10 December 2014
Dirty deals flag need for climate finance rules
If you stick a dollar bill under a microscope it is full of dirt. It turns out something similar is true of climate finance - the billions of dollars developed countries pay to help developing countries cope with the effects of climate change and create cleaner energy systems, industry and cities.
Last week, the Associated Press (AP) broke a story that nearly $1 billion in loans earmarked by Japan as climate finance have been used to fund the construction of three coal-fired power plants in Indonesia. Burning coal is one of the most intensive ways to contribute to climate change.
Indonesian coal plants are not the only dirty deals masquerading as climate finance, an Institute for Policy Studies analysis can reveal.
As part of the same “fast start” financing examined by AP, the Japanese Bank for International Cooperation (JBIC, the country's export credit agency) gave a $600 million loan to Brazilian state oil company Petrobras.
Full article at trust.org
26 November 2014
Rich Countries Pony Up (Some) for Climate Justice
It’s one of the oldest tricks in politics: Talk down expectations to the point that you can meet them.
And it played out again in Berlin as 21 countries—including the United States—pledged nearly 9.5 billion dollars to the Green Climate Fund, a U.N. body tasked with helping developing countries cope with climate change and transition to clean energy systems.
Full article at Foreign Policy in Focus
And it played out again in Berlin as 21 countries—including the United States—pledged nearly 9.5 billion dollars to the Green Climate Fund, a U.N. body tasked with helping developing countries cope with climate change and transition to clean energy systems.
The
total—which will cover a four-year period before new pledges are
made—included three billion dollars from the United States, 1.5 dollars
billion from Japan, and around one billion dollars each from the United
Kingdom, France, and Germany.
That’s a big step in the right direction. But put into context, 9.5 billion dollars quickly sounds less impressive.
Full article at Foreign Policy in Focus
29 July 2014
Passing the bucks: the Green Climate Fund, country ownership and the role of international financial institutions
What role will international
financial institutions like the World Bank play in channelling the
resources of the UN’s Green Climate Fund? And what does that mean for
the concept of “country ownership”? This is the second of a series of
three blogs on critical issues facing the GCF. The first looked at how much money the fund is likely to contain and who is likely to provide it. The third in the series considers whether the fund is likely to support fossil fuels and other forms of “dirty energy”.
The Green Climate Fund is intended to be “country-owned and driven”, with national governments playing a key role in setting priorities and overseeing how funds are deployed. But the emerging structure is increasingly at odds with this commitment, and it looks increasingly likely that a majority of its funding would be channeled via international financial institutions (IFIs) rather than local and national ones. That’s a significant reversal for a fund that was conceived as an alternative to the current system, which is built around a mix of multilateral financing passed through the World Bank and other multilateral banks, and bilateral financing. The shift in favour of IFIs is a blow to attempts to take climate finance out of the hands of institutions that invest heavily in fossil fuels and other forms of ‘dirty energy’ (see more here). It also risks taking decision-making power away from the people most affected by climate change.
In part, the turn to IFIs reflects ambiguities in the definition of “country ownership”, a concept borrowed from the development aid field. According to the 2011 Busan Partnership for Effective Development Cooperation, developing countries should be responsible for defining their own development model, with approaches “tailored to country-specific situations and needs”, and national institutions playing a leading role. The World Bank has adopted a similar-sounding definition, claiming that “Country ownership means that there is sufficient political support within a country to implement its developmental strategy, including the projects, programs, and policies for which external partners provide assistance.” In practice, though, there are key differences between a process that allows national actors to define their needs, with resources channeled directly via accountable national institutions, and “external partners” assisting in the creation, and shaping of, a strategy, which is then sold to the recipient country after the fact.
The GCF Governing Instrument, a constitution-like document that sets out principles for how it will operate, veers towards the stronger definition of country ownership. It states that GCF financing should be consistent with national climate strategies, and support the creation of such strategies where none exist, and suggests that a “national designated authority” (NDA), typically an environment ministry, should be a key channel for advancing proposals and ensuring consistency with such strategies. Beyond this, recipient countries should be able to nominate institutions that can directly access GCF financing, including those at sub-national and national levels.
The primacy of national institutions has been chipped away by successive decisions of the GCF Board, however. In June 2013, the insistence on countries appointing an NDA was relaxed, and it was decided that a “focal point” (often just a single person) would suffice. This option has been the springboard for arguments that the role assumed by the NDA or focal point should be minimal, restricted to little more than providing written consent that a country does not object to a particular project or program taking place within its territory.
The importance of a national approval process – dubbed a “no-objection” procedure – has also been watered down as over time. When the GCF was formally established at the UN Climate Change Conference in Durban in December 2012, the creation of a no-objection procedure was set out as a per-requisite for financing to commence. In October 2013, a proposal was tabled to establish such a procedure, which would give NDAs or focal points a key role in appointing and approving “implementing entities and intermediaries” through which funding would pass, and making formal written approval a condition for GCF financing. This approval should also have contained confirmation that “appropriate consultation processes” had taken place. But no agreement was reached, mainly due to concerns raised by the USA that it would be too time-consuming.
Subsequent iterations have proposed only a “tacit approval” process, with consent assumed after a period of as little as three weeks if no objection is raised, but the final decision will not be taken before October 2014. A possible compromise suggests that countries could choose a “tacit” procedure if they prefer. As with the designation of “focal points,” this is sold in part as providing countries with maximum flexibility – but in order to allow for this, the overall importance of the procedure is diminished.
In place of national governments, other intermediaries are gearing up to take an increasingly central role. The Governing Instrument mentions “financial intermediaries” just once, in the context of local actors supporting private sector activities. But the funding structure agreed in Songdo gives intermediaries a central role. In the “initial” phases of the GCF, at least, financing will pass through “implementing entities”(which could be national bodies or UN agencies) that can provide grant-support, and “intermediaries” that can provide concessional loans and, potentially, other financial instruments if (as many Board members, and the Fund’s Private Sector Advisory Group, advocate) those are subsequently approved. Beyond this, intermediaries will be allowed to “blend” financing with their own resources – a means that institutions like the IFC have used to combine concessional funds with their own non-concessional lending products.
Two issues dominated the debate on intermediaries at the GCF’s Songdo Board meeting. Significant concerns were raised (by the Board member for Zambia, amongst others) that the proposed bar for accrediting as an intermediary was being set so high that only IFIs (and commercial banks) would be able to qualify. This concern was recognized, to some extent, in the final decision in Songdo, which calls for an approach that would more closely tailor the financial management capabilities of the intermediary with the scope and complexity of the onward lending they would engage in.
Second, there was controversy over a proposed “fast track” procedure for accreditation, which the USA suggested should be extended to Equator Principles banks, a grouping of 79 commercial banks. Signatories to this voluntary code, which is based on IFC standards, include Bank of America, Citigroup and many of the world’s largest fossil fuel financiers, a number of which have backed projects with well-documented human rights abuses. The “fast tracking” of Equator Principles banks was blocked in Songdo, but their potential to be a major channel for GCF financing remains.
