure is far lower.

(A revised, article-length version of this post can be found here)

Ad Hoc Working Group on Kyoto Protocol update, aka how to expand carbon markets and count emissions increases as reductions

2009-04-17T17:25:00.000+02:00

I´ve discovered the latest cure for insomnia, which is freely downloadable in the form of the Chair´s summary of the "AD HOC WORKING GROUP ON FURTHER COMMITMENTS FOR ANNEX I PARTIES UNDER THE KYOTO PROTOCOL," Seventh session, Bonn, 29 March to 8 April 2009

(Incidentally, the Chair in question is Harald Dovland who until fairly recently had a consultancy on carbon markets for Poyry plc.)

Don´t fall asleep just yet, though, because it´s a real shocker! Pretty much every half-baked scheme for expanding carbon markets is under discussion - a bore for ordinary climate-concerned citizens, but a wet dream for carbon traders.

At present, there´s fairly broad agreement that the Clean Development Mechanism (CDM) isn´t working (International Rivers have produced a good summary of how and why it fails, and you´ll also find more materials at www.carbontradewatch.org). When you´re in a hole, the best advice is normally to stop digging and climb out while you can. Unfortunately, the solutions being considered by the UN amount to throwing away the shovel and rolling in a JCB... taking the very worst elements of the current system, such as the unknowable fictions of "additionality," and generalising them. The net result would be a massive expansion of carbon markets that would, in the process, redefine all manner of hypotheticals and even pollution increases as "emissions reductions."

What follows is a point by point summary, with annotations and key clauses pulled out

Sinks, nukes and Carbon Capture and Storage in the CDM?
This first section has to do with debates on what can additionally be included in CDM - possible reforms to LULUCF provisions (land use, land use change and forestry); and a debate on the inclusion of Carbon Capture and Storage (CCS) and nuclear power in the Clean Development Mechanism (CDM). This is bad enough, potentially, although the more troubling parts are what follows...

Sectoral carbon markets
Like all of what follows, these are not agreed measures, but simply what is under discussion. So it is not too late to kick up a stink about it.

However, if sectoral carbon markets come into existence, this is what is proposed:

12. A sectoral crediting mechanism is established. A non-Annex I Party may propose to the CMP a crediting target for emissions or removals within a defined sector to be achieved through national actions. Reductions in emissions by sources in the sector below the crediting target, or enhancements in removals by sinks in the sector above the crediting target, shall result in the generation of credits which may be used by Annex I Parties to meet their emission commitments under Article 3, paragraph 1.

In other words, a target for emissions within a specific sector in the South can be treated as and traded for a reduction in industrialised countries. But there is no provision in this or the subsequent paragraphs for this to actually be a reduction - it is simply decided to be so by an expert group that reports to the CMP (which is the Meeting of Parties to Kyoto Protocol).
This potentially allows for a massive expansion of carbon trading beyond the "project-based mechanisms"

How is the target set? It explains...

14. A crediting target shall be [set below the level of projected anthropogenic emissions by sources of GHGs within the sector boundary or above the sum of the projected changes in carbon stocks in the carbon pools within the sector boundary] [as a carbon intensity target below the level of the projected carbon intensity of emissions by sources of GHGs within the sector boundary].

In other words, a reduction may be defined as anything below projected emissions... in essence, generalising "additionality" to whole sectors, while at the same time removing the need for even a cursory project-by-project assessment. Alternatively, and even worse, the target could be an "intensity" target, which is actually a ratio of emissions relative to economic output (expressed as GDP). The key point with the latter is that it is not absolute, so if GDP grows then the allowable amount of emissions grows with it... meaning that increased emissions can be traded as "reductions" (!)

15. The sector boundary for a sectoral crediting activity shall encompass all anthropogenic emissions by sources and removals by sinks of GHGs that are reasonably attributable to the defined sector.

Here sinks are treated as emissions reductions - in other words, what counts are not actual emissions but the net effect when the offsetting of tree-sinks, gas capture (and CCS, if is allowed, which is not just for coal but is also being pushed for major industries like steal).

Targets would be determined on a country-by-country basis.

Crediting on the basis of nationally appropriate mitigation actions

24. [The baseline for a NAMA registered as a CDM project activity shall be the scenario that
reasonably represents the anthropogenic emissions by sources of GHGs within the NAMA boundary, or the sum of the changes in carbon stocks in the carbon pools within the NAMA boundary, that would occur in the absence of the project activity.] [A portion of verified emission reductions that result from a NAMA may generate NAMA credits.]

Square brackets in these kinds of negotiations mark out those parts of the negotiating text that are not agreed, typically the more contentious text.

The NAMA proposal is another means of generalising the fiction of "reductions" beyond simply the project-based mechanisms. At the moment, each project has to tell a story of how emissions would have increased if the project didn´t exist, and show that carbon financing is necessary for it to happen. The problem is that no one knows the future, and all manner of implausible fictions can be elaborated ("we would have burnt coal if we didn´t burn biomass," etc.). This type of scheme generalises that same flawed Enron-accounting, and abstracts even further from the actual local context. Now, a story of how a whole sector in a whole country would otherwise develop can be taken as the basis for calculating reductions...

This proposed "NAMA crediting" seems to incorporate existing programmatic CDM (pCDM) proposals, as well as overlapping with the sectoral mechanism described above. Some of how it might work is rather obscure though.

The ways in which credits might be generated is listed as follows:

29. [Types of NAMA that can generate NAMA credits include but are not limited to:
(a) Sustainable development policies and measures, economy- or sector-wide mitigation
programmes, and mitigation activities and projects;
(b) Low-carbon development plans and programmes;
(c) Sector-based mitigation actions and standards;
(d) Actions under paragraph 1 (b) (iii) of the Bali Action Plan;
(e) Technology deployment programmes;
(f) Relevant standards, laws, regulations and targets at a national or sectoral level;
(g) Voluntary cap-and-trade schemes in non-Annex I Parties.]

For example, it is not clear at what stage carbon credits would be issued for "plans and programmes" - at the point at which they are drawn up, or at the point at which they have been implimented?

Here, as elsewhere in the document, social criteria seem weak or non-existent.

Encourage the development of standardized, multi-project baselines

33. [The CDM Executive Board] [A dedicated body constituted by the CMP and operating under its authority] [One or more dedicated bodies established by the CDM Executive Board and operating under its authority] shall define standardized baselines for specific project activity types and specific sectors or subsectors under the CDM by establishing parameters, including benchmarks, and procedures and making them available for [mandatory] [optional] use by project participants and designated operational entities (DOEs) in the determination of additionality and the application or development of baseline methodologies.

In other words, the new criteria for generating carbon credits will be even more lax, in that they would only need to be judged according to generalised and context-free "benchmarks"

Improve access to clean development mechanism project activities by specified host Parties
and
Promote co-benefits for clean development mechanism projects by facilitative means

These two sections address how to waive the rules for certain (to be specified) countries to encourage more carbon market projects there.

Various exemptions are considered. These include waiving "additionality" criteria and a fast-track process for projects.

The co-benefits section is rather confused, in particular this:

46. A DOE shall, as part of its validation of a project activity, confirm [that the designated national authority of the host Party has confirmed that its stipulated co-benefits are demonstrated by the project activity] [that the proposed project activity demonstrates one or more of the following co-benefits:
(a) Energy efficiency;
(b) Technology transfer;
(c) Environmental services such as air pollution reduction, improvement of water quality, proper treatment and reduction of waste, conservation of biodiversity, and management of hydrological resources;
(d) Poverty alleviation;
(e) Economic growth;
(f) Social benefits;
(g) Strengthening human and institutional capacity.]

