A Critical Conversation on Climate Change, Privatisation, and Power
A Critical Conversation on Climate Change, Privatisation, and Power
A Critical Conversation on Climate Change, Privatisation, and Power
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a critical c<strong>on</strong>versati<strong>on</strong><strong>on</strong> climate change,privatisati<strong>on</strong> <strong>and</strong> powerdevelopment dialogueno. 48 september 2006
Guest editor <strong>and</strong> authorLarry LohmannEditorsNiclas HällströmOlle NordbergRobert ÖsterberghSub-editorWendy DaviesProducti<strong>on</strong> editorsMattias Lass<strong>on</strong>Gerd Ryman-Erics<strong>on</strong>Design <strong>and</strong> layoutMattias Lass<strong>on</strong>PrintersMediaprintUddevalla, Sweden,September 2006Subscribers are kindly requested toinform the Dag Hammarskjöld Centreof any changes of address or subscripti<strong>on</strong>cancellati<strong>on</strong>s.Editorial OfficeThe Dag Hammarskjöld CentreÖvre Slottsgatan 2SE-753 10 Uppsala, SwedenFax: +46-(0)18-12 20 72E-mail: secretariat@dhf.uu.seWebsite: www.dhf.uu.seThe opini<strong>on</strong>s expressed in the journalare those of the authors <strong>and</strong> do notnecessarily reflect the views of the DagHammarskjöld Foundati<strong>on</strong>.ISSN 0345-2328This issue of Development Dialogue is thesec<strong>on</strong>d in a series of What Next projectpublicati<strong>on</strong>s. It also forms part of a new phasein the journal’s history. Development Dialoguehas been given a fresh look - a new coverdesign <strong>and</strong> a new layout. At the same time weare introducing a new <strong>and</strong> simpler numberingsystem, c<strong>on</strong>sisting of a running number al<strong>on</strong>gwith m<strong>on</strong>th <strong>and</strong> year of publicati<strong>on</strong>. Thisissue is No. 48 in the series of issues publishedsince 1972. The length of Development Dialogueissues may vary more than before. We hopethe new design of the journal will meetwith readers’ approval.Development Dialogue will c<strong>on</strong>tinue toprovide a space for pi<strong>on</strong>eering ideas, <strong>and</strong>the essential character of the journal willremain unchanged.This issue of Development Dialogue is publishedin cooperati<strong>on</strong> with the Corner House.Larry Lohmann workswith the Corner House,a small research <strong>and</strong> solidarityorganisati<strong>on</strong> in theUK. He is the co-author ofPulping the South: IndustrialTree Plantati<strong>on</strong>s <strong>and</strong> the World Paper Ec<strong>on</strong>omy(with Ricardo Carrere, 1996) <strong>and</strong> WhoseComm<strong>on</strong> Future? Reclaiming the Comm<strong>on</strong>s‚(with Sim<strong>on</strong> Fairlie, Nicholas Hildyard<strong>and</strong> Sarah Sext<strong>on</strong>, 1993), <strong>and</strong> co-editor ofThe Struggle for L<strong>and</strong> <strong>and</strong> the fate of the Forests(with Marcus Colchester, 1993). Since then,he has published articles <strong>and</strong> book chapters<strong>on</strong> climate change, l<strong>and</strong> rights, globalisati<strong>on</strong>,racism, forest c<strong>on</strong>fl icts, development,envir<strong>on</strong>mental change in Southeast Asia <strong>and</strong>the politics of cost-benefit analysis. Duringthe 1980s he lived <strong>and</strong> worked in Thail<strong>and</strong>,most of the time with n<strong>on</strong>-governmentalorganisati<strong>on</strong>s.Website: www.thecornerhouse.org.uk
C<strong>on</strong>tentsEditorial note 2Chapter 1 Introducti<strong>on</strong> – A new fossil fuel crisis 5Chapter 2 ‘Made in the USA’ – A short history of carb<strong>on</strong> trading 31Chapter 3 Less<strong>on</strong>s unlearned – Polluti<strong>on</strong> trading’s failures 71Property rights <strong>and</strong> privatisati<strong>on</strong> 73Emissi<strong>on</strong>s trading vs. structural change 101The special problems of carb<strong>on</strong> projects 137Where’s the enforcement? 187Narrowing the discussi<strong>on</strong> 190Summing up – Market ideology vs. climate acti<strong>on</strong> 198Chapter 4 Offsets – The fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 219The beginnings – A story from Guatemala 222From the Netherl<strong>and</strong>s to the Andes – A tale from Ecuador 226The story c<strong>on</strong>tinues – Carb<strong>on</strong> forestry in Ug<strong>and</strong>a 237Costa Rica – ‘Envir<strong>on</strong>mental services’ pi<strong>on</strong>eer 247India – A taste of the future 254Sri Lanka – A ‘clean energy’ project that was not so clean 272Thail<strong>and</strong> – Biomass in the service of the coal <strong>and</strong> gas ec<strong>on</strong>omy 280South Africa – Carb<strong>on</strong> credits from the cities 287Brazil – H<strong>and</strong>outs for repressi<strong>on</strong> as usual 302Photo Essay Plantar vs. local people – Two versi<strong>on</strong>s of history 309Chapter 5 Ways forward 329Appendix The Durban Declarati<strong>on</strong> <strong>on</strong> carb<strong>on</strong> trading 356
Editorial NoteIt is now accepted worldwide that the globe is warming to such an extentthat the livelihoods of large swathes of the world’s populati<strong>on</strong> are underserious threat. Violent <strong>and</strong> frequent storms wreck people’s habitats; unpredictableweather drastically changes c<strong>on</strong>diti<strong>on</strong>s for agriculture; newhealth threats emerge. As a result, awareness of global warming is increasinglyinfluencing thinking in both the South <strong>and</strong> the North.The ir<strong>on</strong>y is, however, that some of the resp<strong>on</strong>ses to the global threatof climate change are likely to cause new <strong>and</strong> severe problems, which,in a worst-case scenario, could actually increase global warming. Asthis special report shows, this seems to be the case with carb<strong>on</strong> trading– a gr<strong>and</strong>iose market scheme set up as the world’s primary resp<strong>on</strong>seto the crisis of climate change.The main cause of global warming is rapidly increasing carb<strong>on</strong> dioxideemissi<strong>on</strong>s – primarily the result of burning fossil fuels – despiteinternati<strong>on</strong>al agreements to reduce such emissi<strong>on</strong>s. The trouble is thatdespite being aware of the serious situati<strong>on</strong>, very few decisi<strong>on</strong>- makersare ready to tackle the problem at its roots. Instead of reducing theextracti<strong>on</strong> of fossil fuels <strong>and</strong> searching for other soluti<strong>on</strong>s, currentcarb<strong>on</strong>-trading policies, in practice, favour the further exploitati<strong>on</strong> ofthese fuels. Furthermore, new tree plantati<strong>on</strong>s, which are claimed asa means of mitigating the c<strong>on</strong>sequences of increased carb<strong>on</strong> dioxidepolluti<strong>on</strong>, often drive people out of their traditi<strong>on</strong>al living grounds<strong>and</strong> destroy biological diversity.This special report forms part of the Dag Hammarskjöld Foundati<strong>on</strong>’sWhat Next project. It focuses <strong>on</strong> carb<strong>on</strong> trading <strong>and</strong> is intended to influencecurrent climate politics. In the debate <strong>on</strong> the Kyoto Protocolfew actors have expressed a critical view. It is high time, for the purposesof debate <strong>and</strong> policy-making, to put the spotlight <strong>on</strong> the coreproblem – fossil fuel extracti<strong>on</strong> <strong>and</strong> c<strong>on</strong>sumpti<strong>on</strong>.This publicati<strong>on</strong>, therefore, takes a broad look at several dimensi<strong>on</strong>s ofcarb<strong>on</strong> trading. It analyses the problems arising from the emerging globalcarb<strong>on</strong> market pertaining to the envir<strong>on</strong>ment, social justice <strong>and</strong> humanrights, <strong>and</strong> investigates climate mitigati<strong>on</strong> alternatives. It provides a shorthistory of carb<strong>on</strong> trading <strong>and</strong> discusses a number of ‘less<strong>on</strong>s unlearned’.Nine case studies from different parts of the world provide examples ofthe outcomes – <strong>on</strong> the ground – of various carb<strong>on</strong> ‘offset’ schemes.The publicati<strong>on</strong> project has matured over time. It was first discussedin c<strong>on</strong>necti<strong>on</strong> with an early Dag Hammarskjöld What Next seminarin July 2001 <strong>on</strong> ‘Addressing Nanotechnology <strong>and</strong> Other EmergingTechnologies in the ETC Century’.The editor <strong>and</strong> main author, Larry Lohmann, who works with TheCorner House – a small research <strong>and</strong> solidarity organisati<strong>on</strong> located
editorial note 3in Dorset, UK – pointed the Foundati<strong>on</strong> to the increasing c<strong>on</strong>cernabout carb<strong>on</strong> trading <strong>and</strong> the need for c<strong>on</strong>solidati<strong>on</strong> of critical perspectives.As a result, the Dag Hammarskjöld Foundati<strong>on</strong>, in collaborati<strong>on</strong>with several other civil society organisati<strong>on</strong>s, organised aninternati<strong>on</strong>al seminar in South Africa in October 2004. The seminarled to the ‘Durban Declarati<strong>on</strong> <strong>on</strong> <strong>Climate</strong> Justice’ <strong>and</strong> gave rise tothe Durban Group for <strong>Climate</strong> Justice, which is now playing an increasinglyimportant role in climate politics. The meeting was alsothe starting point for the writing of this report. At various times in2005 <strong>and</strong> 2006, Larry Lohmann worked <strong>on</strong> the project at the DagHammarskjöld Foundati<strong>on</strong> as a Scholar-in-Residence.Members of the Durban Group have played an important role in theprocess by c<strong>on</strong>tributing to <strong>and</strong> commenting <strong>on</strong> the text. An internati<strong>on</strong>alnetwork of independent organisati<strong>on</strong>s, individuals <strong>and</strong> people’smovements, the Durban Group is committed to helping build a globalgrassroots movement for climate justice, mobilising communitiesaround the world <strong>and</strong> pledging solidarity with people opposing carb<strong>on</strong>trading <strong>on</strong> the ground.This special report is a thorough, well-documented work, the purposeof which is to inspire critical <strong>and</strong> far-reaching discussi<strong>on</strong>. Although thetopic is complex, it is our hope that the wealth of informati<strong>on</strong> the reportc<strong>on</strong>tains <strong>and</strong> the dialogue form in which it is written will c<strong>on</strong>tribute tobroader underst<strong>and</strong>ing of the problem <strong>and</strong> deeper engagement in <strong>on</strong>eof the most important issues of our time.* * *The Foundati<strong>on</strong>’s What Next project, of which this special report ispart, aims to c<strong>on</strong>tribute to the discussi<strong>on</strong> of crucial development issuesin the next few decades. A diverse group of c<strong>on</strong>cerned people has cometogether to engage in intense dialogue. The project is a sequel to theFoundati<strong>on</strong>’s What Now: Another Development initiative of 1975.The What Next deliberati<strong>on</strong>s are being compiled in several publicati<strong>on</strong>s.In additi<strong>on</strong> to this special report, there will be a number ofvolumes of What Next papers. The first, entitled Setting the C<strong>on</strong>text,was published in July 2006. Volume II <strong>and</strong> III will follow. The WhatNext Report 2005-2035, to be published before the end of 2006, draws<strong>on</strong> the major debates of the What Next process. It presents a numberof possible scenarios for the next three decades, <strong>and</strong> includes c<strong>on</strong>cernsabout various ‘soluti<strong>on</strong>s’ to climate change such as large-scale ‘geoengineering’schemes as technological fixes to the problem.Olle Nordberg, Niclas Hällström, Robert Österbergh
Chapter 1Introducti<strong>on</strong>A new fossil fuel crisisIn which the growing climate crisis is traced mainly to the mining of coal,oil <strong>and</strong> gas; the dangers to survival <strong>and</strong> livelihood are outlined; the politicalnature <strong>and</strong> implicati<strong>on</strong>s of the problem explored; <strong>and</strong> reas<strong>on</strong>able <strong>and</strong>unreas<strong>on</strong>able soluti<strong>on</strong>s sketched.We’ve all heard about climate change. But is it really something we need to beworried about?Yes. The climatic stability that humans have grown used to over thelast few centuries may be ending so<strong>on</strong>er than we think. The resultsare likely to include intensified droughts <strong>and</strong> floods, changed weatherpatterns, agricultural breakdown, ecosystem disrupti<strong>on</strong>, rising sealevels, epidemics, <strong>and</strong> social breakdowns that ultimately threaten thelives or livelihoods of hundreds of milli<strong>on</strong>s of people.What’s the cause?Like many other social problems, climate change is closely tied tothe burning of oil, coal <strong>and</strong> gas. Fossil carb<strong>on</strong> is being taken out ofthe ground, run through combusti<strong>on</strong> chambers, <strong>and</strong> transferred toa more active <strong>and</strong> rapidly circulating carb<strong>on</strong> pool in the air, oceans,vegetati<strong>on</strong> <strong>and</strong> soil. Some of this active carb<strong>on</strong> builds up in the atmospherein the form of carb<strong>on</strong> dioxide, trapping more of the sun’sheat, warming the earth <strong>and</strong> destabilising the climate. The carb<strong>on</strong>build-up – up to 90 per cent of which has come from the North – hasbeen made worse, especially over the last century, by unchecked l<strong>and</strong>clearance <strong>and</strong> the spread of industrial agriculture. 1The difficulty is that fossil carb<strong>on</strong> is a lot easier to burn than it is tomake. It took milli<strong>on</strong>s of years for plants to extract the carb<strong>on</strong> fromthe atmosphere that makes up today’s coal, oil <strong>and</strong> gas deposits. It’staking <strong>on</strong>ly a few centuries to burn it. Today, the world combusts 400years’ worth of this accumulated, compressed biological matter everyyear, 2 three to four times more than in 1950. This carb<strong>on</strong> will not beable to lock itself safely up underground again as coal, oil or gas formany, many millennia.
6 development dialogue september 2006 – carb<strong>on</strong> tradingAren’t there any other ways that the earth can reabsorb this carb<strong>on</strong>?Yes, but they take even l<strong>on</strong>ger. The weathering of silicate rocks –aided by water <strong>and</strong> the activity of plants – removes some carb<strong>on</strong> dioxidefrom the atmosphere. Carb<strong>on</strong>ates accumulating <strong>on</strong> the sea floorthrough weathering, runoff or the accumulati<strong>on</strong> of carb<strong>on</strong> in theshells of living organisms are eventually pushed under c<strong>on</strong>tinentalplates at ocean edges, finding their way to the atmosphere again involcanic activity. This process, taking milli<strong>on</strong>s of years, isn’t going tosolve the current crisis.So the carb<strong>on</strong> that comes out of the ground stays out of the ground.For a very l<strong>on</strong>g time. And <strong>on</strong>ce it makes its way to the surface in bigenough quantities, there’s no way of stopping it from building up inthe atmosphere. Before the industrial revoluti<strong>on</strong> began there were<strong>on</strong>ly around 580 billi<strong>on</strong> t<strong>on</strong>nes of carb<strong>on</strong> in the atmosphere. Todaythe figure is closer to 750 billi<strong>on</strong> t<strong>on</strong>nes – the highest in hundreds ofthous<strong>and</strong>s of years.Why can’t trees absorb enough carb<strong>on</strong> dioxide to keep it out of the air?Trees can absorb some of it. So can the world’s oceans, grass, soil <strong>and</strong>fresh water. But they can’t absorb enough of it, fast enough, to keepit from accumulating in the atmosphere. Nor can they hold <strong>on</strong>to itfor very l<strong>on</strong>g. Once above ground, carb<strong>on</strong> c<strong>on</strong>stantly flows back <strong>and</strong>forth am<strong>on</strong>g vegetati<strong>on</strong>, water, soils <strong>and</strong> air.The oceans, for instance, can take up just so much of the new carb<strong>on</strong>pouring up from underground. They have already absorbed a thirdof their ultimate potential, <strong>and</strong> the new carb<strong>on</strong> dioxide dissolving inthem is turning them more acid. 3Figure 1. Human-caused CO 2 build-up in the oceans is c<strong>on</strong>centrated in the North Atlantic.Source: US Nati<strong>on</strong>al Oceanic <strong>and</strong> Atmospheric Administrati<strong>on</strong>.
introducti<strong>on</strong> – a new fossil fuel crisis 7Plants <strong>and</strong> soil are an even more limited receptacle for fossil carb<strong>on</strong>than the oceans. Their storage potential is far less than the carb<strong>on</strong>c<strong>on</strong>tent of the coal, oil <strong>and</strong> gas still underground (see Table 1). Living<strong>and</strong> dead biomass hold <strong>on</strong> the order of 2,000 billi<strong>on</strong> t<strong>on</strong>nes of carb<strong>on</strong>,while fossil fuel companies are still planning to transfer around twiceas much fossil carb<strong>on</strong> to the surface. In additi<strong>on</strong>, plants <strong>and</strong> soil can<strong>on</strong>ly hold <strong>on</strong>to carb<strong>on</strong> for a short while before releasing it again tothe air, water or soil. Finally, how much carb<strong>on</strong> l<strong>and</strong> vegetati<strong>on</strong> willabsorb or emit in the future is highly uncertain. 4Table 1. The Earth’s Carb<strong>on</strong> Pools (billi<strong>on</strong> t<strong>on</strong>nes)Atmosphere 720-760Oceans 38,400-40,000Rock (mainly underground) 75,000,000L<strong>and</strong> biosphereliving biomass 600-1,000dead biomass 1,200Fresh water 1-2Fossil fuelscoal 3,510oil 230gas 140other 250Annual transfer of fossil carb<strong>on</strong>7+to above ground carb<strong>on</strong> poolsSources: P. Falkowski et al., ‘The Global Carb<strong>on</strong> Cycle: A Test of Our Knowledge ofEarth as System’, Science 290, 13 October 2000; US Energy Informati<strong>on</strong> Administrati<strong>on</strong>.Estimates of the amount of unmined fossil fuels are all highly c<strong>on</strong>troversial. Muchhigher estimates for oil (670 billi<strong>on</strong> t<strong>on</strong>nes) <strong>and</strong> gas (503 billi<strong>on</strong> t<strong>on</strong>nes) are given, forexample, by Hans-Holger Rogner. 5 The US Geological Survey estimates about 360 billi<strong>on</strong>t<strong>on</strong>nes of carb<strong>on</strong> to lie in ‘recoverable’ oil. 6So the above-ground carb<strong>on</strong> pool in the oceans, vegetati<strong>on</strong> <strong>and</strong> soil is like abathtub with the drain plugged. As l<strong>on</strong>g as the tap stays <strong>on</strong>, the water justkeeps overfl owing.Yes. Or to make what might be a slightly better comparis<strong>on</strong>, youmight look at the earth’s above-ground carb<strong>on</strong>-cycling capacity,minus the atmosphere, as a dumping ground that has the ability torecycle a certain amount of the waste that is put into it, but no more.According to <strong>on</strong>e estimate, between 1850 <strong>and</strong> 1995, a total of 368billi<strong>on</strong> t<strong>on</strong>nes of carb<strong>on</strong> were released globally into the atmospherethrough human activities. Some 208 billi<strong>on</strong> t<strong>on</strong>nes were absorbedinto the oceans <strong>and</strong> into vegetati<strong>on</strong> <strong>and</strong> soils, leaving an extra 160 billi<strong>on</strong>t<strong>on</strong>nes in the atmosphere. 7
8 development dialogue september 2006 – carb<strong>on</strong> tradingFigure 2. Atmospheric carb<strong>on</strong>Source: World Resources InstituteAtmospheric C<strong>on</strong>centrati<strong>on</strong>s ofCarb<strong>on</strong> Dioxide, year 1000-2003Parts Per Milli<strong>on</strong>s By Volume4003803603403203002802602402202001000 1200 1400 1600 1800 2000Source: Scripps, ORNL, <strong>and</strong> IPCCGlobal Carb<strong>on</strong> Emissi<strong>on</strong>s fromFossil Fuel Burning, year 1751-2003Milli<strong>on</strong> T<strong>on</strong>s Carb<strong>on</strong> Equivalent8,0007,0006,0005,0004,0003,0002,0001,00001750 1800 1850 1900 1950 2000Source: Worldwatch, ORNL, BPThe current rate of accumulati<strong>on</strong> in the atmosphere is over 1.6 extrabilli<strong>on</strong> t<strong>on</strong>nes of carb<strong>on</strong> every year. And <strong>on</strong> current trends, manytimes more fossil carb<strong>on</strong> will be added to the atmosphere over thiscentury than has been added since the industrial era began.What would have to be d<strong>on</strong>e to stop the overfl ow?Well, there’s already far more carb<strong>on</strong> dioxide in the atmosphere thanthere has been at any other time in the last half milli<strong>on</strong> years – 380parts per milli<strong>on</strong>, as compared to pre-industrial levels of 280 parts permilli<strong>on</strong>. 8 So a lot of damage has already been d<strong>on</strong>e.According to the Intergovernmental Panel <strong>on</strong> <strong>Climate</strong> <strong>Change</strong>(IPCC) in 1990, in order to stabilise atmospheric c<strong>on</strong>centrati<strong>on</strong>s ata level less than double that of preindustrial times, greenhouse gasemissi<strong>on</strong>s would have to be reduced by 60–80 per cent.So at present we’re acting as if we have something like two <strong>and</strong> a half to fi vetimes the amount of carb<strong>on</strong> dump space than we really have.Well, it’s probably not possible to estimate with any certainty theearth’s capacity to recycle transfers of fossil carb<strong>on</strong> with no remainder.But there’s no questi<strong>on</strong> that the current rate of overflow is huge.
