| From Thinktosustain.com http://www.thinktosustain. Friday, May 20, 2011 | |
| In an interview with ThinktoSustain.com, Dr. Blessing J. Karumbidza and Mr. Wally Menne discuss the sustainability and viability issues of CDM tree plantations being used as carbon emission offset projects under Clean Development Mechanism (CDM), and their impact on local communities and rural economies. | |
 Forests play a crucial role in mitigating global warming. Their inclusion as ‘carbon sinks’ in international frameworks, such as REDD, to reduce emissions, has evoked interest among corporate and governments alike, who look at plantation projects to raise carbon credits to ‘subsidize’ their emissions back at home, in addition to other forest by-products. However, there are many ground-realities largely ignored by project proponents that pose a greater threat to the environment than the envisaged benefits. ThinktoSustain.com interacts with researchers – Dr. Blessing J. Karumbidza andMr. Wally Menne - who recently conducted a study on a tree plantation by a Norwegian company in Tanzania. Tree plantations in South Africa are grown to produce timber and paper products mainly for export, and to generate income that mainly benefits the multinational paper companies that own the plantations and pulp mills. However, they also cause substantial environmental damage, besides affecting local communities and rural economies negatively. To ascertain the impact of such projects, The Timberwatch Coalition conducted a study of a tree plantation carbon sink project at Idete in the Southern Highlands of Tanzania. The Norwegian company that owns the project, Green Resources Ltd., aims to register the project under the CDM (Clean Development Mechanism) so as to be able to generate carbon credits to sell to the Norwegian government. ThinktoSustain.com: First of all, why do industrial plantations exist in Tanzania? Who (government, multinationals or local people) is interested in such projects and Why? Dr. Blessing Karumbidza & Mr. Wally Menne: Industrial tree plantations have a long history in Tanzania, just as anywhere else in Africa where such plantations exist. We (at Timberwatch) focus specifically on industrial tree plantations for a number of reasons. Firstly, these industrial timber plantations are not forests, yet they are considered so in policy, as if they are real forests. Secondly, they are usually a monoculture tree crop that permanently destroys the bio-diversity of any area where they are planted, and impacts negatively on existing land-usage. Most of the established industrial tree plantations in Tanzania were planted during the second half of the 20th century, when the country was still under colonial rule, to help meet the timber, pulp & paper demands of growing industrial economies. They did support a crude form of economic growth, albeit an unsustainable one, requiring large areas of arable land and consuming more water than could be justified by their end value, whilst providing relatively few job opportunities for mainly temporary unskilled workers. Historically speaking, the legislation intended to regulate and control the timber production sector has been very weak in Africa in general, and this has been the case in Tanzania as well. Even in countries like South Africa, where more comprehensive legislation has been introduced, especially relating to water usage, its full implementation and effective enforcement still leaves a lot to be desired. ThinktoSustain.com: What is the Idete plantation project? When was it started? What were the benefits envisaged at the beginning of this project? Dr. Blessing Karumbidza & Mr. Wally Menne: It appears that the Idete ‘forest’ project was conceived in the late 1990s, though the actual tree planting by Green Resources Ltd. at Idete started around 2005. The project was partially in response to a perceived opportunity to make money from earning plantation carbon credits under the CDM (Clean Development Mechanism) of the Kyoto Protocol, which was adopted by the UNFCCC in 1997. However, the main motive for the new tree plantations was probably to take advantage of easy access to cheap community-owned agricultural land and grasslands, for timber production, because it is quite clear that the company would have established the tree plantations there regardless of their being eligible for CDM carbon credits or not.  ThinktoSustain.com: In your study, you have cited local peoples’ experiences in South Africa and other countries. These experiences have not been good. According to you, why has this been so? Dr. Blessing Karumbidza & Mr. Wally Menne: The timber plantation sector is wasteful in many ways: using large areas of land, consuming much water and impacting negatively on the natural environment. Downstream processing of timber for pulp and paper production consumes and pollutes scarce water resources, and requires substantial amounts of cheap energy from non-renewable sources, mainly coal. In South Africa, this sector also developed in tandem with apartheid, and its story is linked to massive forced removals and displacement of poor black communities. Since 1994, when apartheid policies were officially ended, little has changed and the plantation timber industry is still guilty of exploiting poor communities and harming the environment. ThinktoSustain.com: Your study highlights an important aspect that Industrial tree plantations in Tanzania would have a devastating impact on biodiversity and have negative consequences on the local people. Can you explain why and how this has happened or can happen? Dr. Blessing Karumbidza & Mr. Wally Menne: Whether established on agricultural land or in natural habitat, such as the grassland areas at Idete, monoculture tree plantations wipe out other forms of life including important medicinal and food plants, and the wild animals hunted by the local community for food. The loss of grasslands used for grazing also impacts heavily on livestock-keeping, and usually means that grazing pressure will increase in the remaining grasslands, to the detriment of the ecosystem. The informal local economy is dependent on resources derived from Nature, and supplemented by small-scale agriculture. The destruction of this natural resource base through the establishment of tree plantations causes the local community to become dependent on an externally imposed financial economy, wherein inexperienced rural people with little formal education become the victims of their need to survive from the minimal wages paid for their labour by companies like Green Resources Ltd. |
Monday, May 30, 2011
CDM Carbon Sink Tree Plantations: Insights into Sustainability Issues
Wednesday, May 18, 2011
The Nation: The Wrong Kind of Green
I think this article articulates and documents well what has been happening to the mainstream environmental movement in the U.S. and globally, when environmentalists become good buddies with big business and polluters. This is no news but this is part of reason why many concrete and necessary actions towards mitigate and adapt to climate change and ensure planetary sustainability left undone. This is part of why since the 1980s (Rio 1992 was when a lot of these mechanisms were legitimized) there have been so many market-based "solutions" to address "resource efficiencies." This is part of the corporate America.