This seems truly bizarre, and I can´t fully make sense of it. The way it reads, it would mean that a DOE (Designated Operational Entity, ie. consultancies like DNV and Tuv Sud) could verify that a project contributes to "economic growth" (criteria (e)) and, on the basis of this, authorise that other criteria for the project be waived. The result would be that projects leading to "economic growth" in LDCs (say, expansion by a large TNC / extractive industry) could be bought and presented as the same thing as "emissions reductions" in the North?!?!

Introduce multiplication factors to increase or decrease the certified emission reductions issued for specific project activity types

2+2 = 5

Joint Implementation

JI relates mainly to former Soviet countries, although if you look at the JI pipeline (database of current projects) in conjunction with a map you´ll see that some of the largest registered projects are located in the former West Germany.

They are considering including nuclear in JI.

Emissions Trading

This section relates to Annex 1 countries, ie. most of the rich industrialized ones.

Much of this is a reiteration of what went before, with the aim of rendering emissions trading consistent with the sectoral proposals in relation to CDM.

What it also proposes, though, is that a means be established for "Non-Annex I Parties" to directly involve themselves in cap-and-trade schemes, which opens the door (without need for further international agreement) for the linking up of these in order to create a global carbon market

60. Non-Annex I Parties may participate in emissions trading on the basis of agreed emission targets established for sectors. The emission target for a sector shall be set below the level of projected anthropogenic emissions by sources of GHGs within the sector boundary, or above the level of projected enhancements in removals by sinks of GHGs within the sector boundary, and shall be based on the most recent available data. The sector boundary shall encompass all anthropogenic emissions of GHGs that are reasonably attributable to the sector in question.

Again, sinks are treated as the same as reductions

61. A participating non-Annex I Party shall be issued with emission allowances corresponding to its sectoral target. Parties may devolve emission targets and allowances to legal entities.

"Legal entities" is the polite term for corporations. It is not yet clear what the implications of this clause might be. Any suggestions?

Introduce emissions trading on the basis of nationally appropriate mitigation actions

66. [CERs] [Credits] that are generated on the basis of a [NAMA registered as a CDM project activity] [NAMA] may be transferred and acquired under international emissions trading pursuant to Article 17.9

A CER is a CDM reduction unit. This clause is a legal provision to ensure that the whole vast swathe of new "sectoral" credits are "fungible" (ie. exchangeable with) reductions in the Annex 1 (rich, industrialised) countries.

Introduce modalities and procedures for the recognition of units from voluntary emissions trading systems in non-Annex I Parties for trading and compliance purposes under the Kyoto Protocol

69. Where a national or regional emissions trading scheme implemented on a voluntary basis by a non-Annex I Party or non-Annex I Parties meets specific eligibility requirements, emission allowances [and other units] issued under the scheme may be transferred and acquired internationally, and may be used by Annex I Parties to meet their emission commitments under Article 3, paragraph 1.

Please, somebody, send the UNFCCC a dictionary with the definitions of the words "mandatory" and "voluntary" highlighted...

Relax or eliminate carry-over (banking) restrictions on Kyoto units

All possible banking options (except no banking) are on the table, including this: "There shall be no restrictions on the carry-over of Kyoto units to a subsequent commitment period."

The problems with this are illustrated by what could already happen under the first commitment period (to 2012). Currently, through a combination of “hot air” credits (emissions reductions from Ukraine and Russia due to industrial decline and restructuring since the 1990 baseline established by the Kyoto Protocol) and the US non-ratification of Kyoto, there is likely to be a significant surplus of Assigned Amount Units (AAUs, Kyoto reduction units) by 2012. If these are carried over, it would represent a serious loophole in any post-2012 scheme – allowing historical reductions as a result of economic restructuring in the former Soviet bloc, and over-estimations based on the behaviour of George Bush, to be counted as equivalent to future domestic actions by the UK and other Annex I countries...

Other possible improvements to emissions trading and the project-based mechanisms under the Kyoto Protocol

There´s more to come! This last section contains a list of other live issues, some of them positive (restrictions on CDM, JI, etc), some negative, a number contested as to whether it is within the mandate of the AWG-KP to discuss them.

There are a few worrying ones in there too. These include a range of proposals for JI similar to what is detailed for CDM. Perhaps worst of all is this:

III. Emissions trading
A. Eliminate restrictions on the trading and use of certain Kyoto unit types under national and regional emissions trading schemes

In other words, a legal provision that would prevent discrimination on the types of units. For example, in the EU Emissions Trading Scheme, the use of CERs originating from 20MW large scale hydroelectric dams is restricted, etc. The above proposal would seek to overturn that decision.

And that´s all folks. Tune in next time... another round of UN climate negotiations takes place in June 2009 in Bonn, Germany.

Moscow: a worm-hole and a Red Rectangle

2008-10-26T22:51:00.000+01:00

Don’t try looking for a shower in Moscow. Our mission to get clean cost us four of our eight hours in the city, via a non-responsive hostel (thanks, Lonely Planet) and an over-priced taxi ride to an extortionately priced hotel… where a room booking for a shower would have required taking out a (non-sub-prime) mortgage. Sometimes when you get to a new city the whole experience is so confusing that it can take several hours of wandering endlessly to adjust. This was the Moscow worm-hole: a parallel reality where metros only ran in the wrong direction, and maps consistently failed to match up to places on first attempt. The fact that the taxi played Hotel California and Moon River added to the sense of things being curiously out of time.

Eventually we gave up on the washing plan, checked in our left luggage at Yaroslavl station (where the Trans-Manchurian and other Trans-Siberian trains leave), and headed to Red Square – or ‘Red Rectangle’, as one of my friends more accurately dubbed it. We arrived at night to find the building opposite the Kremlin lit up like a Christmas tree, which somewhat spoils the post-Soviet ambiance of the whole scene. That building is now a shopping centre, with a ‘Cartier’ store standing directly opposite Lenin’s tomb. The old man must be turning in his mummified grave.

3 October

Amsterdam to Moscow: borders and bogies

2008-10-26T22:48:00.000+01:00

The journey started from Amsterdam (where I live) on 1 October with the relatively short 6 1/2 hour train journey to Berlin. From there we travelled onwards to Kiev. One thing you quickly learn to appreciate is how small Western Europe is – with Berlin its outermost border. We left the Amsterdam train at the city’s impressive new Hauptbahnhof (central station), but the Kiev train starts at the distinctly less fashionable Gesundbrunnnen. The surly, square-hatted, blue-uniformed train assistants lining the platform welcomed us to the former Communist bloc.

As the train crossed the Polish border, we passed a fleet of Volkwagen vans being imported into Germany. The train passed through Poznan and Warsaw on that first night, and when I awoke it was a beautiful autumn day in the countryside of south-east Poland.

Not long after we passed another border – into Ukraine. The border police there scan your passport with expensive-looking EU-funded equipment (by contrast, the Russian and Chinese officials later in the trip just stand you up and stare at you long and hard). The train then crossed no man’s land and back again, reversing and entering a train shed where the bogies are changed. I have no idea why they are called this, but it refers to the whole undercarriage of the train. As we remained in our carriages, the train was taken apart, with each carriage lifted up to have one set of wheels rolled out and another set rolled back in.