introducti<strong>on</strong> – a new fossil fuel crisis 9And this is defi nitely the main cause of climate change?The United Nati<strong>on</strong>s’ Intergovernmental Panel <strong>on</strong> <strong>Climate</strong> <strong>Change</strong>,perhaps the most prestigious body of climate scientists ever assembled,c<strong>on</strong>cludes that most of the observed warming of the last 50 yearsis likely to be due to the increase in greenhouse gas c<strong>on</strong>centrati<strong>on</strong>sdue to human activities.But isn’t there a lot of c<strong>on</strong>troversy about that?Not much. The IPCC’s judgement is now supported by the US’s Nati<strong>on</strong>alAcademy of Sciences, Brazil’s Academia de Ciencias, China’sAcademy of Sciences, the UK’s Royal Society, France’s Académie desSciences, Germany’s Akademie der Naturforscher Leopoldina, India’sNati<strong>on</strong>al Science Academy, the Science Council of Japan, the Russia nAcademy of Sciences, Italy’s Accademia Nazi<strong>on</strong>ale dei Lince i, theAmerican Meteorological Society, the American Geophysical Uni<strong>on</strong>,Canada’s Royal Society <strong>and</strong> the American Associati<strong>on</strong> for the Advancementof Science. 9 There’s no dissent from it in any of 928 peerreviewedscientific essays <strong>on</strong> global climate change published between1993 <strong>and</strong> 2003. 10 And the few remaining c<strong>on</strong>trary bits of evidence havebeen pretty much explained away over the last couple of years. For example,the oceans have warmed in a way that virtually rules out cyclicvariati<strong>on</strong>s in solar energy as an explanati<strong>on</strong>. 11OK, give me the bad news. What happens if the world’s above-ground carb<strong>on</strong>dump goes <strong>on</strong> overfl owing into the atmosphere?At some point the buildup of carb<strong>on</strong> dioxide <strong>and</strong> other greenhousegases in the atmosphere will change the climate catastrophically. Asbiologist Tim Flannery notes, ‘There is so much carb<strong>on</strong> buried in theworld’s coal seams [al<strong>on</strong>e] that, should it find its way back to the surface,it would make the planet hostile to life as we know it’. 12 Combusti<strong>on</strong>of even a substantial fracti<strong>on</strong> of remaining fossil fuels – even afew more hundred billi<strong>on</strong> t<strong>on</strong>nes – could be disastrous. 13How bad is the situati<strong>on</strong> now?It’s hard to tell what the ultimate effects will be, because the extragreenhouse gas already in the air will have l<strong>on</strong>g-term effects, notall of which are evident today. Global average temperatures haveincreased by <strong>on</strong>ly 0.7 degrees Centigrade since the mid-1800s. Tobe sure, some changes often attributed to global warming are alreadynoticeable. For example, rainfall in mid- to high latitudeshas increased, Arctic communities are increasingly threatened bycoastal erosi<strong>on</strong> <strong>and</strong> damaged hunting territories, Arctic sea ice <strong>and</strong>
10 development dialogue september 2006 – carb<strong>on</strong> tradingpermafrost is dwindling, <strong>and</strong> stress is growing <strong>on</strong> plant <strong>and</strong> animalspecies ranging from polar bears to butterfl ies <strong>and</strong> boreal foresttrees. 14 The proporti<strong>on</strong> of the global populati<strong>on</strong> affected by weatherrelateddisasters doubled between 1975 <strong>and</strong> 2001. 15 But such changesare n othing compared to what’s <strong>on</strong> the way. In its Third Assessmentreport in 2001, the IPCC projected that, <strong>on</strong> current trends, theplanet would warm up by between 1.4 <strong>and</strong> 5.8 degrees Centigradeby 2100. Many researchers now believe that the warming could befar more severe. 16 Whichever estimates are used, it is likely that bythe end of the century the earth will be hotter than at any othertime in the last two milli<strong>on</strong> years.Two milli<strong>on</strong> years! Will human beings be ready for that?Little will have prepared them for it. At that point, climatic c<strong>on</strong>diti<strong>on</strong>swill probably be not <strong>on</strong>ly outside the historical experience ofpresent-day humans, but outside their ancestors’ physical <strong>and</strong> ecologicalexperience as well. 17What are the changes that are expected?Am<strong>on</strong>g the likely manifestati<strong>on</strong>s of climate change in this centurywill be:• Less agricultural productivity, especially in hotter places. 18• More frequent heat waves <strong>and</strong> less frequent cold spells.• Bigger storms, higher winds <strong>and</strong> more weather-related damage likethat associated with Hurricane Katrina in 2005 <strong>and</strong> Hurricane Catarinain 2004, the first recorded hurricane in the South Atlantic. 19• More intense floods <strong>and</strong>, in mid-latitude c<strong>on</strong>tinental interiors,droughts.• Water crises associated with disappearing glaciers <strong>and</strong> snowpacks<strong>and</strong> other events. 20• Movement of farming to other regi<strong>on</strong>s, especially higher latitudes.• Faster disease transmissi<strong>on</strong> <strong>and</strong> other health impacts. 21 The WorldHealth Organizati<strong>on</strong> estimates that the warming <strong>and</strong> precipitati<strong>on</strong>trends due to anthropogenic climate change of the past 30 yearsalready claim over 150,000 lives annually. 22• Rising sea levels. Melting of the West Antarctic <strong>and</strong> Greenl<strong>and</strong> icesheets, <strong>on</strong>ce started, would likely become self-reinforcing (such icemasses could not form in today’s climate). 23 Combined with thethermal expansi<strong>on</strong> of the warmed oceans, this would ultimatelycause a sea-level rise in excess of 10 metres, flooding coastal cities
introducti<strong>on</strong> – a new fossil fuel crisis 11<strong>and</strong> prime agricultural areas. Glaciers within the West Antarcticice sheet are already starting to disappear, <strong>and</strong> collapse of the sheetwithin this century cannot be ruled out. 24• Species extincti<strong>on</strong> <strong>and</strong> biodiversity loss.• Increased numbers of envir<strong>on</strong>mental refugees. 25‘Humanity is performinga “great geophysicalexperiment”, not ina laboratory, not in acomputer, but <strong>on</strong> our ownplanet.’Roger Revelle <strong>and</strong>Hans Suess, 1956How fast is all this happening?No <strong>on</strong>e can be sure how quickly these problems will unfold, <strong>and</strong>how severe they will be. One thing scientists are increasingly c<strong>on</strong>cernedabout is possible feedback reacti<strong>on</strong>s that could accelerate globalwarming. According to the IPCC, such effects are far more likelyto make global warming worse than to mediate it.For example, melting of ice caps in the Arctic, 26 where the climateis changing faster than elsewhere, could lead to redoubled warming,as a highly reflective white surface gives way to a darker, more heatabsorptiveocean surface. 27 As temperatures rise, more carb<strong>on</strong> is alsobeing lost from soils due to more rapid decompositi<strong>on</strong> of organic material,creating another feedback effect. 28In August 2005, scientists reported that the world’s largest expanse offrozen peat bog in western Siberia, spanning a milli<strong>on</strong> square kilometres,was undergoing ‘unprecedented thawing’ that could releaseinto the atmosphere billi<strong>on</strong>s of t<strong>on</strong>nes of methane – a greenhouse gas20 times more powerful in forcing global warming than carb<strong>on</strong> dioxide.29 Some scientists fear that if the oceans are warmed bey<strong>on</strong>d a certaindegree, there may also be sudden, catastrophic releases of methanefrom methane hydrates <strong>on</strong> the sea floor previously kept quiescentthrough high pressures <strong>and</strong> low temperatures. 30The geological <strong>and</strong> ice-core record shows that climatic disc<strong>on</strong> tinuitiescaused by such phenomena have been rife in the past. 31 At times theymay have driven up average global temperatures by as much as eightdegrees Centigrade in the space of a human lifetime. 32Similarly, if dry seas<strong>on</strong>s become l<strong>on</strong>g enough, a desiccated Amaz<strong>on</strong>could burn, releasing huge biotic stores of carb<strong>on</strong> into the atmosphereall at <strong>on</strong>ce. If other forests followed suit, that could drive the temperatureanother two degrees Centigrade higher or more. 33Still other abrupt, n<strong>on</strong>linear ‘fl ips’ of the climate to new equilibria arealso possible. For instance, influxes of fresh water from melting icearound the North Atlantic, together with increased flow of Russianrivers into the Arctic Ocean, are capable of slowing or even stoppingthe ‘thermohaline c<strong>on</strong>veyor-belt’ of the Gulf Stream. Already, a study
12 development dialogue september 2006 – carb<strong>on</strong> trading‘Tipping Points’ <strong>and</strong> ‘Angry Beasts’The climate doesn’t always change gently<strong>and</strong> gradually. More <strong>and</strong> more climate scientistsare pointing to the possibility that, dueto global warming, the earth’s climate couldsuddenly shift to a radically different – <strong>and</strong>radically less hospitable – state, as has oftenhappened in the past (see main text).Geophysicist D<strong>on</strong>ald Perovich likens theclimate system to a rowing boat that isrocked from side to side more <strong>and</strong> moreviolently, until it finally takes in water <strong>and</strong>suddenly capsizes. ‘You can tip <strong>and</strong> thenyou’ll just go back. You can tip it <strong>and</strong> justgo back. And then you tip it <strong>and</strong> you getto the other stable state, which is upsidedown.’ 36Veteran paleoclimatologist Wallace Broeckerof Columbia University uses a differentcomparis<strong>on</strong>: ‘The earth’s climate systemhas proven itself to be an angry beast.When nudged, it is capable of a violent resp<strong>on</strong>se.’37of ocean circulati<strong>on</strong> in the North Atlantic has found a 30 per cent reducti<strong>on</strong>in the warm currents that carry water north from the GulfStream. 34 A shutdown of the Stream would reduce the flow of Caribbeanheat northwards, dropping European temperatures drasticallywhile drying out the climate in regi<strong>on</strong>s such as Central <strong>and</strong> WesternAsia. 35 When the current stopped about 12,700 years ago – possiblydue to a sudden surge of fresh water into the North Atlantic triggeredby the melting of glaciers that had dammed up an ancient lakein North America – it was for more than 1,000 years; another eventlasting 100 years occurred about 8,200 years ago.The climate, in other words, is likely to change in n<strong>on</strong>linear <strong>and</strong> n<strong>on</strong>uniformways. Yet even if it were possible to predict exactly how itmight shift in every regi<strong>on</strong>, it would still be virtually impossible totrack or estimate in advance the effects <strong>on</strong> living things <strong>and</strong> humansocieties with much c<strong>on</strong>fidence.As ecosystems c<strong>on</strong>fr<strong>on</strong>t shock after shock, a raft of difficult-to- anticipateeffects will radiate through communities of living things as fish, insects,microorganisms <strong>and</strong> trees shift their ranges or growth patternsor die off. 38The unpredictability can <strong>on</strong>ly increase as these shocks reverberatethrough social systems. Water, heating, transport, health care, insurance,legal <strong>and</strong> policing systems will all have to adapt to changes faroutside their historical experience. 39
introducti<strong>on</strong> – a new fossil fuel crisis 13Strange weatherahead: globalwarming willincrease stormintensity.Is climate change already irreversible?It depends what you mean, <strong>and</strong> for whom. For many people, for examplein some regi<strong>on</strong>s of the far north, it is not <strong>on</strong>ly irreversible buthas already overturned the lives of, for example, hunters who rely <strong>on</strong>winter ice. For some bird species or coral species it is already too late.In other, broader senses, things can be turned around, even though atthis stage they are bound to get worse before they get better, no matterwhat policies are adopted now.If everything’s so uncertain, why should we do anything? Wouldn’t it be betterto wait until we’re sure what’s going to happen?There will always be uncertainty about the details <strong>and</strong> the timing. Butwhat is certain is that the world is <strong>on</strong> course for severe shocks, that thesewill become more severe the more fossil carb<strong>on</strong> is transferred to the atmosphere,that they will threaten many milli<strong>on</strong>s of people, that therewill c<strong>on</strong>tinue to be surprises, <strong>and</strong> that these surprises will mostly beunpleasant. 40 That’s enough to dem<strong>and</strong> immediate acti<strong>on</strong>.Give me the bottom line. If we d<strong>on</strong>’t do anything, what will climate changecost us?Again, that’s a questi<strong>on</strong> no <strong>on</strong>e is likely to be able to find a sensibleanswer to. First, nobody has any idea how to calculate or estimatewith any c<strong>on</strong>fidence the extent <strong>and</strong> effects of climate change. 41 Norcan any<strong>on</strong>e predict very well the future costs of technologies that
14 development dialogue september 2006 – carb<strong>on</strong> tradinghave yet to be developed or deployed or social changes that are likelyto have multiple effects. 42 Sec<strong>on</strong>d, no <strong>on</strong>e can reas<strong>on</strong>ably assign a costto improbable but irreversible or catastrophic events when what couldtrigger them is so poorly understood, <strong>and</strong> when discount rates arecapable of making any future disaster ultimately inc<strong>on</strong>sequential inm<strong>on</strong>ey terms. 43 Third, those effects may nevertheless be so sweepingthat they undermine many of the imagined c<strong>on</strong>stants <strong>on</strong> which costestimates are based. 44 To take an extreme case, if there are no marketsthere will be no prices. Fourth, the civilizati<strong>on</strong>s <strong>and</strong> human life <strong>and</strong>livelihoods that are threatened by climate change are not generallyheld to be for sale. No <strong>on</strong>e can imagine what markets they would besold in if they were <strong>and</strong> what their price would be, <strong>and</strong> attempts tosituate them in imaginary markets are endlessly disputed. The same istrue of species extincti<strong>on</strong>, health disasters that affect tens of milli<strong>on</strong>sof people, <strong>and</strong> many other of the possible effects of climate change. 45But if we can’t assign a price to all the possible future damage, how can weknow how serious the threat is? And how will we know what level of acti<strong>on</strong>will be appropriate?As Ruth Greenspan Bell of Resources for the Future has pointed out,when a loved <strong>on</strong>e has a potentially fatal disease, you d<strong>on</strong>’t perform acost-benefit analysis when deciding what to do. Instead, you do whatis within your power to help.We can grasp how serious the threat of climate change is by looking atthe trends, looking at the science, looking at the possible effects, <strong>and</strong> notpretending to possess a knowledge that we can’t achieve. The situati<strong>on</strong>is bad, but imagining we can quantify how bad it is interferes with clarityof thought <strong>and</strong> with good decisi<strong>on</strong>-making. Even worse is trying tocompare some imaginary figure for future costs of climate change withimaginary numbers for, say, future ec<strong>on</strong>omic gains or losses associatedwith a transiti<strong>on</strong> to a more sensible energy system. 46The effects of possible changes in climate, however horrifying they are,are not, strictly speaking, ‘risks’. Risks can be calculated <strong>and</strong> probabilitiesassigned to them, allowing them to become the subject of ec<strong>on</strong>omiccalculati<strong>on</strong>s. For example, life insurance companies, extrapolatingfrom history, can compile actuarial tables that will tell them the likelylifespans of people fitting various descripti<strong>on</strong>s. Or, to take the classicexample of champagne producti<strong>on</strong> used in 1921 by Frank Knight, <strong>on</strong>eof the seminal thinkers about risk: ‘Since in the operati<strong>on</strong>s of any producera practically c<strong>on</strong>stant <strong>and</strong> known proporti<strong>on</strong> of the bottles burst,it does not especially matter…whether the proporti<strong>on</strong> is large or small.The loss becomes a fixed cost in the industry <strong>and</strong> is passed <strong>on</strong> to thec<strong>on</strong>sumer, like the outlays for labor or materials.’ 47The climate system is nota statistical sample ofchampagne bottles.
introducti<strong>on</strong> – a new fossil fuel crisis 15Planning for climate change requires a different kind of thinking.The climate system is not a statistical sample of champagne bottles.Climatologists do not extrapolate statistically from past trends, as insurancecompanies <strong>and</strong> wine bottlers do, but c<strong>on</strong>struct simplified,future-focused computer circulati<strong>on</strong> models that yield various differentscenarios. 48 The probabilities of those outcomes that can be anticipatedat all can be calculated <strong>on</strong>ly relative to some assortment ofcomputer models. These models may or may not incorporate relevantfactors, 49 <strong>and</strong> may or may not define the full range of possible futurerealities (see box <strong>on</strong> p. 16: Worlds inside Computers).So industrialised societies aren’t going to be able just to keep <strong>on</strong> what they’redoing, calculate their chances, <strong>and</strong> take out a little more insurance?No. Many of the likely outcomes of climate change are going tobe uninsurable. Andrew Dlugolecki, an insurance specialist formerlywith CGNU (now known as Aviva), the sixth largest insurance firmin the world, speculates that, as early as 2010, abrupt or chaotic climatechange could force insurance companies to charge annual ratesas high as 12 per cent of insured value, forcing most businesses <strong>and</strong>individuals to drop their coverage entirely. 55 Insurance losses becauseof extreme weather, Dlugolecki points out, are increasing by an annual10 per cent while world ec<strong>on</strong>omic growth is averaging 3 per centa year: ‘By 2065 the two growth graphs cross, the world ec<strong>on</strong>omy canno l<strong>on</strong>ger sustain the losses, <strong>and</strong> collapse will follow.’ 56It’s often stressed that the South will suffer most from global warming.Southern countries are estimated to suffer 97 per cent of naturaldisaster-related deaths occurring each year, <strong>and</strong> also face much largerec<strong>on</strong>omic losses than Northern countries in terms of percentageof gross nati<strong>on</strong>al product. 57 But it’s important to realise that globalwarming will not spare industrialised societies, as the recent NewOrleans disaster suggests.Indeed, the locked-in dependence of industrialised societies <strong>and</strong> theirmilitaries <strong>on</strong> an enormous fossil-oriented technological <strong>and</strong> instituti<strong>on</strong>alsystem of unparalleled inertia <strong>and</strong> inflexibility creates its own specialglobal warming vulnerabilities. Michael Northrop of Rockefeller BrothersFund <strong>and</strong> David Sasso<strong>on</strong> of Science First Communicati<strong>on</strong>s note in arecent business publicati<strong>on</strong> that ‘climate change is unlike any other “riskfactor” that our modern financial system has ever c<strong>on</strong>fr<strong>on</strong>ted’:It c<strong>on</strong>tains no reciprocal or alternative opportunity... <strong>Climate</strong>change renders [m<strong>on</strong>ey managers] impotent. It’s a risk that can’tbe managed around, <strong>and</strong> the <strong>on</strong>ly rati<strong>on</strong>al course of acti<strong>on</strong> is tominimise its impact. 58
16 development dialogue september 2006 – carb<strong>on</strong> tradingWorlds inside ComputersGeneral Circulati<strong>on</strong> Models (GCMs) areminiature, closed worlds created insidecomputers. C<strong>on</strong>sisting of tens of thous<strong>and</strong>sof lines of computer code, each GCM calculateshow climate might change in aparticular imaginary world over decadesor centuries, given certain initial assumpti<strong>on</strong>s.These models – there are dozens of them inuse in various places – are based <strong>on</strong> solid principlesof physics. Taken together, they give afeel for how climate might change in the realworld. But their usefulness can’t be checkedby experiment in the ordinary sense, <strong>and</strong>there are things they cannot tell us.First, GCMs are highly simplified whencompared with the real climate system.Sec<strong>on</strong>d, all of them are likely to have leftout certain mechanisms influencing climatethat are not yet known. 50 This difficultyis made more serious by the fact thatmany models share a comm<strong>on</strong> heritage.‘Typically, <strong>on</strong>e modelling group “borrows”another group’s model <strong>and</strong> modifiesit, meaning that the “new” models mayretain problematic elements of those fromwhich they were created’, replicating systematicerrors. 51Third, the global data that models use havecertain limitati<strong>on</strong>s – limitati<strong>on</strong>s exacerbatedby the fact that many of the data are generatedby the models themselves, to fill inblanks needed to run global simulati<strong>on</strong>s. 52Fourth, models are characterised by variouskinds of uncertainty. For instance, theyare extremely sensitive to initial assumpti<strong>on</strong>s,meaning that different runs will yieldhugely different results. No particular runof a model can be expected to reflect thereal climate system, in which, also, smallchanges at <strong>on</strong>e locati<strong>on</strong> <strong>and</strong> time can leadto large differences at other locati<strong>on</strong>s <strong>and</strong>times. 53 <strong>Climate</strong> modelling generates what<strong>on</strong>e analyst calls ‘mutated’ facts full of theories,uncertainties <strong>and</strong> ambiguities – factsthat have to be grasped ‘as much with yourimaginati<strong>on</strong> as with your calculator’. 54 Thatdoes not make them any less worthy of attenti<strong>on</strong>.So if c<strong>on</strong>venti<strong>on</strong>al types of ec<strong>on</strong>omic management are out the window, whatdo we do?A different kind of precauti<strong>on</strong> is needed, <strong>on</strong>e matched to the particularnature of the climate problem.This kind of precauti<strong>on</strong> would acknowledge <strong>and</strong> attempt to removeignorance <strong>and</strong> uncertainty. It would try to maximise flexibility, resilience<strong>and</strong> possibilities for future learning. And in the meantimeit would avoid irreversible courses of acti<strong>on</strong> that are potentially59 60civilisati<strong>on</strong>-threatening.Unavoidably, that means taking better care of the world’s native biota,which c<strong>on</strong>stitute a large <strong>and</strong> volatile storehouse of carb<strong>on</strong>. But aboveall, it means slowing <strong>and</strong> halting fossil fuel extracti<strong>on</strong> pending moreresearch into gaps <strong>and</strong> blind spots.
introducti<strong>on</strong> – a new fossil fuel crisis 17‘Humanity has becomemore <strong>and</strong> more vulnerableto l<strong>on</strong>g- <strong>and</strong> shorttermclimate change, asit has become ever morediffi cult <strong>and</strong> expensivefor us to resp<strong>on</strong>d to it…The times require us tolearn the vagaries of theglobal climate, to study itsmoods, <strong>and</strong> to keep ourskies relatively free of excessivegreenhouse gaseswith the same diligence,<strong>and</strong> for the same reas<strong>on</strong>s,that Mesopotamian farmersfi ve millennia ago hadto learn the moods of theEuphrates <strong>and</strong> keep theirirrigati<strong>on</strong> canals reas<strong>on</strong>ablyfree of silt.’ 60Brian Fagan, 2004What? You mean we have to stop mining coal <strong>and</strong> drilling for oil <strong>and</strong> gas?More or less, yes. Remember the image of the above-ground carb<strong>on</strong>cyclingsystem – oceans, atmosphere, vegetati<strong>on</strong>, soil – as a giant globalwaste dump with limited capacity. Then think of fossil fuel mining<strong>and</strong> burning as a giant factory that’s ceaselessly pumping waste intothis dump regardless. The <strong>on</strong>ly secure way of stopping the dump fromoverflowing is to reduce drastically, <strong>and</strong> ultimately stop, the flow into it– to make sure that most remaining fossil fuels stay in the ground.That seems so extreme.It’s not. Even Sheikh Zaki Yamani, the former Saudi oil minister,has acknowledged that ‘[t]he St<strong>on</strong>e Age did not end for lack of st<strong>on</strong>e,<strong>and</strong> the oil age will end l<strong>on</strong>g before the world runs out of oil.’ 61 Mostfossil fuels are going to have to be left in the ground, just as most ofthe world’s st<strong>on</strong>e is never going to be transformed into arrowheadsor St<strong>on</strong>ehenges.C<strong>on</strong>tinuing to take fossil carb<strong>on</strong> out of the ground <strong>and</strong> putting it in theabove-ground dump is a <strong>on</strong>e-way street, because it can’t safely be putback. Stopping the flow into the dump, <strong>on</strong> the other h<strong>and</strong>, is both possible<strong>and</strong> prudent. Keeping fossil fuels in the ground – <strong>and</strong> encouragingany democratic movements that already have this objective – has to bethe default, mainstream approach to tackling climate change.How so<strong>on</strong> must the fl ow of fossil fuels from the ground to the surface be cut off,then? Immediately? As so<strong>on</strong> as possible? How so<strong>on</strong> is that?There is no single ‘correct’ answer to questi<strong>on</strong>s like that. But somework has already been d<strong>on</strong>e <strong>on</strong> the scale of acti<strong>on</strong>s needed to minimisefuture damage <strong>and</strong> keep opti<strong>on</strong>s open.In 2001, the IPCC estimated that restricting temperature rise to 1.5-3.9 degrees Centigrade would require CO 2 levels to be stabilised at450 parts per milli<strong>on</strong> (ppm). That would imply cumulative carb<strong>on</strong>emissi<strong>on</strong>s of <strong>on</strong>ly 630–650 milli<strong>on</strong> t<strong>on</strong>nes between 1990 <strong>and</strong> 2100,compared to the 4,000 milli<strong>on</strong> t<strong>on</strong>nes or so that would result if all remainingaccessible fossil fuels were exploited. 62In 2005, researcher Malte Meinshausen of the Swiss Federal Instituteof Technology found that, <strong>on</strong> some models, a temperature rise of 2degrees Centigrade or less – identified rather arbitrarily by many climateexperts to be the highest ‘safe’ level of heating – was likely <strong>on</strong>lyif levels of greenhouse gases could be stabilised at 400 ppm of CO 2equivalent, after peaking at 475 ppm. 63 That would entail a 50 percent cut in emissi<strong>on</strong>s by 2050, with a peak emissi<strong>on</strong>s level of no more
18 development dialogue september 2006 – carb<strong>on</strong> tradingthan 120 per cent of 1990 l evels at around 2010. A rise of 2 degreesCentigrade or less could actually be guaranteed <strong>on</strong>ly if atmosphericc<strong>on</strong>centrati<strong>on</strong>s stabilised at 350 ppm. That would imply even steepercuts, since c<strong>on</strong>centrati<strong>on</strong>s already st<strong>and</strong> at 380 ppm.Quick acti<strong>on</strong> is crucial in order to avoid even more painfully drasticacti<strong>on</strong> later. Meinshausen warned that annual reducti<strong>on</strong> rates wouldhave to become 1 per cent steeper for every five years of delay. Delayingcuts by 10 years would nearly double the required reducti<strong>on</strong>rate in 2025. Delaying for 20 years, according to researchers SteffenKalbekken <strong>and</strong> Nathan Rive, would mean having to reduce emissi<strong>on</strong>sthree to seven times faster. 64But how are these cuts going to be made? And who is going to make them?These are the questi<strong>on</strong>s at the heart of the climate debate. And theyare not just questi<strong>on</strong>s for experts. By revealing that the world’s carb<strong>on</strong>dump is a very limited good, the science of global warming hasrevealed a problem that is just as much political as technical.Per capita CO2 emissi<strong>on</strong>s 2002:North America <strong>and</strong> Asia/Pacificmetric t<strong>on</strong>s of CO2 per capitaU.S.20,1AustrailaCanadaSingaporeKorea, Rep.JapanNew Zeel<strong>and</strong>MalaysiaH<strong>on</strong>g K<strong>on</strong>gThail<strong>and</strong>MexicoChinaInd<strong>on</strong>esiaIndiaPhillipines1,41,20,9Source: (CDIAC)2,73,73,76,35,29,49,48,713,816,518,3What do you mean?The world’s carb<strong>on</strong>-cycling capacity, partly because it’s very limited,has also become extremely valuable. For that reas<strong>on</strong>, everybody is goingto be interested in getting rights to it (see box, below: The Birthof Atmospheric Rights). Pressures will grow to divide up the globalcarb<strong>on</strong> dump am<strong>on</strong>g the world’s people.‘Delaying acti<strong>on</strong> fordecades, or even just years,is not a serious opti<strong>on</strong>.’Science, 9 January 2004Divide up how?That’s a crucial questi<strong>on</strong>, <strong>and</strong> <strong>on</strong>e that has simmered underneath thesurface of internati<strong>on</strong>al negotiati<strong>on</strong>s about climate for many years.What kind of rights should people or governments have to carb<strong>on</strong>dump space, given the need to maintain climatic stability for current<strong>and</strong> future generati<strong>on</strong>s? And who will get these rights? Do you divideup the dump space equally am<strong>on</strong>g the world’s people? Do you givethe world’s worst-off disproporti<strong>on</strong>ate shares in the dump? Do yougive the biggest shares to those who haven’t yet had a chance to usemuch of the dump? Do you give the biggest shares to those who canleast afford to cut down <strong>on</strong> their use of the dump? Do you give themost dump space to those who can use it to c<strong>on</strong>tribute the most to theglobal good? Or do you just give the most rights to the dump to thosewho are using it the most already? There are arguments for all of theseways of distributing the world’s carb<strong>on</strong>-cycling capacity.‘If we are to avoid havingto make dramatic <strong>and</strong>ec<strong>on</strong>omically destructivedecisi<strong>on</strong>s in the future, wemust act so<strong>on</strong>.’Foreign Affairs,July/August 2004
introducti<strong>on</strong> – a new fossil fuel crisis 19The Birth of Atmospheric RightsUp to now, philosopher Peter Singer writes,it is as if the world’s people have been living‘in a village in which every<strong>on</strong>e puts theirwastes down a giant sink’. At first there isno problem:‘No <strong>on</strong>e quite knows what happens tothe wastes after they go down the sink,but since they disappear <strong>and</strong> have no adverseimpact <strong>on</strong> any<strong>on</strong>e, no <strong>on</strong>e worriesabout it. Some people c<strong>on</strong>sume a lot, <strong>and</strong>so have a lot of waste, while others, withmore limited means, have barely any, butthe capacity of the sinks to dispose of ourwastes seems so limitless that no <strong>on</strong>e worriesabout the difference.’ 65 No matter howmuch of the sink <strong>on</strong>e pers<strong>on</strong> may use, noproblems arise, because there is alwaysenough for everybody else.But after a while,‘…the sink’s capacity to carry away ourwastes is used up to the full, <strong>and</strong> there isalready some unpleasant seepage that seemsto be the result of the sink’s being usedtoo much… When the weather is warm, itsmells. A nearby water hole where our childrenswim now has algae blooms that makeit unusable. Several respected figures in thevillage warn that unless usage of the sink iscut down, all the village water supplies willbe polluted.’C<strong>on</strong>tinuing to throw wastes down thesink, in other words, does not leave enoughof it for every<strong>on</strong>e to use without harm tothe community.‘What we might have assumed was our defacto right to use the sink any way we wantedcomes into questi<strong>on</strong>. The sink bel<strong>on</strong>gsto us all in comm<strong>on</strong>. In order to avoidc<strong>on</strong>sequences no <strong>on</strong>e wants, every<strong>on</strong>ewho uses it must now accept some limits.’Atmospheric rights, Singer believes, mustnow be discussed, defined, limited <strong>and</strong> allocated.66Whew. Sounds complicated.It is. That’s why the sec<strong>on</strong>d <strong>and</strong> third chapters of this special report ofDevelopment Dialogue are reserved partly for a look at how this politicshas developed.OK, I’ll wait for that. But right now can’t you at least give me some idea ofthe political status quo? Who has been using the most dump space so far? Whois most resp<strong>on</strong>sible for the current climate crisis?As menti<strong>on</strong>ed at the beginning of this chapter, the North is overwhelminglyresp<strong>on</strong>sible. Andrew Simms of the New Ec<strong>on</strong>omicsFoundati<strong>on</strong> perhaps sums up the situati<strong>on</strong> best: ‘Ec<strong>on</strong>omic superpowershave been as successful today in their disproporti<strong>on</strong>ate occupati<strong>on</strong>of the atmosphere with carb<strong>on</strong> emissi<strong>on</strong>s as they were in theirmilitary occupati<strong>on</strong> of the terrestrial world in col<strong>on</strong>ial times.’ 67From 1950 to 1986, the US, with less than 5 per cent of the world’spopulati<strong>on</strong>, was resp<strong>on</strong>sible for 30 per cent of its cumulative greenhouse
20 development dialogue september 2006 – carb<strong>on</strong> tradinggas emissi<strong>on</strong>s. India, with 17 per cent of the world’s populati<strong>on</strong>, wasresp<strong>on</strong>sible for less than 2 per cent. 68 In 2000, the US was emitting20.6 t<strong>on</strong>nes of carb<strong>on</strong> dioxide per pers<strong>on</strong>, Sweden 6.1, Uruguay 1.6<strong>and</strong> Mozambique 0.1.In fact, it’s probably not too far off the mark to say that the US al<strong>on</strong>e iscurrently using all of the ‘available’ global dumping space for greenhousegases. To borrow Peter Singer’s words, to c<strong>on</strong>tinue to act inthis way <strong>and</strong> yet to ‘ensure community survival would be to depriveothers of any use of it at all.’ 69In short, industrialised societies are not <strong>on</strong>ly using more of the world’s carb<strong>on</strong>dumping space than everybody else; they’re also using several times more thanis available for the use of all.That’s about the size of it. So any attempt to keep fossil fuels in the groundis going to have to tackle industrialised societies’ addicti<strong>on</strong> to fossil fuels<strong>and</strong> the energy-profligate ways of living they have made possible.So the days of petrol-fuelled cars, coal-fi red electricity generati<strong>on</strong>, <strong>and</strong> oil-basedair travel are limited.These are all now ‘sunset’ technologies, to be phased out as so<strong>on</strong> aspossible.Not an easy challenge.No, but not an impossible <strong>on</strong>e, either.Where do you start?There are plenty of places to start, <strong>and</strong> many of them will be discussedin this special report. But the important thing to remembernow is that in the struggle to stem the flow of fossil carb<strong>on</strong> out of theground, no <strong>on</strong>e is beginning from zero.Most human experience <strong>and</strong> most human achievement has takenplace in societies in which very little oil, gas or coal is used. It is theworld’s rich minority that has grown most dependent <strong>on</strong> fossil carb<strong>on</strong>;<strong>and</strong> <strong>on</strong>ly in relatively recent times. And even their addicti<strong>on</strong> canbe broken by social <strong>and</strong> technological innovati<strong>on</strong>s that <strong>on</strong>ly requirepowerful enough political movements to be set in moti<strong>on</strong>. 70Nor is it <strong>on</strong>ly efficiency experts, community planners <strong>and</strong> developersof solar or wind energy that are providing the materials to enablegreater independence from fossil fuels. Just as important are the manysocial movements with deep experience in resisting fossil fuel extracti<strong>on</strong>or exploitati<strong>on</strong>.
introducti<strong>on</strong> – a new fossil fuel crisis 21Global warming, after all, isn’t the first fossil fuel crisis. Coal, oil <strong>and</strong>gas have been associated with envir<strong>on</strong>mental degradati<strong>on</strong>, damagedlives, debt, 71 social c<strong>on</strong>fl ict <strong>and</strong> war for a l<strong>on</strong>g time, resulting in sustainedcampaigns of oppositi<strong>on</strong>.For decades, explorati<strong>on</strong> for new oil <strong>and</strong> gas fields has g<strong>on</strong>e h<strong>and</strong> inh<strong>and</strong> with encroachment <strong>on</strong> people’s l<strong>and</strong> <strong>and</strong> with preparati<strong>on</strong>s todispossess them.Extracti<strong>on</strong> has also provoked creative resistance all over the world, as,from Ecuador to the Russian Far East, from Nigeria to Burma, fossilfuel corporati<strong>on</strong>s, usually backed by governments, have stolen orc<strong>on</strong>taminated local l<strong>and</strong>, forests <strong>and</strong> water while massively increasingthe debt of countries they work in. 72Refining <strong>and</strong> transport have brought their own legacy of impairment,disease, dispossessi<strong>on</strong> <strong>and</strong> c<strong>on</strong>taminati<strong>on</strong>. And polluti<strong>on</strong> from industrial<strong>and</strong> power plants burning fossil fuels has left a mark of suffering,disease <strong>and</strong> c<strong>on</strong>fl ict <strong>on</strong> affected communities for over 150 years.Road builtthrough forestin Ecuador toextract oil (top).Oil spill in theEcuadoreanforest (bottom).