It was uncanny that I just spoke to a women from Sierra Club's Atlantic Chapter, who complained about the central office's resistance to more radical actions and causes the local chapters are taking up and fighting for.
Look out for the mainstream environmental NGOs' "partnerships" and praises they give to big polluters. If they cannot do a good job monitoring the big multinationals. We as citizens should add more eyes.
From the Nation
Editor's Note: As the Washington Post reports today, the major conservation group The Nature Conservancy faces "potential backlash as its supporters learn that the giant oil company and the world's largest environmental organization long ago forged a relationship that has lent BP an Earth-friendly image and helped the Conservancy pursue causes it holds dear." The Nation's Johann Hari recently investigated financial ties between environmental groups and environmentally unfriendly corporations for the magazine, offering a wider lens on the relationship between BP and the Nature Conservancy. Hari's piece appears below.
Why did America's leading environmental groups jet to Copenhagen and lobby for policies that will lead to the faster death of the rainforests--and runaway global warming? Why are their lobbyists on Capitol Hill dismissing the only real solutions to climate change as "unworkable" and "unrealistic," as though they were just another sooty tentacle of Big Coal?
At first glance, these questions will seem bizarre. Groups like Conservation International are among the most trusted "brands" in America, pledged to protect and defend nature. Yet as we confront the biggest ecological crisis in human history, many of the green organizations meant to be leading the fight are busy shoveling up hard cash from the world's worst polluters--and burying science-based environmentalism in return. Sometimes the corruption is subtle; sometimes it is blatant. In the middle of a swirl of bogus climate scandals trumped up by deniers, here is the real Climategate, waiting to be exposed.
I have spent the past few years reporting on how global warming is remaking the map of the world. I have stood in half-dead villages on the coast of Bangladesh while families point to a distant place in the rising ocean and say, "Do you see that chimney sticking up? That's where my house was... I had to [abandon it] six months ago." I have stood on the edges of the Arctic and watched glaciers that have existed for millenniums crash into the sea. I have stood on the borders of dried-out Darfur and heard refugees explain, "The water dried up, and so we started to kill each other for what was left."
While I witnessed these early stages of ecocide, I imagined that American green groups were on these people's side in the corridors of Capitol Hill, trying to stop the Weather of Mass Destruction. But it is now clear that many were on a different path--one that began in the 1980s, with a financial donation.
Environmental groups used to be funded largely by their members and wealthy individual supporters. They had only one goal: to prevent environmental destruction. Their funds were small, but they played a crucial role in saving vast tracts of wilderness and in pushing into law strict rules forbidding air and water pollution. But Jay Hair--president of the National Wildlife Federation from 1981 to 1995--was dissatisfied. He identified a huge new source of revenue: the worst polluters.
Hair found that the big oil and gas companies were happy to give money to conservation groups. Yes, they were destroying many of the world's pristine places. Yes, by the late 1980s it had become clear that they were dramatically destabilizing the climate--the very basis of life itself. But for Hair, that didn't make them the enemy; he said they sincerely wanted to right their wrongs and pay to preserve the environment. He began to suck millions from them, and in return his organization and others, like The Nature Conservancy (TNC), gave them awards for "environmental stewardship."
Companies like Shell and British Petroleum (BP) were delighted. They saw it as valuable "reputation insurance": every time they were criticized for their massive emissions of warming gases, or for being involved in the killing of dissidents who wanted oil funds to go to the local population, or an oil spill that had caused irreparable damage, they wheeled out their shiny green awards, purchased with "charitable" donations, to ward off the prospect of government regulation. At first, this behavior scandalized the environmental community. Hair was vehemently condemned as a sellout and a charlatan. But slowly, the other groups saw themselves shrink while the corporate-fattened groups swelled--so they, too, started to take the checks.