Some key questions in the design of the GCF remain to be addressed at the next meeting of its board – notably, the extent to which grants will be used compared to concessional lending, the financial terms on which these will be offered, and whether other financial instruments will be brought into the mix. Much also depends on how the sometimes-vague Board agreements are applied in practice – including how generously the “fit-for-purpose” rules on accrediting “implementing entities and intermediaries” will be interpreted, which should shape how accessible financing is to national governments and specialist agencies, regional and city governments. A narrow application could favor IFIs – but the emerging pipeline of intermediaries seeking accreditation and potential projects is also likely to see the GCF channeling funds via bilateral institutions like the UK’s Green Investment Bank, national development banks like BNDES (the Brazilian Development Bank) and second-tier regional institutions regional institutions such as the West African Development Bank.
The Green Climate Fund is intended to be “country-owned and driven”, with national governments playing a key role in setting priorities and overseeing how funds are deployed. But the emerging structure is increasingly at odds with this commitment, and it looks increasingly likely that a majority of its funding would be channeled via international financial institutions (IFIs) rather than local and national ones. That’s a significant reversal for a fund that was conceived as an alternative to the current system, which is built around a mix of multilateral financing passed through the World Bank and other multilateral banks, and bilateral financing. The shift in favour of IFIs is a blow to attempts to take climate finance out of the hands of institutions that invest heavily in fossil fuels and other forms of ‘dirty energy’ (see more here). It also risks taking decision-making power away from the people most affected by climate change.
In part, the turn to IFIs reflects ambiguities in the definition of “country ownership”, a concept borrowed from the development aid field. According to the 2011 Busan Partnership for Effective Development Cooperation, developing countries should be responsible for defining their own development model, with approaches “tailored to country-specific situations and needs”, and national institutions playing a leading role. The World Bank has adopted a similar-sounding definition, claiming that “Country ownership means that there is sufficient political support within a country to implement its developmental strategy, including the projects, programs, and policies for which external partners provide assistance.” In practice, though, there are key differences between a process that allows national actors to define their needs, with resources channeled directly via accountable national institutions, and “external partners” assisting in the creation, and shaping of, a strategy, which is then sold to the recipient country after the fact.
The GCF Governing Instrument, a constitution-like document that sets out principles for how it will operate, veers towards the stronger definition of country ownership. It states that GCF financing should be consistent with national climate strategies, and support the creation of such strategies where none exist, and suggests that a “national designated authority” (NDA), typically an environment ministry, should be a key channel for advancing proposals and ensuring consistency with such strategies. Beyond this, recipient countries should be able to nominate institutions that can directly access GCF financing, including those at sub-national and national levels.
The primacy of national institutions has been chipped away by successive decisions of the GCF Board, however. In June 2013, the insistence on countries appointing an NDA was relaxed, and it was decided that a “focal point” (often just a single person) would suffice. This option has been the springboard for arguments that the role assumed by the NDA or focal point should be minimal, restricted to little more than providing written consent that a country does not object to a particular project or program taking place within its territory.
The importance of a national approval process – dubbed a “no-objection” procedure – has also been watered down as over time. When the GCF was formally established at the UN Climate Change Conference in Durban in December 2012, the creation of a no-objection procedure was set out as a per-requisite for financing to commence. In October 2013, a proposal was tabled to establish such a procedure, which would give NDAs or focal points a key role in appointing and approving “implementing entities and intermediaries” through which funding would pass, and making formal written approval a condition for GCF financing. This approval should also have contained confirmation that “appropriate consultation processes” had taken place. But no agreement was reached, mainly due to concerns raised by the USA that it would be too time-consuming.
Subsequent iterations have proposed only a “tacit approval” process, with consent assumed after a period of as little as three weeks if no objection is raised, but the final decision will not be taken before October 2014. A possible compromise suggests that countries could choose a “tacit” procedure if they prefer. As with the designation of “focal points,” this is sold in part as providing countries with maximum flexibility – but in order to allow for this, the overall importance of the procedure is diminished.
In place of national governments, other intermediaries are gearing up to take an increasingly central role. The Governing Instrument mentions “financial intermediaries” just once, in the context of local actors supporting private sector activities. But the funding structure agreed in Songdo gives intermediaries a central role. In the “initial” phases of the GCF, at least, financing will pass through “implementing entities”(which could be national bodies or UN agencies) that can provide grant-support, and “intermediaries” that can provide concessional loans and, potentially, other financial instruments if (as many Board members, and the Fund’s Private Sector Advisory Group, advocate) those are subsequently approved. Beyond this, intermediaries will be allowed to “blend” financing with their own resources – a means that institutions like the IFC have used to combine concessional funds with their own non-concessional lending products.
Two issues dominated the debate on intermediaries at the GCF’s Songdo Board meeting. Significant concerns were raised (by the Board member for Zambia, amongst others) that the proposed bar for accrediting as an intermediary was being set so high that only IFIs (and commercial banks) would be able to qualify. This concern was recognized, to some extent, in the final decision in Songdo, which calls for an approach that would more closely tailor the financial management capabilities of the intermediary with the scope and complexity of the onward lending they would engage in.
Second, there was controversy over a proposed “fast track” procedure for accreditation, which the USA suggested should be extended to Equator Principles banks, a grouping of 79 commercial banks. Signatories to this voluntary code, which is based on IFC standards, include Bank of America, Citigroup and many of the world’s largest fossil fuel financiers, a number of which have backed projects with well-documented human rights abuses. The “fast tracking” of Equator Principles banks was blocked in Songdo, but their potential to be a major channel for GCF financing remains.
Some key questions in the design of the GCF remain to be addressed at the next meeting of its board – notably, the extent to which grants will be used compared to concessional lending, the financial terms on which these will be offered, and whether other financial instruments will be brought into the mix. Much also depends on how the sometimes-vague Board agreements are applied in practice – including how generously the “fit-for-purpose” rules on accrediting “implementing entities and intermediaries” will be interpreted, which should shape how accessible financing is to national governments and specialist agencies, regional and city governments. A narrow application could favor IFIs – but the emerging pipeline of intermediaries seeking accreditation and potential projects is also likely to see the GCF channeling funds via bilateral institutions like the UK’s Green Investment Bank, national development banks like BNDES (the Brazilian Development Bank) and second-tier regional institutions regional institutions such as the West African Development Bank.
21 April 2014
IPCC on mitigation: A roadmap to survival
Greenhouse gas emissions are rising, and our addiction to fossil fuels is to blame.
That, in a nutshell, is the conclusion of an authoritative new UN report published on April 13th. Emissions have not only continued to increase, but have done so more rapidly in the last 10 years. While the growing reliance on coal for global energy supplies is chiefly to blame for the latest increase, the broader picture is that “economic growth has outpaced emissions reductions.”
(Full article on IPCC report, written for Foreign Policy in Focus, continues here )
That, in a nutshell, is the conclusion of an authoritative new UN report published on April 13th. Emissions have not only continued to increase, but have done so more rapidly in the last 10 years. While the growing reliance on coal for global energy supplies is chiefly to blame for the latest increase, the broader picture is that “economic growth has outpaced emissions reductions.”