22 development dialogue september 2006 – carb<strong>on</strong> tradingNot least, the militarised quest of industrialised societies for oil hasendangered security, pois<strong>on</strong>ed lives <strong>and</strong> blighted politics around theworld. Today, wars costing countless numbers of lives <strong>and</strong> billi<strong>on</strong>s ofdollars can be fought for the sake of a few m<strong>on</strong>ths’ or years’ worth ofoil, <strong>and</strong> face oppositi<strong>on</strong> movements worldwide.The struggle to stabilise climate – to stop the world’s above-groundcarb<strong>on</strong> dump from overflowing – takes its place as <strong>on</strong>e more aspectof this l<strong>on</strong>g history of c<strong>on</strong>fl ict. And it brings out a less<strong>on</strong> encoded inthat history: the need to find ways of leaving coal, oil <strong>and</strong> gas in theground.That’s not a less<strong>on</strong> you often see discussed in the newspapers or <strong>on</strong> televisi<strong>on</strong>.No. In fact, most business <strong>and</strong> political leaders c<strong>on</strong>tinue to act as if it’sa foreg<strong>on</strong>e c<strong>on</strong>clusi<strong>on</strong> that all remaining oil, gas <strong>and</strong> even coal willhave to be taken out of the ground, even as they proclaim the urgencyof doing something about global warming (see box: Trying to HaveIt Both Ways).Women from coastalcommunities inS<strong>on</strong>gkhla, southernThail<strong>and</strong>, protestagainst a gas pipeline<strong>and</strong> separati<strong>on</strong> plantproject that threatenslocal fisheries,comm<strong>on</strong> l<strong>and</strong> <strong>and</strong>livelihoods.
introducti<strong>on</strong> – a new fossil fuel crisis 23Trying to Have It Both Ways: More Fossil Fuels, Less <strong>Climate</strong> <strong>Change</strong>Most business <strong>and</strong> political leaders speakas if humanity could survive all remainingfossil fuels being taken out of the ground,yet also claim to be committed to acti<strong>on</strong><strong>on</strong> climate change.‘There is no envir<strong>on</strong>ment minister <strong>on</strong>Earth that will stop this oil from beingproduced,’ said Canadian envir<strong>on</strong>mentminister Stephane Di<strong>on</strong> in November2005, 73 referring to a project to mine <strong>and</strong>process Albertan tar s<strong>and</strong>s that will doubleCanada’s CO 2 emissi<strong>on</strong>s in the course ofmaking available billi<strong>on</strong>s of additi<strong>on</strong>albarrels of oil. 74 Less than two weeks later ,Di<strong>on</strong> told the delegates to the internati<strong>on</strong>alclimate negotiati<strong>on</strong>s gathered in M<strong>on</strong>trealthat ‘climate change is the single mostimportant envir<strong>on</strong>mental issue facing theworld today’:‘We know that the l<strong>on</strong>ger we wait, thelarger will be the challenge <strong>and</strong> the damagefrom climate change…more acti<strong>on</strong> isrequired now [in pursuit of] our ultimatecomm<strong>on</strong> objective of stabilising greenhousegas c<strong>on</strong>centrati<strong>on</strong>s.’ 75Across the Atlantic, British Prime MinisterT<strong>on</strong>y Blair bullied Members of Parliamentinto acquiescing in an expansi<strong>on</strong> ofBritain’s aviati<strong>on</strong> industry, the recipient ofa GBP 9 billi<strong>on</strong> annual subsidy in waivedfuel taxes: ‘H<strong>and</strong>s up around this table…how many politicians facing a potentialelecti<strong>on</strong> at some point in the not-toodistantfuture would vote to end cheap airtravel?’Blair, who then went <strong>on</strong> to ditch a po licyto require housebuilders to improve theenergy efficiency of homes, 76 <strong>and</strong> whose‘minimal’ support for renewable energyhas been ‘deplored’ even by a committeeof the House of Lords, 77 had recentlyidentified climate change as ‘probably thesingle most important issue we face as aglobal community’ 78 <strong>and</strong> emphasised that‘the time to act is now’. 79 Subsequently, hecriticised the internati<strong>on</strong>al climate changedebate for a ‘reluctance to face up to reality<strong>and</strong> the practical acti<strong>on</strong> needed to tackleproblems’. 80 Blair’s aviati<strong>on</strong> policy meansthat his government’s target of cutting carb<strong>on</strong>emissi<strong>on</strong>s by 60 per cent by 2050 could<strong>on</strong>ly be achieved if every bit of machineryother than aeroplanes <strong>and</strong> ships stoppedproducing any emissi<strong>on</strong>s at all. 81In the same year, the Internati<strong>on</strong>al EnergyAgency (IEA), comprising the 26 main oilc<strong>on</strong>sumingnati<strong>on</strong>s, recommended that theglobal oil industry invest usd 20.3 trilli<strong>on</strong>in new facilities by 2030, to avoid higheroil prices. The IEA then went <strong>on</strong> to warnthat unless the world takes acti<strong>on</strong> to reduceenergy c<strong>on</strong>sumpti<strong>on</strong>, global greenhousegas emissi<strong>on</strong>s will increase by 52 per centby 2030. ‘These projected trends lead to afuture that is not sustainable… We mustchange these outcomes <strong>and</strong> get the planet<strong>on</strong>to a sustainable energy path,’ said WilliamC. Ramsay, the IEA’s Deputy ExecutiveDirector. 82Oil companies such as BP <strong>and</strong> Shell meanwhilec<strong>on</strong>tinually boast of increased, notdecreased, efforts to find <strong>and</strong> exploit newsources of fossil fuels. ‘My view is that hydrocarb<strong>on</strong>swill be the bulk of the energysupply for the next 30 to 50 years,’ 83 said John
24 development dialogue september 2006 – carb<strong>on</strong> tradingBrowne, chief executive of BP. Yet Browne,who oversaw a switch of BP’s logo to agreen <strong>and</strong> yellow starburst adorned with theslogan ‘Bey<strong>on</strong>d Petroleum’, proclaims that‘global warming is real <strong>and</strong> needs to be addressednow’. 84 R<strong>on</strong> Oxburgh, head of Shell,c<strong>on</strong>ceded in 2004 that climate change madehim ‘very worried for the planet’. 85In a 2005 publicati<strong>on</strong>, the World BusinessCouncil <strong>on</strong> Sustainable Development outlineskey areas for future acti<strong>on</strong> <strong>on</strong> climatechange, including efficiency, nuclear energy,government support for energy research<strong>and</strong> development, <strong>and</strong> technologytransfer to the South. It neglects to menti<strong>on</strong>any measures for phasing out fossilfuels before they are exhausted. 86Finally, the World Bank, which has c<strong>on</strong>sistentlyobeyed the 1981 dem<strong>and</strong> of the USTreasury Department that it play a lead rolein the ‘expansi<strong>on</strong> <strong>and</strong> diversificati<strong>on</strong> of globalenergy supplies to enhance security ofsupplies <strong>and</strong> reduce OPEC market powerover oil prices’, 87 scorned the August 2004recommendati<strong>on</strong> of its own review commissi<strong>on</strong>that it halt support for coal extracti<strong>on</strong>projects immediately <strong>and</strong> phase outsupport for oil extracti<strong>on</strong> projects by 2008. 88The commissi<strong>on</strong>, chaired by former Ind<strong>on</strong>esianenvir<strong>on</strong>ment minister Emil Salim,had pointed out that such extractive projectsdid nothing to promote the Bank’s statedmissi<strong>on</strong> of alleviating global poverty.From 1992 through late 2004, the WorldBank Group approved usd 11 billi<strong>on</strong> in financingfor 128 fossil-fuel extracti<strong>on</strong> projectsin 45 countries – projects that will ultimatelylead to more than 43 billi<strong>on</strong> t<strong>on</strong>nes ofcarb<strong>on</strong>-dioxide emissi<strong>on</strong>s, a figure hundredsof times more than the emissi<strong>on</strong>s reducti<strong>on</strong>sthat signatories to the Kyoto Protocol arerequired to make between 1990 <strong>and</strong> 2012.Another usd 17 billi<strong>on</strong> has g<strong>on</strong>e for otherfossil fuel-related projects. In 2004-2005,the World Bank Group spent usd 7.6 billi<strong>on</strong>in fossil fuel-intensive sectors (37 percentof its total lending for the year) with<strong>on</strong>ly marginal efforts to address the climatechange implicati<strong>on</strong>s. 89 More than 82 percent of World Bank financing for oil extracti<strong>on</strong>has g<strong>on</strong>e to projects that export oilback to wealthy Northern countries. Bankfinancing for fossil fuels outpaces renewableenergy financing by 17 to <strong>on</strong>e. 90 Someof the biggest beneficiaries of Bank fundinginclude Halliburt<strong>on</strong>, the oil c<strong>on</strong>tractor,Shell, Chevr<strong>on</strong>Texaco, Total, Exx<strong>on</strong>Mobil,<strong>and</strong> other fossil fuel com panies. 91 Yet in2005, the Bank was assigned a key role intackling climate change by the G8 group ofec<strong>on</strong>omic powers. ‘Let’s work together fora climate-friendly future,’ said Bank president,Paul Wolfowitz, <strong>on</strong>e of the architectsof the US war <strong>on</strong> Iraq. 92
introducti<strong>on</strong> – a new fossil fuel crisis 25Gas flaring in Delta State,Nigeria (top) <strong>and</strong> protests(bottom).They hope to solve the problem of the overflowing above-groundcarb<strong>on</strong> dump not by cutting off the flow of fossil carb<strong>on</strong> from underground,but by carving out new dumps to put it in.Solemnly, they propose parking carb<strong>on</strong> dioxide in holes in the ground,or liquefying it <strong>and</strong> injecting it into the bottom of the ocean. In allseriousness, they suggest putting the extra carb<strong>on</strong> in billi<strong>on</strong>s of extratrees specially grown for the purpose. Without any sense of absurdity,they advocate ‘compensating’ for the extracti<strong>on</strong> of remaining fossilfuels by making extra efforts to ‘save’ them or use them more efficiently;or by cutting down <strong>on</strong> the use of other greenhouse gases likehydrofluorocarb<strong>on</strong>s or nitrous oxide; or by building more windmillsthan had been originally planned; or by burning off the methane thatcoal mining releases rather than just venting it into the atmosphere.Political <strong>and</strong> business leaders then go <strong>on</strong> to propose a market for exchangingall of these supposedly ‘equivalent’ things for each other.This is a market, they assure the public, in which you will be able to‘pay’ the envir<strong>on</strong>mental costs of c<strong>on</strong>tinuing to drill oil by screwingin efficient light bulbs, or for the costs of opening a new coal mine byburning the methane that seeps up out of the same mine.The message is clear. Industrialised societies can c<strong>on</strong>tinue to use upfossil fuels until there are n<strong>on</strong>e left worth recovering. Subsidies forexploitati<strong>on</strong> of fossil fuel deposits need not be reduced. Nor is thereany need to get started right away <strong>on</strong> a just technological <strong>and</strong> culturaltransiti<strong>on</strong> to a society that does not need coal, oil <strong>and</strong> gas.The untenability of this attempt to escape from the climate crisis –<strong>and</strong> the way it extends those classic c<strong>on</strong>fl icts over explorati<strong>on</strong>, extracti<strong>on</strong>,refining, polluti<strong>on</strong>, militarisati<strong>on</strong>, debt <strong>and</strong> insecurity that havebeen a feature of society’s relati<strong>on</strong>ship to coal, oil <strong>and</strong> gas for morethan a century – will be the subject of much of the rest of this specialreport. The next chapter will sketch how carb<strong>on</strong> trading developedhistorically.
26 development dialogue september 2006 – carb<strong>on</strong> trading1 J. T. Hought<strong>on</strong> et al., <strong>Climate</strong> <strong>Change</strong>: The ScientificBasis, Cambridge University Press, 2001 estimates thatabout three-quarters of anthropogenic atmosphericcarb<strong>on</strong> dioxide increases are due to fossil fuel burning.Duncan Austin et al. put the figure at 70 per cent(‘C<strong>on</strong>tributi<strong>on</strong>s to <strong>Climate</strong> <strong>Change</strong>: Are C<strong>on</strong>venti<strong>on</strong>alMeasures Misleading the Debate?’, World ResourcesInstitute, Washingt<strong>on</strong>, 1998). L<strong>and</strong> use change is thoughtto c<strong>on</strong>tribute most of the rest. See, e.g., Johannes J.Feddema et al., ‘The Importance of L<strong>and</strong>-Cover <strong>Change</strong>in Simulating Future <strong>Climate</strong>s’, Science 310, 9 December2005, pp. 1674 – 1678. The cumulative c<strong>on</strong>tributi<strong>on</strong> offossil fuels to the excess carb<strong>on</strong> in the atmosphere isgrowing, however. Although carb<strong>on</strong> dioxide is the mostimportant greenhouse gas, many other gases are alsosignificant, including methane, nitrous oxide, halogenatedcompounds <strong>and</strong> water vapor.2 Jeffrey S. Dukes, ‘Burning Buried Sunshine: HumanC<strong>on</strong>sumpti<strong>on</strong> of Ancient Solar Energy’, Climatic<strong>Change</strong> 61, 2003, pp. 31-44.3 Taro Takahashi, ‘The Fate of Industrial Carb<strong>on</strong> Dioxide’,Science 305, 16 July 2004, pp. 352-3; ‘Emissi<strong>on</strong>s TurningOceans Acid, Hostile to Marine Life’, Envir<strong>on</strong>mentalNews Service, 6 July 2005; Carol Turley, ‘The OtherCO 2 Problem’, http://www.opendemocracy.net/debates/article-6-129-2480.jsp; Rowan Hooper, ‘Marinecrisis looms over acidifying oceans’, New Scientist, 30June 2005. See also C. L. Sabine et al., ‘The OceanicSink for Anthropogenic CO 2 ’, Science, 16 July 2004,;pp. 367-71 <strong>and</strong> C. Le Quere <strong>and</strong> N. Metzl, ‘NaturalProcesses Regulating the Ocean Uptake of CO 2 ’, in C.B. Field <strong>and</strong> M. R. Raupach, eds, The Global Carb<strong>on</strong>Cycle: Integrating Humans, <strong>Climate</strong>, <strong>and</strong> the NaturalWorld, Isl<strong>and</strong> Press, Washingt<strong>on</strong>, 2004.4 See, for example, G. C. Hurtt et al., ‘Projecting theFuture of the U.S. Carb<strong>on</strong> Sink’, Proceedings of theNati<strong>on</strong>al Academy of Sciences 99, 1999, pp. 1389-94;P. M. Cox et al., ‘Accelerati<strong>on</strong> of Global Warming Dueto Carb<strong>on</strong>-Cycle Feedbacks in a Coupled <strong>Climate</strong>Model,’, Nature, 9 November 2000, pp. 184-87; J.L. Dufresne et al., ‘On the Magnitude of PositiveFeedback between Future <strong>Climate</strong> <strong>Change</strong> <strong>and</strong> theCarb<strong>on</strong> Cycle’, Geophysical Research Letters 29, 2002;<strong>and</strong> Chapter 3.5 Hans-Holger Rogner, ‘<strong>Climate</strong> <strong>Change</strong> Assessments:Technology Learning <strong>and</strong> Fossil Fuels – How MuchCarb<strong>on</strong> Can Be Mobilized?’, paper presented toInternati<strong>on</strong>al Energy Agency Workshop <strong>on</strong> <strong>Climate</strong><strong>Change</strong> Damages <strong>and</strong> the Benefits of Mitigati<strong>on</strong>, 26-28 February 1997, Internati<strong>on</strong>al Institute for AppliedSystems Analysis.6 Robert L. Hirsch et al., ‘Peaking of World OilProducti<strong>on</strong>: Impacts, Mitigati<strong>on</strong> <strong>and</strong> Risk Assessment’,US Department of Energy, Washingt<strong>on</strong>, 2005, availableat http://www.hubbertpeak.com/us/NETL/OilPeaking.pdf. For another view of the c<strong>on</strong>troversy see JeremyLeggett, ‘Half G<strong>on</strong>e: The Coming Global EnergyCrisis, Its C<strong>on</strong>flati<strong>on</strong> with Global Warming <strong>and</strong> theC<strong>on</strong>sequences’, 2005, http://www.lorax.org/~oilchange/priceofoil.org/media/20051000_I_o_P.pdf.7 Duncan Austin et al., op. cit. supra note 1.8 United States Nati<strong>on</strong>al Oceanic <strong>and</strong> AtmosphericAdministrati<strong>on</strong>, NOAA Magazine, 15 July 2004, www.magazine.noaa.gov; Eugene Linden, ‘Cloudy with aChance of Chaos’, Fortune, 17 January 2006. Puttingall remaining fossil carb<strong>on</strong> into the atmosphere wouldentail staggering c<strong>on</strong>centrati<strong>on</strong>s of several thous<strong>and</strong>parts per milli<strong>on</strong>.9 ‘Joint Science Academies’ Statement: Global Resp<strong>on</strong>seto <strong>Climate</strong> <strong>Change</strong>’, June 2005, http://www.royalsoc.ac.uk/displaypagedoc.asp?id=20742.10 Naomi Oreskes, ‘The Scientific C<strong>on</strong>sensus <strong>on</strong> <strong>Climate</strong><strong>Change</strong>’, Science 306, 3 December 2004, p. 1686.11 Tim P. Barnett et al., ‘Penetrati<strong>on</strong> of Human-InducedWarming into the World’s Oceans’, Science 309, 5732, 8July 2005, pp. 284-287. See also Fred Pearce, ‘<strong>Climate</strong>Evidence Finds Us Guilty as Charged’, New Scientist2503, 11 June 2005.12 Tim Flannery, ‘M<strong>on</strong>strous Carbuncle’, L<strong>on</strong>d<strong>on</strong> Review ofBooks 27 1, 6 January 2005.13 Jeremy Leggett, The Carb<strong>on</strong> War: Dispatches from theEnd of the Oil Century, L<strong>on</strong>d<strong>on</strong>: Allen Lane, 1999.14 Arctic <strong>Climate</strong> Impact Assessment, Impacts ofa Warming Arctic, Cambridge University Press,Cambridge, 2004. See highlights at http://amap.no/acia/Highlights.pdf. See also Elizabeth Kohlert, ‘The<strong>Climate</strong> of Man’, The New Yorker, 25 April 2005.15 Benito Muller, ‘Equity in <strong>Climate</strong> <strong>Change</strong>: The GreatDivide’, Oxford Institute for Energy Studies, Oxford,2002.16 Richard Black, ‘Global Warming Risk “Much Higher”’,BBC News, 23 May 2006; Bala Govidasamy, ‘Too Hot toH<strong>and</strong>le’, Science <strong>and</strong> Technology, Lawrence LivermoreLaboratory, Livermore, CA, June 2006, http://www.llnl.gov/str/June06/Govindasamy.html.17 Kohlert, op. cit. supra note 14.18 Dick Ahlstrom, ‘World’s Starving Could Grow by50m People’, Irish Times, 6 September 2005; FredPearce, ‘Rice Yields Plunging due to Balmy Nights’,New Scientist, 29 June 2004; Glenn, Jerome C.<strong>and</strong> Theodore J. Gord<strong>on</strong>, 2005 State of the Future,American Council for the United Nati<strong>on</strong>s University,Washingt<strong>on</strong>, 2005.19 For views <strong>on</strong> whether global warming has alreadyresulted in str<strong>on</strong>ger hurricanes, see P. J. Webster etal., ‘<strong>Change</strong>s in Tropical Cycl<strong>on</strong>e Number, Durati<strong>on</strong>,<strong>and</strong> Intensity in a Warming Envir<strong>on</strong>ment’, Science 353,6 October 2005, pp. 1433-1436 <strong>and</strong> ‘NOAA AttributesRecent Increase in Hurricane Activity to Naturally
introducti<strong>on</strong> – a new fossil fuel crisis 27Occurring Multi-Decadal <strong>Climate</strong> Variability’, NOAAMagazine, 29 November 2005, http://www.magazine.noaa.gov.20 David Cyranoski, ‘The L<strong>on</strong>g Range Forecast’ <strong>and</strong> T. P.Barnett et al., ‘Potential Impacts of a Warming <strong>Climate</strong><strong>on</strong> Water Availability in Snow-Dominated Regi<strong>on</strong>s’Nature 438, 17 November 2005, pp. 303-310; ‘OceanWarmth Tied to African Drought’, New York Times, 24May 2005.21 Paul R. Epstein, ‘<strong>Climate</strong> <strong>Change</strong> <strong>and</strong> Human Health’,New Engl<strong>and</strong> Journal of Medicine 353, 14, 6 October2005, pp.1433-1436.22 J<strong>on</strong>athan A. Patz et al., ‘Impact of Regi<strong>on</strong>al <strong>Climate</strong><strong>Change</strong> <strong>on</strong> Human Health’, Nature 438, 17 November2005, pp. 310-318. See also Working Group <strong>on</strong> <strong>Climate</strong><strong>Change</strong> <strong>and</strong> Development, Africa – Up in Smoke?, NewEc<strong>on</strong>omics Foundati<strong>on</strong>, L<strong>on</strong>d<strong>on</strong>, 2005.23 Jenny Hogan, ‘Antarctic Ice Sheet is an ‘AwakenedGiant’’, New Scientist, 2 February 2005. Sea levelchanges will be complicated if the North Atlanticthermohaline circulati<strong>on</strong> shuts down. The “plugholeeffect” of salty North Atlantic surface water sinkingtoward the ocean bottom will abate, resulting in evenhigher sea levels in Northern Europe, Greenl<strong>and</strong> <strong>and</strong>Canada, while there will be compensating loweringeffect <strong>on</strong> sea levels in other regi<strong>on</strong>s of the globe. SeeStephen Battersby, ‘Deep Trouble’, New Scientist 2547,15 April 2006, pp. 42-46.24 Richard A. Kerr, ‘A Bit of Icy Antarctica is Sliding towardthe Sea,’ Science 305, 24 September 2004, p. 1897.25 J. T. Hought<strong>on</strong>, op. cit. supra note 1.26 Satellite measurements analysed by the US Nati<strong>on</strong>alSnow <strong>and</strong> Ice Data Center show 20 per cent less icethan when NASA took the first pictures in 1978 (FredPearce, ‘<strong>Climate</strong> Going Crazy’, New Scientist 2531, 24December 2005). Levels of Arctic ice are now at theirlowest levels in more than a century, prompting Inuithunters who depend <strong>on</strong> the regi<strong>on</strong>’s game to file ahuman rights complaint against the US government forhuman rights violati<strong>on</strong>s (Reuters, 29 September 2005).27 Arctic <strong>Climate</strong> Impact Assessment, op. cit. supra note 14.28 John Pickrell, ‘Soil May Spoil UK’s <strong>Climate</strong> Efforts’,New Scientist 2516, 7 September 2005. See also DavidPowls<strong>on</strong>, ‘Will Soil Amplify <strong>Climate</strong> <strong>Change</strong>?’, Nature433, 20 January 2005, pp. 204-5.29 Fred Pearce, ‘<strong>Climate</strong> Warning as Siberia Melts’, NewScientist 2512, 11 August 2005, p. 12.30 Leggett, op. cit. supra note 13.31 Ibid.32 Hadley Centre for <strong>Climate</strong> Predicti<strong>on</strong> <strong>and</strong> Research,‘An Update of Recent Research from the HadleyCentre’, UK, November 2000; Richard B. Alley, TheTwo-Mile Time Machine: Ice Cores, Abrupt <strong>Climate</strong><strong>Change</strong> <strong>and</strong> Our Future, Princet<strong>on</strong> University Press,Princet<strong>on</strong>, 2002 <strong>and</strong> ‘Abrupt <strong>Climate</strong> <strong>Change</strong>’,Scientific American, November 2004, pp. 62-69;Nati<strong>on</strong>al Research Council, Abrupt <strong>Climate</strong> <strong>Change</strong>:Inevitable SurprisesI, Nati<strong>on</strong>al Academy Press,Washingt<strong>on</strong>, 2002; Lam<strong>on</strong>t-Doherty Earth Observatory,‘Abrupt <strong>Climate</strong> <strong>Change</strong>’, Columbia University, http://www.ldeo.columbia.edu/res/pi/arch/; Richard A. Kerr,‘C<strong>on</strong>fr<strong>on</strong>ting the Bogeyman of the <strong>Climate</strong> System,Science 310, 21 October 2005, pp. 432-33.33 Fred Pearce, ‘Violent Future’, New Scientist 2300, 21July 2001. See also Intergovernmental Panel <strong>on</strong> <strong>Climate</strong><strong>Change</strong>, Third Assessment Report, 2001, WorkingGroup II, Secti<strong>on</strong> 2.6; A. A. J. Williams, D. J. Karoly <strong>and</strong>N. Tapper, ‘The Sensitivity of Australian Fire Danger to<strong>Climate</strong> <strong>Change</strong>’, Climatic <strong>Change</strong> 49, 2001, p. 171.34 Fred Pearce, ‘Faltering Currents Trigger Freeze Fear’,New Scientist 2528, 3 December 2005.35 Alley, ‘Abrupt <strong>Climate</strong> <strong>Change</strong>’, op.cit. supra note 32;Brian Fagan, The L<strong>on</strong>g Summer: How <strong>Climate</strong> <strong>Change</strong>dCivilizati<strong>on</strong>, Granta, L<strong>on</strong>d<strong>on</strong>, 2004.36 Kohlert, op. cit. supra note 14.37 W. S. Broecker, ‘Does the Trigger for Abrupt <strong>Climate</strong><strong>Change</strong> Reside in the Oceans or in the Atmosphere?’,Science 300, 6 June 2003, pp. 1519-1522.38 Allis<strong>on</strong> L. Perry et al., ‘<strong>Climate</strong> <strong>Change</strong> <strong>and</strong> Distributi<strong>on</strong>Shifts in Marine Fishes’, Science 308, 24 June 2005,pp. 1912-16; Fred Pearce, ‘Dark Future Looms for ArcticTundra’, New Scientist 2535, 21 January 2006; ‘LakeAlgae C<strong>on</strong>firm Global Warming Link’, New Scientist2523, 29 October 2005, p. 19.39 Peter Schwartz et al., ‘An Abrupt <strong>Climate</strong> <strong>Change</strong>Scenario <strong>and</strong> Its Implicati<strong>on</strong>s for US Nati<strong>on</strong>al Security’,Department of Defense, Washingt<strong>on</strong>, October 2003;Eugene Linden, op. cit. supra note 8.40 Nati<strong>on</strong>al Research Council, op. cit. supra note 32.41 Douglas A. Kysar, ‘<strong>Climate</strong> <strong>Change</strong>, CulturalTransformati<strong>on</strong> <strong>and</strong> Comprehensive Rati<strong>on</strong>ality’,Envir<strong>on</strong>mental Affairs Law Review 31, 2004, pp. 555-590, pp. 563-570.42 See, for instance, J<strong>on</strong>athan Kohler et al., ‘New Less<strong>on</strong>sfor Technology Policy <strong>and</strong> <strong>Climate</strong> <strong>Change</strong> Investmentfor Innovati<strong>on</strong>’, Tyndall Centre for <strong>Climate</strong> <strong>Change</strong>Research, Norwich, 2005, http://www.tyndall.ac.uk/publicati<strong>on</strong>s/briefing_notes/note13.pdf.43 See, for example, Deutsche Gesellschaft furTechnische Zusammenarbeit (GTZ) et al., ‘North-SouthDialogue <strong>on</strong> Equity in the Greenhouse: A Proposalfor an Adequate <strong>and</strong> Equitable Global <strong>Climate</strong>Agreement’, GTZ, Berlin, 2004. For another argument<strong>on</strong> discount rates, see also Kysar, op. cit. supra note 41,pp. 578-85.44 Kysar, op. cit. supra note 41, pp. 564-566.