Christine MacDonald, an idealistic young environmentalist, discovered how deeply this cash had transformed these institutions when she started to work for Conservation International in 2006. She told me, "About a week or two after I started, I went to the big planning meeting of all the organization's media teams, and they started talking about this supposedly great new project they were running with BP. But I had read in the newspaper the day before that the EPA [Environmental Protection Agency] had condemned BP for running the most polluting plant in the whole country.... But nobody in that meeting, or anywhere else in the organization, wanted to talk about it. It was a taboo. You weren't supposed to ask if BP was really green. They were 'helping' us, and that was it."
She soon began to see--as she explains in her whistleblowing book Green Inc.--how this behavior has pervaded almost all the mainstream green organizations. They take money, and in turn they offer praise, even when the money comes from the companies causing environmental devastation. To take just one example, when it was revealed that many of IKEA's dining room sets were made from trees ripped from endangered forests, the World Wildlife Fund leapt to the company's defense, saying--wrongly--that IKEA "can never guarantee" this won't happen. Is it a coincidence that WWF is a "marketing partner" with IKEA, and takes cash from the company?
Likewise, the Sierra Club was approached in 2008 by the makers of Clorox bleach, who said that if the Club endorsed their new range of "green" household cleaners, they would give it a percentage of the sales. The Club's Corporate Accountability Committee said the deal created a blatant conflict of interest--but took it anyway. Executive director Carl Pope defended the move in an e-mail to members, in which he claimed that the organization had carried out a serious analysis of the cleaners to see if they were "truly superior." But it hadn't. The Club's Toxics Committee co-chair, Jessica Frohman, said, "We never approved the product line." Beyond asking a few questions, the committee had done nothing to confirm that the product line was greener than its competitors' or good for the environment in any way.
The green groups defend their behavior by saying they are improving the behavior of the corporations. But as these stories show, the pressure often flows the other way: the addiction to corporate cash has changed the green groups at their core. As MacDonald says, "Not only do the largest conservation groups take money from companies deeply implicated in environmental crimes; they have become something like satellite PR offices for the corporations that support them."
It has taken two decades for this corrupting relationship to become the norm among the big green organizations. Imagine this happening in any other sphere, and it becomes clear how surreal it is. It is as though Amnesty International's human rights reports came sponsored by a coalition of the Burmese junta, Dick Cheney and Robert Mugabe. For environmental groups to take funding from the very people who are destroying the environment is preposterous--yet it is now taken for granted.
This pattern was bad enough when it affected only a lousy household cleaning spray, or a single rare forest. But today, the stakes are unimaginably higher. We are living through a brief window of time in which we can still prevent runaway global warming. We have emitted so many warming gases into the atmosphere that the world's climate scientists say we are close to the climate's "point of no return." Up to 2 degrees Celsius of warming, all sorts of terrible things happen--we lose the islands of the South Pacific, we set in train the loss of much of Florida and Bangladesh, terrible drought ravages central Africa--but if we stop the emissions of warming gases, we at least have a fifty-fifty chance of stabilizing the climate at this higher level. This is already an extraordinary gamble with human safety, and many climate scientists say we need to aim considerably lower: 1.5 degrees or less.
Beyond 2 degrees, the chances of any stabilization at the hotter level begin to vanish, because the earth's natural processes begin to break down. The huge amounts of methane stored in the Arctic permafrost are belched into the atmosphere, causing more warming. The moist rainforests begin to dry out and burn down, releasing all the carbon they store into the air, and causing more warming. These are "tipping points": after them, we can't go back to the climate in which civilization evolved.
So in an age of global warming, the old idea of conservation--that you preserve one rolling patch of land, alone and inviolate--makes no sense. If the biosphere is collapsing all around you, you can't ring-fence one lush stretch of greenery and protect it: it too will die.
You would expect the American conservation organizations to be joining the great activist upsurge demanding we stick to a safe level of carbon dioxide in the atmosphere: 350 parts per million (ppm), according to professor and NASA climatologist James Hansen. And--in public, to their members--they often are supportive. On its website the Sierra Club says, "If the level stays higher than 350 ppm for a prolonged period of time (it's already at 390.18 ppm) it will spell disaster for humanity as we know it."
But behind closed doors, it sings from a different song-sheet. Kieran Suckling, executive director of the Center for Biological Diversity, in Arizona, which refuses funding from polluters, has seen this from the inside. He told me, "There is a gigantic political schizophrenia here. The Sierra Club will send out e-mails to its membership saying we have to get to 350 parts per million and the science requires it. But in reality they fight against any sort of emission cuts that would get us anywhere near that goal."