Aside from the curiosity of the train-lifting show, I marvelled at the administrative logic that presumably underpins this whole exercise. If the point is passenger convenience, then surely changing trains rather than a long border stop would be preferable. If the point is practicality, then I would have thought that adjustable wheels or twin sets of wheels that could be raised and lowered should be more convenient. So I’m tempted to think the whole scheme – which is repeated on the Russia-China border – has been designed by committee, then entrenched by years of repeated practice until that is just the way these things are done.

The Ukrainian countryside was also bathed in autumn sunlight and, aside from discovering courtesy of two British travellers that Chernobyl is now a tourist destination, the remainder of the trip to Kiev passed uneventfully.

We arrived late at night, but to a busy station whose grandeur showed no signs of fading. English got us nowhere with the station staff here, or in Moscow, but we managed to book an onward sleeper train leaving shortly after midnight. The attractive wooden carriages ushered us comfortably to Moscow, where we arrived the next afternoon.

1 to 3 October.

Russia before Russia, and the perils of ‘ethical travel’

2008-10-26T22:44:00.000+01:00

My first experience of Russia was in The Hague. We were there to get visas as the Russian consulate, an anonymous doorway in the city’s embassy district. A man in a shiny suit opened the door and said nothing, but his eyes were saying – in an accusatory tone – what do you want? We waited for some words… and waited, the silence being a game of who would flinch first. ‘Is this the consulate?’ we flinched. Our reaction produced no words from our Russian companion, but he reached behind him and thrust two visa application forms into our hands. He requested a photo, monosyllabically (quite an achievement for a two syllable word). We didn’t have them. His stare was eloquently unimpressed. Eventually we managed to communicate that we simply want to ask some questions about visa applications, and were ushered in. The woman at the counter was exceedingly helpful and friendly.

One other vignette to set the tone for my trip: it almost didn’t happen. The ‘ethical’ travel agent I was advised to use for bookings to the conference, who then claimed to have booked my trip, called me back after I was told I had a confirmation and unilaterally cancelled it: ‘the itinerary was too complicated, and how about I take a plane instead?’ The delay killed off any plans to travel via Mongolia, and confirmed that I would bypass Belarus, since getting the visas for those two countries plus Russia and China would prove too time consuming. So in the end I bought up the tickets separately, with the aid of seat61, Amsterdam station, a Trans-Siberian specialist (Trans-Sputnik in The Hague), the China International Travel Service (for the return leg - rather delightfully for this age of streamlined bureaucracy, you collect the tickets from a filing cabinet on the 8th floor of a Beijing skyscraper), a much improved Rail Europe website (for my final leg from Italy), and the rest en route. In the meantime, I gained two wonderful travel companions for the outward leg.

ps. at some point I will get around to augmenting this blog with pictures – and maybe even some videos.

To Beijing and back by train: why bother?

2008-10-26T22:42:00.000+01:00

Why did I just travel to Beijing and back? By train? Via Athens? I have, by now, several well-rehearsed short answers to this question. Climate change. Curiosity. A need to escape the internet. A book project to work on. None of these quite captures the whole picture, but each carries a grain of truth. First things first, though, I simply needed to go to both places for work – the Asia Europe People’s Forum (www.aepf.info) in Beijing, and an anti-corruption conference in Athens. So why not travel over land? ‘It seems a waste of time’ is the most obvious comeback – but it isn’t as if you enter a state of suspended animation as soon as the train door slams shut, as this blog will hopefully explain. Nor is , it just a ‘tourist outing’. There are many pleasurable ways, I’m sure, to do this trip touristically, but non-stop is unlikely to be the best of them. In fact, the Trans-Manchurian trains themselves are distinctly tourist-free, at this time of year at least: on the 13 carriages (give or take the odd attachment and detachment) that travelled from Beijing to Moscow, a grand total of three people – including myself – were not Russian or Chinese.

To start with the obvious: if you work on climate change, you should try not to fly. This is true, but trite. In spending any time tracking global processes, you are likely to end up with a hypocritically large carbon footprint (this is probably not the occasion for me to discuss how many ineffectual air miles are chalked up in maintaining a ‘global civil society’) and the best way to mitigate this is simply to think carefully what trips you really need to take, and which can easily be skipped. Having a sense of your own replaceability can definitely help too. But in the end, that still leaves an unhealthily large share of travelling – which, if you consider that a collective effort is necessary to achieve structural changes, hopefully outweighs the negatives of individual practice. Beyond that, I feel strongly that flying shouldn’t be the default instinct – as it is still is for many ‘activists’, even on short European trips. There are several ways to travel over land or sea, and www.seat61.com is an indispensable starting point for these (although I am still looking for advice on how to cross the Atlantic cheaply without breaking the bank).

The other reasons – writing, escape, meetings – I’ll come to as this story progresses. The one I keep coming back to, though, is to gain a sense of perspective. Travelling across Europe, then through the world’s largest country and on to the capital of the world’s most populous one, gives a sense of scale that no A to B tin-can hop from airport to airport can match.

World's largest biofuel plant will not be veggie friendly

2008-09-15T02:56:00.000+02:00

I just finished an article on agrofuels for the next Red Pepper... but since there are a lot of nuggets that I left out I may post a few here. I started with a theme of "what are the world's largest agrofuel producers?" That changed a lot, mainly because there have been several recent policy developments to report... but in the process I found a few interesting things.

Here's one: the Finnish-based Neste Oil is currently developing the world's largest biodiesel refinery in Singapore. Opening in 2010, it will process 800,000 tonnes a year. This will be joined by a similar-sized refinery in Rotterdam by 2011.

Both plants will process the company's NexBTL blend of biodiesel. This is made from a blend that includes palm oil. The Singapore plant is strategically located near production sites in Indonesia and Malaysia... which are hugely destructive, since much of this is produced on recently deforested land. In Indonesia's Riau province, which I visited last year, the land is a deep peatland - which makes the whole process massively damaging in climate terms, because peat is a rich carbon sink. Aside from palm oil, the blend is made from rape seed oil and... vegetarians beware... animal fat?!

A second nugget of info, which may be of interest to Premier League football fans.... Dubai Investment Group, who tried but failed to by Liverpool FC, have major investments in palm oil in Malaysia. They're still after a Premier League club...

UN ‘clean development’ money sought for dam that threatens World Heritage Site in Panama

2008-08-07T12:28:00.000+02:00

A new hydroelectric dam in Panama could receive funding from the UN’s Clean Development Mechanism, environmental justice and conservation groups have warned.

The Chan-75 dam is being built by a subsidiary of the Virginia-based Allied Energy Systems Corporation (AES), which has now requested carbon credit certification for the project. Yet the environmental impact could be devastating.

“The construction threatens the environment and violates the human rights of the Ngöbe indigenous tribe living in the region” says Osvaldo Jordan of the Alliance for Conservation and Development (ACD), a Panamanian environmental organisation.

The dam’s construction is currently taking place in the Palo Seco Protected Forest within the La Amistad Biosphere Reserve, in the Bocas Del Toro region of Panama. Yet the Chan 75 project does not comply with the guidelines of the World Commission on Dams. The construction threatens the La Amistad International Park, a UNESCO World Heritage Site shared by Panama and Costa Rica, and part of the Mesoamerican Biological Corridor. Earlier this year, BBC News reported the discovery of three new species of amphibians on the Costa Rican side of the Park, very close to the border with Panama. The dam will most likely cause the extirpation of all of the major migratory aquatic fish and shrimp species from the La Amistad, and will negatively affect populations of jaguars, tapirs, and harpy eagles.