28 development dialogue september 2006 – carb<strong>on</strong> trading45 Larry Lohmann, ‘Whose Voice is Speaking? HowOpini<strong>on</strong> Polling <strong>and</strong> Cost-Benefit Analysis SynthesizeNew “Publics”’, Corner House Briefing No. 7, 1998,available at http://www.thecornerhouse.org.uk. See alsoKysar, op. cit. supra note 41, pp. 570-78.46 For various irrati<strong>on</strong>alities associated with costbenefitanalysis, see also Henry Richards<strong>on</strong>, PracticalReas<strong>on</strong>ing about Final Ends, Cambridge UniversityPress, Cambridge, 1994; Martha Nussbaum, TheFragility of Goodness, Cambridge University Press,Cambridge, 1986; John O’Neill, Ecology, Policy <strong>and</strong>Politics, Routledge, L<strong>on</strong>d<strong>on</strong>, 1993; Elizabeth Anders<strong>on</strong>,Value in Ethics <strong>and</strong> Ec<strong>on</strong>omics, Harvard UniversityPress, Cambridge, MA, 1993; David Wiggins, Needs,Values, Truth, Oxford University Press, Oxford, 1987<strong>and</strong> Mary O’Brien, Making Better Envir<strong>on</strong>mentalDecisi<strong>on</strong>s: An Alternative to Risk Assessment, MITPress, Cambridge, MA, 2000.47 Frank H. Knight, Risk, Uncertainty <strong>and</strong> Profit, Hought<strong>on</strong>Mifflin, Bost<strong>on</strong>, 1921, Part III, Chapter VII. See alsoBox: Carb<strong>on</strong> Offsets <strong>and</strong> the Ghost of Frank Knight, inChapter 3 of this special report, pp. 160-161.48 Evan Mills, ‘Insurance in a <strong>Climate</strong> of <strong>Change</strong>’, Science309, 12 August 2005, pp. 1040-1044.49 For example, an Oxford University programmeattempting to model climate change between 1920<strong>and</strong> 2080, <strong>and</strong> run <strong>on</strong> thous<strong>and</strong>s of home computersin Britain, had to be restarted in April 2006 aftermodelers decided that ‘<strong>on</strong>e of the input files to themodel hadn’t been increasing the amount of sulphatepolluti<strong>on</strong> in the atmosphere (sometimes called the“global dimming” effect) as it should have d<strong>on</strong>e’,resulting in an ‘unmasked’ <strong>and</strong> therefore exacerbatedwarming. See http://www.bbc.co.uk/sn/hottopics/climatechange/updates1.shtml.50 Fred Pearce, ‘Harbingers of Doom?’, New Scientist2457, 24 July 2004.51 Paul N. Edwards, ‘Global <strong>Climate</strong> Science, Uncertainty<strong>and</strong> Politics: Data-Laden Models, Model-Filtered Data’,Science as Culture 8, 4, 1999, pp. 437-472.52 Paul N. Edwards, ‘The World in a Machine: Origins<strong>and</strong> Impacts of Early Computerized Global SystemsModels’ in Thomas P. Hughes <strong>and</strong> Agatha C. Hughes,Systems Experts <strong>and</strong> Computers, MIT Press,Cambridge, MA, 2000, pp. 221-254.53 David Stainforth, ‘Modelling <strong>Climate</strong> <strong>Change</strong>: KnownUnknowns’, Open Democracy, 3 June 2005, http://www.opendemocracy.net/globalizati<strong>on</strong>-climate_change_debate/2571.jsp; see also James M. Murphy et al.,‘Quantificati<strong>on</strong> of Modelling Uncertainties in a LargeEnsemble of <strong>Climate</strong> <strong>Change</strong> Simulati<strong>on</strong>s’, Nature 430,12 August 2004, pp. 768-772.54 George Myers<strong>on</strong>, D<strong>on</strong>na Haraway <strong>and</strong> GM Foods, Ic<strong>on</strong>Books, Cambridge, 1999, quoted in Hugh Gusters<strong>on</strong>,‘Decoding the Debate <strong>on</strong> ‘Frankenfood’’, in BetsyHartmann, Banu Subramaniam <strong>and</strong> Charles Zerner:Making Threats: Biofears <strong>and</strong> Envir<strong>on</strong>mental Anxieties,Rowman <strong>and</strong> Littlefield, New Jersey, 2005.55 Eugene Linden, op.cit. supra note 8.56 Paul Brown, ‘Isl<strong>and</strong>s in Peril Plead for Deal’, TheGuardian, 24 November 2000, available at http://www.guardian.co.uk/climatechange/story/0,12374,782560,00.html.57 United Nati<strong>on</strong>s Internati<strong>on</strong>al Strategy for DisasterReducti<strong>on</strong>, ‘Natural Disasters <strong>and</strong> SustainableDevelopment: Underst<strong>and</strong>ing the Links betweenDevelopment, Envir<strong>on</strong>ment <strong>and</strong> Natural Disasters’,Background Paper No. 5, Geneva, 2002, p. 3,http://www.un.org/jsummit/html/documents/backgrounddocs/unisdr%20report.pdf. See alsoChristian Aid, The <strong>Climate</strong> of Poverty: Facts, Fears <strong>and</strong>Hope, Christian Aid, L<strong>on</strong>d<strong>on</strong>, 2006.58 Michael Northrop <strong>and</strong> David Sasso<strong>on</strong>, ‘Catching upwith Fiduciaries’, Envir<strong>on</strong>mental Finance supplement,November 2005, p. S40.59 Paul Harremoës et al., The Precauti<strong>on</strong>ary Principle inthe 20 th Century, Earthscan, L<strong>on</strong>d<strong>on</strong>, 2002, pp. 210-218.60 Brian Fagan, op. cit. supra note 35, pp. xiv-xvi.61 ‘The End of the Oil Age’, The Ec<strong>on</strong>omist, 23 October2003.62 IPCC, Third Assessment Report, Cambridge, 2001,WMO/UNEP, cited in Joseph E. Aldy et al., Bey<strong>on</strong>dKyoto: Advancing the Internati<strong>on</strong>al Effort against<strong>Climate</strong> <strong>Change</strong>, Pew Center <strong>on</strong> Global <strong>Climate</strong><strong>Change</strong>, Arlingt<strong>on</strong>, VA, December 2003, p. 34.63 Malte Meinshausen, ‘On the Risk of Overshooting2 o C.’, Exeter, 2 February 2005, http://www.stabilisati<strong>on</strong>2005.com/day2/Meinshausen.pdf.64 Steffen Kalbekken <strong>and</strong> Nathan Rive, ‘Why Delaying<strong>Climate</strong> Acti<strong>on</strong> is a Gamble’, Centre for Internati<strong>on</strong>al<strong>Climate</strong> <strong>and</strong> Envir<strong>on</strong>mental Research, http://www.stabilisati<strong>on</strong>2005.com/30_Steffen_Kallbekken.pdf.65 Peter Singer, One World: The Ethics of Globalizati<strong>on</strong>,Yale University Press, New Haven, 2002, p. 27.66 Singer, op. cit. supra note 65.67 Andrew Simms, ‘The Ecological Debt Crisis’, Tiempo55, April 2005, p. 19. Simms notes that ‘a decade afterthe UNFCCC was signed, countries including the US, Australia, Canada <strong>and</strong> many European nati<strong>on</strong>s areemitting more carb<strong>on</strong> dioxide per pers<strong>on</strong> than theywere at the time of the 1992 earth summit. . . . in lessthan two days, a US family uses the equivalent in fossilfuels per pers<strong>on</strong> as a family in Tanzania will depend <strong>on</strong>for a whole year’ (op. cit., p. 18).68 Duncan Austin et al., supra note 1.69 Peter Singer, op. cit. supra note 65.
introducti<strong>on</strong> – a new fossil fuel crisis 2970 See Chapters 3 <strong>and</strong> 5, as well as such recent works as,for example, George M<strong>on</strong>biot, Heat: How to Stop thePlanet Burning, Allen Lane, L<strong>on</strong>d<strong>on</strong>, 2006.71 Stephen Kretzmann <strong>and</strong> Irfan Nooruddin, Drilling intoDebt: An Investigati<strong>on</strong> into the Relati<strong>on</strong>ship betweenDebt <strong>and</strong> Oil, Oil <strong>Change</strong> Internati<strong>on</strong>al, Washingt<strong>on</strong>,2005.72 For recent documentati<strong>on</strong>, see, for example, thewebsite of Oilwatch, http://www.oilwatch.org <strong>and</strong>Platform, Pumping Poverty: Britain’s Departmentfor Internati<strong>on</strong>al Development <strong>and</strong> theOil Industry,Platform, L<strong>on</strong>d<strong>on</strong>, 2005, http://www.carb<strong>on</strong>web.org/documents/pumping_poverty_web.pdf; <strong>and</strong> Brett<strong>on</strong>Woods Project, ‘Chad-Camero<strong>on</strong> Pipeline: Corrupti<strong>on</strong><strong>and</strong> Double St<strong>and</strong>ards’, L<strong>on</strong>d<strong>on</strong>, 2004.73 See http://cnews.canoe.ca/CNEWS/Science/2005/11/17/1311486-cp.html’target=3D’_blank’>Dennis Bueckert: CNEWS, 17 November 2005.74 MacD<strong>on</strong>ald Stainsby, ‘Canada, the US, <strong>and</strong> the TarS<strong>and</strong>s’, Z Magazine, 31 December 2005, http://www.zmag.org/.75 United Nati<strong>on</strong>s Framework C<strong>on</strong>venti<strong>on</strong> <strong>on</strong> <strong>Climate</strong><strong>Change</strong>, C<strong>on</strong>ference of the Parties 11, OpeningCerem<strong>on</strong>ies: Speaking Notes for the H<strong>on</strong>ourableStéphane Di<strong>on</strong>, P.C., M.P., Minister of the Envir<strong>on</strong>ment,M<strong>on</strong>treal, 28 November 2005.76 Paul Brown, ‘Energy Efficiency Targets Scrapped’, TheGuardian, 18 July 2005.77 House of Lords, Science <strong>and</strong> Technology Committee,‘Renewable Energy: Practicalities’, Fourth Report ofSessi<strong>on</strong> 2003-04, Volume I: Report, Stati<strong>on</strong>ery Office,L<strong>on</strong>d<strong>on</strong>, 2004, p. 7.78 T<strong>on</strong>y Blair, video address to the Internati<strong>on</strong>alC<strong>on</strong>ference <strong>on</strong> Renewable Energy, B<strong>on</strong>n, 1-4 June,2004.79 Prime Minister’s speech <strong>on</strong> climate change, 14September 2004.80 T<strong>on</strong>y Blair, ‘Get Real <strong>on</strong> <strong>Climate</strong> <strong>Change</strong>’, Observer(L<strong>on</strong>d<strong>on</strong>) 30 October 2005.81 Tyndall Centre for <strong>Climate</strong> <strong>Change</strong> Research,Decarb<strong>on</strong>izing the UK: Energy for a <strong>Climate</strong> C<strong>on</strong>sciousFuture, Exeter, 2005.82 Internati<strong>on</strong>al Energy Agency, World Energy Outlook2005, Paris, 2005, http://www.iea.org/Textbase/press/pressdetail.asp?PRESS_REL_ID=163.83 Darcy Frey, ‘How Green Is BP?’, New York TimesMagazine, 8 December 2002.84 John Browne, ‘Bey<strong>on</strong>d Kyoto’, Foreign Affairs, July/August 2004.85 ‘Shell Boss Fears for the Planet’, BBC News, 17 June2004.86 World Business Council for Sustainable Development,Sharpening the Focus for Acti<strong>on</strong> – A BusinessPerspective, WBCSD, 2005, http://www.wbcsd.org/.87 Jim Vallette et al., Wr<strong>on</strong>g Turn from Rio: The WorldBank’s Road to <strong>Climate</strong> Catastrophe, Institute forPolicy Studies, Washingt<strong>on</strong>, 2004, p. 5.88 Ibid.89 J<strong>on</strong> Sohn et al., ‘Mainstreaming <strong>Climate</strong> <strong>Change</strong> at theMultilateral Development Banks’, World ResourcesInstitute, Washingt<strong>on</strong>, 2005.90 Ibid.91 Jim Vallette <strong>and</strong> Steve Kretzmann, The Energy Tug ofWar: The Winners <strong>and</strong> Losers of World Bank Fossil FuelFinance, Institute for Policy Studies, Washingt<strong>on</strong>, 2004,pp. 21-26.92 See http://web.worldbank.org.
Chapter 2‘Made in the USA’A short history of carb<strong>on</strong> tradingIn which the surprising story is told of how corporati<strong>on</strong>s, academics, governments,United Nati<strong>on</strong>s agencies <strong>and</strong> envir<strong>on</strong>mentalists united around a neoliberal or‘market’ approach to climate change emanating from North America.In the space of a few decades, a new form of global inequality hasabruptly become politically important. An industrialised minorityhas been shown to be overusing the earth’s ability to cleanse the atmosphereof excess carb<strong>on</strong> <strong>and</strong> other greenhouse gases. Awkwardly,this inequality has turned out to be <strong>on</strong>e that threatens survival itself– including, ultimately, the survival of the rich.So what’s to be d<strong>on</strong>e?By whom? And about what? Different people see the crisis in differentways.Northern elites face <strong>on</strong>e set of problems. How are they going to defendpower <strong>and</strong> privilege over a global good they never had to competefor before? How are corporati<strong>on</strong>s <strong>and</strong> society going to cope withthe new threat to a fossil-fuelled industrial structure? How best mightcorporati<strong>on</strong>s ride the wave of the climate crisis, seeking rewards forinnovati<strong>on</strong> <strong>and</strong> seizing new assets? What effect will different kinds ofpolitical acti<strong>on</strong> <strong>on</strong> climate change have <strong>on</strong> accumulati<strong>on</strong> <strong>and</strong> interregi<strong>on</strong>alec<strong>on</strong>omic competiti<strong>on</strong>? How can the political unrest that’ssure to follow <strong>on</strong> from various climate disasters be either c<strong>on</strong>tainedor exploited?Southern elites are c<strong>on</strong>cerned about somewhat different questi<strong>on</strong>s.How can the climate crisis be prevented from being used as yet anotherexcuse for pushing aside the l<strong>on</strong>g-thwarted claims of Southerncountries to industrialisati<strong>on</strong> <strong>and</strong> the world’s wealth? How might itbe transformed into a source of political leverage? What are the beststrategies for dealing with unanticipated catastrophes <strong>and</strong> enormouslyincreased flows of envir<strong>on</strong>mental refugees?As with every new internati<strong>on</strong>al development, all sides are eyeingeach other cautiously, uncertain how the new c<strong>on</strong>diti<strong>on</strong>s will affecttheir respective st<strong>and</strong>ings.
32 development dialogue september 2006 – carb<strong>on</strong> tradingSounds like a familiar story.Yes. But if elites’ attitudes are predictable, some of the issues are new.Global warming isn’t a threat like that of oz<strong>on</strong>e depleti<strong>on</strong> or evennuclear weap<strong>on</strong>s. It can’t be fixed without broad social <strong>and</strong> politicalchange. Its implicati<strong>on</strong>s for corporati<strong>on</strong>s are many-sided, but threateningfor the largest energy companies <strong>and</strong> the energy-intensive privatesector generally. Hardest of all, as this report will argue, avertingthe worst effects of climate chaos is likely to entail democraticmobilisati<strong>on</strong>.For global elites, particularly in the North, these realisati<strong>on</strong>s are inevitablyharder to stomach than the threats posed by global warmingitself. The science ficti<strong>on</strong>-like spectre of rampant superstorms, collapsingagriculture <strong>and</strong> drowned coastlines is easily trumped, in theelite imaginati<strong>on</strong>, by the more mind-wrenching terrors of less energyuse, less centralisati<strong>on</strong>, slower transport, <strong>and</strong> – most staggering of all– less inequality.But isn’t it also the case that political <strong>and</strong> business leaders are simply in denialabout the urgency of the climate crisis?Northern envir<strong>on</strong>mentalists often like to say so. But as the last chapterhas suggested, most elites, with a little help, can quite well imaginewhat lies in store if greenhouse gas levels c<strong>on</strong>tinue to rise. Whatthey have difficulty with is accepting political acti<strong>on</strong> that is commensuratewith the problem.You mean they know what’s happening, but lack the political will to do anythingabout it.It’s not really a ‘lack of political will’. In fact, as this chapter will document,many leaders – <strong>and</strong> the private corporati<strong>on</strong>s <strong>and</strong> technocraciesthat channel their choices – have a surplus of ‘political will’ for dealingwith the climate crisis, just as they have plenty of political will fortrying to turn any other crisis to their advantage. The problem is thatalmost all of this ‘will’ is directed towards technical, informati<strong>on</strong>al or‘market’ fixes entrusted to a h<strong>and</strong>ful of undemocratic instituti<strong>on</strong>s.Thus US president George W. Bush openly proclaims the need forthe US to break its addicti<strong>on</strong> to oil – <strong>on</strong>ly to propose technologicalfixes such as sequestrati<strong>on</strong> of carb<strong>on</strong> from coal-fired power plants,biofuels <strong>and</strong> more nuclear energy. 5 Sir David King, the UK government’schief scientific adviser, warns that climate change is a threatgreater than terrorism – <strong>on</strong>ly to embrace some of the same technologies,plus emissi<strong>on</strong>s trading, as a soluti<strong>on</strong>. 6Technological fixes aretempting.
‘made in the usa’ – a short history of carb<strong>on</strong> trading 33What Is Internati<strong>on</strong>al <strong>Climate</strong> Policy About?The 1992 Framework C<strong>on</strong>venti<strong>on</strong> <strong>on</strong> <strong>Climate</strong><strong>Change</strong> ‘was not negotiated primarilyto reduce greenhouse gas emissi<strong>on</strong>s’ butrather ‘as part of a wider bargain betweenrich <strong>and</strong> poor countries, competing energyinterests <strong>and</strong> governments faced withgrowing ec<strong>on</strong>omic problems making investmentsin the future increasingly moreessential but also more difficult.’ 1S<strong>on</strong>ja Boehmer-Christiansen, 1994‘It is more appropriate to explain the natureof the principal elements in climatepolicy at both nati<strong>on</strong>al <strong>and</strong> internati<strong>on</strong>allevels if <strong>on</strong>e assumes that what is drivingthe leading states <strong>and</strong> firms in this regardis the c<strong>on</strong>cern to create new sites of capitalaccumulati<strong>on</strong>, rather than a focus <strong>on</strong> aggregateGDP growth <strong>and</strong> the impacts ofclimate policies <strong>on</strong> such growth.’ 2Karine Matthews <strong>and</strong> Matthew Paters<strong>on</strong>, 2005‘Establishing a robust global regime for addressingclimate change is… compar ableto the creati<strong>on</strong> of the internati<strong>on</strong>al traderegime under the World Trade Organizati<strong>on</strong>.’3Michael Zammit Cutajar,ex-Executive Secretaryof the United Nati<strong>on</strong>s FrameworkC<strong>on</strong>venti<strong>on</strong> <strong>on</strong> <strong>Climate</strong> <strong>Change</strong>, 2004‘Acceptance of [the carb<strong>on</strong> trading provisi<strong>on</strong>sof the Kyoto Protocol] represents anarticle of faith, faith in the free market <strong>and</strong>faith in the process of globalisati<strong>on</strong>. It rests<strong>on</strong> an ideological stance.’ 4Mick Kelly, Climatic Research Unit,University of East Anglia, 2000You talk about ‘fi xes’ as if there was something wr<strong>on</strong>g with them. But what’swr<strong>on</strong>g with fi xes? Isn’t that what we want – to fi x the climate crisis?The problem is that such ‘fixes’ d<strong>on</strong>’t fix. They promise to deliverthe world from the worst dangers of climate change while leavingeverything else – politics, commerce <strong>and</strong> so forth – just as it is. Butin fact, as the rest of this special report will dem<strong>on</strong>strate, they do theopposite. They leave the course of climate change just as it is while exacerbatingthe inequalities that will have to be addressed if the issueis to be touched <strong>on</strong> at all.This chapter will introduce this subject by sketching the history ofthe processes that trapped official internati<strong>on</strong>al acti<strong>on</strong> <strong>on</strong> climatechange within a US-style framework of neoliberal policy. It will suggestthat a new enclosure movement has formed around three interlinkedstrategies, or alternatives, each of which interacts with <strong>and</strong>often reinforces the others.
34 development dialogue september 2006 – carb<strong>on</strong> tradingThe fi rst strategy works to reshape or suppress underst<strong>and</strong>ing of the climateproblem so that public reacti<strong>on</strong> to it will present less of a politicalthreat to corporati<strong>on</strong>s. The sec<strong>on</strong>d strategy appeals to technologicalfixes as a way of bypassing debate over fossil fuels while helping tospur innovati<strong>on</strong>s that can serve as new sources of profit. The third strategyappeals to a ‘market fix’ that secures the property rights of heavyNorthern fossil fuel users over the world’s carb<strong>on</strong>-absorbing capacitywhile creating new opportunities for corporate profit through trade.The knowledge fixOne c<strong>on</strong>stant theme of climate politics over the last 20 years has beenthe attempt to engineer public reacti<strong>on</strong> to global warming so that itwill present fewer political threats to, <strong>and</strong> more opportunities for,corporati<strong>on</strong>s <strong>and</strong> their political clients. Some corporati<strong>on</strong>s, particularlyin the US, try to deny that humans are changing the climate atall. Others openly acknowledge the threat while trying to reformulateit in a way that benefits them.So the big companies are arguing am<strong>on</strong>g themselves about global warming?Yes, but <strong>on</strong> another level the different sides are working in similardirecti<strong>on</strong>s. For example, more regressive facti<strong>on</strong>s in the oil industry,working public opini<strong>on</strong> mainly within the US, may promote theview that the climate isn’t changing or that it’s fruitless to try to doanything about it. Other facti<strong>on</strong>s, working worldwide, may arguethat there is a scientific basis for acti<strong>on</strong> but read the science in a waythat helps them steer internati<strong>on</strong>al agreements toward technological<strong>and</strong> market fixes that preserve the inertia of fossil fuel-intensive industries.The broader outcome is the same: entrenchment of corporatepower over carb<strong>on</strong> dumps.It sounds like the good cop – bad cop technique of police interrogati<strong>on</strong>. It’s as if,like the proverbial bad cop, industry activists within the US go straight for thethroat of any internati<strong>on</strong>al agreement <strong>on</strong> climate change – while, like the goodcop, their colleagues outside the US ‘defend’ such agreements, hoping to cajole<strong>and</strong> squeeze them into giving them what they want. Have the people who denythat humans are causing the climate to change g<strong>on</strong>e as far as the pro-tobaccolobby used to go in rejecting the evidence?There are certainly some parallels with previous cases of suppressi<strong>on</strong>of scientific evidence, but the antag<strong>on</strong>ists in the climate debate aremore numerous <strong>and</strong> the issues more complicated.The health effects of tobacco (some of which were noticed as earlyas 1602), 7 were c<strong>on</strong>firmed through extensive research in the 20th
‘made in the usa’ – a short history of carb<strong>on</strong> trading 35cen tury, but it was not until 1970 that the Surge<strong>on</strong> General’s healthwarning had to be displayed <strong>on</strong> every cigarette pack sold in the US.Discussi<strong>on</strong> of climate change science follows a somewhat similar –but much more complex <strong>and</strong> twisting – trajectory. Although the firstexplanati<strong>on</strong> of how carb<strong>on</strong> dioxide can act as a greenhouse gas isusually attributed to the great Swedish scientist Svante Arrhenius in1896, 8 the ‘greenhouse earth’ analogy was used as early as 1827 bythe French polymath Jean-Baptiste Fourier 9 <strong>and</strong> the term itself menti<strong>on</strong>edby US scientist Thomas Chamberlin in 1906. 10 In the 1950s, aregular rise in levels of carb<strong>on</strong> dioxide in the atmosphere began to bedocumented, <strong>and</strong> in the 1970s a series of studies by the US Departmentof Energy increased c<strong>on</strong>cern about possible global warming. In1975, scientists still weren’t sure whether the earth was warming orcooling, but 10 years later, at the first major internati<strong>on</strong>al c<strong>on</strong>ference<strong>on</strong> the greenhouse effect at Villach, Austria, climatologists warned ofa ‘rise of global mean temperature which is greater than any in man’shistory’ in the first half of the 21st century <strong>and</strong> up to a <strong>on</strong>e-metre risein sea levels.At that point, with the help of funding-hungry research bodies, analarmed US government moved energetically, in the words of <strong>on</strong>eobserver, to put climate scientists ‘back in their cages’. 11How?It worked to shift the centre of gravity of engaged scientific inquiryinto climate change from independent academics <strong>and</strong> the United Nati<strong>on</strong>sEnvir<strong>on</strong>mental Programme to technical bureaucracies moreclosely tied to governments. These included the World MeteorologicalOrganisati<strong>on</strong> <strong>and</strong> the Intergovernmental Panel <strong>on</strong> <strong>Climate</strong><strong>Change</strong> (IPCC), which was formed in 1988. 12The scientificdebate oversociety’s effects<strong>on</strong> the climate hassome similaritieswith past debatesover tobacco’shealth effects.