For example, in 2009 the EPA moved to regulate greenhouse gases under the Clean Air Act, which requires the agency to ensure that the levels of pollutants in the air are "compatible with human safety"--a change the Sierra Club supported. But the Center for Biological Diversity petitioned the EPA to take this commitment seriously and do what the climate science says really is "compatible with human safety": restore us to 350 ppm. Suckling explains, "I was amazed to discover the Sierra Club opposed us bitterly. They said it should not be done. In fact, they said that if we filed a lawsuit to make EPA do it, they would probably intervene on EPA's side. They threw climate science out the window."
Indeed, the Sierra Club's chief climate counsel, David Bookbinder, ridiculed the center's attempts to make 350 ppm a legally binding requirement. He said it was "truly a pointless exercise" and headed to "well-deserved bureaucratic oblivion"--and would only add feebly that "350 may be where the planet should end up," but not by this mechanism. He was quoted in the media alongside Bush administration officials who shared his contempt for the center's proposal.
...
full story http://www.thenation.com/article/wrong-kind-green
It was uncanny that I just spoke to a women from Sierra Club's Atlantic Chapter, who complained about the central office's resistance to more radical actions and causes the local chapters are taking up and fighting for.
Look out for the mainstream environmental NGOs' "partnerships" and praises they give to big polluters. If they cannot do a good job monitoring the big multinationals. We as citizens should add more eyes.
From the Nation
Editor's Note: As the Washington Post reports today, the major conservation group The Nature Conservancy faces "potential backlash as its supporters learn that the giant oil company and the world's largest environmental organization long ago forged a relationship that has lent BP an Earth-friendly image and helped the Conservancy pursue causes it holds dear." The Nation's Johann Hari recently investigated financial ties between environmental groups and environmentally unfriendly corporations for the magazine, offering a wider lens on the relationship between BP and the Nature Conservancy. Hari's piece appears below.
Why did America's leading environmental groups jet to Copenhagen and lobby for policies that will lead to the faster death of the rainforests--and runaway global warming? Why are their lobbyists on Capitol Hill dismissing the only real solutions to climate change as "unworkable" and "unrealistic," as though they were just another sooty tentacle of Big Coal?
At first glance, these questions will seem bizarre. Groups like Conservation International are among the most trusted "brands" in America, pledged to protect and defend nature. Yet as we confront the biggest ecological crisis in human history, many of the green organizations meant to be leading the fight are busy shoveling up hard cash from the world's worst polluters--and burying science-based environmentalism in return. Sometimes the corruption is subtle; sometimes it is blatant. In the middle of a swirl of bogus climate scandals trumped up by deniers, here is the real Climategate, waiting to be exposed.
I have spent the past few years reporting on how global warming is remaking the map of the world. I have stood in half-dead villages on the coast of Bangladesh while families point to a distant place in the rising ocean and say, "Do you see that chimney sticking up? That's where my house was... I had to [abandon it] six months ago." I have stood on the edges of the Arctic and watched glaciers that have existed for millenniums crash into the sea. I have stood on the borders of dried-out Darfur and heard refugees explain, "The water dried up, and so we started to kill each other for what was left."
While I witnessed these early stages of ecocide, I imagined that American green groups were on these people's side in the corridors of Capitol Hill, trying to stop the Weather of Mass Destruction. But it is now clear that many were on a different path--one that began in the 1980s, with a financial donation.
Environmental groups used to be funded largely by their members and wealthy individual supporters. They had only one goal: to prevent environmental destruction. Their funds were small, but they played a crucial role in saving vast tracts of wilderness and in pushing into law strict rules forbidding air and water pollution. But Jay Hair--president of the National Wildlife Federation from 1981 to 1995--was dissatisfied. He identified a huge new source of revenue: the worst polluters.
Hair found that the big oil and gas companies were happy to give money to conservation groups. Yes, they were destroying many of the world's pristine places. Yes, by the late 1980s it had become clear that they were dramatically destabilizing the climate--the very basis of life itself. But for Hair, that didn't make them the enemy; he said they sincerely wanted to right their wrongs and pay to preserve the environment. He began to suck millions from them, and in return his organization and others, like The Nature Conservancy (TNC), gave them awards for "environmental stewardship."
Companies like Shell and British Petroleum (BP) were delighted. They saw it as valuable "reputation insurance": every time they were criticized for their massive emissions of warming gases, or for being involved in the killing of dissidents who wanted oil funds to go to the local population, or an oil spill that had caused irreparable damage, they wheeled out their shiny green awards, purchased with "charitable" donations, to ward off the prospect of government regulation. At first, this behavior scandalized the environmental community. Hair was vehemently condemned as a sellout and a charlatan. But slowly, the other groups saw themselves shrink while the corporate-fattened groups swelled--so they, too, started to take the checks.