(Full article on IPCC report, written for Foreign Policy in Focus, continues here )
EU climate plans lack ambition... what could be done instead of carbon trading?
Followers of climate change policy are used to getting their
disappointment early. With the launch of the EU’s 2030 climate and
energy plan, the European Commission offered several years’ worth of
let-downs in one handy package. This article for Red Pepper magazine parses the European Commission's 2030 climate policy proposals.
In far greater depth, this report on Life Beyond Emissions Trading, written for Corporate Europe Observatory, looks at what would fill the void if the EU ETS were allowed to collapse.
In far greater depth, this report on Life Beyond Emissions Trading, written for Corporate Europe Observatory, looks at what would fill the void if the EU ETS were allowed to collapse.
Recent articles on the UN’s Green Climate Fund
In advance of its Bali Board meeting in February, I published a summary of 7 things to look out for in the UN's Green Climate Fund. The issues in question are: Is the GCF a Fund or a Bank? Will the GCF fund fossil fuel infrastructure? Whatever happened to the promise of civil society participation? Will the GCF balance mitigation and adaptation? What protection will GCF environmental and social safeguards offer? What are “intermediaries” and why does their role keep expanding? How concessional will GCF concessional lending be?
Just one of those questions was answered in Bali, where progress was made on committing the Fund to financing a greater proportion of adaptation than is typical of most climate financing. This article, co-authored by Robert Muthami from the Pan African Climate Justice Alliance, examines the latest decisions taken about the fate of the GCF.
My IPS colleague Janet Redman and I explored the question of the Fund's potential fossil fuel lending in this article for Foreign Policy in Focus.
18 July 2013
Songdo Fallout: Is Green Finance a Red Herring?
With the latest Green Climate Fund talks in Songdo,
wealthy countries have taken another step toward financializing the
world's response to climate change.
Songdo, in short, is a monoculture plantation of skyscrapers, shorn of the diverse ecosystem that characterizes living cities. And the G-Tower is the symbol that tops the lot: a skyscraper with a Pac-Man-like cutaway, as though the institution is running from the ghosts of the World Bank and other multilateral development banks. Like the Fund itself—a centerpiece of the international climate finance regime, designed to fund climate mitigation projects in the developing world—it is currently empty.
A few streets away from the G-Tower, Songdo’s convention center recently played host to the fourth meeting of the GCF’s governing board. There, the GFC’s 24 board members (government officials selected on a regional basis) made several key decisions. These include how the Fund will be managed (should money ever arrive), by whom, and according to what rules.
...
The key structural decisions taken in Songdo concerned the GCF’s Private Sector Facility (PSF), which was created to encourage private investment in projects that reduce both the causes of climate change (by mitigating greenhouse gases) and its impacts (by adapting to a warmer world). These decisions walked a diplomatic tightrope—advancing the creation of the institution while carefully avoiding debates over which private sector the Fund is actually meant to target.
On one side, the developed countries represented on the GCF board advocate a PSF that appeals to capital markets, in particular the pension funds and other institutional investors that control trillions of dollars that pass through Wall Street and other financial centers. They hope that the Fund will ultimately use a broad range of financial instruments.
There is a troubling circular logic underlying this, however. The complex repackaging of debt to hide systemic risk was a key contributor to the financial crisis in developed countries, resulting in huge bailouts that increased their indebtedness. As a result, many developed countries now claim that they have little money available for climate finance, and that the GCF should look to financial markets to make up this shortfall.
On the other side, many developing countries and non-governmental organizations have suggested that the PSF should focus on “pro-poor climate finance” that addresses the difficulties faced by micro-, small-, and medium-sized enterprises in developing countries. This emphasis on encouraging the domestic private sector is also written into the GCF’s Governing Instrument, its founding document.
The purpose of the PSF remained unresolved in Songdo, but many of the rules needed to start its operations were agreed upon. A major dividing line related to whether or not the PSF would have its own “governance structure.” This was opposed by many developing countries amidst concerns that it would give the private sector the largest voice in determining how this part of the Fund is run—potentially opening the door to both generous corporate subsidies and excessive financial risk-taking.
Continue reading at Foreign Policy in Focus
Background: What is the Green Climate Fund?
16 July 2013
Climate markets
At the Institute for Policy Studies, we've set up a new website on Climate Finance and Markets (climatemarkets.org) to help climate activists and advocates understand financial markets, as well as monitoring the Wall Street-friendly solutions currently being dreamed up by the World Bank, the Green Climate Fund and others.
The site offers a range of materials, including a glossary and a Reader, looking at the new financial tools that are emerging, the role of key private sector actors (from banks to private equity funds), attempts to “leverage” private investment, and alternatives to this Wall Street-driven approach.
Climate Change PLC
This article was written for the Morning Star as part of the launch of WDM's Carbon Capital campaign
From offshore drilling to gas fracking, it's boom time for fossil fuels - and the City of London is at the heart of it.
Oil exploration and production requires huge reserves of cash, which first comes from selling shares and bank lending.
The London Stock Exchange provides a platform to channel investors' money, much of it from ordinary people's pension funds and insurance policies, to fossil fuel companies.
Shell and BP are the largest and third-largest companies in the FTSE 100, but they are far from alone.
Almost a fifth of the index is made up of companies directly involved in extracting oil, gas or coal, while another fifth of the FTSE 100 consists of financial services companies investing in these activities.
London is also one of the world's main banking hubs, hosting the global headquarters of HSBC and Barclays, and the European, Middle Eastern and African operations of every leading US investment bank. Between them they lend billions every year to fund new extraction projects.
The City of London and Canary Wharf also play host to an enormous supporting cast of financial analysts, ratings agencies, corporate lawyers and accountants.
And if things go wrong, Lloyd's of London is the world's biggest insurance market, covering everything from oil leaks to the "political risk" that extractive projects may face civil disturbances or state repatriation.
To see how this plays out let's take the example of Tullow Oil, a small company by the standards of the oil industry, but still the 40th-largest player on the FTSE 100.
Fans of Sunderland football club might know it via Invest in Africa, a Tullow-run front charity that sponsors their shirts.
But Tullow is only really a household name in Ghana, where the company's offshore discoveries turned oil into the number one issue in recent elections.
As the history of nearby Nigeria's "oil curse" shows, it's mainly foreign corporations, politicians and security firms who strike it rich when oil is discovered, while poor people remain poor.
Production in Ghana began in 2010, and the early signs don't look good. Against a backdrop of inadequate environmental regulations, flaring - burning off toxic waste gases - is already widespread.
Tullow gets its funding from a mix of equity - selling shares to raise funds - debt and sales revenues.
The vast majority of its shares are held by "institutional investors." The largest of these is BlackRock, whose 11 per cent stake in the company is distributed across a dozen or more of its funds, which manage money for anyone from large insurance companies to rich individuals.
Pension firms including Prudential, Legal & General and Scottish Equitable are also major shareholders.
The combined value of Tullow's shares, currently over £7 billion, is mostly based on the company's estimates of how much oil it can extract from drilling sites including Ghana, Uganda and Kenya.
While some of the biggest corporations issue bonds - large "I-owe-you" slips - Tullow is typical of companies its size in agreeing a loan package with a syndicate of lenders.