36 development dialogue september 2006 – carb<strong>on</strong> tradingHow did that help the US?The Northern-dominated science bureaucracy that resulted was ‘increasinglydependent <strong>on</strong> multinati<strong>on</strong>al research funding’ 13 <strong>and</strong> wassubject to a great deal of US influence, with many US officials assignedto comment <strong>on</strong> every draft report produced. 14Designated the task of providing governments <strong>and</strong> diplomats with authoritativebut st<strong>and</strong>ardised story lines describing climate change, theIPCC naturally tended to homogenise c<strong>on</strong>trasting views <strong>and</strong> downplayc<strong>on</strong>troversy. Under pressure from policy makers to say exactlyhow bad things might get, it also got into the dubious habit of reformulatingindeterminacies <strong>and</strong> ignorance as ‘uncertainties’ or mere‘risks’ or ‘probabilities’. 15 This stance was useful in giving some policymakers the numbers they wanted <strong>and</strong> attracting more research funding,but it also encouraged the noti<strong>on</strong> that governments <strong>and</strong> corporati<strong>on</strong>scould delay acti<strong>on</strong> until more ‘definitive’ results were in.That’s hardly evidence that the IPCC was under the thumb of the US government.It wasn’t. It’s important not to oversimplify. But there has always beena sense in which the IPCC has helped shape climate problems <strong>and</strong>soluti<strong>on</strong>s in ways that make them more acceptable to powerful governments<strong>and</strong> corporati<strong>on</strong>s. A more c<strong>on</strong>crete example might be theIPCC’s resp<strong>on</strong>se to diplomats’ request to look into the possibility ofstoring carb<strong>on</strong> in trees <strong>and</strong> soil as a way of compensating for carb<strong>on</strong>dioxide emissi<strong>on</strong>s.Under pressurefrom policy makersto say exactly howbad things mightget, some scientistsgot into the dubioushabit of reformulatingindeterminacies<strong>and</strong> ignorance as‘probabilities’.I suppose you’re going to say that the IPCC was under a lot of pressure to giveits stamp of approval to the idea of trading trees for smoke, because that’s whatNorthern countries needed in order to c<strong>on</strong>tinue using fossil fuels.Well, it’s certainly true that by 2000, when the IPCC submitted its377-page report <strong>on</strong> L<strong>and</strong> Use, L<strong>and</strong> Use <strong>Change</strong> <strong>and</strong> Forestry, 16 countriessuch as the US, Japan, Canada, Australia, New Zeal<strong>and</strong> <strong>and</strong>Norway had been pressing hard for some time to be allowed to counthuge amounts of the carb<strong>on</strong> soaked up by their forested l<strong>and</strong> againsttheir industrial emissi<strong>on</strong>s. Many Northern countries were also keen<strong>on</strong> being allowed to buy polluti<strong>on</strong> rights from carb<strong>on</strong>-absorbing forestryprojects abroad.So perhaps it shouldn’t be a complete surprise that the IPCC’s reportprovided the US <strong>and</strong> its allies with just the c<strong>on</strong>clusi<strong>on</strong>s they needed.The problem was that the report had to ab<strong>and</strong><strong>on</strong> normal st<strong>and</strong>ards oftechnical rigour in order to do so.
‘made in the usa’ – a short history of carb<strong>on</strong> trading 37What do you mean?Defying a warning from the Internati<strong>on</strong>al Institute for Applied SystemsAnalysis that the IPCC’s work to date ‘could not be c<strong>on</strong>sideredadequate in h<strong>and</strong>ling the uncertainties underlying the carb<strong>on</strong>accountingproblem <strong>and</strong> thus the Kyoto Protocol’, 17 the authors assumedwithout evidence that ‘removals by sinks’ could verifiablycompensate for ‘emissi<strong>on</strong>s by sources’. According to <strong>on</strong>e author, thel<strong>and</strong> use panel ‘never c<strong>on</strong>sidered’ whether the necessary carb<strong>on</strong> accountingprocedures were actually possible or not (see Chapter 3).After the report came out, <strong>on</strong>e businessman panel member proclaimedthat there were ‘no technical problems left’ with the idea oftrading emissi<strong>on</strong>s for trees. 18It quickly emerged that the panel had brought little of the availableknowledge relevant to forest carb<strong>on</strong> accounting to bear <strong>on</strong> its deliberati<strong>on</strong>s.Thous<strong>and</strong>s of relevant peer-reviewed references were missing– <strong>on</strong> deforestati<strong>on</strong>, the history of forestry development projects,peasant resistance, forest comm<strong>on</strong>s regimes, investor behaviour, <strong>and</strong>so <strong>on</strong>. While the panel observed that it is ‘very difficult, if not impossible’to distinguish changes in biotic carb<strong>on</strong> stocks that are ‘directlyhuman-induced’ from those that are ‘caused by indirect <strong>and</strong> naturalfactors’, 19 it failed to draw the logical c<strong>on</strong>clusi<strong>on</strong> that it would be verydifficult, if not impossible, for countries to claim credit for changesin forests <strong>and</strong> soils. 20 Ir<strong>on</strong>ically, it fell to n<strong>on</strong>-scientist UN delegatesfrom Southern countries such as Ug<strong>and</strong>a, Kenya, Tanzania <strong>and</strong> Guatemalato raise scientific questi<strong>on</strong>s that the expert panel had neglected,about forest data, opportunity costs of carb<strong>on</strong> forestry, accountingfor effects <strong>on</strong> fossil fuel use, discount rates, <strong>and</strong> so forth.Are you suggesting that somebody bribed the whole panel to come up with the‘politically correct’ resp<strong>on</strong>se?No, of course not.Are you saying that this panel of dozens of reputable experts <strong>and</strong> businesspeoplewas somehow incompetent?Not at all. Their technical qualificati<strong>on</strong>s were often impressive.You mean that some<strong>on</strong>e intimidated them, then?Nothing so crude. The ways influence works are usually more subtle<strong>and</strong> more powerful. Most of the authors of the report were affi liatedwith envir<strong>on</strong>mental c<strong>on</strong>sultancies, mainstream forestry or ec<strong>on</strong>omicsinstitutes or faculties, industry associati<strong>on</strong>s, official agencies <strong>and</strong>government-funded research instituti<strong>on</strong>s. Many saw carb<strong>on</strong> ‘ offset’
38 development dialogue september 2006 – carb<strong>on</strong> tradingresearch as a promising enterprise for their instituti<strong>on</strong>s. Threequartershailed from the North, <strong>and</strong> even more worked at Northerninstituti<strong>on</strong>s. Over half of the authors <strong>and</strong> editors of the chapter examiningthe technical possibility of countries’ claiming carb<strong>on</strong> credit for‘additi<strong>on</strong>al l<strong>and</strong> <strong>and</strong> forest activities’ within their borders were fromthe US, Canada or Australia – the three countries most active in dem<strong>and</strong>ingcredit for wooded l<strong>and</strong>. 21At the same time, the panel included no representatives of indigenouspeoples who live in or depend <strong>on</strong> forests, or of communities directlyaffected by plantati<strong>on</strong> projects. It included no representatives of communitiesdamaged by fossil-fuel polluti<strong>on</strong> that would be licensed by‘forestry offset’ projects, who also would have had incentives to insist<strong>on</strong> better science. To the middle-class natural scientists <strong>and</strong> ec<strong>on</strong>omistswho dominated the panel, it was likely to be simply a given thatthere were vast ‘degraded l<strong>and</strong>s’ in the South (but not the North) thatcould be taken over for carb<strong>on</strong> projects without l<strong>and</strong> or forests beingdegraded elsewhere as a result; that project development agenciescould do what they promised; <strong>and</strong> that it would be easy to determinefrom a distant office whether projects actually ‘saved’ carb<strong>on</strong>. Thepanel’s membership was largely mismatched with the problem it investigated.So you’re saying that offi cial climate-mitigati<strong>on</strong> science is c<strong>on</strong>taminated withpolitics?No. To say the science is ‘c<strong>on</strong>taminated’ would imply that it’s an abnormalsituati<strong>on</strong> for science to be enabled, c<strong>on</strong>strained <strong>and</strong> motivatedby politics.But it’s not abnormal. It’s unavoidable. No world can exist in whichpolicy can be ‘science-led’ without science being ‘policy-led’ at thesame time. Nor would such a world be desirable. Nor would it be desirableto live in a world in which people believed such a world waspossible or desirable.What are you suggesting?Just that it would be c<strong>on</strong>structive for scientists <strong>and</strong> policy makers toface the reality that ‘modern science both c<strong>on</strong>stitutes <strong>and</strong> is c<strong>on</strong>stitutedby particular forms of politics’, as Sheila Jasanoff, Professor ofScience <strong>and</strong> Public Policy at Harvard, puts it. 22 It would be helpful forevery<strong>on</strong>e simply to admit that both the answers scientists give <strong>and</strong> thequesti<strong>on</strong>s they ask <strong>and</strong> the way they work are influenced by funding,by policy makers’ <strong>and</strong> journalists’ questi<strong>on</strong>s, by market ideologies, bycultural background, by friends, by schooling <strong>and</strong> all the rest.
‘made in the usa’ – a short history of carb<strong>on</strong> trading 39Why would that be helpful?Acknowledging <strong>and</strong> examining these lines of influence – rather thanclaiming that ‘good science’ is somehow immune from them – wouldgive all sides incentives to be more aware of what kind of politicsis involved in any particular research scheme, <strong>and</strong> what the c<strong>on</strong>sequencesare. It could help refocus public attenti<strong>on</strong> <strong>on</strong> the importanceof working to create an envir<strong>on</strong>ment in which there can be scientificcommunities that ask interesting <strong>and</strong> varied questi<strong>on</strong>s of c<strong>on</strong>cern toa wide range of interests in a democratic society, <strong>and</strong> are not pushedtoo hard into trying to provide impossible escape routes for narrowelites or inveigled into dead-end research programmes, damagingmistakes <strong>and</strong> acts of self-decepti<strong>on</strong>. Such communities would be ableto work am<strong>on</strong>g a group of peers who would allow <strong>and</strong> encouragethem to questi<strong>on</strong> received wisdom, to make trouble for neoliberaldoctrine when the scientific need arises, <strong>and</strong> to have the choice notto answer every policy maker’s or journalist’s dem<strong>and</strong> with an oversimplificati<strong>on</strong>.Claiming to be ableto c<strong>on</strong>jure up an‘objective’ scienceoutside any socialc<strong>on</strong>text isn’t anopti<strong>on</strong>.But what would make that possible?Probably the <strong>on</strong>ly way to make a space for a science less restrained byneoliberalism is to work against the dominance of neoliberalism in thewider society. Finessing the problem by claiming to be able to c<strong>on</strong>jureup an ‘objective’ science outside any social c<strong>on</strong>text isn’t an opti<strong>on</strong>. Asscience scholar Sim<strong>on</strong> Shackley <strong>and</strong> colleagues observe, scientists mayas well accept politicisati<strong>on</strong> of climate science ‘as a given <strong>and</strong> find waysto cope c<strong>on</strong>structively with such a political reality’. 23In another example of the interpenetrati<strong>on</strong> of politics <strong>and</strong> climateinquiry, prodding from the US <strong>and</strong> ‘well-organized social scienceresearch interests’ resulted in orthodox ec<strong>on</strong>omists capturing muchof the agenda of the IPCC’s Working Group III, charged with definingpossible resp<strong>on</strong>ses to global warming. 24 The historical <strong>and</strong> socialroots of climate change were ignored, as were grassroots resourcesfor tackling climate change. Instead, technocrats forecast energy use,modelled the future global ec<strong>on</strong>omy, collected socioec<strong>on</strong>omic dataneeded for management ‘soluti<strong>on</strong>s’ <strong>and</strong> toyed with the idea of usingcost-benefit analysis to help make decisi<strong>on</strong>s about climate change.On the whole, the tendency was to try to fuse ‘formal mechanisticmodels across the various distinct natural <strong>and</strong> social science disciplines’25 <strong>and</strong> to ‘treat society as a single species’. 26The bad (social) science that resulted should not be blamed <strong>on</strong> bias– even the best-researched <strong>and</strong> best-defended results would have beenbiased – but <strong>on</strong> the narrowness <strong>and</strong> less than democratic nature of
40 development dialogue september 2006 – carb<strong>on</strong> tradingthe political process that guided <strong>and</strong> c<strong>on</strong>stituted the research. Corresp<strong>on</strong>dingly,insofar as the bad science that came out of WorkingGroup III was challenged at all, it was countered most effectivelyby a political movement that put that narrow process in perspective,not a dem<strong>and</strong> from within the professi<strong>on</strong> of orthodox ec<strong>on</strong>omics forgreater ‘objectivity’.How was the challenge made?In 1995, ec<strong>on</strong>omists in Working Group III, using data <strong>on</strong> how muchm<strong>on</strong>ey different groups spent to avoid risk of death, calculated thevalue of a statistical life of a US citizen at usd 1.5 milli<strong>on</strong> <strong>and</strong> thatof a statistical life of a ‘developing country’ citizen at usd 100,000.The ec<strong>on</strong>omists used these calculati<strong>on</strong>s to suggest that climate changewould cause twice as much ‘socio-ec<strong>on</strong>omic’ damage to the industrialisedcountries as to the rest of the world. The figures touched off afurore am<strong>on</strong>g Southern delegati<strong>on</strong>s to the UNFCCC, who c<strong>on</strong>testedthis interpretati<strong>on</strong> of their countries’ citizens’ appreciati<strong>on</strong> for safety.The calculati<strong>on</strong>s were sent back to their authors. 27Despite such setbacks, much of the IPCC’s work had the effect ofmaking climate change seem potentially manageable by private <strong>and</strong>public sector instituti<strong>on</strong>s including oil companies <strong>and</strong> the WorldBank, <strong>and</strong> by means of neoliberal approaches generally. It became‘politically incorrect’ to enquire whether radical social change mightbe necessary to reduce greenhouse gas c<strong>on</strong>centrati<strong>on</strong>s to a safer level.What was needed, it was implied, was to unleash the productivepowers of private sector companies in the service of climatic stability.For corporati<strong>on</strong>s, this was the positive, opportunity-creating aspectof the ‘knowledge fix’.But the story is far from <strong>on</strong>e-sided. Viewed from another angle, theestablishment of the IPCC was itself an admissi<strong>on</strong> of the difficultyof rec<strong>on</strong>ciling the climate problem with business as usual. And thevery c<strong>on</strong>straints inherent in having to pursue a highly centralised,self-censoring, compromise science meant that results indicating thereality of climate change – when they did come in from bodies suchas the IPCC – were hard for the US <strong>and</strong> many large corporati<strong>on</strong>s toh<strong>and</strong>le.So this particular US attempt to block or shape public awareness of climatechange was double-edged.Very much so. It backfired so badly, in fact, that in the end variousruling facti<strong>on</strong>s in the US became dissatisfied with the very body – theIPCC – that the US had been so influential in setting up in order to
‘made in the usa’ – a short history of carb<strong>on</strong> trading 41‘c<strong>on</strong>tain’ scientists’ talk. Even Robert T. Wats<strong>on</strong>, the World Bankscientist-bureaucrat who as head of the IPCC had often worked hardto accommodate scientific findings to US <strong>and</strong> World Bank sensibilities,28 attracted the wrath of Exx<strong>on</strong>Mobil <strong>and</strong> was voted out of hispositi<strong>on</strong> in 2002. 29But didn’t US corporate interests have ways of infl uencing climate science otherthan through the IPCC?Of course. US companies <strong>and</strong> their political supporters would neverhave dreamed of relying <strong>on</strong> <strong>on</strong>ly <strong>on</strong>e set of instituti<strong>on</strong>s to c<strong>on</strong>tain thedomestic political threats implied by climate change.Corporate or corporate-backed groups such as the Business Roundtable,the Global <strong>Climate</strong> Informati<strong>on</strong> Project, the Coaliti<strong>on</strong> for VehicleChoice, the Nati<strong>on</strong>al Centre for Public Policy Research, the Advancementof Sound Science Coaliti<strong>on</strong> <strong>and</strong> the Informati<strong>on</strong> Councilfor the Envir<strong>on</strong>ment spent milli<strong>on</strong>s of dollars <strong>on</strong> experts, c<strong>on</strong>ferences,books <strong>and</strong> advertisements associating climate acti<strong>on</strong> with ec<strong>on</strong>omicharm to the US, including higher petrol prices. 30 The US Electric<strong>Power</strong> Research Institute, which is funded by electric utilities, financiallysupported ‘seven of the major authors of integrated assessmentstudies’ as well as co-sp<strong>on</strong>soring a special issue of The Energy Journal<strong>on</strong> the costs of the Kyoto Protocol, provoking the editors of the academicjournal Climatic <strong>Change</strong> to protest that the ‘nature of fundingof most leading ec<strong>on</strong>omic models’ of climate change was ‘a source ofc<strong>on</strong>cern’. 31 N<strong>on</strong>-government organisati<strong>on</strong>s such as the Pew Centre for<strong>Climate</strong> <strong>Change</strong> <strong>and</strong> establishment think-tanks such as the Council<strong>on</strong> Foreign Relati<strong>on</strong>s, aided by the faculties of many North American<strong>and</strong> British ec<strong>on</strong>omics departments, also helped carry the message t<strong>on</strong>ews media that Kyoto targets were ‘unrealistic’. 32Aligned with a somewhat different set of corporate interests, the Global<strong>Climate</strong> Coaliti<strong>on</strong> meanwhile aimed a multimilli<strong>on</strong>-dollar disinformati<strong>on</strong>campaign at US audiences attacking the whole idea that the climatewas changing, including a usd 13 milli<strong>on</strong> pre-Kyoto Protocol advertisingblitz in 1997 al<strong>on</strong>e. 33 Business coaliti<strong>on</strong>s <strong>and</strong> corporate-fundedthink-tanks have also sought out <strong>and</strong> supported climate-sceptic scientistsin order to disseminate their views in an attempt to ensure that theidea of human-caused climate change remains ‘c<strong>on</strong>troversial’. 34These are the famous climate change ‘deniers’ we always hear about?Yes.