Christine MacDonald, an idealistic young environmentalist, discovered how deeply this cash had transformed these institutions when she started to work for Conservation International in 2006. She told me, "About a week or two after I started, I went to the big planning meeting of all the organization's media teams, and they started talking about this supposedly great new project they were running with BP. But I had read in the newspaper the day before that the EPA [Environmental Protection Agency] had condemned BP for running the most polluting plant in the whole country.... But nobody in that meeting, or anywhere else in the organization, wanted to talk about it. It was a taboo. You weren't supposed to ask if BP was really green. They were 'helping' us, and that was it."
She soon began to see--as she explains in her whistleblowing book Green Inc.--how this behavior has pervaded almost all the mainstream green organizations. They take money, and in turn they offer praise, even when the money comes from the companies causing environmental devastation. To take just one example, when it was revealed that many of IKEA's dining room sets were made from trees ripped from endangered forests, the World Wildlife Fund leapt to the company's defense, saying--wrongly--that IKEA "can never guarantee" this won't happen. Is it a coincidence that WWF is a "marketing partner" with IKEA, and takes cash from the company?
Likewise, the Sierra Club was approached in 2008 by the makers of Clorox bleach, who said that if the Club endorsed their new range of "green" household cleaners, they would give it a percentage of the sales. The Club's Corporate Accountability Committee said the deal created a blatant conflict of interest--but took it anyway. Executive director Carl Pope defended the move in an e-mail to members, in which he claimed that the organization had carried out a serious analysis of the cleaners to see if they were "truly superior." But it hadn't. The Club's Toxics Committee co-chair, Jessica Frohman, said, "We never approved the product line." Beyond asking a few questions, the committee had done nothing to confirm that the product line was greener than its competitors' or good for the environment in any way.
The green groups defend their behavior by saying they are improving the behavior of the corporations. But as these stories show, the pressure often flows the other way: the addiction to corporate cash has changed the green groups at their core. As MacDonald says, "Not only do the largest conservation groups take money from companies deeply implicated in environmental crimes; they have become something like satellite PR offices for the corporations that support them."
It has taken two decades for this corrupting relationship to become the norm among the big green organizations. Imagine this happening in any other sphere, and it becomes clear how surreal it is. It is as though Amnesty International's human rights reports came sponsored by a coalition of the Burmese junta, Dick Cheney and Robert Mugabe. For environmental groups to take funding from the very people who are destroying the environment is preposterous--yet it is now taken for granted.
This pattern was bad enough when it affected only a lousy household cleaning spray, or a single rare forest. But today, the stakes are unimaginably higher. We are living through a brief window of time in which we can still prevent runaway global warming. We have emitted so many warming gases into the atmosphere that the world's climate scientists say we are close to the climate's "point of no return." Up to 2 degrees Celsius of warming, all sorts of terrible things happen--we lose the islands of the South Pacific, we set in train the loss of much of Florida and Bangladesh, terrible drought ravages central Africa--but if we stop the emissions of warming gases, we at least have a fifty-fifty chance of stabilizing the climate at this higher level. This is already an extraordinary gamble with human safety, and many climate scientists say we need to aim considerably lower: 1.5 degrees or less.
Beyond 2 degrees, the chances of any stabilization at the hotter level begin to vanish, because the earth's natural processes begin to break down. The huge amounts of methane stored in the Arctic permafrost are belched into the atmosphere, causing more warming. The moist rainforests begin to dry out and burn down, releasing all the carbon they store into the air, and causing more warming. These are "tipping points": after them, we can't go back to the climate in which civilization evolved.
So in an age of global warming, the old idea of conservation--that you preserve one rolling patch of land, alone and inviolate--makes no sense. If the biosphere is collapsing all around you, you can't ring-fence one lush stretch of greenery and protect it: it too will die.
You would expect the American conservation organizations to be joining the great activist upsurge demanding we stick to a safe level of carbon dioxide in the atmosphere: 350 parts per million (ppm), according to professor and NASA climatologist James Hansen. And--in public, to their members--they often are supportive. On its website the Sierra Club says, "If the level stays higher than 350 ppm for a prolonged period of time (it's already at 390.18 ppm) it will spell disaster for humanity as we know it."
But behind closed doors, it sings from a different song-sheet. Kieran Suckling, executive director of the Center for Biological Diversity, in Arizona, which refuses funding from polluters, has seen this from the inside. He told me, "There is a gigantic political schizophrenia here. The Sierra Club will send out e-mails to its membership saying we have to get to 350 parts per million and the science requires it. But in reality they fight against any sort of emission cuts that would get us anywhere near that goal."