Last year it set the seal on a deal with 27 major banks, including RBS and Lloyds TSB - in which the British government owns significant stakes - and the World Bank's International Finance Corporation (IFC), allowing it to borrow over £2.2bn until 2019.
Revenue from oil sales translates into large profits - £445 million post-tax in 2011 - which are paid out to shareholders and reinvested in further exploration and production. The oil is mostly sold as futures ahead of actually being extracted, with Tullow using London's network of brokers and commodity traders to find buyers, many of whom will use it as the basis for financial speculation.
A whole host of Tullow's support services can be traced back to London's financial services industry too.
City law firm Ashurst is helping the firm to sue the Ugandan government for a £250m tax claim.
Several City insurance firms limit Tullow's liabilities in case of oil spills. Investment banks, including Barclays, and specialists structure "mergers and acquisitions" that free up cash for new exploration.
The City of London is a financial services hub that helps fossil fuel companies to maximise profits and minimise accountability.
Shareholder activism can shine a spotlight on abuses, like the recent protests at GCM Resources over its controversial coal mine planned in Bangladesh.
But companies won't really change unless the rules governing them change, which means we need to push the British government and the EU to alter course.
Even small measures could help, such as "publish what you pay" rules to force extractive industries on the London Stock Exchange to disclose their payments to foreign governments.
This could help campaigners in the global south to track unfair deals and government kickbacks.
Britain could set an example by using its board positions at the European Investment Bank, IFC, RBS and Lloyds TSB to force through cleaner lending policies.
It could help create an international tribunal that holds firms and their executives accountable for any environmental and human rights abuses they commit.
It could even take a lead in pushing the European Union to decarbonise electricity supplies and transport.
As a first step, the World Development Movement is demanding that the government force banks, pension funds and other finance companies to come clean on the impact of the dirty energy projects they finance.
New regulation coming into force later this year will mean these businesses will have to disclose the carbon footprint of the lightbulbs in their London offices, but they won't have to report on the carbon emissions from the coal and oil projects they finance around the world.
The government must be put under pressure to start holding the finance sector to account and to make banks disclose the carbon footprint of their investments.
From offshore drilling to gas fracking, it's boom time for fossil fuels - and the City of London is at the heart of it.
Oil exploration and production requires huge reserves of cash, which first comes from selling shares and bank lending.
The London Stock Exchange provides a platform to channel investors' money, much of it from ordinary people's pension funds and insurance policies, to fossil fuel companies.
Shell and BP are the largest and third-largest companies in the FTSE 100, but they are far from alone.
Almost a fifth of the index is made up of companies directly involved in extracting oil, gas or coal, while another fifth of the FTSE 100 consists of financial services companies investing in these activities.
London is also one of the world's main banking hubs, hosting the global headquarters of HSBC and Barclays, and the European, Middle Eastern and African operations of every leading US investment bank. Between them they lend billions every year to fund new extraction projects.
The City of London and Canary Wharf also play host to an enormous supporting cast of financial analysts, ratings agencies, corporate lawyers and accountants.
And if things go wrong, Lloyd's of London is the world's biggest insurance market, covering everything from oil leaks to the "political risk" that extractive projects may face civil disturbances or state repatriation.
To see how this plays out let's take the example of Tullow Oil, a small company by the standards of the oil industry, but still the 40th-largest player on the FTSE 100.
Fans of Sunderland football club might know it via Invest in Africa, a Tullow-run front charity that sponsors their shirts.
But Tullow is only really a household name in Ghana, where the company's offshore discoveries turned oil into the number one issue in recent elections.
As the history of nearby Nigeria's "oil curse" shows, it's mainly foreign corporations, politicians and security firms who strike it rich when oil is discovered, while poor people remain poor.
Production in Ghana began in 2010, and the early signs don't look good. Against a backdrop of inadequate environmental regulations, flaring - burning off toxic waste gases - is already widespread.
Tullow gets its funding from a mix of equity - selling shares to raise funds - debt and sales revenues.
The vast majority of its shares are held by "institutional investors." The largest of these is BlackRock, whose 11 per cent stake in the company is distributed across a dozen or more of its funds, which manage money for anyone from large insurance companies to rich individuals.
Pension firms including Prudential, Legal & General and Scottish Equitable are also major shareholders.
The combined value of Tullow's shares, currently over £7 billion, is mostly based on the company's estimates of how much oil it can extract from drilling sites including Ghana, Uganda and Kenya.
While some of the biggest corporations issue bonds - large "I-owe-you" slips - Tullow is typical of companies its size in agreeing a loan package with a syndicate of lenders.
Last year it set the seal on a deal with 27 major banks, including RBS and Lloyds TSB - in which the British government owns significant stakes - and the World Bank's International Finance Corporation (IFC), allowing it to borrow over £2.2bn until 2019.
Revenue from oil sales translates into large profits - £445 million post-tax in 2011 - which are paid out to shareholders and reinvested in further exploration and production. The oil is mostly sold as futures ahead of actually being extracted, with Tullow using London's network of brokers and commodity traders to find buyers, many of whom will use it as the basis for financial speculation.
A whole host of Tullow's support services can be traced back to London's financial services industry too.
City law firm Ashurst is helping the firm to sue the Ugandan government for a £250m tax claim.
Several City insurance firms limit Tullow's liabilities in case of oil spills. Investment banks, including Barclays, and specialists structure "mergers and acquisitions" that free up cash for new exploration.
The City of London is a financial services hub that helps fossil fuel companies to maximise profits and minimise accountability.
Shareholder activism can shine a spotlight on abuses, like the recent protests at GCM Resources over its controversial coal mine planned in Bangladesh.
But companies won't really change unless the rules governing them change, which means we need to push the British government and the EU to alter course.
Even small measures could help, such as "publish what you pay" rules to force extractive industries on the London Stock Exchange to disclose their payments to foreign governments.
This could help campaigners in the global south to track unfair deals and government kickbacks.
Britain could set an example by using its board positions at the European Investment Bank, IFC, RBS and Lloyds TSB to force through cleaner lending policies.
It could help create an international tribunal that holds firms and their executives accountable for any environmental and human rights abuses they commit.
It could even take a lead in pushing the European Union to decarbonise electricity supplies and transport.
As a first step, the World Development Movement is demanding that the government force banks, pension funds and other finance companies to come clean on the impact of the dirty energy projects they finance.
New regulation coming into force later this year will mean these businesses will have to disclose the carbon footprint of the lightbulbs in their London offices, but they won't have to report on the carbon emissions from the coal and oil projects they finance around the world.
The government must be put under pressure to start holding the finance sector to account and to make banks disclose the carbon footprint of their investments.
City of London and Climate Change
I've written a new booklet for the World Development Movement looking at how the City of
London organises the fossil fuel investments for destructive fossil
fuel projects that are leading to runaway climate change, and asks
what we can do to stop it. Its aim is to inform campaigners and equip
them to take action. You can find it online by clicking here.
