Carbon Trading Exposed

The devastating effects of climate change are already a reality for many communities across the globe.  Our neighbours in low lying islands and river deltas in Asia and the Pacific are increasingly affected by storms and rising seas.  Climate change has been called the greatest long-term threat that humanity faces.  Left unabated, it will impact on everyone, and most significantly on the world’s poor who are least responsible for the problem.  Without drastic action, climate change will undo the progress made towards achieving the Millennium Development Goals.  The necessity of turning around ever-increasing greenhouse gas emissions grows more urgent by the day.

Since the change of federal government, Australia has seen a flurry of political activity on climate change.  The government is presently designing its Carbon Pollution Reduction Scheme (emissions trading scheme), with a planned start date of 2010.  The end of September marked the release of a key input into this process, the Garnaut Climate Change Review.

The climate movement has widely criticised Professor Garnaut for acknowledging the dire threat of climate change, and yet failing to recommend a course of action that would prevent its occurrence.  They assert that his recommended goal of stabilising atmospheric greenhouse gases at 450 or 550 parts per million represents an unacceptably high risk of climate catastrophe.  Professor Garnaut has been taken to task for, by his own admission, placing perceived political feasibility ahead of what the climate science demands.

Less criticised has been the process by which Professor Garnaut proposes that greenhouse gas emissions actually be delivered – emissions trading (cap and trade).  The logic of emissions trading is that allowing the trade in emissions permits delivers emission reductions at the lowest cost.  However, unlike conventional regulation, emissions trading does not have a proven history in reducing pollution(1).  Even free market commentators such as George Soros and Jeffrey Sachs criticise emissions trading, viewing it as unnecessarily complex and notoriously susceptible to distortion and capture by special interests(2).  Activists associated with the Durban Group for Climate Justice argue that even if emissions trading did deliver emissions reductions, these reductions are likely to be small and to be made in such a way that they slow down structural shifts away from fossil fuels that are urgently needed.  Big polluters are able to continue to pollute, while paying others to make cheap and easy emissions reductions elsewhere(3).

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Emissions trading explained

There are two variations on emissions trading - cap and trade, and baseline and credit.

Cap and trade (e.g. EU Emission Trading Scheme, and as proposed in the Carbon Pollution Reduction Scheme)

  • The government sets a target (cap) for total greenhouse gas emissions.
  • Permits to emit greenhouse gases are either given, sold or auctioned to polluters. The total permits issued equals the cap.
  • Polluters can either use their permits (IE pollute to that level), buy more (if they need to pollute more) or sell them to other polluters (if they can pollute less). That is, the emissions permits can be traded.
  • The mechanism supposedly forces polluters to pay while those using cleaner technologies will not have to pay and so have lower costs. This provides a financial incentive for businesses to develop and use cleaner technologies.

Baseline and credit (e.g. the Kyoto Protocol's Clean Development Mechanism)

  • Polluters that are regulated by an emissions cap can buy "credits" or "offsets" from projects that reduce emissions below a certain "baseline" level of emissions (the emissions that would have occurred without the project).
  • Examples of offset projects might include growing crops to produce biofuels, burning methane from a coal mine or a landfill, or generating renewable electricity.
  • This mechanism reduces the costs of supposed emissions reductions, by allowing polluters to buy offsets where this is cheaper than reducing their own emissions.

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Internationally, the global agreement on climate change (United Nations Framework Convention on Climate Change and its Kyoto Protocol), which has emissions trading (both cap and trade, and baseline and credit) as its central mechanism, has thus far failed to deliver global emissions reductions(4).  It has, however, along with the EU Emission Trading Scheme, facilitated the development of a global carbon market valued at tens of billions of dollars(5), and delivered enormous profits to many of the world’s big greenhouse gas polluters(6).  There is no evidence to suggest that emissions trading would be any different in Australia.  As proposed in the government’s Carbon Pollution Reduction Scheme green paper, emissions trading would cover less than half our greenhouse gas emissions(7).  It would also gift several billion dollars of free emissions permits to some of the country’s largest and richest polluters, such as Rio Tinto, Xstrata and BHP Billiton(8).

We do not need more carbon markets.  What we need, in no small part, is a shift away from the single most important source of the climate problem – the combustion of fossil fuels.

The failure of mainstream climate politics to address the issue of fossil fuels is a source of frustration for growing numbers of climate activists.  Famously, British social commentator George Monbiot chose to stay in the UK and help close down a Welsh coal mine for a day rather than attend the post-Kyoto climate negotiations in Bali in late 2007.  He was convinced that this action was more effective than international negotiations that did not effectively address fossil fuel supply(9).  In doing so, he joined other communities across the globe who have taken action to keep fossil fuels in the ground – in places such as Phulbari (Bangladesh), Yasun (Ecuador), Alberta, California, Alaska, the Niger Delta, and our own Hunter Valley.