For example, in 2009 the EPA moved to regulate greenhouse gases under the Clean Air Act, which requires the agency to ensure that the levels of pollutants in the air are "compatible with human safety"--a change the Sierra Club supported. But the Center for Biological Diversity petitioned the EPA to take this commitment seriously and do what the climate science says really is "compatible with human safety": restore us to 350 ppm. Suckling explains, "I was amazed to discover the Sierra Club opposed us bitterly. They said it should not be done. In fact, they said that if we filed a lawsuit to make EPA do it, they would probably intervene on EPA's side. They threw climate science out the window."
Indeed, the Sierra Club's chief climate counsel, David Bookbinder, ridiculed the center's attempts to make 350 ppm a legally binding requirement. He said it was "truly a pointless exercise" and headed to "well-deserved bureaucratic oblivion"--and would only add feebly that "350 may be where the planet should end up," but not by this mechanism. He was quoted in the media alongside Bush administration officials who shared his contempt for the center's proposal.
...
full story http://www.thenation.com/article/wrong-kind-green
Tuesday, May 17, 2011
The hype versus the reality of carbon markets
Shefali Sharma 2011-05-11, Issue 529
http://pambazuka.org/en/category/comment/73132
The Africa Carbon Exchange (ACX) was launched in Nairobi on March 24; yet only two days before, Bloomberg headlines announced: ‘Global Carbon Credits Die as Smart Money Backs Indian RECs (Renewable Energy Certificates).’[1]While the ACX is positioning itself to be the hub of ‘climate change business and sustainable development in the African continent,’ existing and attempted carbon emissions exchanges in Europe and the United States have suffered one blow after another - fraud, carbon credit theft, poor legislative design, even profits for some major polluters - all at the expense of ordinary citizens and the environment.
Moreover, these exchanges have not led to a decrease in global greenhouse gas (GHG) emissions. Rather, they threaten to directly increase emissions by diverting capital to the carbon-market casino that could have otherwise gone toward reducing pollution at its source.
The Bloomberg article contends:
‘Today, carbon trading remains a backwater of the global commodities market, and it’s not even included in the benchmark Dow Jones UBS Commodity Index. Without demand from institutional investors spurred by global limits on emissions, the price of carbon has languished compared with the fossil fuels that policy makers are aiming to marginalize.’
There has been a 16 per cent decline in the membership of the Geneva-based International Emissions Trading Associations (IETA) since the climate talks reached deadlock in Copenhagen in 2009 and carbon-trading platforms such as Intercontinental Exchange Inc. folded up when the Chicago Climate Exchange (CCX) itself collapsed at the end of 2010.
What happened and what lessons can be learned from these debacles?
Carbon ‘offsets’ - the backbone of the Kenyan ACX - are supposed to work like this: a series of projects are implemented to take planet-warming carbon out of the atmosphere, which are then subjected to a complex set of measurement, reporting and verifying (MRV) procedures. These projects would receive ‘carbon credits’ that would be sold to polluters who could neutralise or ‘offset’ their own pollution by buying these credits.
The creation of carbon-offset projects can include a large number of players. The project can be ‘owned’ by an organisation, company or individuals. Local communities will be impacted if the project depends on utilising their time, resources or land. Several other entities will also be involved, such as project design consultants who ensure that the project follows an acceptable MRV methodology, project validators who ensure that the MRV is valid and meets a certain accepted standard, and project verifiers to ensure that the MRV methodology is being followed properly. The project then either receives ‘certified emissions reduction’ credits (CERs) or ‘voluntary emissions reduction’ credits (VERs), depending on whether the project is meant to meet mandatory ‘compliance’ targets of the UN climate treaty or feed into the voluntary carbon market. The cost of setting up such projects can therefore be substantial.
A polluter in an industrialised country can buy these CER credits to offset emissions, and hence continue polluting. In reality, however, these credits can be bought and resold in poorly regulated carbon exchanges as much as a hundred times through complex financial instruments called ‘derivatives’. A buyer without any obligations to reduce emissions can buy these offset credits, package them with credits from other projects and trade them as a carbon emissions derivative for purely speculative purposes. The credits are sold even before there is any proof that such projects have actually resulted in reducing greenhouse gases.
Such trade involves numerous middlemen in the form of traders and various forms of investment firms. Similar derivatives in still-unregulated over-the-counter markets (OTC) led to the infamous Wall Street collapse in 2008 and the ensuing global financial crisis, and regulators still have not developed adequate rules to govern these markets.
EUROPEAN AND US EXPERIENCE WITH CARBON EXCHANGES
In order to put the ‘promise’ of the ACX as an agent for development and environmental good in perspective, let’s examine first the largest climate exchange in the world: The European Emissions Trading Scheme (ETS).