20 April 2013
New climate policy course needed as EU carbon trading flagship sinks
The European Union’s Emissions Trading System (ETS) is the world’s
largest carbon market, and the model for similar schemes in California
and worldwide. But it has hit the rocks and should be replaced, writes
Oscar Reyes.
The Emissions Trading System (ETS) is the European Union’s flagship climate policy and it is sinking fast.
The stated aim behind the ill-fated “cap and trade” scheme was to set an overall legal limit on greenhouse gas emissions (a “cap”) and then grant industries a certain number of licenses to pollute (“emissions allowances”). Companies that do not meet their cap can buy permits from others that have a surplus (“a trade”). The idea is that a scarcity of permits to pollute should encourage their price to rise; and the resulting additional cost to industry and power producers should then encourage them to pollute less.
But for seven of the eight years in which the EU ETS has been in operation, the number of allowances circulating has exceeded the “cap” – a result of corporate lobbying, large offset allowances that allow companies to buy cheaper emissions credits from beyond the EU, and the effects of the economic downturn. As a result, the carbon price has collapsed. Today, it reached record lows of €2.62 (compared with highs of around €32).
The latest collapse follows a European Commission proposal to re-float the scheme involved delaying (“backloading”) planned auctions of carbon allowances, making them temporarily more scarce in order to sure up carbon prices in the short term. The European Parliament rejected this, with center-right Members of the European Parliament (MEPs) from across the continent voting against the measure. Their stated aim was to avoid market “intervention,” but their scarcely concealed intent was to give European industry a free ride from climate obligations.
Conservatives are not alone in their objections. Increasing numbers of non-governmental organizations, and some left-of-center MEPs are also calling for the ETS to be scrapped. “The vote on backloading is the wrong debate,” according to Hannah Mowat from FERN, an NGO specialized in forest policy. “No amount of structural tinkering will get away from the fact that the EU has chosen the wrong tool to reduce emissions in Europe. It is inherently too weak to get the EU to where it needs to be in the necessary timescale.” In short, it’s no use reaching for some buckets when we should be heading for the lifeboats.
These criticisms face particular opprobrium from those who believe that the only realistic course is to “save” the ETS. Opponents are treated as “useful idiots” playing right into the hands of those opposed to any climate legislation. But eight years on, and several reforms later, the ETS is still failing to reduce emissions, and at the same time has even rewarded polluters with large subsidies. Why should we expect different results from doing the same thing over and over again?
Saying “no” to the ETS is not the end of the story. It’s simply a way of refusing a forced choice, rejecting the terms of a debate that falls between rejecting legislation to address climate change and pursuing a policy that has been shown to achieve nothing. In Europe, we’ve already seen how “protecting” emissions trading has been used as an excuse to water down energy efficiency policies, which would be far more effective in reducing emissions. Emissions trading also contradicts policies like feed-in tariffs which, when applied correctly, create far better price incentives to stimulate the uptake of renewable energy.
Scrapping the ETS does not mean that climate policy will fall into a vacuum. Energy policy is largely controlled by EU member states rather than the Commission itself, and there are important lessons to be shared at a national level. Germany’s Energy Transition (Energiewende) has seen the share of renewable energy rise from 6 to 25 per cent over 10 years, with the biggest shifts driven by community and local investment rather than the energy multinationals. This has not been driven by the ETS, but rather by a guarantee that renewables will gain access to electricity grids, providing certainty for investors.
At the EU level, the Commission should re-focus on securing more ambitious climate targets now that “backloading” is dead in the water. Removing the ability to circumvent domestic action by buying carbon offsets would help considerably with that goal.
There are significant lessons, too, for other states that are considering emissions trading. Attempts to patch up the ETS ignore the schemes more fundamental failings. These start with the very notion of abstracting “carbon” as a tradablecommodity, which frames climate change as a problem of cost adjustments that can be managed by a market that is assumed to allocate goods efficiently, rather than as a historically embedded problem of the dominant fossil fuel-based development model.
Ultimately, the EU and other industrialized countries need to massively reduce its overall consumption of energy, including its outsourced emissions, which have continued to rise irrespective of emissions trading. This doesn’t require “flagship” emissions trading schemes, but rather a sea-change in our thinking about how policymakers can help to address climate change.
A version of this article was first published by the EU Observer.
The Emissions Trading System (ETS) is the European Union’s flagship climate policy and it is sinking fast.
The stated aim behind the ill-fated “cap and trade” scheme was to set an overall legal limit on greenhouse gas emissions (a “cap”) and then grant industries a certain number of licenses to pollute (“emissions allowances”). Companies that do not meet their cap can buy permits from others that have a surplus (“a trade”). The idea is that a scarcity of permits to pollute should encourage their price to rise; and the resulting additional cost to industry and power producers should then encourage them to pollute less.
But for seven of the eight years in which the EU ETS has been in operation, the number of allowances circulating has exceeded the “cap” – a result of corporate lobbying, large offset allowances that allow companies to buy cheaper emissions credits from beyond the EU, and the effects of the economic downturn. As a result, the carbon price has collapsed. Today, it reached record lows of €2.62 (compared with highs of around €32).
The latest collapse follows a European Commission proposal to re-float the scheme involved delaying (“backloading”) planned auctions of carbon allowances, making them temporarily more scarce in order to sure up carbon prices in the short term. The European Parliament rejected this, with center-right Members of the European Parliament (MEPs) from across the continent voting against the measure. Their stated aim was to avoid market “intervention,” but their scarcely concealed intent was to give European industry a free ride from climate obligations.
Conservatives are not alone in their objections. Increasing numbers of non-governmental organizations, and some left-of-center MEPs are also calling for the ETS to be scrapped. “The vote on backloading is the wrong debate,” according to Hannah Mowat from FERN, an NGO specialized in forest policy. “No amount of structural tinkering will get away from the fact that the EU has chosen the wrong tool to reduce emissions in Europe. It is inherently too weak to get the EU to where it needs to be in the necessary timescale.” In short, it’s no use reaching for some buckets when we should be heading for the lifeboats.
These criticisms face particular opprobrium from those who believe that the only realistic course is to “save” the ETS. Opponents are treated as “useful idiots” playing right into the hands of those opposed to any climate legislation. But eight years on, and several reforms later, the ETS is still failing to reduce emissions, and at the same time has even rewarded polluters with large subsidies. Why should we expect different results from doing the same thing over and over again?
Saying “no” to the ETS is not the end of the story. It’s simply a way of refusing a forced choice, rejecting the terms of a debate that falls between rejecting legislation to address climate change and pursuing a policy that has been shown to achieve nothing. In Europe, we’ve already seen how “protecting” emissions trading has been used as an excuse to water down energy efficiency policies, which would be far more effective in reducing emissions. Emissions trading also contradicts policies like feed-in tariffs which, when applied correctly, create far better price incentives to stimulate the uptake of renewable energy.
Scrapping the ETS does not mean that climate policy will fall into a vacuum. Energy policy is largely controlled by EU member states rather than the Commission itself, and there are important lessons to be shared at a national level. Germany’s Energy Transition (Energiewende) has seen the share of renewable energy rise from 6 to 25 per cent over 10 years, with the biggest shifts driven by community and local investment rather than the energy multinationals. This has not been driven by the ETS, but rather by a guarantee that renewables will gain access to electricity grids, providing certainty for investors.