The dam also violates the human rights of Panama’s indigenous Ngöbe population. The Panamanian environmental agency, La Autoridad Nacional del Ambiente (ANAM), approved the construction without the free, prior and informed consent of the affected Ngöbe. The dam will result in the complete relocation of more than 1,000 Ngöbe subsistence farmers, and the destruction of their unique lifestyle. AES has met Ngöbe protests in response to the construction with the use of bribery, blackmail and outright police repression, all with the intention of pressuring the Ngöbe farmers to leave their land.

“The Chan-75 case is further evidence that the CDM is being treated as a subsidy stream for environmentally destructive projects,” says Oscar Reyes of Carbon Trade Watch, a project of the Amsterdam-based Transnational Institute. “It risks a lose-lose scenario, where the people and environment of Panama are threatened by a project that would allow industries elsewhere to continue polluting.”

A factsheet on the Chan-75 project can be found here

1. In March 2008, two non-governmental organizations, La Alianza para la Conservacion y el Desarrollo (ACD) and Cultural Survival, filed a petition to the Inter-American Human Rights Commission to protect the human rights of the Ngöbe. The NGOs argue that the CDM should not be utilized to propagate human rights violations and the destruction of the world’s biological diversity in the name of clean energy.

2. In line with the Clean Development Mechanism (CDM) of the Kyoto Protocol carbon market, the CDM Executive Board is now accepting public comment on the legitimacy of the project. ACD and Cultural Survival are now requesting that comments on the project be sent to the CDM Executive Board, by emailing manja.welzel@tuev-sued.de with the heading (Changuinola, Panama – COMMENTS) before 8 Friday 8 August.

3. Hydropower is the most common form of technology in the CDM pipeline, with 828 such projects awaiting approval as of April 2008. See International Rivers, Bad Deal for the Planet http://www.internationalrivers.org/node/2826 for further details

Fannie and Freddie sneeze, the world catches a cold

2008-07-18T22:33:00.000+02:00

When United States Federal Reserve Chairman Ben Bernanke gave the US Congress a bleak assessment about the state of the country’s economy on Tuesday, he blamed the housing markets, high energy prices and tight credit conditions for a slowing of growth.

Bernanke’s statement came just two days after the Federal Reserve – which is the central bank in the United States - and the US Treasury Department came to the rescue of mortgage giants Fannie Mae and Freddie Mac.

That move marks the latest development in a global financial crisis that was triggered by falls in the US housing market earlier this year.

The US had initially looked to the Fannie Mae and Freddie Mac, two ‘government sponsored’ companies, to sure up the country’s mortgage market when the initial crisis hit.

Now the rescuers – which, between them, hold or guarantee more than $5 trillion dollars in mortgages - have had to be rescued with emergency loans from the Federal Reserve.
In response shares on Wall Street, the US stock market, slumped.

But why does it matter what happens in the US mortgage market? And what was the subprime mortgage crisis, of which this Fanny Mae and Freddy Mac bailout is a part?

As Jim Stanford pointed out in the last Red Pepper sub-prime mortgages were, in essence, cheap loans issued to home purchasers in the United States –offered at low rates to lure buyers into the market. When the rates started rising, the loans were increasingly defaulted – and lenders, realising their investments were liable, started to lose confidence in the market. That loss of trust then had knock on effects in other parts of the financial system, triggering a financial crisis that has seen the US tumble towards recession.

But the bursting of the housing bubble was only one symptom of a much wider financial crisis that is besetting the US economy. With the liberalisation of global economies in recent years, the old economic adage that ‘when the US sneezes the world catches a cold’ still has a ring of truth.

Like most crises, this one was avoidable – but the signs were not recognised by leading bankers and economists.

Bernanke himself attributed rising US housing prices to ‘strong economic fundamentals’ in 2005 – blind to the role of speculative activity in this sector.

The US housing boom was also fuelled by a lack of regulation, with the debt burden for US mortgages parcelled up and resold so that investors didn’t know what they were buying.

This pattern of speculation was itself underpinned by a disconnection between the real and financial economies. In essence, with the ‘real economy’ faultering, investors shifted their money to financial assets from which they could generate greater profits. But with stock markets spiralling out of control – failing to take account of the real value of their assets – it was inevitable that this ‘bubble’ would eventually burst.

The results have so far fallen hardest on homeowners in US, rather than on the corporations which speculated in continued growth. And these same investors have shifted assets back to the real economy – one of the key reasons why food and oil prices have been on the rise this year.

Nor is it a surprise that Chinese capital is the main foreign investment behind Fanny Mae and Freddy Mac.

As Walden Bello points out in an excellent article on chain-gang economics, China’s economic growth has largely depended on the ability of US consumers to continue their debt-financed spending spree to absorb much of the output of China’s production - a process backed up by massive Chinese lending to the US Treasury and US firms.

The result has been an unsustainable cycle of Chinese production and US consumption. And while it could help the Chinese, and the whole globe, to de-couple their economy from the US – there are not yet signs that this is happening.

Sarko's Club Med

2008-07-18T22:19:00.000+02:00

A new Union for the Mediterranean was officially launched in Paris last Sunday, with French President Nicholas Sarkozy claiming it would help bring about peace and stability.

Actually, he was rather more romantic: 'The purpose of the Mediterranean summit, of this union for the Mediterranean, is that people learn to love each other in the Mediterranean region instead of keeping on hating each other, and fighting each other.'

Sarko's love-in was attended by Palestinian President Mahmoud Abbas and Israeli Prime Minister Ehud Olmert, who added to their holiday snaps by posing together, as well as Syrian leader, Bashar al-Assad. This was the first meeting he'd had with Olmert, although he quietly slipped out of the room before having to listen to his Israeli counterpart.

Despite the hype, though the new club of nations is far from a new proposal. In fact, the Union for the Mediterranean is the latest of several attempts to formalize relations between the European Union and its neighbours to the South and East.

It was devised by Sarkozy as a key pillar of the French EU presidency, which runs until the end of the year.

The new Union overlaps with an earlier EU proposal for cooperation in the Mediterranean region, officially called the 'Barcelona Process'.

But suspicions are widespread to French motives for proposing the new club of nations.

Turkey has long expressed its reservations about the plan – seeing moves towards a Union of the Mediterranean as a manouvre by Sarkozy to block its entry into the European Union (and with good reason).

The Libyan leader Muammar Qaddafi boycotted the summit, claiming that the new Union was a ‘neo-colonialist’ attempt to reassert French influence in North Africa.

Beyond this posturing, however, the move towards a new Mediterranean Union is driven more by economic concerns than by grand intentions to build peace in the region.

Its formation has sparked up internal rivalry within the European Union, with German Chancellor Angela Merkel seeing it as an attempt by France designed mainly to advance its own economic and political interests in North Africa.

In response, Merkel won some concessions. The European Commission, which has so far spent 16 billion euros since 1995 on the ‘Barcelona process’ will limit its funding for the new Mediterranean union to 7.5 billion euros until 2013.

This package was agreed alongside a pledge to dedicate more funding to the EU’s eastern relationships – in which Germany has a stronger interest. Germany is the largest contributor to the EU budget.

Both policies, in fact, overlap with a more broad-ranging European Union Neighbourhood Policy to promote free trade and control migration into the 27-member bloc.