The ETS was intended to help Europe meet its binding commitments under the Kyoto Protocol to reduce GHGs. Launched in 2005, the ETS resulted in increased, rather than decreased, greenhouse gas emissions, while the price of carbon itself crashed to as low as one euro per tonne from a high of about 30 euros. Several complex reasons can be cited for this, but a very simple reason was the over-allocation of pollution permits that were given, at no cost, to major polluters, which were then traded and re-traded in financial markets. In other words, there was no demand for permits from polluters who faced no strict requirement to reduce emissions.
The ETS has shown through its six-year history how susceptible it is to fraud, malpractice and Internet hacking. Just this February, the ETS had to shut down its trading because cyber criminals had hacked into the system, stealing 40 million USD worth of pollution permits and reselling them. The European Law Enforcement Agency (Europol) estimates that up to five billion euros of European tax revenue (approximately 7.1 billion USD) has been lost due to fraud in value-added tax evasion through carbon trading.[2]
The two major ventures related to carbon exchanges in the United States have also suffered major blows. Just the week before the ACX was launched, the San Francisco Superior Court ordered the state of California to suspend its proposed cap-and-trade system, which includes offsets, because it was in violation of environmental laws in California. The judge ruled that the California Air Resource Board had not sufficiently considered alternatives to the cap-and-trade system and needed to do so.
Just months prior, the United States’ only national climate exchange - the Chicago Climate Exchange (CCX) - shut down its operations at great cost to farmers who invested in it in anticipation of offset credits. The Chicago Climate Exchange shut down because large investors were not interested in a voluntary market and had counted on US legislation to enact a mandatory market. When the climate bill in the US Congress failed, there was little incentive for companies to continue to buy and sell credits in the market.
Emerging controversies in Australia are also relevant for the ACX. The Australian ‘Carbon Farming Initiative’ is being proposed as a major offset scheme for Australian polluters and those abroad to meet Kyoto targets. Market analysts doubt whether there would be an adequate supply of credits for sufficient trading in the initial years.
Concerns are also being raised regarding the environmental integrity of such an offset scheme that could lead to pressure on water and land, given that the CFI is supposed to derive reduction in GHGs through activities such as fertiliser management, reduced livestock emissions, soil carbon and reforestation.[3]
LESSONS FOR THE ASX: WITHER DEVELOPMENT AND REDUCED RISKS OF CLIMATE CHANGE?
The ACX would sell pollution ‘credits’ generated on African soil through individual projects, thereby enabling companies in the industrialised world to continue polluting and yet comply with their governments’ commitments to meet international and national targets for emissions reductions. ACX registered projects would also aim to generate a sufficient supply of projects to be made available for carbon trading on voluntary markets.
It is now common knowledge that the Cancún climate pledges could lead to the warming of the planet by four degrees Celsius or more. The latest science shows that even a global average warming of two degrees will be devastating for life on Earth. For much of sub-Saharan Africa, a two-degree global average temperature rise would mean even higher temperatures on the ground.
This spells disaster for food security in Africa - with devastated cropping cycles, water scarcity and widespread famine. Carbon offsets are a major exit strategy for polluters to continue polluting while shifting the burden of GHG reductions to African nations that have the lowest carbon footprint on the planet. In the end, the impacts of the failure of this UNFCCC approved ‘market mechanism’ will be acutely felt by the African people who stand to suffer greatly from a warming planet.
In addition, the types of offset projects envisioned for Africa primarily entail ‘land-based carbon’ projects, either through avoiding deforestation, reforesting or reducing emissions from agriculture. This means that projects are banking on receiving credit for changing land-use practices in forests and soils to store carbon relative to what would have happened in a business-as-usual (baseline) scenario.
However, trading carbon from land-based offsets is met with major scepticism by real financial investors because of serious scientific challenges in measuring carbon in soils and forests and understanding previous and future land-use changes.
Moreover, because the bulk of forest and agriculture land is used by local communities, significant risks are associated with land tenure issues and social conflicts, with research showing an increase in land grabs of large areas of customary land in Africa by agribusiness and government agencies.[4]
A recent study[5] by experts in derivatives trading platforms also shows that land-based offsets will meet significant barriers to investment. This is because the land-based asset itself is difficult to define and therefore trade because of the high degree of uncertainty in measuring, reporting and verifying (MRV) land-based carbon.
The costs and controversies associated with land-based offsets are also likely to make them a risky venture. It will therefore lead to control of the trade by very few companies given the monopolistic nature of commodity markets (carbon is a commodity) and because very few companies will be able to finance the risk associated with this trade.
The experts therefore conclude that the market for land-based offsets will either fail because of the numerous difficulties inherent in land based carbon accounting or lead to ‘the creation of a substandard, risky and ultimately destructive forest carbon market.’[6] The same applies to agricultural soil carbon where the underlying ‘tradable’ asset is even more varied and uncertain.