42 development dialogue september 2006 – carb<strong>on</strong> tradingAre they really still around?Well, these days they’re fighting a bit of a rearguard battle. And therewere never many of them in the first place. Still, as late as May 2006,the right-wing Competitive Enterprise Institute was laying out hundredsof thous<strong>and</strong>s of dollars for a US televisi<strong>on</strong> advertising campaignattacking ‘global warming alarmism’ as an attempt to ‘suppress energyuse’ based <strong>on</strong> dubious science. 35 As before, such efforts are targetedmainly at the US public. 36 But they also remain visible elsewhere. 37Still, it’s in the US that the infl uence of the global warming sceptics reallycounts.Yes. What with the dependence of US elected officials <strong>on</strong> corporatefinance, extreme <strong>and</strong> often bizarre views about climate change thatwould not be heard elsewhere in the world have endlessly reverberatedin the echo chamber of C<strong>on</strong>gress as well as <strong>on</strong> US televisi<strong>on</strong>news programmes. Also, while many US scientists do c<strong>on</strong>tinue to beoutspoken about the biophysical dangers of climate change <strong>and</strong> theglobal inequalities that underlie the overloading of the atmospherewith fossil carb<strong>on</strong>, they are seldom able to draw c<strong>on</strong>clusi<strong>on</strong>s fromthese views in a way that challenges c<strong>on</strong>venti<strong>on</strong>al ec<strong>on</strong>omic developmentideology <strong>and</strong> its corporati<strong>on</strong>-first pieties. All too often, theyfollow warnings about the need for drastic acti<strong>on</strong> <strong>on</strong> climate changewith claims (for instance) that more nuclear energy or tree plantati<strong>on</strong>sare needed, or that ‘we should not have a strategy that results in prematureretirement of capital stock’. 38The same instituti<strong>on</strong>alised weakness of imaginati<strong>on</strong> is reproducedin US universities, schools, newspapers <strong>and</strong> popular entertainment.The global warming movie The Day after Tomorrow, for instance, hasplenty of scenes of New York streets awash in an icy Atlantic ocean,but, just as in UN negotiati<strong>on</strong>s, the words ‘oil’ <strong>and</strong> ‘corporati<strong>on</strong>’ arenot menti<strong>on</strong>ed. The crisis the film is about, it is implied, can be tracedmainly to the failure of political leaders to ‘listen to scientists’. Asidefrom the slightly cheeky suggesti<strong>on</strong> that Mexico might so<strong>on</strong> be facedwith a tide of middle-class envir<strong>on</strong>mental refugees from the US, themovie’s main c<strong>on</strong>tributi<strong>on</strong> toward stimulating its viewers’ politicalimaginati<strong>on</strong>s is to declare itself ‘carb<strong>on</strong>-neutral’ – a marketing strategywhose pointlessness will be explored later in this report. FormerUS vice-president Al Gore’s documentary An Inc<strong>on</strong>venient Truth, releasedtwo years later, presents more climatology, but also winds uptrying to channel acti<strong>on</strong> into carb<strong>on</strong> trading, resp<strong>on</strong>sible c<strong>on</strong>sumerism,tree plantati<strong>on</strong>s <strong>and</strong> other ‘fixes’. Meditating <strong>on</strong> Hollywood disastermovies, literary critic Fredric James<strong>on</strong> <strong>on</strong>ce observed: ‘It seemsto be easier for us today to imagine the thoroughgoing deteriorati<strong>on</strong>
‘made in the usa’ – a short history of carb<strong>on</strong> trading 43of the earth <strong>and</strong> of nature than the breakdown of late capitalism.’ 39 It’sno surprise, in an age when Hollywood scriptwriters are advising thePentag<strong>on</strong> <strong>on</strong> terror scenarios 40 <strong>and</strong> pulp novelist Michael Cricht<strong>on</strong>appears as an expert witness <strong>on</strong> climate change before a US Senatecommittee, 41 that such attitudes are reflected back into politics.Where imaginati<strong>on</strong> is most lacking in such envir<strong>on</strong>ments is in the realmnot of climatology but of politics. An unhealthy mixture of biophysicalhorror stories, scepticism, fatalism <strong>and</strong> vague calls for ‘acti<strong>on</strong>’ is all tooeasily answered with sophisticated versi<strong>on</strong>s of ‘business as usual’.The technological fixA sec<strong>on</strong>d strategy for c<strong>on</strong>taining climate change <strong>and</strong> the present <strong>and</strong>future political threats it implies – as well as for using the climate crisisto open up new opportunities for corporati<strong>on</strong>s – is to appeal totechnological fixes that allow c<strong>on</strong>tinued exploitati<strong>on</strong> of coal, oil <strong>and</strong>gas. Once again, the US has always played a central role.An unhealthy mixtureof biophysical horrorstories, scepticism,fatalism <strong>and</strong> vague callsfor ‘acti<strong>on</strong>’ is all tooeasily answered withsophisticated versi<strong>on</strong>s of‘business as usual’.What are these fi xes?From the 1970s to the 1990s, scientists such as Freeman Dys<strong>on</strong> <strong>and</strong>Norman Myers <strong>and</strong> ec<strong>on</strong>omists such as Roger Sedjo proposed country -sized tree plantati<strong>on</strong>s (usually c<strong>on</strong>veniently sited in the South) as waysof soaking up industrial carb<strong>on</strong> dioxide. 42 Genetic modificati<strong>on</strong> hasrecently been added to this techno-fix: trees are now being deliberatelyengineered to absorb more carb<strong>on</strong> from the atmosphere. 43Giant plantati<strong>on</strong>s were not the <strong>on</strong>ly place US elites hoped to stashthe carb<strong>on</strong> released by the burning of fossil fuels. By 2000, <strong>on</strong>e USEnergy Department laboratory was laying plans to spend over usd900 milli<strong>on</strong> over the next 15 years <strong>on</strong> such schemes as dosing soilwith coal combusti<strong>on</strong> by-products to increase carb<strong>on</strong> uptake, injectingcarb<strong>on</strong> dioxide into deep ocean waters off the coast of Hawaii,<strong>and</strong> burying carb<strong>on</strong> dioxide hydrates under M<strong>on</strong>terey Bay. 44Other US-inspired projects have included seeding large areas of l<strong>and</strong>with organisms genetically engineered to fix carb<strong>on</strong> ‘more efficiently’;establishing floating kelp farms thous<strong>and</strong>s of square kilometres insize which, growing heavier as they c<strong>on</strong>sumed carb<strong>on</strong> dioxide, wouldeventually sink to the ocean floor; <strong>and</strong> using fleets of C-130 militarytransport planes to bomb Scotl<strong>and</strong> <strong>and</strong> other countries with milli<strong>on</strong>sof metal c<strong>on</strong>es c<strong>on</strong>taining pine saplings. 45 In 2001, the Los Alamos Nati<strong>on</strong>alLaboratory in New Mexico proposed c<strong>on</strong>structing a collecti<strong>on</strong>of calcium hydroxide p<strong>on</strong>ds covering an area of 200,000 square kilometresto scrub fossil fuel-produced carb<strong>on</strong> dioxide from the air. 46
44 development dialogue september 2006 – carb<strong>on</strong> tradingGood grief!It doesn’t end there. US <strong>and</strong> Canadian research instituti<strong>on</strong>s have alsorecently seeded various areas of the Pacific Ocean with ir<strong>on</strong> particlesto try to stimulate CO 2 -absorbing plankt<strong>on</strong> blooms. 47 With financialsupport from the US Department of Energy, human genome pi<strong>on</strong>eerCraig Venter is now committed to creating a new life form – a syntheticc<strong>on</strong>struct based <strong>on</strong> simple micro-organisms – to clean up carb<strong>on</strong>dioxide or other greenhouse gases. 48Scientists c<strong>on</strong>vened by the White House under George W. Bush havemeanwhile proposed fleets of ocean-going turbines to throw up saltspray into clouds to improve their reflectivity. 49 And the US Nati<strong>on</strong>alScience Foundati<strong>on</strong> is discussing the possibility of creating a biologicalfilm over the ocean’s surface to divert hurricanes. 50 In January2006, a ‘weather-modificati<strong>on</strong>’ bill (S517) was ‘fast-tracked’ by theUS Senate <strong>and</strong> House of Representatives. The Bill was expected tobecome law before the 2006 hurricane seas<strong>on</strong>. 51US scientists have also l<strong>on</strong>g c<strong>on</strong>templated spraying the stratosphere withfine metallic particles to reflect sunlight, perhaps using the engines ofcommercial jets for the job. 52 Taking unilateral acti<strong>on</strong> to dim the sky inthis way, explained the late Edward Teller, the father of the hydrogenbomb, is a simpler, cheaper alternative to ‘internati<strong>on</strong>al c<strong>on</strong>sensus <strong>on</strong>…large-scale reducti<strong>on</strong>s in fossil fuel-based energy producti<strong>on</strong>’. 53These schemes sound crazy! Who knows what might happen if they werecarried out? Shouldn’t scientists <strong>and</strong> technologists be encouraged to use theiringenuity in ways that would help end dependence <strong>on</strong> fossil fuels instead?Perhaps they should, but they would need more instituti<strong>on</strong>al, financial<strong>and</strong> cultural support to do so. Today, as Teller implied, the focusis <strong>on</strong> avoiding ‘large-scale reducti<strong>on</strong>s’ in fossil fuel use.Supporting more use of fossil fuels certainly seems to be a big priorityat, for example, the US Department of Energy <strong>and</strong> its old nati<strong>on</strong>alnuclear weap<strong>on</strong>s laboratories, which have teamed up with oil companiessuch as Chevr<strong>on</strong>, Texaco, Shell, <strong>and</strong> BP to study geologicalsequestrati<strong>on</strong> of carb<strong>on</strong> dioxide. It’s also a priority at top universities,due to floods of government <strong>and</strong> corporate funding directed at thesame objective. In 2000, for instance, BP <strong>and</strong> Ford c<strong>on</strong>tributed usd20 milli<strong>on</strong> to Princet<strong>on</strong>’s Carb<strong>on</strong> Mitigati<strong>on</strong> Initiative, the largestcorporate c<strong>on</strong>tributi<strong>on</strong> in the university’s history. Headed by professorsfrom two departments – mechanical <strong>and</strong> aerospace engineering,<strong>and</strong> ecology <strong>and</strong> evoluti<strong>on</strong>ary biology – the scheme tried to find waysto collect carb<strong>on</strong> dioxide at central processing sources, then store itdeep underground. One ostensible objective was to help India <strong>and</strong>
‘made in the usa’ – a short history of carb<strong>on</strong> trading 45China ‘spend fossil fuels…without doing what we’ve d<strong>on</strong>e to the atmosphere’.54With the help of <strong>on</strong>-the-ground corporate experiments in Norway<strong>and</strong> Algeria, the initiative helped disseminate this little-tested<strong>and</strong> hazardous techno-fix 55 into mainstream discourse. A Scientifi cAmerican article entitled ‘Can We Bury Global Warming?’ 56 appearedin 2005, al<strong>on</strong>g with a parlour game for industry, academic <strong>and</strong> NGOaudiences that c<strong>on</strong>veys the message that carb<strong>on</strong> capture <strong>and</strong> sequestrati<strong>on</strong>,biofuels, tree plantati<strong>on</strong>s <strong>and</strong> nuclear power can all be reas<strong>on</strong>ablyplaced al<strong>on</strong>gside energy efficiency <strong>and</strong> solar energy as comp<strong>on</strong>entsof a climate acti<strong>on</strong> portfolio. 57 By 2004, R<strong>on</strong> Oxburgh, n<strong>on</strong>executivechairman of Shell, was <strong>on</strong> record saying that ‘if we d<strong>on</strong>’thave sequestrati<strong>on</strong> I see very little hope for the world’. 58Not to be outd<strong>on</strong>e, Exx<strong>on</strong>-Mobil, General Electric, SchlumbergerTechnology <strong>and</strong> Toyota agreed in 2002 to funnel usd 225 milli<strong>on</strong> toStanford University for a Global <strong>Climate</strong> <strong>and</strong> Energy Project assignedto investigate carb<strong>on</strong> capture <strong>and</strong> sequestrati<strong>on</strong>, producti<strong>on</strong> of hydrogenfrom fossil fuels, biomass energy, <strong>and</strong> other fields <strong>on</strong> a list set outin the c<strong>on</strong>tract with the four corporati<strong>on</strong>s. 59The market fixThe third strategy for c<strong>on</strong>taining the political threats implied by climatechange – while at the same time using it to create new opportunitiesfor corporate profit – is the ‘market fix’.The market fix began to take shape in the late 1980s <strong>and</strong> early 1990s.Public pressure was growing for governments to agree to do somethingabout global warming. Some of the changes needed had beenobvious since the 1970s. 60 These included l<strong>on</strong>g-term shifts in thestructure of Northern industrial, transport <strong>and</strong> household energyuse away from wasteful expenditure of fossil fuels toward frugal useof solar <strong>and</strong> other renewable sources. Tackling the problem internati<strong>on</strong>allymeant addressing the instituti<strong>on</strong>s <strong>and</strong> power imbalances thathad resulted in both the overuse <strong>and</strong> the globally unequal use of theearth’s carb<strong>on</strong>-absorbing capacity.That sort of acti<strong>on</strong> would have been hard for corporati<strong>on</strong>s, governments <strong>and</strong>UN agencies to accept unless they were under a lot of public pressure to do so.Yes. It also required a historical <strong>and</strong> political perspective unfamiliar tomany climate scientists <strong>and</strong> technocrats. It was easier to view globalwarming’s causes in simple physical terms – ‘too much greenhousegas’ – without looking too carefully at what would have to be d<strong>on</strong>e
46 development dialogue september 2006 – carb<strong>on</strong> tradingto tackle the problem. The priority became to set some targets whileleaving the ‘how’ of l<strong>on</strong>g-term structural change for later.Many internati<strong>on</strong>al negotiators <strong>and</strong> their advisers were encouragedto take this approach by the precedent of the 1987 M<strong>on</strong>treal Protocol<strong>on</strong> Substances that Deplete the Oz<strong>on</strong>e Layer. 61 The M<strong>on</strong>treal agreementhad been a technocrat’s dream. Spearheaded by Northern scientificbureaucracies <strong>and</strong> governments, it had never had to scrutinisethe industrial system as a whole. 62 The oz<strong>on</strong>e problem was presentedas nothing more than ‘fl ights of inanimate particles from activitiesdeemed benign in themselves, <strong>and</strong> not the lifestyles of the rich <strong>and</strong>famous’, to quote the wry assessment of Harvard’s Sheila Jasanoff. 63But the treaty worked. Unlike global warming, the oz<strong>on</strong>e problemdidn’t require l<strong>on</strong>g-term restructuring of energy sectors central to industrialisedec<strong>on</strong>omies. 64 Only a few factories were involved. It was relativelyeasy to set a target <strong>and</strong> find substitutes for some oz<strong>on</strong>e-depletingsubstances or phase them out. With the eventual backing of industryitself <strong>and</strong> the help of a few transiti<strong>on</strong>-aiding payments to Southern nati<strong>on</strong>s,nearly all nati<strong>on</strong>s wound up complying with the agreement.A tempting model.Yes. Many climate negotiators thought a similar idea might workwith global warming. 65 They were even guided by some of the samescientist-bureaucrats. Targets <strong>and</strong> timetables for reducing emissi<strong>on</strong>sbecame the big issue. Few questi<strong>on</strong>s were asked about power, property,<strong>and</strong> path-dependence.Into this vacuum rushed the idea that the technical means of achievingreducti<strong>on</strong>s could best be left to the private sector <strong>and</strong> ‘technologytransfer’. And if corporati<strong>on</strong>s were going to be the stars of the show,why not make it as cheap <strong>and</strong> profitable as possible for them to meetwhatever targets had been set?And this was the market fi x?Yes. The earth’s carb<strong>on</strong> dump would gradually be made ec<strong>on</strong>omicallyscarce through limits <strong>on</strong> its use imposed by states. Tradeable legalrights to it would be created <strong>and</strong> distributed to the biggest emitters.Bargaining would generate a price that would reflect the value society(that is, governments) placed <strong>on</strong> carb<strong>on</strong> dump use. Emitters whofound ways of using the dump more efficiently could profit by sellingtheir unused rights to more backward producers. They could alsodevelop new dumps. The market would ‘help society find <strong>and</strong> moveal<strong>on</strong>g the least-cost polluti<strong>on</strong> reducti<strong>on</strong> supply curve’ 66 (see box <strong>on</strong>next page, ‘What is Carb<strong>on</strong> Trading?’).
‘made in the usa’ – a short history of carb<strong>on</strong> trading 47What is Carb<strong>on</strong> Trading?There are two kinds of carb<strong>on</strong> trading.The first is emissi<strong>on</strong>s trading. The sec<strong>on</strong>d istrading in project-based credits. Often the twocategories are put together in hybrid tradingsystems.Emissi<strong>on</strong>s tradingSuppose you have two companies, A <strong>and</strong>B. Each emits 100,000 t<strong>on</strong>nes of carb<strong>on</strong>dioxide a year.The government wants to cut their emissi<strong>on</strong>sby 5 per cent. It gives each companyrights, or ‘allowances’, to emit 95,000 t<strong>on</strong>nesthis year. Each company must either reduceits emissi<strong>on</strong>s by 5,000 t<strong>on</strong>nes or buy 5,000t<strong>on</strong>nes of allowances from some<strong>on</strong>e else.The market price for these allowances isusd 10 per t<strong>on</strong>ne. Company A can reduceits emissi<strong>on</strong>s for half this cost per t<strong>on</strong>ne.So it’s reas<strong>on</strong>able for it to cut its emissi<strong>on</strong>sby 10,000 t<strong>on</strong>nes: if it sells the extra 5,000t<strong>on</strong>nes (for usd 50,000) it will be able torecover its entire expenditure. So the companysaves usd 25,000.For company B, making reducti<strong>on</strong>s is moreexpensive. Cutting each t<strong>on</strong>ne of emissi<strong>on</strong>scosts it usd 15. So it decides not to reduceits emissi<strong>on</strong>s, but instead to buy the 5,000t<strong>on</strong>nes of surplus allowances that companyA is offering. If company B reduced its ownemissi<strong>on</strong>s, it would cost usd 75,000. But ifit buys company A’s surplus allowances, thecost is <strong>on</strong>ly usd 50,000. So company B alsosaves usd 25,000 <strong>on</strong> the deal.Both firms, in short, save usd 25,000 overwhat they would have had to spend withouttrading. If they are the <strong>on</strong>ly two companiesin the country, this means the country’sbusiness sector winds up cutting emissi<strong>on</strong>sjust as much as it would have underordinary regulati<strong>on</strong>. But by distributing thereducti<strong>on</strong>s over the country’s entire privatesector, it costs the sector as a whole usd50,000 less to do so.Some emissi<strong>on</strong>s trading schemes allowcompanies to save any surplus allowancesthey have for their own use in future years,rather than selling them.Emissi<strong>on</strong>s trading is also sometimes called‘cap-<strong>and</strong>-trade’.Trading in project-based creditsSuppose you have the same two companies,A <strong>and</strong> B, each emitting 100,000 t<strong>on</strong>nes ofcarb<strong>on</strong> dioxide a year. Again, the governmentwants to cut their emissi<strong>on</strong>s by 5 percent, so it gives each company allowances toemit <strong>on</strong>ly 95,000 t<strong>on</strong>nes.But now the government tells each companythat if it doesn’t want to cut its emissi<strong>on</strong>sby 5,000 t<strong>on</strong>nes each, it has anotheropti<strong>on</strong>. It can invest abroad in projects that‘reduce’ emissi<strong>on</strong>s of carb<strong>on</strong> dioxide 5,000t<strong>on</strong>nes ‘below what would have happenedotherwise’. Such projects might includegrowing crops to produce biofuels that canbe used instead of oil; installing machineryat a chemical factory to destroy greenhousegases; burning methane seeping out of acoal mine or waste dump so that it doesn’tescape to the atmosphere; or building awindpower generator. The price of creditsfrom such projects is <strong>on</strong>ly usd 4 per t<strong>on</strong>ne,due to low labour costs, a plethora of ‘dirty’factories, <strong>and</strong> government <strong>and</strong> World Banksubsidies covering part of the costs of buildingthe projects <strong>and</strong> calculating how muchcarb<strong>on</strong> dioxide equivalent they save.
48 development dialogue september 2006 – carb<strong>on</strong> tradingIn this situati<strong>on</strong>, it makes sense for bothcompany A <strong>and</strong> company B to buy creditsfrom abroad rather than make reducti<strong>on</strong>sthemselves. Company A saves usd 5,000 bybuying credits from projects abroad ratherthan cutting its own emissi<strong>on</strong>s. CompanyB meanwhile saves usd 55,000. The totalsaving for the domestic private sector isusd 60,000.Other names for project-based credit tradinginclude ‘baseline-<strong>and</strong>-credit’ trading<strong>and</strong> ‘offset’ trading.Hybrid trading systemsSome polluti<strong>on</strong> trading systems use emissi<strong>on</strong>strading <strong>on</strong>ly. Hybrid systems use bothemissi<strong>on</strong>s trading <strong>and</strong> ‘offset’ trading, <strong>and</strong>try to make ‘allowances’ exchangeable forproject-based ‘credits’.The US sulphur dioxide market uses emissi<strong>on</strong>strading <strong>on</strong>ly. But both the KyotoProtocol <strong>and</strong> the EU Emissi<strong>on</strong>s TradingSystem mix ‘cap-<strong>and</strong>-trade’ allowances<strong>and</strong> project-based credits, <strong>and</strong> try to makethem mutually exchangeable.Such systems are enormously complex.Not <strong>on</strong>ly is it difficult to try to createcredible ‘credits’ <strong>and</strong> make them equivalentto ‘allow ances’. Mixing the two alsochanges the ec<strong>on</strong>omics.For example, imagine that company A <strong>and</strong>company B above are allowed three opti<strong>on</strong>sin any combinati<strong>on</strong>: cutting their ownemissi<strong>on</strong>s, trading allowances with eachother, or buying credits from abroad.For company B, the best opti<strong>on</strong> would be,again, to buy usd 20,000 worth of creditsabroad rather than spend usd 75,000 to reduceits own emissi<strong>on</strong>s.For company A, the best opti<strong>on</strong> would beto cut its own emissi<strong>on</strong>s by 10,000 t<strong>on</strong>nes– but <strong>on</strong>ly if it could find a buyer whowould pay usd 10 per t<strong>on</strong>ne for the 5,000allowances it would have to spare. Insteadof having to pay usd 20,000 for carb<strong>on</strong>credits from abroad, it wouldn’t have tospend anything.Unfortunately for company A, it can’t findany such buyer. If company B can save usd5,000 by going abroad for credits, it w<strong>on</strong>’tbuy company A’s spare allowances. Butcompany B is the <strong>on</strong>ly other firm in theemissi<strong>on</strong>s trading scheme. So without companyB as a buyer, it’s not worthwhile forcompany A to make any cuts at all, <strong>and</strong> ittoo will wind up buying credits overseas.As Michael Zammit Cutajar, the former executive secretary of theUNFCCC, has stressed, this approach was ‘made in the USA’. 67 Thepolluti<strong>on</strong>-trading mechanisms that formed the core of the KyotoProtocol were of a type proposed by North American ec<strong>on</strong>omists inthe 1960s; 68 put into practice in US markets for lead, nitrogen oxides<strong>and</strong> sulphur dioxide <strong>and</strong> other pollutants beginning in the 1970s <strong>and</strong>1980s; 69 <strong>and</strong> successfully pressed <strong>on</strong> the UN by the US government, advisedby US ec<strong>on</strong>omists, US NGOs <strong>and</strong> US business, in the 1990s. 70What is the Kyoto Protocol exactly?The Protocol was adopted in 1997 at <strong>on</strong>e of the annual c<strong>on</strong>ferencesof the parties to the 1992 United Nati<strong>on</strong>s Framework C<strong>on</strong>venti<strong>on</strong> <strong>on</strong>
‘made in the usa’ – a short history of carb<strong>on</strong> trading 49<strong>Climate</strong> <strong>Change</strong> (UNFCCC). The treaty finally came into force <strong>on</strong>16 February 2005, having been ratified by 127 countries resp<strong>on</strong>siblefor 61 per cent of global greenhouse-gas emissi<strong>on</strong>s.The Protocol binds 38 industrialised nati<strong>on</strong>s to reducing their emissi<strong>on</strong>san average of 5.2 per cent below 1990 levels by 2008-2012.But there are loopholes. Countries unable or unwilling to achievethese modest targets are allowed to ‘compensate’ for their failurethrough three trading mechanisms, or markets.Which are?First, they are allowed to buy emissi<strong>on</strong>s rights from countries thathave permits to spare. Countries that were able to win very lax targetsto begin with, such as Russia <strong>and</strong> the Ukraine, are likely to haveplenty of permits with which to supply this market.And sec<strong>on</strong>d?Sec<strong>on</strong>d, industrialised countries can also escape the need to reduceemissi<strong>on</strong>s by putting m<strong>on</strong>ey into carb<strong>on</strong>-absorbing forestry or soilc<strong>on</strong>servati<strong>on</strong>. 71And third?Last, <strong>and</strong> most important, the industrialised North can escape its obligati<strong>on</strong>sto reduce at home by investing in special, UN-approved‘greenhouse gas-saving’ projects abroad.What are these foreign-based projects?They fall into two categories. Clean Development Mechanism(CDM) projects are carried out in the South, in countries not subjectto the emissi<strong>on</strong>s ‘cap’ <strong>on</strong> industrialised nati<strong>on</strong>s.Joint Implementati<strong>on</strong> (JI) projects are similar, but are set up in otherindustrialised countries, in practice mostly in Eastern Europe.Such trading mechanisms had been tried out nowhere in the worldoutside of the US. By <strong>and</strong> large, they had failed even there (see Chapter3). But support for them from the Bill Clint<strong>on</strong> regime set in moti<strong>on</strong>a politics that eventually prevailed over both European <strong>and</strong>Southern oppositi<strong>on</strong> 72 (see box <strong>on</strong> page 52, ‘Internati<strong>on</strong>al <strong>Climate</strong>Politics: Some Recent Highlights’). As climate expert Michael Grubbnotes, the ‘dominance of US power, <strong>and</strong> the c<strong>on</strong>tinuing weakness offoreign policy… elsewhere’ has ensured that the negotiati<strong>on</strong>s followingthe Kyoto Protocol – as well as the Protocol itself – have been‘very much as sought by the US administrati<strong>on</strong>’. 73
50 development dialogue september 2006 – carb<strong>on</strong> tradingAlso significant was support from some Northern corporati<strong>on</strong>s, whowere happier with schemes that gave big polluters free property rightsin previously ‘open access’ global dumps than with programmes focused<strong>on</strong> taxati<strong>on</strong> <strong>and</strong> more c<strong>on</strong>venti<strong>on</strong>al forms of regulati<strong>on</strong>. Traders<strong>and</strong> bankers hoped to set up new carb<strong>on</strong> exchanges in L<strong>on</strong>d<strong>on</strong>,Chicago, Sydney, Amsterdam, Leipzig <strong>and</strong> elsewhere. Envir<strong>on</strong>mentalgroups, too, threw in their lot with the market fix <strong>on</strong> the theory thatit was the <strong>on</strong>ly way to get a climate treaty approved. 74By the time the sec<strong>on</strong>d George Bush pulled out of Kyoto in 2001(much to the c<strong>on</strong>sternati<strong>on</strong> of US companies hoping to profit fromcarb<strong>on</strong> trading, such as Enr<strong>on</strong>), the approach had become internati<strong>on</strong>allyentrenched even though its original political rati<strong>on</strong>ale hadvanished. Its envir<strong>on</strong>mentalist backers, many of whom had by nowspent much of their careers in the negotiati<strong>on</strong>s, were left in the oddpositi<strong>on</strong> of having to champi<strong>on</strong> an agreement written largely by theUS for US purposes <strong>on</strong> the basis of US experience <strong>and</strong> US ec<strong>on</strong>omicthinking, but which no l<strong>on</strong>ger had US support.But the anomaly was quickly forgotten. Journalists <strong>and</strong> envir<strong>on</strong>mentalistsalike so<strong>on</strong> came to treat any criticism of the Kyoto Protocolnot as directed against US-style ‘free market’ envir<strong>on</strong>mentalism but,ir<strong>on</strong>ically, as playing into the h<strong>and</strong>s of US oil interests <strong>and</strong> as endorsinga do-nothing positi<strong>on</strong>. A little-tested idea spearheaded by a smallUS elite was now perceived as a global c<strong>on</strong>sensus <strong>and</strong> the ‘<strong>on</strong>ly showin town’. 75Why was US pressure to turn the Kyoto Protocol into a set of market mechanismsso successful?There’s no simple answer. Almost certainly, many factors were involved.First, there is sheer force of numbers. In the 2000 UNFCCC climatenegotiati<strong>on</strong>s in The Hague, to take <strong>on</strong>e example, the US fielded 150well-equipped delegates, housing them in a luxury hotel <strong>and</strong> sendingwell-rested <strong>and</strong> well-briefed representatives to every working groupmeeting, while Mozambique had to put up its three harried delegatesin a noisy youth hostel occupied largely by Chinese tourists. 76 Duringcomplex negotiati<strong>on</strong>s featuring many simultaneous sessi<strong>on</strong>s <strong>and</strong> draftsof hundreds of crucial documents fl ying around for c<strong>on</strong>tinuous comment<strong>and</strong> revisi<strong>on</strong>, such numerical superiority can be decisive.The US was also able to impose a language <strong>on</strong> the climate talksin which objecti<strong>on</strong>s to neoliberal policies could not be effectivelymade. 77 As IPCC member Wolfgang Sachs notes, orthodox ec<strong>on</strong>omics<strong>and</strong> public policy methodology prevented the questi<strong>on</strong> even being
‘made in the usa’ – a short history of carb<strong>on</strong> trading 51raised as to what type of changes would be necessary to reduce greenhousegas c<strong>on</strong>centrati<strong>on</strong>s to a safer level or allocate atmospheric rightsequitably. 78 Officials of most countries had neither the backgroundnor the staff to work out in time how to counter, or even to underst<strong>and</strong>,a complicated polluti<strong>on</strong>-trading policy jarg<strong>on</strong> essentially ‘madein the USA’.In additi<strong>on</strong>, the structure of the climate negotiati<strong>on</strong>s was itself biasedin favour of US interests. As scholar Joyeeta Gupta notes, st<strong>and</strong>ard UNnegotiating techniques such as ‘avoiding polarisati<strong>on</strong>’, ‘incrementallybuilding <strong>on</strong> agreement’, <strong>and</strong> pretending to be guided by internati<strong>on</strong>allegal norms h<strong>and</strong>icap activist Southern diplomats by automaticallyrelegating talk of structural change to the category of the ‘merelyrhetorical’ or ‘irrelevant’. 79 Privately, too, negotiators also often speakof US trade threats, bribes <strong>and</strong> ‘dirty tricks’, although diplomats <strong>and</strong>other officials who are successfully targeted often want to keep thenews off the record as much as the US itself does.One example of US influence in the negotiati<strong>on</strong>s comes from theKyoto Protocol talks themselves. In 1997 Brazil proposed a ‘CleanDevelopment Fund’ that would use penalties paid by industrialisedcountries that had exceeded their emissi<strong>on</strong>s targets to finance ‘no regrets’clean energy initiatives in the South.The gist of Brazil’s proposal was accepted by the G-77 nati<strong>on</strong>s <strong>and</strong>China. During a few days of intense negotiati<strong>on</strong>s, however, the fundwas transformed into a trading mechanism allowing industrialisedcountries to buy rights to pollute from countries with no emissi<strong>on</strong>slimits. Fines were transformed into prices; a judicial system was transformedinto a market.How?Smaller negotiating groups assigned to discuss channelling penaltiesfor Northern failure to meet emissi<strong>on</strong>s targets to a fund for the Southwere dominated by Northern delegates who wanted to dodge the issueof penalties as much as possible. The ‘direct link between compliance<strong>and</strong> the fund dissolved’ 80 <strong>and</strong> the negotiati<strong>on</strong>s turned into agruel ling series of sessi<strong>on</strong>s <strong>on</strong> how to c<strong>on</strong>vert the clean developmentfund into a versi<strong>on</strong> of a trading scheme the US had already been backingagainst the oppositi<strong>on</strong> of most of the G-77/China <strong>and</strong> the EU.The Clean Development Mechanism that resulted now occupies animmense slice of UN time <strong>and</strong> involves billi<strong>on</strong>-dollar m<strong>on</strong>ey flowsdespite the fact that its effect <strong>on</strong> the climate may well be negative (seeChapters 3 <strong>and</strong> 4).