As part of this strategy the European Union is building detention centres to lock up migrants in Libya – as part of a cooperation agreement that critics have called a ‘Fortress Europe’ strategy.

The EU is also pursuing a series of bilateral trade agreements with Africa, aimed at opening up markets for European-based corporations. Trade between the EU and its Mediterranean neighbours amounted to 120 billion euros in 2006, with EU-based multinational companies the main beneficiaries.

In fact, the most immediate objective effect of the new Mediterranean union is the promotion of a series of investment projects – in water management, sea purification and nuclear energy – which are most likely to help French companies acquire lucrative new contracts in the region. And that's an idea that Sarkozy truly loves.

The world in 23 minutes

2008-06-11T12:51:00.000+02:00

Here's a TV programme that I did, which rounds up the world news from the last seven days (well actually 10 now because it went out a few days ago):

http://www.presstv.ir/Programs/player/?id=59208#

The main items are on the World Food Summit and Obama's primary victory

Obama’s Middle East policy: more of the same?

2008-06-06T21:58:00.000+02:00

What is it about American politics? No sooner has Barack Obama won the Democratic nomination, than he’s in front of the America Israel Public Affairs Committee promising to strengthen US-Israeli military ties; promising not to negotiate with Hamas or Hezbollah; and promising to keep the threat of military action against Iran ‘on the table’.

So is there any chance that Obama – who’s election campaign message is ‘a change you can believe in’ - can bring about any genuine shift in US foreign policy towards the Middle East?

Well, his position on Iraq is unquestionably favourable to that of his rival. McCain has promised to ‘stay a hundred years in Iraq’, whereas Obama has pledged to withdraw US troops from the country within 16 months of his election.

But look behind the headlines and Obama’s call is for a withdrawal only of ‘combat troops.’ This would still leave anywhere between 35 and 75,000 so-called counter-terrorism troops and trainers in Iraq, as well as all or most of the 180,000 mercenaries that the US pays to support its military. He has also said little about closing the 15 permanent military bases that the US has built in Iraq, including the one less than 2 miles from the Iranian border.

Obama’s policy towards Iran is also ambiguous, at best. Initially, he sought to distinguish himself from other candidates in the US Presidential race by urging the need for immediate negotiations with Iran ‘without preconditions.’ He talked of the potential for Iran to enter the World Trade Organisation, as well as of the need to offer some guarantees to Iran.

As he gets closer to the White House he appears to be distancing himself from this stand and taking a harder line. His latest remarks on the supposed threat of Iranian nuclear weapons are a case in point.

Don’t get me wrong – an Obama White House would be a different beast to a McCain one. And the fact that Obama grew up in Hawaii and Indonesia suggests that he might at least bring with him a more intuitive sense of the disastrous role of US militarism across the world.

The course of an Obama presidency is far from fixed, moreover. His support base amongst the many Americans who oppose current US foreign policy is a cause for hope, if they manage to use that position to pressure him to resist a ‘business as usual’ approach to the Middle East.

But while I’d like to believe in the change that an Obama presidency would bring, I’m not holding my breath. For those of us who don’t believe in the Great Men theory of history, the political conditions in which a leader operates are all important.

The salient question is not what Obama wants to achieve, so much as what it is possible for him to achieve. What openings can he find or engineer in a Washington that is wedded to an aggressive sense of its own national interest, and beset by powerful lobbies, from the arms industry and pro-Israel groups, as well as an oil industry looking to achieve ‘energy security’ at any cost?

The signs so far are that Obama is likely to prove unwilling and unable to redefine the US national interest in ways that would fundamentally break with the ideology of empire.

Oil boom... and bust?

2008-05-23T21:02:00.000+02:00

In Indonesia, thousands of people protested as the government cut fuel subsidies in response to sharply rising prices.

In France, fishermen are blockading oil refineries .

And in the United States, Ford is to cut production of its oil-hungry sports utility vehicles; while American Airlines has retired old planes and added a $15 surcharge to flight tickets.

This week, oil prices hit record highs of $135 per barrel – which, even taking inflation into account, is higher than at the peak of the 1970s oil crisis.

Is the world running out of oil? Or are oil traders cashing in on temporary price hikes – creating a temporary bubble that will soon burst?

With oil prices reaching record highs, there is no shortage of explanations for the current boom.

The latest surge came after the US government reported that its supplies of crude oil and petrol fell unexpectedly in the last week.

Financial speculation was rife, with a $5 dollar price hike in a single day’s trading on Wednesday bearing all the hallmarks of a speculative bubble.

The weak US currency was also a factor, as it makes it cheaper for holders of other currencies to buy oil - which is traditionally priced in dollars.

In addition, many investors see commodities such as oil as a hedge against inflation and the falling dollar.

But while some analysts consider that, in the short term, this bubble could burst, the fundamentals of oil supply and global politics make it more likely that the price of a barrel of crude will continue its upward trend.

The International Energy Agency (IEA) last year reported that oil demand is likely to outpace rises in oil supply until at least 2012, generating significant shortfalls.

The economic and consumer boom in the world's largest developing countries, particularly China and India, are one key factor.

But this is accompanied by a pronounced slowdown in the expansion of global supply, due mainly to a dearth of new discoveries, which many analysts take a sign that the world is approaching peak oil - the moment in our history where supplies start to dwindle.

This trend has been exacerbated by the unwillingness – and, to some extent, inability - of the oil cartel Opec to pump significantly more crude.

Recurrent political disorder in key oil fields already in production – including Iraq and Nigeria – is a further factor.

US aggression towards key oil producers, including Iraq, Venezuela and Iran – has made the markets nervous too, with the resulting spike in oil prices having a significant ‘blowback’ effect on the US economy itself.

So what is the effect of all this?

The environmental impact is ambiguous. A cut in flights, and a decline in sales of gas guzzling 4x4 vehicles in the United States is good news for the planet. But price alone will not change the oil addition of Western consumers. And while oil-dependent companies are reporting losses, oil companies themselves are doing well – with the high price making it viable to invest in new “unconventional” oil sources, such as tar sands and deep-offshore fields.

The impact on the US economy is more telling, however. With oil prices now over twice what they were a year ago, they are fuelling US inflation by making it more expensive to transport goods such as food.

This, in turn, is helping to weaken the value of the dollar on international currency markets – which then inflates the price of oil itself in international trading.

More fundamentally, though, the high oil price is weakening the US economy in the longer term by generating a huge balance-of-payments deficit.

As the United States continues to feed its oil addiction, wealth is being transferred at a rapid rate to the economies of oil-producing nations.

When the CAP doesn't fit

2008-05-23T21:01:00.000+02:00

The European Commission presented plans to shake up its Common Agricultural Policy, its multi-billion dollar system of farm subsidies, last Tuesday.

But the new proposals do little to fundamentally reform the system, despite pressure from rising global food prices, and growing environmental concerns about large-scale industrial agriculture.
More than 40 per cent of the European Union’s 155 billion dollar annual budget is spent on farm subsidies.

Currently, 15 per cent of farmers receive 85 per cent of the direct farm subsidies in the EU’s 27 member states.

Under the Commission’s new proposals, the EU would cut the link between its subsidies and the amount of food that is actually produced on the land. It claims that this will help to protect the environment and promote traditional family farms.

But the Confederation Paysanne Europeanne, a Europe-wide network representing small farmers, also claimed that the new measures do not go far enough. It argues that market de-regulation pushed by the EU has undermined food sovereignty globally.