At the EU level, the Commission should re-focus on securing more ambitious climate targets now that “backloading” is dead in the water. Removing the ability to circumvent domestic action by buying carbon offsets would help considerably with that goal.
There are significant lessons, too, for other states that are considering emissions trading. Attempts to patch up the ETS ignore the schemes more fundamental failings. These start with the very notion of abstracting “carbon” as a tradablecommodity, which frames climate change as a problem of cost adjustments that can be managed by a market that is assumed to allocate goods efficiently, rather than as a historically embedded problem of the dominant fossil fuel-based development model.
Ultimately, the EU and other industrialized countries need to massively reduce its overall consumption of energy, including its outsourced emissions, which have continued to rise irrespective of emissions trading. This doesn’t require “flagship” emissions trading schemes, but rather a sea-change in our thinking about how policymakers can help to address climate change.
A version of this article was first published by the EU Observer.
12 April 2013
What's the private sector up to on "climate finance" and what are the issues with that?
Climate policymakers are now exploring ways to encourage private sector finance for climate action in developing countries, i.e. investment in projects to reduce greenhouse gas emissions and build capacity to adapt to climate change impacts.
Here's a paper I wrote for the UK Bond Development and Environment Group on these issues. It examines the evidence from existing channelling of development and climate finance via private sector instruments to identify the probable risks and benefits of such approaches. The particular aim of this paper is to stimulate debate within the UK context.
Download here or here.
Here's a paper I wrote for the UK Bond Development and Environment Group on these issues. It examines the evidence from existing channelling of development and climate finance via private sector instruments to identify the probable risks and benefits of such approaches. The particular aim of this paper is to stimulate debate within the UK context.
Download here or here.
23 November 2012
What Next: Climate, Development and Equity
A copy of this arrived in my post box yesterday.
It can arrive in yours too if you contact info [at] whatnext.org, or request via the website of the Dag Hammerskjold Foundation.
That site also offers a free download, as does the What Next Forum.
I've contributed a chapter on carbon trading, which surveys the latest in the EU Emissions Trading System and the (near-)collapse of the Clean Development Mechanism, as well as explaining how carbon is actually traded.
There are many excellent chapters. I'm still working my way through, but Kevin Anderson's chapter (based on a talk that you can listen to and watch a slideshow of here), and Dale Wen's article on China.
Full contents are:
Foreword John Vidal
Introduction Niclas Hällström
Part I » Setting the Context – Climate, Development and Equity Challenges
Climate change going beyond dangerous – Brutal numbers and tenuous hope
Kevin Anderson............................................................................... 16
Climate debt – A primer
Matthew Stilwell.............................................................................. 41
The North-South divide, equity and development – The need for trust-building for emergency mobilisation
Sivan Kartha, Tom Athanasiou and Paul Baer.................................... 47
Part II » The Climate Negotiations
A clash of paradigms – UN climate negotiations at a crossroads
Martin Khor ...................................................................................76
Why Bolivia stood alone in opposing the Cancun climate agreement
Pablo Solón................................................................................... 106
‘The Great Escape III’
Pablo Solón................................................................................... 108
What happened in Durban?......................................................... 110
Weak ambitions and loopholes.....................................................115
India and Africa at COP 17 – The false dichotomy of ‘survival vs.development’
Sivan Kartha...................................................................................118
Climate finance – How much is needed?
Matthew Stilwell............................................................................ 120
China and climate change – Spin, facts and realpolitik
Dale Jiajun Wen............................................................................. 125
Climate change, equity and development – India’s dilemmas
Praful Bidwai................................................................................. 147
Part III » What Next? – On Real and False Solutions
Climate as investment – Dead and living solutions
Larry Lohmann............................................................................. 164
What goes up must come down – Carbon trading, industrial subsidies and capital market governance
Oscar Reyes...................................................................................185
Darken the sky and whiten the earth – The dangers of geoengineering
ETC Group – Pat Mooney, Kathy Jo Wetter and Diana Bronson....... 210
Ecological agriculture, climate resilience and adaptation – A roadmap
Doreen Stabinsky and Lim Li Ching.............................................. 238
A global programme to tackle energy access and climate change
Tariq Banuri and Niclas Hällström................................................. 264
Reclaiming power – An energy model for people and the planet
Pascoe Sabido and Niclas Hällström............................................... 280
Part IV » Movement Towards Change
Beyond patzers and clients – Strategic reflections on climate change and the 'Green Economy'
Larry Lohmann............................................................................. 295
Civil society strategies and the Stockholm syndrome
Pat[zer] Mooney............................................................................ 327
Leaving the oil in the soil – Communities connecting to resist oil extraction and climate change
Nnimmo Bassey............................................................................. 332
Riding the wave – How Transition Towns are changing the world and having fun
Teresa Anderson............................................................................. 340
Contributors................................................................................. 348
Glossary....................................................................................... 352
It can arrive in yours too if you contact info [at] whatnext.org, or request via the website of the Dag Hammerskjold Foundation.
That site also offers a free download, as does the What Next Forum.
I've contributed a chapter on carbon trading, which surveys the latest in the EU Emissions Trading System and the (near-)collapse of the Clean Development Mechanism, as well as explaining how carbon is actually traded.
There are many excellent chapters. I'm still working my way through, but Kevin Anderson's chapter (based on a talk that you can listen to and watch a slideshow of here), and Dale Wen's article on China.
Full contents are:
Foreword John Vidal
Introduction Niclas Hällström
Part I » Setting the Context – Climate, Development and Equity Challenges
Climate change going beyond dangerous – Brutal numbers and tenuous hope
Kevin Anderson............................................................................... 16
Climate debt – A primer
Matthew Stilwell.............................................................................. 41
The North-South divide, equity and development – The need for trust-building for emergency mobilisation
Sivan Kartha, Tom Athanasiou and Paul Baer.................................... 47
Part II » The Climate Negotiations
A clash of paradigms – UN climate negotiations at a crossroads
Martin Khor ...................................................................................76
Why Bolivia stood alone in opposing the Cancun climate agreement
Pablo Solón................................................................................... 106
‘The Great Escape III’
Pablo Solón................................................................................... 108
What happened in Durban?......................................................... 110
Weak ambitions and loopholes.....................................................115
India and Africa at COP 17 – The false dichotomy of ‘survival vs.development’
Sivan Kartha...................................................................................118
Climate finance – How much is needed?
