[SustainableTompkins] The Carbon Folly

[GayNicholson at aol.com]

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The Carbon Folly  
By Emily Flynn Vencat  
Newsweek  
Monday 12 March 2007 Issue  
Policymakers have settled on "emissions trading" as  their favorite 
global-warming fix. But it isn't  working.
Global warming isn't the only debate that may  be over. Governments and 
policymakers around the world also seem to have  settled on a solution. "A 
responsible approach to solving this crisis," Al  Gore said recently at New York 
University's Law School, would be "to  authorize the trading of emissions ... 
globally." Emissions trading, also  called carbon trading, is being expanded in the 
European Union and Japan.  And in many places where it's yet to take hold, 
like Sacramento, Sydney  and Beijing, politicians are embracing it. Nicholas 
Stern, former chief  economist of the World Bank and Europe's foremost political 
expert on  global warming, predicts that the value of carbon credits in 
circulation,  now about $28 billion, will climb to $40 billion by 2010.  
This should be great news for the environment,  but many experts have their 
doubts. The notion that emissions trading is  going to make a significant dent 
in global warming is deeply flawed, they  say. Current emissions-trading 
schemes have proved to be little more than  a shell game, allowing polluters in the 
developed world to shift the  burden of making cuts onto factories in the 
developing world. Too often  factory owners use the additional profits banked 
from carbon credits to  expand their dirty factories. Even more worrying, 
emissions trading may  have set back the battle against climate change by diverting 
investment  from renewable-energy technology, which arguably is essential to 
any  long-term solution. So far, the real winners in emissions trading have  
been polluting factory owners who can sell menial cuts for massive  profits, and 
the brokers who pocket fees each time a company buys or sells  the right to 
pollute. "Carbon trading is a promising strategy for reducing  greenhouse-gas 
emissions," says Dan Esty, director of Yale's Center for  Environmental Law and 
Policy, "but the current structures have serious  flaws."  
Part of the appeal of emissions trading is that  it is a market mechanism 
that's easy to implement. By turning the right to  release greenhouse gases into 
a commodity that can be traded like gold or  sugar, governments need only set 
caps on the amount of pollution they'll  allow and let the invisible hand of 
capitalism do the rest. But emissions  trading is proving to be a grossly i
nefficient way of cutting emissions in  the developing world. For instance, under 
the Kyoto Protocol, the  U.N.-brokered agreement that set limits for carbon 
and other emissions,  companies in nations with Kyoto targets can avoid making 
expensive cuts to  their own emissions by paying companies in countries like 
China to make  cuts instead. This approach has been a boon to developing-world 
factory  owners and international brokers, but the impact on the environment is 
 more ambiguous. Since developing countries don't have any caps on  
emissions, companies can take the handsome payments they receive from  carbon cuts and 
use the money to build new fossil-fuel and coal factories.  India's Gujarat 
Fluorochemical, for instance, made €27 million in the last  three months of 2006 
- triple its total company earnings compared with the  same period in 2005 - 
thanks to carbon credits. That boost in profits will  no doubt help fund its 
new plant for making Teflon and caustic soda, both  polluting substances.  
One reason emissions trading is so politically  popular is that it's 
vulnerable to lobbying. The European Union's  Emissions Trading Scheme, which 
accounted for two thirds of the global  carbon trading that went on last year, or $20 
billion, is a case in point.  On paper, the scheme is a zero-sum game: the 
European Commission issued a  limited amount of carbon credits. These caps are 
supposed to bring  emissions down across the EU to a level 8 percent below those 
of 1990 by  2012. But most European governments, under pressure from 
lobbyists, were  too generous in handing out targets to specific industries. As a 
result,  many companies weren't forced to make any cuts, or buy any credits.  
Indeed, in May 2006, when inspectors began checking the books, they found  a 
surplus of carbon credits which, as soon it became public, triggered a  market 
collapse.  
The scale of the inefficiency of emissions  trading was revealed in a study 
published in the scientific journal Nature  last month. The nearly $6 billion 
already spent on projects to curb  emissions of HFC-23, a potent greenhouse 
gas, had the same impact on the  environment as would $132 million worth of 
equipment upgrades. Last year  companies in Kyoto countries paid about $3 billion 
to some of the worst  carbon polluters in the developing world. What impact did 
this money have?  Shri Bajrang, an iron factory in a gritty stretch of flat 
scrubland near  Raipur on the main route between Mumbai and Kolkata, is a 
typical case. In  the nearby village of Bendri, the morning sun is barely 
discernible  through the acrid haze, the trees are black with soot and women wash  
clothes in polluted ponds. Respiratory illnesses such as tuberculosis,  which now 
afflicts about 15 percent of the locals at the village, are on  the rise. Last 
year, to generate carbon credits it could sell to European  firms, the 
factory's owners fitted the plant with waste-heat-recovery  boilers and turbine 
generators, which will reduce the amount of pollution  it releases by 107,000 tons 
a year for the next decade - which Shri  Bajrang puts at 12 percent of its 
total emissions. "Put bluntly, the  [United Nations'] carbon-credit scheme is a 
failure," says Larry Lohmann  of London-based environmental and social-justice 
think tank Corner House.  
Emissions trading has also failed to stimulate  investment in new green 
technologies. While trading funnels billions of  dollars of international 
environmental investment money into companies  like Shri Bajrang, renewable-energy 
projects aren't receiving funding  because they're more costly. Indeed, only 2 
percent of the United Nations'  trading projects involve renewable energy like 
hydro dams and wind farms,  and communities that preserve forests and follow 
other ecofriendly  practices are ignored. "The only solution is to stop the 
industry," says  Ram Naran Nishad, a farmer in Bendri whose tomato yields have 
decreased by  70 percent since the factory's arrival.  
Many experts think a carbon tax would be the  better alternative. It's more 
straightforward and jargon-free, and would  prevent much of the "gaming of the 
system" that's plaguing carbon trading.  The problem, of course, is that new 
taxes are unpopular with voters. "A  carbon tax would be far superior," says 
Yale's Esty, "but trading is a  good second-best solution."  
Legislators around the world are trying to fix  the current trading schemes. 
Europe has set stricter carbon quotas for  next year, U.S. politicians are 
talking about auctioning carbon credits  instead of giving them away, and U.N. 
officials want to beef up  renewable-energy projects. Emissions trading will 
succeed to the extent  that world leaders can muster the political will to make 
the caps strict,  and make them stick.  
 
____________________________________
With Chris Stowers in Raipur.  
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----------------------------------------------------
Gay  Nicholson, Ph.D. 

607-533-7312 (home office)
607-279-6618  (cell)

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gaynicholson at aol.com

Sustainable Tompkins 
Program  Coordinator 
w_ww.sustainabletompkins.org_ (http://www.sustainabletompkins.org/) 

Southern Tier Energy$mart Communities
Regional  Coordinator
Cornell Cooperative Extension of Tompkins County
615 Willow  Ave., Ithaca, NY 14850
agn1 at cornell.edu

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