The EU’s new proposals would also abolish set-aside, the practice of leaving 10 per cent of arable land fallow.

This measure is supported by farmers’ representatives, but was strongly criticised by environmentalists – who claim that the fallow land is a lifeline for the continent’s birdlife.

Reforms to the Common Agricultural Policy have long been demanded by Southern governments and development organisations, which have criticized the European Union for forcing developing countries to open their markets to heavily subsidized European agricultural produce. This is said to undermine the development of sustainable agriculture in poor countries.

Yet with the rise in food prices globally, the gap between the market price and the EU prices has narrowed; and with that, attention has turned to the role of other EU measures, such as its biofuel subsidies for the production of fuel from crops, in undermining sustainable agriculture.

A victory against BAE

2008-04-10T19:14:00.000+02:00

"No-one, whether within this country or outside, is entitled to interfere with the course of our justice. It is the failure of Government and the defendant [the Director of the Serious Fraud Office] to bear that essential principle in
mind that justifies the intervention of this court."

"It is obvious . . . that the decision to halt the investigation suited the objectives of the executive. Stopping the investigation avoided uncomfortable consequences, both commercial and diplomatic."

A pretty emphatic verdict from the High Court in the battle over the Saudi-BAE corruption case, then. Stopping a Serious Fraud Office inquiry on the grounds of 'national security' was one of the most reprehensible acts of the Blair premiership.

Well done to CAAT and The Corner House who brought the case (and see the Control BAE website for more details).

The stock market reacted with its usual ethical indifference - BAE shares were down 1.3 %, only marginally below the FTSE average for the day's trading. Business-as-usual, in other words. How about, just for once, instead of the government interfering in the legal process to prevent investigations into fraud, it regulates the arms trade instead?

Clinton's right-hand man: who exactly is Mark Penn?

2008-03-22T16:59:00.000+01:00

If you read enough reports on the race for the Democratic nomination for US president, there's one name that comes back at you again in quote after snide quote: Mark Penn, chief political strategist for Hilary Clinton. Penn's usual stock in trade is to dismiss as irrelevant any Obama gains. Most notably, he has claimed that the smaller states that Obama has won don't count and that caucuses don't count; most recently, he added that the endorsement of Obama by Bill Richardson, the Latino New Mexico governor who's endorsement both Democrat candidates had courted, doesn't count. And the less said about his early campaign memos talking up the 'inevitability' of Hilary's candidature, the better - let's just say they seem a bit premature now.

If there's a consistent analysis underlying these spin attempts, it is the idea that elections are won and lost by small 'c' conservative swing voters... and that any attempt at redrawing the map of US political politics should be shunned. So while Republicans were busily moving the 'centre' of US politics far to the right, the Clintonite Democrats were chasing to keep up with them. Whatever the flaws of Obama's campaign, it is at least an attempt to break with this strategy.

Penn's role goes beyond that of 'chief strategist', however. As CEO of public relations firm Burson-Marsteller, Penn is at the centre of the corporate web that surrounds Clinton's candidature. Burson-Marsteller is the PR agency of choice for governments engaged in human rights violations, and corporations seeking to scupper environmental legislation and action on climate change (see here for some background, albeit a bit dated). The firm is also well versed in anti-labour propaganda, which landed Hilary in some hot water with US unions last year.

Unspinning Darling’s climate claims

2008-03-13T18:37:00.000+01:00

Alistair Darling claims that auctioning EU pollution permits will encourage investment in renewable energy. But the Treasury backs the opposite view in Europe, while continuing to push nuclear power.

It’s becoming an iron law of budgets that the initial spin gives way to a far less attractive reality. The first Budget since Brown was supposed to have a green streak running right through it. But several of Alistair Darling’s environmental claims fail to stack up.

Carrier bags grabbed the headlines – and there are, indeed, may good reasons to charge for their use or, better still, ban them altogether. But to mention these in the context of climate change strategies looks suspiciously like ‘greenwash’. As the environmentalist George Marshall points out, ‘An average plastic bag produces 31 grammes of Carbon Dioxide, about the same as comes from driving my car 90 metres. That doesn’t get me very far towards the supermarket. If I was in a jetplane it wouldn’t get me to the end of my garden.’

A more serious, though less headline-grabbing, flaw lies in Alistair Darling's claim that the European Emissions Trading Scheme (ETS) can be used to 'encourage investment in low-carbon technology and in energy renewables', aided by the auctioning of allowances for energy generators. This is misleading for several reasons.

Darling claimed that ‘we have helped build the Emissions Trading Scheme to curb the amount of carbon produced by generators and large industrial users.’ What he failed to add is that it didn’t work. In its first phase, the ETS awarded windfall profits to these large-scale polluters, but there is no evidence that carbon trading actually reduced any emissions. In fact, the corporate lobbying around the scheme was so fierce that, in 90 per cent of cases, the ‘caps’ on emissions failed to cap anything, proving far less effective than conventional regulation.

He also claimed that 100 per cent of the permits awarded to energy generators should be auctioned. This reflects the European Commission’s position, but distorts the bigger picture. In other sectors, the EU has proposed that many of these permits to pollute need not be auctioned until 2020, and it provides a huge get-out clause that would potentially allow all of them to be given away free even then.

The idea that this scheme would generate investment in low-carbon technology and renewables is also highly questionable. Indeed, the European Commission has suggested that only 20 per cent of these auction revenues need be directed towards alternative energy investment. An Ecofin meeting of European finance ministers on 12 February (at which Angela Eagle represented the Treasury) balked at even this modest proposal, rejecting any EU-wide target for 'mandatory earmarking' whatsoever.

Where Darling is more accurate is in his assessment that such measures will encourage investment in nuclear energy. In fact, as the World Information Service on Energy (WISE) has shown, the government’s promise of unilateral action to underpin the price of carbon can best be read in relation to its nuclear policy – providing a means to provide indirect subsidies to this industry in a situation where direct subsidies look politically unacceptable.

The larger point is this. If the incentives to act on climate change are focused mainly on price, what happens is that the richest actors in the market are allowed to buy their way out of responsibility, while perverse incentives are created for the nuclear industry or the dirtiest forms of oil exploration (as BP’s recently stated intention to extract oil from Canadian ‘tar sands’ has shown).

Such proposals are far from green.

Be My Anti-Valentine

2008-02-14T18:56:00.000+01:00

"Happy unimaginative, consumerist-oriented and entirely arbitrary, manipulative and shallow intepretation of romance day."

That warm sentiment, and other great cards like it, can be found here

Of course, if anyone wants to just ignore this and send chocolate, then the Red Pepper office address is on the bottom of the page on our website ;-)

Climate change and dead canaries

2008-02-11T22:27:00.000+01:00

Last December, as the UN climate conference was basking in hot sunshine (with frequent gusts of hot air blown from the mouths of government and industry delegates), NASA climate scientist Jay Zwally reviewed data that Arctic sea ice could melt entirely by the summer of 2040 and found that, in fact, this process could happen by the summer of 2012.

"The Arctic is often cited as the canary in the coal mine for climate warming. Now as a sign of climate warming, the canary has died. It is time to start getting out of the coal mines" said Zwally, who as a teenager hauled coal.