52 development dialogue september 2006 – carb<strong>on</strong> tradingInternati<strong>on</strong>al <strong>Climate</strong> Politics: Some Recent Highlights1990: In the wake of warnings from scientists,internati<strong>on</strong>al support grows for requiringcountries to reduce their greenhousegas emissi<strong>on</strong>s to mitigate globalwarming. The US is opposed.1991: The UN C<strong>on</strong>ference <strong>on</strong> Trade <strong>and</strong>Development sets up a department <strong>on</strong>greenhouse gas emissi<strong>on</strong>s trading.1992: The Rio de Janeiro Earth Summitproduces the United Nati<strong>on</strong>s FrameworkC<strong>on</strong>venti<strong>on</strong> <strong>on</strong> <strong>Climate</strong> <strong>Change</strong>( UNFCCC) to prevent ‘dangerous anthropogenicinterference with the Earth’sclimate system’. The UNFCCC suggests,but does not require, that emissi<strong>on</strong>s in2000 not exceed 1990 levels.1994: The UNFCCC enters into force,signed by 153 countries. The Alliance ofSmall Isl<strong>and</strong> States, in an attempt to holdsea-level rise to 20 centimetres, dem<strong>and</strong>sthat emissi<strong>on</strong>s be cut to 80 per cent of currentlevels by 2005. The US <strong>and</strong> its alliesreject the idea of cuts, saying that it wouldbe cheaper for them to be allowed to buypermits to pollute in an emissi<strong>on</strong>s market.Most EU nati<strong>on</strong>s, believing they alreadyhave cost-effective means for domestic reducti<strong>on</strong>s,portray the US proposal as an attemptto shirk resp<strong>on</strong>sibility.1996: US proposals to avoid reducti<strong>on</strong>s bybuying permits from abroad <strong>and</strong> borrowingagainst future emissi<strong>on</strong>s c<strong>on</strong>tinue to bec<strong>on</strong>demned by the EU, G-77 nati<strong>on</strong>s <strong>and</strong>most NGOs.1997: The Kyoto Protocol is adopted,binding industrialised countries to limitemissi<strong>on</strong>s to approximately 95 per centof 1990 levels by 2008-2012. But Northernpressure, especially from the US, opensloopholes that allow the target to be metpartly by global trading in emissi<strong>on</strong>s allowances<strong>and</strong> carb<strong>on</strong> project credits, aswell as growth of domestic forest cover.1998: Increasingly worried about the costsof domestic emissi<strong>on</strong>s reducti<strong>on</strong>s <strong>and</strong>, inthe face of industry pressure, unable tomake enough progress <strong>on</strong> comm<strong>on</strong> regulatorypolicies <strong>and</strong> taxes, 81 the EU beginsto develop an internal emissi<strong>on</strong>s tradingscheme. But it insists <strong>on</strong> limits to globalcarb<strong>on</strong> trading, dem<strong>and</strong>ing that permitsbought in from abroad be used to meetno more than 50 per cent of any country’semissi<strong>on</strong>s targets. The US opposesany limits <strong>on</strong> global trading <strong>and</strong> threatensto form a pact with Canada, Japan, Australia<strong>and</strong> New Zeal<strong>and</strong> to meet all emissi<strong>on</strong>stargets by buying meaningless Russiancredits created by the use of 1990 (beforethe post-Soviet ec<strong>on</strong>omic collapse) asa ‘baseline year’.1999: The World Bank sets up a PrototypeCarb<strong>on</strong> Fund (PCF) to generatecheap credits from Southern carb<strong>on</strong>savingprojects that can ‘reduce the costsof emissi<strong>on</strong>s reducti<strong>on</strong>s for industrialisedcountries’. 82 The PCF quickly attracts investmentfrom Mitsubishi, BP, <strong>and</strong> othercompanies, as well as several governments.The Internati<strong>on</strong>al Emissi<strong>on</strong>s TradingAssociati<strong>on</strong>, a corporate lobby group,is established through the cooperati<strong>on</strong> ofUNCTAD <strong>and</strong> the World Business Councilfor Sustainable Development. 832000: The EU rejects a compromise thatwould have allowed the US limited creditsfor its own forest carb<strong>on</strong> sinks, allowed
‘made in the usa’ – a short history of carb<strong>on</strong> trading 53it to buy credits for carb<strong>on</strong> sinks abroad,lifted the 50 per cent limit <strong>on</strong> the use oftrading to meet domestic targets, <strong>and</strong> notpunished it if it failed to meet any targets.European industrialists step up efforts toerode European oppositi<strong>on</strong> to unlimitedcarb<strong>on</strong> trading. Denmark experimentswith domestic carb<strong>on</strong> dioxide trading.2001: The US withdraws from the KyotoProtocol. With carb<strong>on</strong> trading freed of thestigma of being associated with US intransigence,the EU reverses its oppositi<strong>on</strong> tothe extensive use of trading. 84 Now holdingthe balance of power over whether theProtocol will be ratified, Japan <strong>and</strong> Russiadem<strong>and</strong> extra carb<strong>on</strong> credits for their domesticforests. Desperate to hang <strong>on</strong>to theProtocol as a way of asserting EU leadershipin global climate policy, 85 <strong>and</strong> alreadycommitted to its own emissi<strong>on</strong>s tradingscheme <strong>and</strong> other climate legislati<strong>on</strong>, theEU capitulates. Most NGOs celebrate anagreement they would have c<strong>on</strong>demned ayear previously, justifying it as a ‘necessarycompromise’. A ‘rule book’ for CDM <strong>and</strong>other Kyoto Protocol trading mechanismsis adopted after much wrangling, protectingloopholes that essentially cancel outthe Protocol’s minimal emissi<strong>on</strong>s cuts.2003: Northeastern states of the US beginto develop a Regi<strong>on</strong>al Greenhouse Gas Initiativethat would use trading to cut thecosts of a proposed 10 per cent cut in emissi<strong>on</strong>sfrom power plants by 2020.2004: Defying envir<strong>on</strong>mentalist objecti<strong>on</strong>s,the EU decides to allow countries touse credits from carb<strong>on</strong> projects outside theEU to meet EU emissi<strong>on</strong>s targets. 862005: The EU Emissi<strong>on</strong>s Trading Schemecomes <strong>on</strong> line with broad backing fromNGOs. The Kyoto Protocol comes intoforce after being ratified by Russia in 2004,again with broad NGO support. It becomesobvious that many industrialised signatorieswill not meet their 2008-2012 emissi<strong>on</strong>stargets. New procedures are adoptedfor speeding the flow of CDM credits intothe system. Kyoto signatories ‘agree to discuss’emissi<strong>on</strong>s targets for the sec<strong>on</strong>d complianceperiod bey<strong>on</strong>d 2012. Countrieswithout targets such as the US <strong>and</strong> Chinaagree to a ‘n<strong>on</strong>-binding dialogue’ <strong>on</strong> theirfuture role in curbing emissi<strong>on</strong>s. The USproposes an Asia-Pacific Partnership forClean Development <strong>and</strong> <strong>Climate</strong> to seektechnological fixes for global warming.2006: The EU carb<strong>on</strong> market crashes, duepartly to governments having given theircorporati<strong>on</strong>s too many property rights inthe earth’s carb<strong>on</strong> dumps for the commodityto be sufficiently scarce (see Chapter 3).Projects expected to deliver some 420 milli<strong>on</strong>t<strong>on</strong>nes of carb<strong>on</strong> dioxide credits by2012 are registered with the CDM by midyear,injecting still more assets into globalcarb<strong>on</strong> trading systems.
54 development dialogue september 2006 – carb<strong>on</strong> tradingEarly history of the market fixThe market fix for global warming could not have become so dominantif it came out of nowhere. Part of its success is owed to the factthat it is part of a larger, more l<strong>on</strong>gst<strong>and</strong>ing historical wave of neoliberalism.Internati<strong>on</strong>ally, neoliberalism is a movement using instituti<strong>on</strong>s suchas the World Bank, <strong>and</strong> the World Trade Organisati<strong>on</strong>, al<strong>on</strong>g withvarious treaties, to establish new forms of globally-centralised c<strong>on</strong>trolover far-flung resources. Attempting to integrate trading systemsworldwide, neoliberalism reorganises property rights systems<strong>and</strong> fights regulati<strong>on</strong> in an attempt to reduce the power of nati<strong>on</strong>algovernments, labour uni<strong>on</strong>s <strong>and</strong> local communities over corporateactivity.Justifying neoliberalism is an ideology of ‘efficiency’ developed overdecades, largely in the think-tanks, academic ec<strong>on</strong>omics departments,internati<strong>on</strong>al agencies <strong>and</strong> government ministries of Anglo-America.The ideology revolves around the claim that society as a whole willbenefit if it ‘makes the most’ out of whatever stuff is available to it.That seems reas<strong>on</strong>able.Sure – as l<strong>on</strong>g as everybody agrees <strong>on</strong> what it means to ‘make themost’ out of the stuff you have.How do you tell when you’ve made the most out of what you have?On a neoliberal view, you first divide all your stuff into a lot of differentbits. This isn’t always so easy. The categories the bits are dividedinto d<strong>on</strong>’t always reflect the categories people use to live their lives.For example, you might be forced to divide your l<strong>and</strong> into ‘permanentforests’ <strong>and</strong> ‘permanent fields’ even if you’re a member of anindigenous group that doesn’t demarcate l<strong>and</strong> this way <strong>and</strong> insteaduses some areas as woodl<strong>and</strong> during some periods <strong>and</strong> as fields duringothers.Or you might be forced to divide your activities into ‘labour’, ‘housework’<strong>and</strong> ‘leisure’, even though you’re not used to looking at thingsthat way either. 87 Or you might have to divide your state welfare instituti<strong>on</strong>sinto pieces that can be more easily managed for profit.It’s a bit like taking a picture <strong>and</strong> sawing it into a jigsaw puzzle. Youwind up with a lot of odd-shaped pieces with a bit of blue sky <strong>and</strong>cloud here <strong>and</strong> half an eye or a piece of a house over there.
‘made in the usa’ – a short history of carb<strong>on</strong> trading 55So what’s next?You transform all these jigsaw puzzle pieces into ‘resources’ <strong>and</strong>‘commodities’. A resource is something whose value lies in being a‘source’ of something else, usually an abstracti<strong>on</strong> called wealth. 88 Acommod ity is something whose value lies in what it can be swappedfor or what price it can fetch. So you wind up treating your bits notas pieces of a picture that happened to get separated from each other,but as things that are <strong>on</strong> their way to being something else, somethingto do with industry <strong>and</strong> wealth.Ec<strong>on</strong>omist R<strong>on</strong>aldCoase, who insisted thata polluter should not beseen as some<strong>on</strong>e ‘doingsomething bad that hasto be stopped’. Accordingto Coase, ‘[P]olluti<strong>on</strong> isdoing something bad <strong>and</strong>good. People d<strong>on</strong>’t pollutebecause they like polluting.They do it because it’s acheaper way of producingsomething else. Thecheaper way of producingsomething else is the good;the loss in value that youget from the polluti<strong>on</strong>is the bad. You’ve got tocompare the two. That’s theway to look at it.’ 90And then?Now you shuffle all the pieces together with a view to finding outwho should get them <strong>and</strong> what new thing can be made out of them asa whole. Crudely speaking, you see which way of distributing, using,keeping or destroying your bits makes the most m<strong>on</strong>ey. That’s howyou find out how to make the most out of the stuff you have.Neoliberals say not <strong>on</strong>ly that dividing <strong>and</strong> redistributing all your stuffinto these interchangeable bits is a good idea, but also that what willtell you how to make the most of them is a special computer calledthe ‘perfect market’. Feed your bits into the perfect market <strong>and</strong> theresult will be that everything gets used or destroyed in a way thatmaximises total producti<strong>on</strong>.Wow. But what does all this have to do with climate change?That’s the c<strong>on</strong>tributi<strong>on</strong> of R<strong>on</strong>ald Coase, a University of Chicagoec<strong>on</strong>omist who wrote a series of influential articles in the middle ofthe last century. In a way, Coase is the gr<strong>and</strong>father of polluti<strong>on</strong> trading(<strong>and</strong> thus of the Kyoto Protocol). In some ways, he’s also the presidingec<strong>on</strong>omic spirit of the 1992 Earth Summit <strong>and</strong> the internati<strong>on</strong>alenvir<strong>on</strong>mental agreements that followed. 89Coase’s idea was that a polluti<strong>on</strong> dump is just another jigsaw puzzlepiece – just another resource or commodity. The right to pollute is afactor of producti<strong>on</strong> just like the right to use l<strong>and</strong>. In both cases, exercisingyour right naturally entails that some losses will be sufferedelsewhere. 90 The <strong>on</strong>ly questi<strong>on</strong> is how significant those losses are.To find out how best to use a polluti<strong>on</strong> dump, you put it <strong>on</strong> the markettogether with the other bits you’ve created – like real estate, water,labour, rice, silver, forests, jet planes <strong>and</strong> mobile ph<strong>on</strong>es. You measurethem all by the same yardstick <strong>and</strong> treat them all in the same way.If the market is a perfect market – if it has no ‘transacti<strong>on</strong> costs’, asCoase called them, <strong>and</strong> is inhabited by properly calculating, maxi-
56 development dialogue september 2006 – carb<strong>on</strong> tradingmising ec<strong>on</strong>omic agents with perfect informati<strong>on</strong> – the polluti<strong>on</strong>dump will wind up being used in the way that c<strong>on</strong>tributes the mostto society’s ‘total product’. 91If that means a lot of polluti<strong>on</strong>, so be it. But there’s no need to worrythat there will be ‘too much’ polluti<strong>on</strong>, because if the society got toopolluted, you wouldn’t get the best value out of other goods – yourlabourers might die, for example – <strong>and</strong> ‘total product’ would decline.The perfect market will select against that, automatically ‘optimising’polluti<strong>on</strong> so that there’s neither too little nor too much.I think I’ve heard this line of thought somewhere before…It certainly made headlines back in 1991. That’s when Larry Summers,former US Treasury Secretary <strong>and</strong> former president of HarvardUniversity, built <strong>on</strong> Coase’s view in a famous memor<strong>and</strong>um he wroteto colleagues when he was chief ec<strong>on</strong>omist of the World Bank. ‘Theec<strong>on</strong>omic logic of dumping a load of toxic waste in the lowest wagecountry is impeccable, <strong>and</strong> we should face up to it,’ Summers said.‘Underpopulated countries in Africa are vastly underpolluted.’ 92Now I remember.But if it’s poor ec<strong>on</strong>omics simply to say that polluti<strong>on</strong> is ‘bad’ withoutlooking at ‘total product’, it follows that it’s also poor ec<strong>on</strong>omics tosay that polluters must be held liable for damages, or that they mustinternalise all costs, or that certain types of polluti<strong>on</strong> have to be reduced‘whatever the cost’, or that regulati<strong>on</strong> or taxes should be based<strong>on</strong> that assumpti<strong>on</strong>.To do that, Coase thought, would be to fail to ‘optimise’ polluti<strong>on</strong>or maximise the ‘value of producti<strong>on</strong>’. A tax that penalised both polluters<strong>and</strong> pollutees for losses to ‘total product’ might be a good thing(although Coase thought such a tax would be impossible to calculate),but not a tax that was based <strong>on</strong> the idea that some level of polluti<strong>on</strong>was simply unacceptable.Which is, as you’ve been saying, the idea now emerging from the science ofclimate change.Yes. But bear with Coase at least until you hear what he had to say.Because what he said now dominates a great deal of world climatepolitics.The idea of resp<strong>on</strong>sibility, Coase c<strong>on</strong>cluded, is of no use ec<strong>on</strong>omically:‘Whether some<strong>on</strong>e is liable or not liable for damages that he creates,in a regime of zero transacti<strong>on</strong> costs, the result would be the same…
‘made in the usa’ – a short history of carb<strong>on</strong> trading 57[<strong>and</strong>] you can exp<strong>and</strong> that to say that it doesn’t matter who ownswhat; in a private enterprise system, the same results would occur.’The important thing is to create property rights <strong>and</strong> reduce impedimentsto bargaining so that ‘affected parties themselves can decidewhether to restrict activities through private trading of rights’. 93 Ina perfect market, polluti<strong>on</strong> rights would gravitate into the h<strong>and</strong>s ofwhoever could squeeze the most m<strong>on</strong>ey out of them. 94But where are you going to fi nd a perfect market? They d<strong>on</strong>’t exist.No. And nobody knew that better than Coase himself. As he rightlystressed, a perfect market is <strong>on</strong>ly a figment of the imaginati<strong>on</strong>. Butthe c<strong>on</strong>clusi<strong>on</strong> he drew was that, in the real world, the state <strong>and</strong> thecourts would have to lend a h<strong>and</strong> in giving rights to pollute to thosewho could make the most out of them.Coase’s successors, such as the ec<strong>on</strong>omist J. H. Dales, 95 modified polluti<strong>on</strong>trading theory further. While c<strong>on</strong>tinuing to emphasise the importanceof giving polluters rights to pollute, they avoided Coaseantalk about ‘optimising’ polluti<strong>on</strong> through trading. It should be up tothe government, they said, not an imaginary ‘perfect market’, to setthe best overall level of polluti<strong>on</strong>. 96 In their h<strong>and</strong>s, polluti<strong>on</strong> tradingbecame merely a way of finding the most cost-effective way to reachan emissi<strong>on</strong>s goal that had been set beforeh<strong>and</strong>.And when did all this begin to be put into practice?The first major emissi<strong>on</strong>s trading programme was adopted in 1976by the US Envir<strong>on</strong>mental Protecti<strong>on</strong> Agency. It allowed new pollutingplants to be built in exchange for ‘offsets’ that reduced air polluti<strong>on</strong>by a greater amount from other sources in the same regi<strong>on</strong>. A1979 policy allowed polluters to meet emissi<strong>on</strong>s targets through anycombinati<strong>on</strong> of <strong>on</strong>-site emissi<strong>on</strong>s reducti<strong>on</strong>s. Then, in the 1980s, academicsadvocated market fixes as cost-effective alternatives to regulati<strong>on</strong>sthat would have required more technological change. A backlashagainst the envir<strong>on</strong>mental regulati<strong>on</strong> of the 1970s encouragedbusiness to team up with some Washingt<strong>on</strong>-based NGOs to formulatetrading legislati<strong>on</strong>. 97In the increasingly strident neoliberal political climate of the 1980s<strong>and</strong> 1990s, polluti<strong>on</strong> trading became more <strong>and</strong> more fashi<strong>on</strong>able. 98Finally came the Clean Air Act Amendments of 1990, which set upa nati<strong>on</strong>al sulphur dioxide trading programme to save power plantsm<strong>on</strong>ey in the effort to c<strong>on</strong>trol acid rain, as well as encouraging statesto use emissi<strong>on</strong>s trading to reduce urban smog. 99 That paved theway for later US trading programmes in water polluti<strong>on</strong>, wetl<strong>and</strong>s
58 development dialogue september 2006 – carb<strong>on</strong> tradingdestructi<strong>on</strong>, biodiversity depleti<strong>on</strong> <strong>and</strong> so <strong>on</strong>. By the early 1990s, withthe blessing of the Clint<strong>on</strong> regime, polluti<strong>on</strong> trading was poised forits leap into the climate arena. In an atmosphere of privatisati<strong>on</strong>, thething to do seemed to be to privatise the atmosphere.‘All that is solid melts into air’The neoliberal approach that currently dominates global warmingpolitics does more than just reorganise the earth’s carb<strong>on</strong>-absorbingabilities. At a time when ‘oil <strong>and</strong> state’ are merged at the highest levelsof US government, 100 it is also helping dissolve most of the c<strong>on</strong>venti<strong>on</strong>alboundaries that used to divide private corporati<strong>on</strong>s, governments,the UN, scientists, academics, c<strong>on</strong>sultancies, think-tanks,n<strong>on</strong>-government organisati<strong>on</strong>s <strong>and</strong> even artists. As instituti<strong>on</strong>al bordersdisappear, so do checks <strong>and</strong> balances that could have restrainedthe blunders <strong>and</strong> excesses of carb<strong>on</strong> trading.Polluti<strong>on</strong> trading itself is no corporate c<strong>on</strong>spiracy, but rather a jointinventi<strong>on</strong> of civil society, business <strong>and</strong> the state. N<strong>on</strong>-governmentalorganisati<strong>on</strong>s (NGOs) have been nearly as prominent in its developmentas private corporati<strong>on</strong>s.Are you serious?Completely. Although polluti<strong>on</strong> trading derived from the theories ofec<strong>on</strong>omists working in universities <strong>and</strong> think tanks, 101 it was writteninto the 1990 US Clean Air Act Amendments by Envir<strong>on</strong>mental Defence,a corporate-friendly NGO that subsequently pushed for it tobe included both in the Kyoto Protocol <strong>and</strong> in Chinese envir<strong>on</strong>mentalprogrammes. 102 The Washingt<strong>on</strong>-based NGO World ResourcesInstitute (partly bankrolled by government <strong>and</strong> UN agencies, internati<strong>on</strong>alfinancial instituti<strong>on</strong>s <strong>and</strong> corporati<strong>on</strong>s such as M<strong>on</strong>santo,TotalFinaElf, Shell, BP, <strong>and</strong> Cargill Dow) tirelessly lobbied for carb<strong>on</strong>trading al<strong>on</strong>gside the World Business Council for Sustainable Development<strong>and</strong> other corporate pressure groups. The World Wide Fundfor Nature (WWF), an organisati<strong>on</strong> with an annual budget 3.5 timesthat of the World Trade Organisati<strong>on</strong>, meanwhile joined the EuropeanRoundtable of Industrialists (UNICE) <strong>and</strong> the US think tankinspiredCentre for European Policy Studies in support of the EUEmissi<strong>on</strong>s Trading Scheme. 103 WWF also helped develop an eco-labelfor the Kyoto Protocol’s Clean Development Mechanism projects (seeChapter 4). Greenpeace, for its part, has moved from being critical ofcorporate lobby groups <strong>and</strong> carb<strong>on</strong> trading to complete acceptance.As forest c<strong>on</strong>servati<strong>on</strong> NGOs such as the Nature C<strong>on</strong>servancy <strong>and</strong>C<strong>on</strong>servati<strong>on</strong> Internati<strong>on</strong>al move in to mop up corporate <strong>and</strong> World
‘made in the usa’ – a short history of carb<strong>on</strong> trading 59Bank finance being offered for ‘carb<strong>on</strong> sinks’, other NGOs c<strong>on</strong>finethemselves to trying to reform or ‘c<strong>on</strong>tain the damage’ d<strong>on</strong>e by tradingprogrammes such as the Clean Development Mechanism (CDM).Most Northern members of the largest NGO grouping <strong>on</strong> climatechange, the <strong>Climate</strong> Acti<strong>on</strong> Network, have thrown their support behindthe carb<strong>on</strong> market, often demoting themselves to the role ofadvisers to governments <strong>on</strong> such matters as nati<strong>on</strong>al emissi<strong>on</strong>s allocati<strong>on</strong>s.<str<strong>on</strong>g>Critical</str<strong>on</strong>g> NGOs, to borrow the words of Daphne Wysham ofthe Institute for Policy Studies, are being c<strong>on</strong>tinually urged ‘to unitebehind an entirely bizarre, incomprehensible, <strong>and</strong> totally corruptiblesystem of carb<strong>on</strong> trading’. 104 Even well-meaning artists such as sculptorDamien Hirst <strong>and</strong> rock group Coldplay have got into the act asboth clients <strong>and</strong> spokespeople for carb<strong>on</strong> marketing firms. 105What’s the UN’s role in all this?As carb<strong>on</strong> trading moved into the centre of internati<strong>on</strong>al climate policy,UN climate c<strong>on</strong>ferences began to resemble trade fairs more thaninternati<strong>on</strong>al envir<strong>on</strong>mental negotiati<strong>on</strong>s. From the start, umbrellagroups such as the Internati<strong>on</strong>al Petroleum Industry Envir<strong>on</strong>mentalC<strong>on</strong>servati<strong>on</strong> Associati<strong>on</strong>, the Transatlantic Business Dialogue <strong>and</strong> theEmissi<strong>on</strong>s Marketing Associati<strong>on</strong> have been in touch with nati<strong>on</strong>algovernments to promote market approaches to global warming, <strong>and</strong>corporati<strong>on</strong> executives even sit <strong>on</strong> country delegati<strong>on</strong>s. 106 At today’sUN climate negotiati<strong>on</strong>s, carb<strong>on</strong> traders, c<strong>on</strong>sultants, manufacturersassociati<strong>on</strong>s, fossil fuel, mining, nuclear <strong>and</strong> forestry companies, togetherwith lobbyists <strong>and</strong> other corporate representatives of all kinds,easily outnumber both government delegates <strong>and</strong> envir<strong>on</strong>mentalists. 107Early <strong>on</strong>, the rot also spread to UN agencies other than the UNFCCCas well.Business meets <strong>and</strong>greets in exhibiti<strong>on</strong> <strong>and</strong>c<strong>on</strong>ference spaces atUN climate meetings.Such as?The World Bank, which provides billi<strong>on</strong>s of dollars in public m<strong>on</strong>eyto fossil fuel companies for their producti<strong>on</strong> <strong>and</strong> transport expenses,profitably exp<strong>and</strong>ed its remit to host seven different carb<strong>on</strong> fundsaimed at providing cheap credits to corporati<strong>on</strong>s to allow them toc<strong>on</strong>tinue to use fossil fuels. 108In additi<strong>on</strong>, in the late 1990s, the UN Development Programme(UNDP) put its head together with the World Business Council <strong>on</strong>Sustainable Development to get companies involved in CDM projects 109<strong>and</strong>, together with the Food <strong>and</strong> Agriculture Organisati<strong>on</strong>, sp<strong>on</strong>soredresearch into carb<strong>on</strong> sinks <strong>and</strong> carb<strong>on</strong> accounting. 110 By 2006, UNDPwas pushing for an internati<strong>on</strong>al polluti<strong>on</strong> permit trading system that
60 development dialogue september 2006 – carb<strong>on</strong> tradingit claimed could deliver usd 3.64 trilli<strong>on</strong> in global wealth. 111 The cashstrappedUN Envir<strong>on</strong>ment Programme meanwhile infuriated manyenvir<strong>on</strong>mentalists in 2000 by trying to positi<strong>on</strong> itself as a broker forCDM projects, including carb<strong>on</strong> ‘offset’ forestry projects in Africa. 112Is there more?A lot, but it’s not always visible to the naked eye. A good deal ofcorporati<strong>on</strong>s’ work with the UN goes <strong>on</strong> behind the scenes. One exampleinvolves the Internati<strong>on</strong>al Chamber of Commerce (ICC), apowerful corporate lobby group that has played a huge role in globalnegotiati<strong>on</strong>s since the 1992 Rio Earth Summit. Shortly before the1998 climate talks in Buenos Aires, the ICC, together with Shell,Texaco, Mobil <strong>and</strong> Chevr<strong>on</strong>, sent a 30-pers<strong>on</strong> team to Senegal toround up support for the CDM from the energy <strong>and</strong> envir<strong>on</strong>mentministers of more than 20 African countries. In return, the companiesoffered technology transfer <strong>and</strong> foreign investment. 113 Similarefforts with forest-rich Latin American nati<strong>on</strong>s have helped recruitnearly all their governments to the cause of carb<strong>on</strong> forestry.As carb<strong>on</strong>-trading businesses fused with the UN climate apparatus, revolvingdoors between the two became jammed with profiteers movingin both directi<strong>on</strong>s. In 1991, the UN C<strong>on</strong>ference <strong>on</strong> Trade <strong>and</strong> Development(UNCTAD), an agency charged with ‘assisting developing countries’,brushed aside other regulatory or tax alternatives to set up a department<strong>on</strong> greenhouse gas emissi<strong>on</strong>s trading. UNCTAD later helped formthe Internati<strong>on</strong>al Emissi<strong>on</strong>s Trading Associati<strong>on</strong> (IETA), a corporatelobby group dedicated to promoting emissi<strong>on</strong>s trading. Frank Joshua,who served as the UN Head of Greenhouse Gas Emissi<strong>on</strong>s Trading <strong>and</strong>led several expert groups including the UNCTAD Earth Council Emissi<strong>on</strong>sTrading Policy Forum <strong>and</strong> the UNCTAD Expert Group <strong>on</strong> theClean Development Mechanism, went <strong>on</strong> to be the first executive directorof the IETA, Global Director of Greenhouse Gas Emissi<strong>on</strong> TradingServices at Arthur Andersen, <strong>and</strong> managing director of US-based carb<strong>on</strong>trader Natsource – all of which are cashing in <strong>on</strong> the accounting rulesJoshua himself helped to enshrine in the UN. 115 James Camer<strong>on</strong>, a lawyerwho helped negotiate the Kyoto Protocol, later became Vice Chairmanof <strong>Climate</strong> <strong>Change</strong> Capital, a carb<strong>on</strong>-trading merchant bank. 116At the same time, staff of corporati<strong>on</strong>s <strong>and</strong> other organisati<strong>on</strong>s in apositi<strong>on</strong> to benefit financially from carb<strong>on</strong> trading occupied positi<strong>on</strong>s<strong>on</strong> UN expert panels that decided <strong>on</strong> the rules that would determinetheir future profits. 117Sticker <strong>on</strong> the windowof a L<strong>on</strong>d<strong>on</strong> chain storethat buys carb<strong>on</strong> creditsfrom the Carb<strong>on</strong> NeutralCompany (formerly FutureForests). The credits areclaimed to ‘neutralise’ thestore’s greenhouse gasemissi<strong>on</strong>s. The Carb<strong>on</strong>Neutral Company isthe secretariat of theUK Parliament’s All-Parliamentary <strong>Climate</strong><strong>Change</strong> Group, whichnumbers over 100 Membersof Parliament from all threemajor parties. The Groupcounts promoti<strong>on</strong> of theCarb<strong>on</strong> Neutral Company’s‘carb<strong>on</strong>-neutral’ idea am<strong>on</strong>gits objectives. 114 ChairmanColin Challen, MP, defendsthe sp<strong>on</strong>sorship deal asst<strong>and</strong>ard parliamentarypractice.
