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« An invitation to return | Main | Agriculture in the spotlight at Bonn climate talks »

June 15, 2011

Carbon emissions trading at the Bonn climate change negotiations: alive but not so well

Pollution Lying among the position papers of the International Emissions Trading Association (IETA) at the June 6–18 climate change negotiations in Bonn, Germany, was a badge stating, “Cap and Trade – Alive and Well (and not just in Europe).” IETA’s more than 170 organizations include large industrial firms subject to a cap on their carbon emissions, as well as financial firms that trade carbon emissions in metric tonnes, mostly under the European Union’s Emissions Trading Scheme (ETS). Indeed, the ETS provides 97 percent of global demand for carbon trading, according to the World Bank’s “State and Trends of Carbon Markets 2011.” Nevertheless, IETA’s members see a near term future in voluntary carbon markets, as well as in an expansion of the ETS. As corporations with deep financial resources, they can afford to wait for the U.S. Congress to pass a climate change bill that includes the creation of a tax-payer financed, mandatory cap-and trade-program. In the Waxman-Markey bill passed by the House of Representatives in June 2009, but not taken up in the U.S. Senate, permits to pollute worth tens of billions of dollars are given to the largest industries while they adjust their operations to a gradually, if all too slowly, tightening limit on greenhouse gas emissions. Hence the message on IETA’s badge, “Cap and Trade – Alive and Well.”

IATP and the British NGO FERN co-organized a June 14 side event, “New Market Mechanisms, Land-Based Offsets and Alternatives: Critical Considerations,” for the Bonn negotiations. The overall message from five speakers, including IATP’s Shefali Sharma and Steve Suppan, was that there are sound scientific and financial reasons that cap and trade is not well. An expansion the trading of carbon emissions offset projects, based on agricultural practices to sequester carbon in the soil, provides almost no financial benefits to farmers. There are many scientific and methodological disputes about measuring how much carbon can be sequestered in soil, whether that sequestration is permanent and where to set a baseline from which to measure greenhouse gas reductions in a given area of land.

According to Shefali’s case study in progress of the World Bank’s poster child project for carbon sequestration, eventually 60,000 farmers in Kenya will be paid about a $1 USD (one dollar!) a year each for twenty years to use good agricultural practices to reduce carbon emissions from their soils. Instead of paying carbon project design consultants about $1.5 million to design the carbon accounting system that would result in offset credits to be traded largely under the ETS, why not pay the $1.5 million to farmers to allow them to adapt to the droughts, floods and other afflictions that are affecting agricultural production and food security?

The exploitation of farmers to produce—for almost nothing—offset credits whose purchase by polluters allow them to manage the costs of their polluting, without necessarily adopting low-carbon emissions technologies and otherwise cleaning up their operations, is awful. Worse still is that the World Bank will be the interim trustee of the U.N. Framework Convention on Climate Change’s (UNFCCC) Green Climate Fund (GCF) and is providing staff to help design the GCF to carry out more Kenyan like projects. Steve pointed out that like IETA, the World Bank sees carbon trading as essential to “leveraging” finance (using public money to attract private investors) for reducing GHGs and for adapting to climate change. Yet even the World Bank’s own carbon market forecasts show a very weak demand for carbon credits in the voluntary markets, and hence very weak environmental performance for reducing GHGs. The $50 million of the World Bank’s Global Environmental Facility projects for adapting to climate change pales compared to their $2.1 billion USD group of Bio-Carbon Funds, largely for the financing of offset projects for the carbon market.

Time constraints (we have to get back to the negotiations venue to find out about the governments’ debate on an agricultural work plan!) in the UNFCCC agreements are preventing us from summarizing the rich presentations of Oscar Reyes, of Carbon Trade Watch, Jutta Kill of FERN, and Kate Horner of Friends of the Earth U.S. Their presentations and related publications will be posted at the side event website. Suffice it to say that Oscar showed how the ETS is even sicker than we had thought as a source for fraudulent trading and environmental performance failure; Jutta outlined how cap and trade not only failed to reduce GHG releases from deforestation but actually incentivized that destruction in some cases; happily, Kate concluded the panel with an outline of the kinds and amounts of alternative finance to that of carbon trading that could become available to adapt to climate change and to reduce GHGs before the human and environmental suffering produced by climate change becomes irremediable.

Image used under Creative Commons license roberthuffstutter.

Steve Suppan, Institute for Agriculture and Trade Policy

Ben Lilliston

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