Finally, given that energy markets have a high degree of price correlation with carbon, excessive speculation in carbon is likely to adversely affect food and commodity prices.[7]
Bundling carbon derivatives into index funds with other commodities would also tend to destabilise prices, as would trading carbon derivatives without position limits (limits on the number of contracts held). Highly volatile oil and food commodity prices not only have a significant impact on the economic stability of net oil and food-importing countries but also on the agriculture sector as a whole, given the high dependence on fossil fuels for synthetic fertilisers, transport, distribution and storage. Expanding carbon markets that are structurally highly susceptible to fraud and speculation and part of commodity markets, particularly through index funds, thus has serious implications for food production and food security in Africa.
SHOW ME THE MONEY
The most often quoted World Bank figure for the global carbon market is 144 billion USD. However this figure largely includes derivatives trading. Out of this, only around 3,370 million USD goes to offset project developers as total revenue (not profit) with a much more uncertain fraction of that going to local communities who may host the project.[8] The FAO estimates that close to 17 billion euros (approximately 24.3 billion USD) could be required in transaction costs alone to set up soil carbon sequestration projects from 2010 - 2030, diverting scarce resources away from critical adaptation needs.
According to the World Bank’s own estimates adaptation costs to developing countries will range between 2.5 and 2.6 billion USD per year from 2010 -2050.[9] Experts monitoring Reduced Emissions from Deforestation and Degradation (REDD) schemes also find that important institutional and public resources are being diverted to create the technical capacity and infrastructure required to create offset credits to trade on potential forest carbon markets. Rather than diverting scarce resources, this money could be invested directly into institutions and communities to build resilience against climate change and directly address deforestation.
CALCULATING THE COSTS
The Africa Carbon Exchange is being publicised as the next big ticket that will help solve the development gap in Africa, with plans to replicate the exchange in other regional blocs such as the East African Community (EAC), Common Market for Eastern and Southern Africa (COMESA) and the Economic Community for West African States (ECOWAS).
However, before that happens, governments and their parliaments should examine:
- ongoing challenges and investment trends in climate exchanges in industrialised countries,
- investor aversion to land-based offsets,
- environmental and food security risks to Africans by allowing industrialised countries to continue polluting, and
- resources needed for African countries to adapt to climate change.
There is a real danger that carbon offsets will become a major policy distraction and capital diversion from the real climate change challenges that Africa faces: the urgent task of climate change adaptation and ensuring resilience of communities.
ALTERNATIVES EXIST
A financial transaction tax[11] on financial trading, feed-in tariff policies through which clean solar and wind energies are incentivised, and the use of International Monetary Fund (IMF) special drawing rights[12] by developing countries are just some of many alternatives being proposed to both finance the reversal of climate change and to help developing countries adapt to it. Industrialised countries have a legal, historical and moral responsibility to curb their domestic emissions at home and help finance adaptation in Africa and elsewhere. Let’s not let carbon trading and the promises of a speculative derivatives market distract us from these critical goals.
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* Sharma's work focuses on international trade and financial institutions, and international food and agriculture policies, with a particular interest and focus on India and South Asia. This article is sourced from The Institute for Agricultural and Trade Policy.
* Please send comments to editor@pambazuka.org or comment online at Pambazuka News.
REFERENCES:
[1]. B. Sills, Global Carbon Credits Die as Smart Money Backs Indian RECs, Bloomberg Markets Magazine, March 22, 2011. Available at [url=http://bloom.bg/igjsR9[/url]
[2]. World Watch Institute, A Brief History of Fraudulent Activity on the EU ETS, 2011.
[3]. Point Carbon, Australian Greens Challenge Offset Mechanism, March 24, 2011.
[4]. L. Cotula, Land deals in Africa: What is in the contracts?, IIED, London. Available at http://pubs.iied.org/12568IIED.html
[5]. Munden Project, REDD and Forest Carbon: Market-based Critique and Recommendations, 2011. Available at [url=http://bit.ly/kibEbS[/url]
[6]. Ibid.
[7]. In an orderly market, carbon prices should rise with energy prices but haven’t due to the aforementioned crimes, poor legislative design and MRV controversies, and costs.
[8]. FERN, Designed to fail? The Concepts, Practices and Controversies Behind Carbon Trading, 2010.
[9]. FAO, Climate Smart Agriculture: Policies, Practices and Financing for Food Security, Adaptation and Mitigation, 2010, 22.
[10]. FERN and Forest Peoples Programme, Smoke and Mirrors: A Critical Assessment of the Forest Carbon Partnership Facility, February 2011.
[11]. See European Parliament, Committee on Economic and Monetary Affairs, DRAFT REPORT on Innovative Financing at Global and European Level, also known as the ‘Podimata Report,’ October 2010. Accessed at:http://bit.ly/joj3cs.
[12]. See ActionAid, Using Special Drawing Rights for Climate Finance, Discussion Paper, February 2010.
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