Matthew Stilwell............................................................................ 120
China and climate change – Spin, facts and realpolitik
Dale Jiajun Wen............................................................................. 125
Climate change, equity and development – India’s dilemmas
Praful Bidwai................................................................................. 147
Part III » What Next? – On Real and False Solutions
Climate as investment – Dead and living solutions
Larry Lohmann............................................................................. 164
What goes up must come down – Carbon trading, industrial subsidies and capital market governance
Oscar Reyes...................................................................................185
Darken the sky and whiten the earth – The dangers of geoengineering
ETC Group – Pat Mooney, Kathy Jo Wetter and Diana Bronson....... 210
Ecological agriculture, climate resilience and adaptation – A roadmap
Doreen Stabinsky and Lim Li Ching.............................................. 238
A global programme to tackle energy access and climate change
Tariq Banuri and Niclas Hällström................................................. 264
Reclaiming power – An energy model for people and the planet
Pascoe Sabido and Niclas Hällström............................................... 280
Part IV » Movement Towards Change
Beyond patzers and clients – Strategic reflections on climate change and the 'Green Economy'
Larry Lohmann............................................................................. 295
Civil society strategies and the Stockholm syndrome
Pat[zer] Mooney............................................................................ 327
Leaving the oil in the soil – Communities connecting to resist oil extraction and climate change
Nnimmo Bassey............................................................................. 332
Riding the wave – How Transition Towns are changing the world and having fun
Teresa Anderson............................................................................. 340
Contributors................................................................................. 348
Glossary....................................................................................... 352
17 June 2012
Blogging and tweeting from Rio+20
I'll be blogging for the Institute for Policy Studies from Rio+20.
My first post, asking "What's at Stake with the Green Economy" is now online here. It claims that simply obtaining measures to implement the commitments made 20 years ago would be better than creating any new corporate-driven initiatives or issuing yet more empty promises.
The post also highlights and links to some key reading ahead of the Rio Summit.
I'd also recommend following the blogs from the World Development Movement.
And finally... I appear to be the latest victim to succumb to twitter, where I'm tweeting from #Rioplus20 as @_oscar_reyes
My first post, asking "What's at Stake with the Green Economy" is now online here. It claims that simply obtaining measures to implement the commitments made 20 years ago would be better than creating any new corporate-driven initiatives or issuing yet more empty promises.
The post also highlights and links to some key reading ahead of the Rio Summit.
I'd also recommend following the blogs from the World Development Movement.
And finally... I appear to be the latest victim to succumb to twitter, where I'm tweeting from #Rioplus20 as @_oscar_reyes
07 June 2012
World Bank Group Environment Strategy 2012 – 2022 at first glance
Rather than waiting on the outcomes of
Rio+20, the World Bank has announced just announced it’s new
environment strategy for the next decade. The full document can be downloaded here. Here are some very rough notes, on first reading, for anyone who's interested in this type of thing:
-
There seems to be a very weak interconnection between the Bank's environment strategy and its “core infrastructure business,” beyond some waffley rhetoric. Further work is needed to see how the environment strategy maps onto and relates to Bank’s energy and infrastructure strategies.
-
The Strategy assumes a continuing (expanded?) role for the Climate Investment Fundss – with no “sunset” in sight. By way of background, these controversial funds were started with a "sunset clause," which should mean that they disappear once a Green Climate Fund is up and running.
-
Wealth Accounting and Valuation of Ecosystem Services (WAVES) is the first of 7 strategic focusses identified in the Strategy. The Bank looks set to push policy advice that “focuses on the value of natural capital and integration of “green accounting” in more conventional development planning analysis. ” Very briefly, this approach looks to have elements of a positive framing (moving beyond GDP as a measure) but is ultimately wound back into a policy-promotion framework that encourages the financialisation of nature. The WAVES framework (the first phase of which is funded by the UK’s DfID) is something the Bank looks keen to launch at Rio, in the form of proposing “an international program of action on Ecosystem Accounting” at the Summit.
-
“Blue carbon” (relating to coastal regions and wetlands) is increasingly a part of the Bank’s “green” agenda; while soil carbon is a critical concern for the Bank’s work in Africa.
-
There’s a lot on REDD (Reducing Emissions from Deforestation and Degradation) and some “innovations” to support REDD are foreseen. These include “wildlife premiums” (Zoellick’s proposal from Cancun on “charistmatic species”) as well as instruments (including bonds) that could support a REDD market in the current context of virtually non-existent demand for credits
-
Despite the obvious failings of carbon markets, the Bank shows no sign of retreat (it currently holds a $2.7 billion portfolio of carbon funds). Quite the opposite, in fact: “Developing access to carbon finance for low-income countries will be the centerpiece of the WBG’s strategy.” (p.61). The Bank envisages a 3-fold approach: (1) encouraging policies and simplified regulations to “accelerate speed to market” (irrespective of contradictions with environmental integrity); support for developing countries’ development of “capacity, technical knowledge, and carbon market infrastructure”; and support for “building up the potential supply for a scaled-up future carbon market” so as to “avoid possible future market dysfunctions resulting from supply shortages. ” Setting aside all of the major critiques of carbon markets for a moment, this is quite an extraordinary and unjustified focus given the obvious over-supply problems that the market faces.
-
The WB highlights the following carbon funds as key in moving forwards: Carbon Partnership Facility (including support for sectoral approaches), Forest Carbon Partnership Facility (REDD readiness), Partnership for Market Readiness (piloting new market instruments, and “increasingly... examining the possibilities for carbon trading between domestic markets on a bilateral or multilateral basis. ”); BioCarbon Fund Tranche 3 (BioCF T3) (next generation): (including developing new methodologies for forestry and agriculture); Carbon Initiative for Development (CI-Dev) (capacity building, technical assistance, and financing to the seller entities behind the programs).
-
This confirms a trend that’s already been apparent for the last couple of years – namely, that the Bank is shifting it’s emphasis beyond project-based funding to support new market infrastructures across whole economic sectors, plus putting guarantees/funding to the investors (rather than purchasing credits directly).
-
The IFC is becoming more involved in climate-related activities. “While the IFC’s investment and advisory work in energy efficiency, renewable energy, and resource efficiency will remain the mainstay of its climate change activities, it also aims to grow its Cleantech venture investment portfolio. ... The IFC is working on several initiatives to mobilize commercial and concessional funding to support private sector climate investments in the form of equity, debt, and technical assistance.” It will also build on its post-2012 Carbon facility (which targets European utilities and energy companies).
-
Carbon neutral greenwashing is being upscaled (p.63) : “As with the headquarters, the carbon emissions of country offices will also be offset, along with emissions from staff travel. ”
-
Climate risk insurance (p.64) is likely to form a key part of the Bank’s adaptation agenda
01 June 2012
UK aid to Morocco will fund electricity for Europe
Money taken from the UK aid budget is to be used by the World Bank to
finance the Ouarzazate solar project, designed to prioritise export to
Europe rather than to ensure that ordinary Moroccans can access
affordable electricity.
The project is part funded the World Bank’s Clean Technology Fund, which receives 14 per cent of its money - or £385 million – from the UK overseas aid budget.
Investment in renewable energy is essential to the fight against climate change. But measures to tackle climate change will only work if they also address poverty and inequality. By setting in place an export-led model that is likely to see electricity costs for the Moroccan people increase, and by asking the Moroccan government to subsidise the creation of a risky mega-project, Ouarzazate could make it more difficult for ordinary Moroccans to access electricity, especially in rural areas. And yet the project is being funded from the UK’s overseas aid project, the very purpose of which is to reduce poverty.
You can read this new report, published by the World Development Movement, by following this link.