The reason such predictions can be so wrong is that climate change is not a linear process, but is subject to a whole series of feedback loops and tipping points. A lot of scary evidence for this is presented in a new report from Friends of the Earth Australia, entitled Climate Code Red

Imported goods, exported pollution

2008-02-11T22:18:00.000+01:00

Imagine the following scenario: UK business outsources to China or is outflanked by cheap imports. China ships stuff back to the UK. The UK then claims an 'emissions reduction' because the domestic emissions are 'off the books'. Repeat the same effect across the globe and what does this global free trade model amount to, in terms of its impact on climate change? Well, look here: "A new study shows that 20% of the earth's carbon is emitted from production activities in developing nations that are aimed at meeting the consumption needs of developed countries."

EU ETS: the emissions trading handouts continue

2008-02-11T21:50:00.000+01:00

Those of you interested in the EU's Emissions Trading Scheme (and frankly, with a title like that, how could you not be?) might be interested to learn that the EU's claims that it will start auctioning its 'permits to pollute' are dubious, at best. Ok, if you haven't got the faintest what I'm on about, click here .

Despite the EU's claim that auctioning will become ‘the basic principle for allocation’ under the new ETS after 2012, the European Commission's draft directive sets up so many exceptions to this rule that it is hard to see what happened to the rule at all:

* First, it names the risk of ‘carbon leakage’ – 'ie. relocation of greenhouse gas emitting activities from the EU to third countries and thereby increasing global emissions.' as a result of its climate policy. This is used to justify the fact that most polluting sectors of the economy will continue to receive free permits to pollute; and that in others the ‘transition’ from free permits to auctioned ones is delayed for several years - despite the acknowledged urgency of the climate crisis.
* Second, the terms of this transition from a system of 'free' to 'auctioned' permits are lax. There will still be free allocation of 80% of allowances in 2013, decreasing year on year ‘by equal amounts’ until ‘no free allocation in 2020’. In other words, the majority of permits to pollute will still be given away until the middle of the next decade.
* Third, it is also proposed that a Commission study will identify by 30 June 2010 which sectors are affected by carbon leakage, and potentially allow these energy-intensive industries to receive ‘up to 100% of allowances free of charge’. This will be re-assessed every three years, so polluters who fail in their lobbying first time out can have several more bites.

To summarise what's happening here (in case you've not read the whole EU Draft Directive): the shift from a system of free permits to allowances is delayed, with the potential that it won’t happen at all. Where allocations are given away, windfall profits for the EU’s most polluting companies will continue. Where they are auctioned, windfall profits for the EU can be expected. Only 20% of that money will be ring-fenced for reinvestment in renewables or for contributing to funding for the poorer electricity users and countries… from whom the property rights to this ‘carbon’ were stolen in the first place!

It strikes me that there is a genuine problem that is being addressed here – ie. the EU can set rules on pollution domestically, but if these are not matched elsewhere in the world then factories could fly to those places where there are fewer environmental restrictions. However, (1) threats of this nature tend to be overstated as a lobbying ploy by industry to extract favourable terms from the EU: the real costs of relocation and the infrastructure needed to maintain certain industrial locations are high and may outweigh what could, in practice, only be a short-term economic benefit of relocating to avoid EU caps. A far more important point is (2) that this is a problem of the EU’s own making, since it is aggressively pursuing free trade policies (now rebranded as ‘global Europe’) that encourage a race to the bottom to undermine standards; (3) the EU's caveat to all this - namely, that it must also abide by WTO rules - disavows the EU’s role in making those rules in the first place. If you don’t worship at the alter of free trade, by contrast, this is a non-issue: there are various was of regulating to ensure emissions reductions without having to make concessions to insure against flighty capital.

And finally, in case you were ever stuck on how to rebrand failure as success, try taking some lessons from the EU:

The failed 2005 to 2007 ETS is now referred to as the “first ‘learning-by-doing’” phase. This phase ‘successfully established free trade of emission allowances across the EU, set up the necessary infrastructure… developed into the world’s largest single carbon market…’ etc….. hang on, there’s something missing from this list… successfully established a market, right, but what about actually achieving any emissions reductions? … “However, the environmental outcome of the 1st phase of the EU ETS could have been more significant [you don’t say…] but was limited due to excessive allocation of allowances in some Member States and some sectors, which must mainly be attributed to reliance on projections and a lack of verified emission data.” Ah, I see, nothing to do with excessive corporate lobbying meaning that the caps on this ‘cap and trade’ scheme were set so high that they didn’t actually cap anything…

Costly BAE Blunder

2008-01-29T21:17:00.000+01:00

If I had a dollar for every press release I'd laid my eyes on... I'd be Donald Trump. Well, Donald Trump without the toupe, obviously. If I had a dollar for every well-written press release, I'd more likely to be scraping along on minimum wage. This one popped into my inbox today, though, and is interesting - not only does it raise the latest scandal about unaccounable defence contracting, but it also keeps short and to the point, as well as raising key campaign objectives ("BAE is a burden, not a benefit, for the British economy." ) I hope it gets wide attention - as the court case in a few weeks time surely will too.

BAE BLUNDERS COST UK TAXPAYERS OVER £2 BILLION

The arms company BAE Systems is so far over budget with two of its latest projects that they will cost UK taxpayers £2.2 billion more than expected. The figure is revealed in a report by the House of Commons Defence Select Committee, which looks at BAE's contracts with the Ministry of Defence. The Committee found that the budget for BAE's Astute Submarines has increased by 47% and the budget for BAE's Type 45 Destroyer ships by 18%.

Symon Hill, spokesperson for Campaign Against Arms Trade (CAAT), said: "This is outrageous. BAE has once again been exposed as a drain on taxpayers' money. This waste is on top of the roughly £850 million spent every year on subsidies for the arms trade. BAE is a burden, not a benefit, for the British economy."

The news comes only weeks ahead of a High Court case in which the Government's relationship with BAE will come under scrutiny. On 14th and 15th February, lawyers for CAAT and The Corner House will argue that the Government behaved illegally in cutting short a Serious Fraud Office investigation into BAE's Saudi arms deals.

New issue, new issues

2008-01-27T17:34:00.000+01:00

Ok, so I've not exactly been a regular blogger. Where do regular bloggers get all their time, exactly? The new issue of Red Pepper is out very soon. The highlight, for me, is an excellent piece on Pakistan by Graham Usher. It is always a tricky question as to how to balance our coverage of contemporary events with news agendas at the time of publication, but this article gets behind the headlines to make sense of the situation there more clearly than any other commentary I've yet read.

Sometimes we're successful at predicting what will be topical. For example, today's Observer trails a new 'eco battle' over airport expansion, another issue that is covered in the new issue. When we go to press we never quite know if someone will scoop our stories but I'm confident that the article we ran goes into far more depth than the Observer could, and I'm pleased that it doesn't just focus on the forthcoming battle over a third runway at Heathrow - important though that is.

My own contribution was to try to decode new proposals aimed at 'reducing emissions from deforestation and degradation' - which was the hot issue at the Bali climate conference, although it doesn't exactly trip off the tongue. The best background reading on this is still, probably, this paper from the Forest Peoples' Programme.

And finally, it isn't all words, words words. As well as a photo essay on Ghana and football, we've got an extract from a new Atlas of Radical Cartography

As always, it is good to receive feedback on the magazine. Hopefully, this new blog won't be so cluttered with spam as the old one, so the comments aren't fighting for space with hot Russian sexbots, cheap viagra and mortgage advice....

