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.
Showing posts with label CDM. Show all posts
Showing posts with label CDM. Show all posts
29 November 2009
New book on carbon trading
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.
08 May 2009
UN Climate Negotiations: analysis of latest positions
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.
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.
17 April 2009
Ad Hoc Working Group on Kyoto Protocol update, aka how to expand carbon markets and count emissions increases as reductions
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.
(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.
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