It's the second in a series called Power to the People?, looking at the World Bank's Clean Tech Fund. The first report, on a wind project in Mexico, can be found here.
The project is part funded the World Bank’s Clean Technology Fund, which receives 14 per cent of its money - or £385 million – from the UK overseas aid budget.
Investment in renewable energy is essential to the fight against climate change. But measures to tackle climate change will only work if they also address poverty and inequality. By setting in place an export-led model that is likely to see electricity costs for the Moroccan people increase, and by asking the Moroccan government to subsidise the creation of a risky mega-project, Ouarzazate could make it more difficult for ordinary Moroccans to access electricity, especially in rural areas. And yet the project is being funded from the UK’s overseas aid project, the very purpose of which is to reduce poverty.
You can read this new report, published by the World Development Movement, by following this link.
It's the second in a series called Power to the People?, looking at the World Bank's Clean Tech Fund. The first report, on a wind project in Mexico, can be found here.
31 May 2012
World Bank State and Trends of the Carbon Market 2012: market growth is more spin than substance
The World Bank's annual State and Trends of the Carbon Market report is out, and can be found here:
It's a very useful source of data which, like all WB stuff, needs to be treated with caution. The spin is all about a growing carbon market, rising to $176 billion, an 11% increase on the previous year's figures for 2010. (see, for example, how Reuters picked it up) However, it is worth noting that :
It's a very useful source of data which, like all WB stuff, needs to be treated with caution. The spin is all about a growing carbon market, rising to $176 billion, an 11% increase on the previous year's figures for 2010. (see, for example, how Reuters picked it up) However, it is worth noting that :
- The largest proportion of the "carbon market growth" is accounted for by a change in how the World Bank counts the figures, the explanation for which is buried in an annex: “Instead of using external data, however, in 2012 the authors calculated the volumes and values for 2010... . The calculation resulted in higher volumes and values, particularly for EUA and secondary CER transactions. Instead of the global carbon market of US$142 billion reported in 2010, the revised calculations resulted in a global carbon market that is greater by about US$17 billion year on year (yoy). A higher value in the EUA market accounted for about US$14 billion, 80% of the difference. This year’s calculation also resulted in a secondary CER market greater by US$2 billion in 2010 yoy. The remaining differ- ence is explained by the value of the post-2012 CER transactions, not reported last year, which reached over US$1 billion in 2010. ” (p.124)
- That said, the market still grew a bit, and the reason given for that is a rise in hedging and speculative trades: “Trading volumes soared in 2011, coinciding with the second decline in verified emissions in three years. A considerable portion of the trades is primarily motivated by hedging, portfolio adjustments, profit taking, and arbitrage." (there's quite a useful box explaining this around p.39)
- It's also worth noticing that the Bank has massaged the figures to overcome the embarrassment of a shrinking CDM
Last year's "primary" CDM market (ie. the value of the credits generated by projects; rather than the cumulative value of further trading in these credits) was $900 million, the lowest ever (comparisons below - figures in US$billions)
2011
0.9
2010
1.5
2009
2.7
2008
6.5
2007
7.4
2006
5.8
2005
2.6
- The Bank then boosts this figure by adding another $1.9 billion for forward pCER post-2012" value - "call options" on credits that are not yet issued. Put simply, it's counting an option to buy a credit that does not yet exist as part of the value of the CDM. A lot of carbon is actually traded this way, although the press doesn't exactly get very far in explaining this. But the real massaging of the figures is revealed here (p.49) : “without a brighter market outlook, it is unlikely that a substantial proportion of these post-2012 ERPAs will be exercised at the indicative prices and volumes established in these documents. ” (ie. the figures written to Emissions Reduction Purchase Agreements, which are the basis for this $1.9 billion, would generally - I'd wager almost exclusively - mean that options would not be taken up with CDM credits going for less than €3.50 per ton, as at present).
- With the CDM, too, the story is one of greater financialisation. The biggest trade in CDM credits passes through the UK and Switzerland (where a lot of the financial intermediaries are based "Entities in the UK transacted the largest share, accounting for 47Mt or 39% of pre-2013 pCERs and 44Mt or 26% of post-2012 pCERs. The primary catalyst for this was the high concentration of buyers in the UK. However, a large portion of these vol-umes are known to be redistributed upon deliv-ery. Switzerland had a robust increase in 2010 and in 2011 in both pre-2013 and post-2012 markets compared to previous years. The Swiss market share came right after the UK, for the same reasons as the latter." (p.55)
26 May 2012
Carbon Markets After Durban - The Atmosphere Business
The most recent issue of the journal ephemera is a special issue on “The atmosphere business”. It takes a critical look at "climate capitalism".
My contribution on "Carbon Markets after Durban" can be found here It starts out fro, the contradiction of the push for new market mechanisms in the context of offset prices crashing to all-time lows and carbon branded the ‘world’s worst performing commodity’.
25 March 2012
After COP17: Where now for civil society engagement in UNFCCC climate negotiations?
I recently contributed to a report, commissioned by Earthlife Africa Johannesburg , to reflect on civil society’s impact on the United Nations Climate Change Conference (COP17) in Durban, and to spark an internal reassessment of global civil society’s actions towards the UNFCC; for whatever we are doing, it is not working.
If there is a single message about the engagement with the United Nations Framework Convention on Climate Change that comes out of this report, it is that civil society should stop looking at the COP process as a “quick fix” for climate change. Instead, civil society needs return to the hard, expensive and time-consuming work of grassroots mobilisation to create real and substantial mass movements that have the sheer weight of numbers to force change. National governments need to go to a COP knowing that their populaces want a global deal on climate change and will not take kindly to them returning from a COP with only empty promises and a hollow text.
The full report can be downloaded from here.
If there is a single message about the engagement with the United Nations Framework Convention on Climate Change that comes out of this report, it is that civil society should stop looking at the COP process as a “quick fix” for climate change. Instead, civil society needs return to the hard, expensive and time-consuming work of grassroots mobilisation to create real and substantial mass movements that have the sheer weight of numbers to force change. National governments need to go to a COP knowing that their populaces want a global deal on climate change and will not take kindly to them returning from a COP with only empty promises and a hollow text.
The full report can be downloaded from here.
24 February 2012
After Durban: All talked out?
The current issue of Red Pepper includes my assessment of the COP17 UN Climate Change Conference in Durban. Read the full article here
If a lexicon of international climate conferences is ever written, Durban will be listed right after the words debacle, delusion, disaster and disillusionment. Even the disappointments were not surprising at the 17th Conference of the Parties of the United Nations Framework Convention on Climate Change, which took place in South Africa last December. Instead, they followed the usual script: two weeks of ineffectual jargon-filled bickering followed by an agreement to delay action on climate change beyond the political lifespan of most of the governments present
If a lexicon of international climate conferences is ever written, Durban will be listed right after the words debacle, delusion, disaster and disillusionment. Even the disappointments were not surprising at the 17th Conference of the Parties of the United Nations Framework Convention on Climate Change, which took place in South Africa last December. Instead, they followed the usual script: two weeks of ineffectual jargon-filled bickering followed by an agreement to delay action on climate change beyond the political lifespan of most of the governments present
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