UN Climate Conference in Bali

2007-12-12T10:25:00.000+01:00

I’m currently in Bali at the UN Climate Conference. To follow progress here, keep track of the Alter Eco, which is available online here

Africom: US military expansion in Africa

2007-11-09T10:34:00.000+01:00

When investigative reporters learn their trade, the first advice they get is: follow the money. For those hoping to understand something more about global politics, this should quickly be followed by advice to follow the troops.

Under the guise of expanding ’security assistance programmes’ - a euphemism for supporting client states - the US government is establishing a new unified command structure for its forces in sub-Saharan Africa. It is also motivated, no doubt, by China’s concerted effort to secure energy supplies from the continent.

This new strategy is discussed in The Nation this week by Danny Glover and Nicole Lee. For a more detailed analysis, it is worth checking out this article by Daniel Vollman in Pambazuka News.

Michael Heseltine: speaking truth after power

2007-11-09T10:30:00.000+01:00

Did you see Question Time? I must confess I didn’t, partly because I’m out of the country, mainly because it is usually very boring. But this quote, as recounted by Seumas Milne, looks set to become one of those that is recounted to death:

”I was involved in the process of arming Saddam Hussein,” Heseltine told the BBC’s Question Time programme, in a startling answer to a question about whether the west had been right to back the military dictatorship of General Musharraf in Pakistan. “The reason we armed Saddam Hussein is because he was seen as an absolutely fundamental interest of the west against rising Muslim fundamentalism based on Iran. We have destabilised Iraq, greatly empowered Iran and the dangers to us in that process have been very considerably increased.”

File alongside:

“The hidden hand of the market will never work without a hidden fist.” - Thomas Friedman

“It’s a hard choice, but I think, we, think, it’s worth it.” - Madeline Albright, asked about the over half a million children killed by the Iraqi sanctions.

That Albright one is on YouTube. I’m still waiting for the Heseltine clip to appear there, it is archived on the BBC Question Time website for the next week.

Pissing on environmental protection

2007-11-08T10:46:00.000+01:00

According to the ETC Group, a private geoengineering company recently received an official “go signal” to dump 500 tonnes of urea into the Sulu Sea near the Philippines for a large scale “carbon sequestration” experiment without an Environmental Impact Assessment. The experimental urea dumping may happen this year. This is one of a number of spurious ‘ocean fertilisation’ schemes. Full story is here.

This year’s Golden Loobrush Award goes to…

2007-11-06T10:27:00.000+01:00

Surfers Against Sewage campaigners took to the stage at the British Environment and Media Awards (BEMAS), sponsored by Northumbrian Water, to present their own ‘Golden Loo Brush’ Award to the company’s Communications Director. The campaigners accuse the company, which plans to reduce the level of sewage treatment from its plants in the North East, of disregarding the health of the marine environment.

Full story here and here

The demise of RESPECT: back to the future?

2007-11-03T09:49:00.000+01:00

When RESPECT was founded as a ‘unity coalition’ in 2004, it always seemed like tempting fate. The British left has long been better at factional infighting than togetherness, and the record of the ill-fated Socialist Alliance – one of RESPECT’s immediate precursors – didn’t bode well.

A few years ago, Mike Marqusee wrote an excellent analysis on ‘democracy and the left’ that has more than a familiar ring today. It is worth reading in full, but here’s an excerpt that touches, in passing, on some of the issues that have come back to haunt RESPECT:

In the end, the SWP is imbued with an authoritarian ethic – most recently confirmed by their readiness to dub as “divisive” or “disruptive” anyone who voices political preferences contrary to theirs. We’ve seen this in the Socialist Alliance, where they have dumped dissenters from national officer positions and crudely packed a meeting in Birmingham in order to force out one of the few genuinely independent (and respected) trade union activists the SA could boast. We’ve also seen it in the Stop the War Coalition where decisions are taken by the SWP leadership and foist on the STWC with barely a semblance of democratic consultation, where SWP members appear on platforms as “STWC” spokespersons, though they have no links to any STWC structures, where the priorities of the SWP leadership (at the moment, campaigning for George Galloway), take precedence over the priorities of the wider movement (surely, at the moment, stepping up the pressure on Blair regarding the absent WMD and building a long-term campaign against the occupation of Iraq) - and where anyone who wanted a slightly greater emphasis on direct action, or a broader approach to the choice of speakers on the big demonstrations, or didn’t totally buy into the crude construction of “the Muslims” as a homogenous (manipulable) entity was effectively excluded. And in both the SA and the STWC, on the rare occasions when initiatives not under the direct control of the SWP emerged from democratic discussion, they were either ignored or undermined by the SWP.

UN climate conference: views from Indonesia

2007-10-30T09:51:00.000+01:00

With the UN climate change conference taking place in Bali in December, the implications of current policies on climate justice will be an important consideration. Already several Indonesian NGOs have expressed their concerns at the current ‘mercantilist’ policies that dominate international policy making on this issue. Their full statement is reproduced here.

On 23 October, there was also a protest against carbon trading in Denpasar, capital of Bali. Top marks to whoever made a banner that read: “Our Forest is not a Carbon Toilet for Developed Countries.”

Facebook: the twitching net curtain of the net

2007-10-14T10:52:00.000+02:00

Some of my best friends would not be seen dead on Facebook. Can you blame them? It is, they claim, the death of real-life socialising, another way of chaining you to your computer, and a total abuse of privacy. That said, I like Facebook. In a guilty pleasure kind of way. It is the twitching net curtain of the net. Somewhere between socially sanctioned noseyness and an alumni association.

Yet it is also risky. Like most Facebookers, my ‘friends’ list encompasses a motley crew of the long lost, the estranged, the hardly known, the passing acquaintance, the former flatmate, the ‘person I once worked with’, family members and best mates. This is, as the Trade Union Congress pointed out a few months ago, an accident waiting to happen . Put simply, the kind of information sometimes posted on Facebook, from drunken musings to workplace bitching, are not likely to endear you to your boss. It disturbs the work life balance.

Another aspect of the same problem is that there are friends and then there are friends. This post demonstrates the point quite well: “The trouble with Facebook is that it’s a confused social space. There are too many different facets of personality being exposed through social openness. So much so, in fact, that it gets a bit difficult to manage.”It also has some handy diagrams and suggestions on how to keep them separated. Not in a friendship-apartheid kindof way, just recognising that the social networks we inhabit are uneven and that flattening those out may not always be such a hot idea

Footballers and nurses

2007-10-10T10:55:00.000+02:00

I must admit to being pretty impressed by the efforts of Noreena Hertz, who once wrote a pretty useless book on globalisation, to convince Premier League footballers to donate a day’s pay to help nurses in financial hardship.

Unfortunately, the Royal College of Nursing is having trouble collecting the money from the footballers in question, who’s promises are proving about as reliable as government pledges of aid money: £200,000 has been collected, but that leaves £550,000 of outstanding promises yet to be collected.

Update: Not quite sure what to make of this quote, although my instinct isn’t really to feel sorry for Premiership footballers. “I am disgusted with the manner in which this campaign has gone about its fundraising. The players at this club support any number of local and national charities and good causes, either via financial support, giving up their own time or both. This is often done privately, meaning they neither receive nor ask for any public gratitude or praise. We invited Dr Hertz into the club to hear her appeal but we were already concerned by the way in which those who had not agreed to donate a day’s salary had been named and shamed in the national media. The campaign’s fundraising style has bordered on blackmail” - Gareth Southgate.