Indeed, throughout the years of climate negotiations, governments and international financial institutions have continued to finance and promote fossil fuel exploitation at an accelerating rate.  Australia is a case in point.  Government subsidies for fossil fuels are worth billions of dollars annually(10), and the NSW government is in the process of doubling the export capacity of what is already the word’s biggest coal port.

At the same time as Monbiot was protesting in Wales, a new global coalition of social movements called “Climate Justice Now!” formed in Bali to call for a break with false climate solutions such as emissions trading.  Instead, the coalition, which included voices from poor communities affected by climate change, indigenous peoples, and peasant farmers, demanded real solutions to the climate crisis, including:

  • reduced consumption;
  • huge financial transfers from North to South for climate change adaptation and mitigation, based on historical ecological debt and paid for by redirecting military budgets, innovative taxes and debt cancellation;
  • leaving fossil fuels in the ground and investing in energy efficiency and community-led renewable energy;
  • rights based resource conservation that enforces indigenous land rights and promotes people’s sovereignty over energy, forests, land and water; and
  • sustainable family farming and people’s food sovereignty(11).

We should heed these voices as we near our government’s announcement of its interim greenhouse gas emission reduction targets, and the finalisation of its Carbon Pollution Reduction Scheme.  We should not only be concerned with abstract questions of emissions reduction targets, but also advocate for measures that deliver these cuts in ways that protect the lives and livelihoods of the world’s poor.  Perhaps it is time to acknowledge that some of the most concrete solutions to climate change have been put on the table by these very people.

 

Notes/References

(1) Patrick Bond, “The global carbon trade debate: For or against the privatisation of the air?”, Paper presented to the South African Sociological Association 15th Congress, Stellenbosch University, 10 July 2008, available http://www.sasaonline.org.za/index.php?option=com_content&task=view&id=17.  Larry Lohmann argues that the limited US sulphur dioxide trading scheme is the only emissions trading scheme to date that has not been an unambiguous failure (Larry Lohmann, “Carbon trading, climate justice and the production of ignorance”, Development, 2008, 51:359-365, available http://www.thecornerhouse.org.uk/subject/climate/).  A comprehensive history of emissions trading can be found in Larry Lohmann, “Carbon Trading: A Critical Conversation on Climate Change, Privatisation and Power”, Development Dialogue, No.48, September 2006, available http://www.thecornerhouse.org.uk/subject/climate/).

(2) George Soros interview with Bill Moyers, Bill Moyers Journal, 10 October 2008, available http://www.pbs.org/moyers/journal/10102008/transcript1.html.  Timothy Gardner, “Carbon tax seen as best way to slow global warming”, The Guardian, 10 October 2008, available http://www.climateark.org/shared/reader/welcome.aspx?linkid=108065.

(3) Larry Lohmann, 2008, op. cit.

(4) According to the Intergovernmental Panel on Climate Change, global greenhouse gas emissions increased by 70% between 1970 and 2004, and by 24% between 1990 and 2004, and are likely to continue to grow over the next few decades in the absence of policy change (IPCC, “Climate change 2007: Synthesis report”, available http://www.ipcc.ch/pdf/assessment-report/ar4/syr/ar4_syr.pdf, p.36, 44.)

(5) Karan Capoor and Philippe Ambrosi, “State and trends of the carbon market 2008”, The World Bank, 2008, available http://carbonfinance.org/docs/State_Trends_FINAL.pdf.

(6) Many reports and articles at http://www.carbontradewatch.org and http://www.thecornerhouse.org.uk/subject/climate/ attest to how emissions trading has resulted in “polluter profits” rather than “polluter pays”.

(7) The Climate Institute, “Submission to the Carbon Pollution Reduction Scheme Green Paper”, September 2008, available http://www.climateinstitute.org.au/images/reports/tcigpsub.pdf.

(8) Innovest Strategic Value Advisors, “The impact of industry assistance measures under the Carbon Pollution Reduction Scheme”, research note prepared for the ACF, 16 October 2008, available http://www.acfonline.org.au/uploads/res/Innovest-Recipients-of-CPRS-assistance-Oct08.pdf

(9) George Monbiot, “Leave it in the ground”, The Guardian, 11 December 2007, available http://www.monbiot.com/archives/2007/12/11/rigged/.

(10) Wendy Frew, “Public purse props up fossil fuel industries”, Sydney Morning Herald, 8 May 2007, available http://www.smh.com.au/news/national/public-purse-props-up-fossil-fuel-industries/2007/05/07/1178390228019.html.  Ben Cubby, “Government urged to cut fossil fuel subsidies”, Sydney Morning Herald, 8 April 2008, available http://www.smh.com.au/news/global-warming/government-urged-to-cut-fossil-fuel-subsidies/2008/04/27/1209234657422.html.

(11) “What's missing from the climate talks? Justice!”, press release, 14 December 2007, available http://www.foei.org/en/media/archive/2007/whats-missing-from-the-climate-talks-justice/.