‘made in the usa’ – a short history of carb<strong>on</strong> trading 61Globalisati<strong>on</strong> <strong>and</strong> Carb<strong>on</strong> Trading: Two Complementary Views‘The resp<strong>on</strong>se of global business to newlegal frameworks is creating new relati<strong>on</strong>ships… the carb<strong>on</strong> market can be easilygrafted <strong>on</strong>to powerful financial marketsthat can bring amoral scale… C<strong>on</strong>sidercolleagues of mine at <strong>Climate</strong> <strong>Change</strong>Capital, an Australian woman who builtexperience in the carb<strong>on</strong> market at theWorld Bank, a Hungarian educated in theUS who founded an organisati<strong>on</strong> in histwenties to work <strong>on</strong> the climate change issue,working together with a Chinese plantmanager in a hard hat during endless dinnerswith unusual foods, vast amounts ofalcohol, explaining how internati<strong>on</strong>al lawworks <strong>and</strong> why we must have English lawgovern the c<strong>on</strong>tract <strong>and</strong> at the end there isopportunity for wealth to be created herein cosmopolitan L<strong>on</strong>d<strong>on</strong> <strong>and</strong> the rapidlydeveloping world.’ 118James Camer<strong>on</strong>, Vice Chairman,<strong>Climate</strong> <strong>Change</strong> Capital, 2005‘A lot of “offsets” are produced by c<strong>on</strong>sultants.Example: you own a steel plant in apoor country that turns scrap metal int<strong>on</strong>ew steel. It is an old-fashi<strong>on</strong>ed basic oxygenfurnace (BOF), <strong>and</strong> it is finally completelyworn out. A rebuild w<strong>on</strong>’t do thistime; it needs to be replaced. There is hydroelectricpower in your area. You cansave a lot of m<strong>on</strong>ey by buying an ElectricArc Furnace (EAF) <strong>and</strong> using that forprocessing your scrap metal. But you knowthat EAF is a lot cleaner <strong>and</strong> greener thanyour old BOF. Isn’t there some way youcan get paid for this? Why, yes, there is.Call in a certified carb<strong>on</strong> market c<strong>on</strong>sultant<strong>and</strong> pay him a nice fee. He will produce astudy certifying that you could have gottenten more years out of that old BOF, <strong>and</strong>that the <strong>on</strong>ly reas<strong>on</strong> you are investing in anew EAF is carb<strong>on</strong> credits. Voila! The carb<strong>on</strong>market will examine the report, findit c<strong>on</strong>vincing, <strong>and</strong> a new annual producerof offsets is born – which a “green” rockb<strong>and</strong> can buy to justify burning petroleumin planes <strong>and</strong> buses. “Mommy, where docarb<strong>on</strong> offsets come from?” “Well, you see,h<strong>on</strong>ey, when a polluter <strong>and</strong> a c<strong>on</strong>sultantlove m<strong>on</strong>ey very, very much, they cometogether in a very special way to producean extremely l<strong>on</strong>g piece of paper.”’ 119Gar Lipow,systems analyst <strong>and</strong> peace activist, 2006In additi<strong>on</strong>, the small circle of private carb<strong>on</strong> c<strong>on</strong>sultancies that helpdesign <strong>and</strong>, with the permissi<strong>on</strong> of the UN, validate, verify <strong>and</strong> certifygreenhouse gas-saving projects in the South have little incentiveto questi<strong>on</strong> the effectiveness of the carb<strong>on</strong> projects they work<strong>on</strong>, since to do so would be to jeopardise their chances of gettingfuture work. It could also jeopardise their relati<strong>on</strong>ships with theirother clients. For example, the Norwegian-based Det Norske Veritas(DNV) c<strong>on</strong>sultancy, under c<strong>on</strong>tract to the World Bank’s PrototypeCarb<strong>on</strong> Fund (PCF), recommended the c<strong>on</strong>troversial Plantar scheme(see Chapter 4) as a CDM project. Yet DNV also has significant c<strong>on</strong>sultancyc<strong>on</strong>tracts with two of the PCF’s investors, Statoil <strong>and</strong> Norsk
62 development dialogue september 2006 – carb<strong>on</strong> tradingHydro. One validator, which had not even visited the project it wasvalidating, was actually part-owned by a parent-company that was aninvestor in the CDM project. After a meeting with the CDM ExecutiveBoard in 2005, validators agreed to take measures to avoid suchincidents in the future, without specifying what such measures wouldc<strong>on</strong>sist of or how they would be enforced. ‘We must establish selfjusticeinternally,’ said Einar Telnes of DNV. 120Advertisementfor DNV <strong>Climate</strong><strong>Change</strong> Services,Milan, December2003.Hasn’t any<strong>on</strong>e at the UN ever heard of c<strong>on</strong>fl ict of interest?Sometimes it’s hard to say. C<strong>on</strong>fl ict of interest has become so routinein internati<strong>on</strong>al climate politics, as elsewhere under neoliberalism,that the c<strong>on</strong>cept has virtually disappeared. Despite being proddedby NGOs such as the World Rainforest Movement, the UN has declinedto acknowledge the issue. To try to keep vested interests outof the rule-making process for carb<strong>on</strong> trading, said John Hought<strong>on</strong>,a member of the IPCC Bureau which appointed the l<strong>and</strong> use reviewteam, would ‘cut out important experts’. In his view, ‘It’s impossibleto flush out everybody.’ 121
‘made in the usa’ – a short history of carb<strong>on</strong> trading 63Three in <strong>on</strong>eThis chapter has suggested that a market fix, a technological fix <strong>and</strong> aknowledge fix have come to be intertwined in climate change politicsin an intimate way.The recent US neoliberal innovati<strong>on</strong> known as the polluti<strong>on</strong> market,growing largely out of academic theory, NGO advocacy <strong>and</strong> an antiregulati<strong>on</strong>backlash am<strong>on</strong>g corporati<strong>on</strong>s, moved with startling speedinto internati<strong>on</strong>al climate politics in the 1990s. Fed by a corporatefriendlyreading of climate science <strong>and</strong> ec<strong>on</strong>omics, as well as researchinto technological fixes, it drew UN agencies <strong>and</strong> activists alike intoits gravitati<strong>on</strong>al field, eventually triumphing over early Southern <strong>and</strong>European oppositi<strong>on</strong> through complex <strong>and</strong> still partly obscure politicalprocesses. An ast<strong>on</strong>ishing range of instituti<strong>on</strong>s from private companiesto UN agencies, university departments <strong>and</strong> NGOs are nowaligned around an agenda characterised by rejecti<strong>on</strong> of precauti<strong>on</strong>,inability to come to terms with indeterminacy <strong>and</strong> irreversibility, insistencethat tradeoffs are always possible, <strong>and</strong> support for growth incorporate power.The market fix, the technological fix <strong>and</strong> the knowledge fix havecome together to encase internati<strong>on</strong>al climate politics in a debate inwhich almost the <strong>on</strong>ly questi<strong>on</strong>s spoken are the narrow <strong>on</strong>es largecorporati<strong>on</strong>s most want to hear. Is there or is there not human-causedclimate change? If there is, what might make c<strong>on</strong>tinued fossil fuel usepossible? How can more subsidies be channelled to technologies corporati<strong>on</strong>scan profit from? How can privatisati<strong>on</strong> <strong>and</strong> ‘efficiency’ befurthered in a way most acceptable to the public? Such questi<strong>on</strong>s areuniting the most cynical corporate hack <strong>and</strong> the most innocent envir<strong>on</strong>mentalactivist in a single agenda. The c<strong>on</strong>sequences of bypassingthe central issues of fossil fuel overuse, ownership, corporate power,free enquiry <strong>and</strong> democracy will be explored in the next chapter.
64 development dialogue september 2006 – carb<strong>on</strong> trading1 S<strong>on</strong>ja Boehmer-Christiansen, ‘Global <strong>Climate</strong>Protecti<strong>on</strong> Policy: The Limits of Scientific Advice’,Parts 1 <strong>and</strong> 2, Global Envir<strong>on</strong>mental <strong>Change</strong> 4, 2 <strong>and</strong>3, 1994, pp. 140-59, 185-200.2 Karine Matthews <strong>and</strong> Matthew Paters<strong>on</strong>, ‘Boom orBust? The Ec<strong>on</strong>omic Engine behind the Drive for<strong>Climate</strong> <strong>Change</strong> Policy’, Global <strong>Change</strong>, Peace <strong>and</strong>Security 17, 1, February 2005, pp. 59-75.3 See US United Nati<strong>on</strong>s Associati<strong>on</strong> archives athttp://www.unausa.org/.4 Mick Kelly, ‘Smoke <strong>and</strong> Mirrors’, Tiempo 36/37,September 2000, p. 34.5 ‘Bush Has Plans to End Oil Addicti<strong>on</strong>’, CNN,31 January 2006, http://www.cnn.com/2006/POLITICS/01/31/bush.sotu.6 ‘Global Warming “Biggest Threat”’, BBC News,9 January 2004, http://news.bbc.co.uk/1/hi/sci/tech/3381425.stm; David King, Ninth ZuckermanLecture, L<strong>on</strong>d<strong>on</strong>, 31 October 2002, http://www.foundati<strong>on</strong>.org.uk/801/311002_2.pdf.7 Carlo M. Cipolla, Before the Industrial Revoluti<strong>on</strong>,W.W. Nort<strong>on</strong>, New York, 1993, p. 222.8 Svante Arrhenius, ‘On the Influence of Carb<strong>on</strong>icAcid in the Air up<strong>on</strong> the Temperature of theGround’, Philosophical Magazine 41, 1896, pp. 237-76.9 Joseph Fourier, ‘Mémoire sur Les Températuresdu Globe Terrestre et des Espaces Planétaires’,Mémoires de l’Académie Royale des Sciences 7, 1827,pp. 569-604.10 Thomas C. Chamberlin, ‘On a Possible Reversal ofDeep-Sea Circulati<strong>on</strong> <strong>and</strong> Its Influence <strong>on</strong> Geologic<strong>Climate</strong>s’, Journal of Geology 14, 1906, pp. 363-73.11 Fred Pearce, ‘The Week the <strong>Climate</strong> <strong>Change</strong>d’, NewScientist, 15 October 2005.12 Boehmer-Christiansen, op. cit. supra note 1; S.Agrawala, ‘Structural <strong>and</strong> Process History of theIPCC’, Climatic <strong>Change</strong> 39, 1998, pp. 628-32.13 Boehmer-Christiansen, op. cit. supra note 1.14 Interview with Wolfgang Sachs, <strong>Climate</strong> EquityObserver, 12 May 2001, http://www.ecoequity.org/ceo/ceo_3_4.htm.15 See, for instance, Sim<strong>on</strong> Shackley <strong>and</strong> Brian Wynne,‘Representing Uncertainty in Global <strong>Climate</strong> <strong>Change</strong>Science <strong>and</strong> Policy: Boundary-Ordering Devices <strong>and</strong>Authority’, Science, Technology, <strong>and</strong> Human Values21, 3, Summer 1996, pp. 275-302; Sim<strong>on</strong> Shackleyet al., ‘Adjusting to Policy Expectati<strong>on</strong>s in <strong>Climate</strong><strong>Change</strong> Modeling: An Interdisciplinary Study ofFlux Adjustments in Coupled Atmosphere-OceanGeneral Circulati<strong>on</strong> Models’, Climatic <strong>Change</strong>43, 1999, pp. 413-454; Brian Wynne <strong>and</strong> Sim<strong>on</strong>Shackley, ‘Envir<strong>on</strong>mental Models: Truth Machine orSocial Heuristics?’, Weather 21, 1994, pp. 6-8. Manyclimatologists c<strong>on</strong>tinue to c<strong>on</strong>fuse ignorance withuncertainty <strong>and</strong> risk in their statements to the press,assigning bogus ‘probabilities’ to climate scenariosthat are likely to be invalidated by changes inthe inputs to computer models necessitated byunexpected scientific discoveries about climatechange mechanisms.16 Robert T. Wats<strong>on</strong> et al., eds, L<strong>and</strong> Use, L<strong>and</strong> Use<strong>Change</strong> <strong>and</strong> Forestry (a Special Report of theIPCC), Cambridge University Press, Cambridge,2000.17 M. J<strong>on</strong>as et al., ‘Full Carb<strong>on</strong> Accounting <strong>and</strong> theKyoto Protocol: A Systems-Analytical View’, InterimReport IR-99-025, Internati<strong>on</strong>al Institute for AppliedSystems Analysis, Laxenburg, Austria, 1999, p. 35.See also chapters 3 <strong>and</strong> 4.18 Larry Lohmann, ‘Carb<strong>on</strong> C<strong>on</strong>? Group Charges“Intellectual Corrupti<strong>on</strong>” over Global WarmingProposal’, Multinati<strong>on</strong>al M<strong>on</strong>itor, September 2000,p. 26. The businessman in questi<strong>on</strong>, Mark Trexler,has since changed his view.19 Wats<strong>on</strong> et al., eds, op. cit. supra note 16, p. 58.20 Ibid., p. 139. The report also notes, but fails todraw c<strong>on</strong>clusi<strong>on</strong>s from, the climatic irrelevanceof the accounting system proposed by the KyotoProtocol for tallying up carb<strong>on</strong> flows associated withafforestati<strong>on</strong>, reforestati<strong>on</strong> <strong>and</strong> deforestati<strong>on</strong> (ibid.,pp. 167, 176).21 Richard Feynman, What Do You Care What OtherPeople Think?, Harper <strong>and</strong> Row, New York, 1988.22 Sheila Jasanoff, ‘Science <strong>and</strong> Norms’ in F. O.Hamps<strong>on</strong> <strong>and</strong> J. Reppy, eds, Earthly Goods:Envir<strong>on</strong>mental <strong>Change</strong> <strong>and</strong> Social Justice, CornellUniversity Press, 1996, p. 196.23 Sim<strong>on</strong> Shackley et al., op. cit. supra note 15, p. 448.24 The first chairs of Working Group III of the IPCCwere US State Department bureaucrats, <strong>and</strong> thegroup was early <strong>on</strong> dominated by legal experts <strong>and</strong>government negotiators (Boehmer-Christiansen, op.cit. supra note 1, p. 149; S. Agrawala, op. cit. supranote 12, pp. 624-5).25 Brian Wynne <strong>and</strong> Sim<strong>on</strong> Shackley, op. cit. supra note15, p. 7.26 Boehmer-Christiansen, op. cit. supra note 1.27 Nature, 3 August 1995; New Scientist, 19 August1995; Samuel Fankhauser, Letter to the Editor, TheEcologist 25, 4, 1995, p. 167. See also Mark Sagoff,‘Should Preferences Count?’, L<strong>and</strong> Ec<strong>on</strong>omics 70,127, 1994; Larry Lohmann, ‘Whose Voice Is Speaking?How Public Opini<strong>on</strong> Polls <strong>and</strong> Cost-Benefit AnalysisSynthesize New Publics’ Corner House BriefingNo. 7, http://www.thecornerhouse.org.uk; <strong>and</strong>, <strong>on</strong> the
‘made in the usa’ – a short history of carb<strong>on</strong> trading 65noti<strong>on</strong> of ‘statistical pers<strong>on</strong>’, Lisa Heinzerling, ‘TheRights of Statistical People’, Harvard Envir<strong>on</strong>mentalLaw Review 24, 189, 2000. The Southern delegati<strong>on</strong>sto the UNFCCC owed much of their awareness ofWorking Group III’s error to an NGO, the GlobalComm<strong>on</strong>s Institute, <strong>and</strong> its director Aubrey Meyer.28 Larry Lohmann, ‘Democracy or Carbocracy?Intellectual Corrupti<strong>on</strong> <strong>and</strong> the Future of the <strong>Climate</strong>Debate’, Corner House Briefing Paper No. 24,October 2001, http://www.thecornerhouse.org.uk.29 See Bill Moyers, interview with Robert Wats<strong>on</strong>, Now,12 April 2002, http://www.pbs.org/now/transcript/transcript113_full.html.30 ‘Corporate America <strong>and</strong> the Kyoto <strong>Climate</strong> Treaty’,Greenpeace Briefing, Amsterdam, 2001, p. 3;Corporate Europe Observatory, ‘GreenhouseMarket Mania: UN <strong>Climate</strong> Talks Corruptedby Corporate Pseudo-Soluti<strong>on</strong>s’, Amsterdam,November 2000, http://www.corporateeurope.org/greenhouse/index.html., p. 35.31 ‘Crying No Wolf: Why Ec<strong>on</strong>omists D<strong>on</strong>’t Worryabout <strong>Climate</strong> <strong>Change</strong>, <strong>and</strong> Should: An EditorialComment’, Climatic <strong>Change</strong> 47, 2000, pp. 225-32.32 The Pew Charitable Trust was set up in 1948 with anendowment totalling USD 3.4 billi<strong>on</strong>, largely based<strong>on</strong> profits made by the Sun Oil Company (Sunoco)<strong>and</strong> Oryx Energy. Its income also derives frominvestments in forestry firms such as Weyerhaeuser<strong>and</strong> Internati<strong>on</strong>al Paper <strong>and</strong> mining <strong>and</strong> oil firmssuch as Phelps Dodge <strong>and</strong> Atlantic Richfield.See Alex<strong>and</strong>er Cockburn <strong>and</strong> Ken Silverstein,Washingt<strong>on</strong> Babyl<strong>on</strong>, Verso, L<strong>on</strong>d<strong>on</strong>, 1996,pp. 210-14.33 ‘Corporate America <strong>and</strong> the Kyoto <strong>Climate</strong> Treaty’,Greenpeace Briefing, Amsterdam, 2001, p. 3.34 See, e.g., Myanna Lahsen, ‘Technocracy,Democracy <strong>and</strong> US <strong>Climate</strong> Politics: The Need forDemarcati<strong>on</strong>s’, Science, Technology <strong>and</strong> HumanValues 30, 1, 2005, pp. 137-169.35 See the Competitive Enterprise Institute website athttp://streams.cei.org/.36 See http://www.exx<strong>on</strong>secrets.org.37 See, for example, Sara Jeswani, ‘KTH Bjuder inKlimatfornekare’, Tidningen Arbetaren 23, 7-14 June2006, http://www.arbetaren.se/2006/23/nyhet1.html.38 See statements of then IPCC Chairman RobertT. Wats<strong>on</strong> reported in The Ec<strong>on</strong>omist, 22 January2000, <strong>and</strong> in ‘<strong>Climate</strong> <strong>Change</strong>: The NuclearOpportunity?’, Mining Week, 13 November 1998, p.383.39 Fredric James<strong>on</strong>, The Seeds of Time, ColumbiaUniversity Press, New York, 1994.40 Anth<strong>on</strong>y B. Rogins<strong>on</strong>, ‘An End to Our Holiday fromHistory’, Seattle Post-Intelligencer, 2 November2001; Johnnie L. Roberts, ‘Big Media <strong>and</strong> the BigStory’, Newsweek web editi<strong>on</strong>, 13 October 2001,http://msnbc.msn.com/id/3067548/.41 Michael K. Janofsky, ‘Michael Cricht<strong>on</strong>, Novelist,Becomes Senate Witness’, New York Times, 29September 2005.42 W. Booth, ‘Johnny Appleseed <strong>and</strong> the Greenhouse:Replanting Forests to Mitigate Global Warming’,Science 242, 4875, October 1988, p. 197; RogerSedjo <strong>and</strong> A. M. Solom<strong>on</strong>, ‘<strong>Climate</strong> <strong>and</strong> Forests’ inN. J. Rosenberg et al., eds, Greenhouse Warming:Abatement <strong>and</strong> Adaptati<strong>on</strong>, Resources for theFuture, Washingt<strong>on</strong>, 1989; Richard Hought<strong>on</strong> et al.,‘Current L<strong>and</strong> Cover in the Tropics <strong>and</strong> its Potentialfor Sequestering Carb<strong>on</strong>”, Global BiogeochemicalCycles 7, 2, 1993, pp. 305-320; Mark Trexler <strong>and</strong>C. Haugen, Keeping it Green: Tropical ForestryOpportunities for Mitigating <strong>Climate</strong> <strong>Change</strong>, WorldResources Institute, Washingt<strong>on</strong>, 1995; NormanMyers <strong>and</strong> T. J. Goreau, ‘Tropical Forests <strong>and</strong> theGreenhouse Effect: A Management Resp<strong>on</strong>se’,<strong>Climate</strong> <strong>Change</strong> 19, 1-2, 1991, pp. 215-25.43 See Chris Lang, ‘GE Trees: No Soluti<strong>on</strong> to <strong>Climate</strong><strong>Change</strong>’, Gen-ethischer Informati<strong>on</strong>sdienst,February/March 2005, http://chrislang.blogspot.com/2005_03_01_chrislang_archive.html.44 US Department of Energy <strong>and</strong> Nati<strong>on</strong>al EnergyTechnology Laboratory, ‘Carb<strong>on</strong> Sequestrati<strong>on</strong>,Overview <strong>and</strong> Summary of Program Plans’ (draft),Pittsburgh <strong>and</strong> Morgantown, WV, April 2000.45 Paul Brown, ‘Aerial Bombardment to Reforest theHighl<strong>and</strong>s’, The Guardian, 4 October 1999.46 Eugenie Samuel, ‘Scrub the Planet Clean’, NewScientist, 31 March 2001, p. 14.47 Kenneth H. Coale et al., ‘Southern Ocean Ir<strong>on</strong>Enrichment Experiment: Carb<strong>on</strong> Cycling in High<strong>and</strong>Low-Si Waters’, Science 304, 16 April 2004, pp.408-414; Tim Flannery, The Weather Makers: HowMan is Changing The <strong>Climate</strong> <strong>and</strong> What It MeansFor Life On Earth, Atlantic M<strong>on</strong>thly Press, New York,2005, pp. 250-251.48 The head of the US Department of Energy’ssynthetic biology <strong>and</strong> climate change initiativerecently resigned his post to become president ofSynthetic Genomics, a company formed by Venterin 2005 to address climate change. See http://www.syntheticgenomics.com/press/2006-02-02.htm.49 Michael Behar, ‘How Earth-Scale Engineering CanSave the Planet’, Popular Science, June 2005.50 Amy Sowder, ‘Hurricane Workshop to Meet in BayArea – Nati<strong>on</strong>al Science Board to Take Look atRecovery’, Pensacola News Journal, April 17, 2006.
66 development dialogue september 2006 – carb<strong>on</strong> trading51 S. 517: Weather Modificati<strong>on</strong> Research <strong>and</strong>Technology Transfer Authorizati<strong>on</strong> Act of 2005,introduced 3 March 2005. Much of the informati<strong>on</strong>in this secti<strong>on</strong> is owed to Pat Mo<strong>on</strong>ey <strong>and</strong> the ETCGroup.52 Robert E. Dickins<strong>on</strong>, ‘<strong>Climate</strong> Engineering: A Reviewof Aerosol Approaches to Changing the GlobalEnergy Balance’, Climatic <strong>Change</strong> 33, 3, July 1996,special issue <strong>on</strong> ‘Could We/Should We Engineer theEarth’s <strong>Climate</strong>?’, pp. 279-90.53 Edward Teller et al., ‘Global Warming <strong>and</strong> Ice Ages:I. Prospects for Physics-Based Modulati<strong>on</strong> of Global<strong>Change</strong>’, paper prepared for the 22nd Internati<strong>on</strong>alSeminar <strong>on</strong> Planetary Emergencies, Erice, Italy, 20-23 August 1997, Lawrence Livermore Laboratory,California, 1997, http://www.llnl.gov/globalwarm/231636.pdf.Some historical perspective <strong>on</strong>planetary engineering projects is given in StephenH. Schneider, ‘Geoengineering: Could – or Should– We Do It?’, Climatic <strong>Change</strong> 33, 1996, pp. 291-302.54 ‘New Initiative Aims to Curb Global Warming’,Princet<strong>on</strong>, Winter 2001, pp. 1, 3.55 ‘Carb<strong>on</strong> Dioxide’s Great Underground Escape inDoubt’, New Scientist 2560, 18 July 2006, p. 19; ‘Planto Bury CO 2 under North Sea’, the Guardian, 5September 2003.56 Robert H. Socolow, ‘Can We Bury Global Warming?’Scientific American, July 2005. pp. 45-59.57 Carb<strong>on</strong> Mitigati<strong>on</strong> Initiative, Princet<strong>on</strong> University,‘The Stabilisati<strong>on</strong> Triangle: Tackling the Carb<strong>on</strong><strong>and</strong> <strong>Climate</strong> Problem with Today’s Technologies’,Princet<strong>on</strong> University, Princet<strong>on</strong>, 2005, http://www.princet<strong>on</strong>.edu/~cmi.58 David Adam, ‘I’m Really Very Worried for the Planet’,The Guardian, 17 June 2004.59 Board of Trustees of the Lel<strong>and</strong> Stanford JuniorUniversity et al., ‘Agreement for Global <strong>Climate</strong> <strong>and</strong>Energy Project’, 2002. See also http://gcep.stanford.edu/pdfs/gcep_brochure.pdf.60 For example, Amory Lovins, Soft Energy Paths:Toward a Durable Peace, Harper, New York, 1979.61 David Victor, The Collapse of the Kyoto Protocol<strong>and</strong> the Struggle to Slow Global Warming, Princet<strong>on</strong>University Press, 2001, pp. 14-17.62 Sheila Jasanoff, ‘Science <strong>and</strong> Norms’ in F. O.Hamps<strong>on</strong> <strong>and</strong> J. Reppy, eds, ‘Earthly Goods,Envir<strong>on</strong>mental <strong>Change</strong> <strong>and</strong> Social Justice’, CornellUniversity Press, 1996, p. 196.. See also K. T. Litfin,Oz<strong>on</strong>e Discourses: Science <strong>and</strong> Politics in GlobalEnvir<strong>on</strong>mental Cooperati<strong>on</strong>, Columbia UniversityPress, 1994, pp. 52-176.63 Jasanoff, op. cit supra note 62, p. 196.64 S. Agrawala, ‘C<strong>on</strong>text <strong>and</strong> Early Origins of theIntergovernmental Panel <strong>on</strong> <strong>Climate</strong> <strong>Change</strong>’,Climatic <strong>Change</strong> 39, 1998, pp. 612, 614.65 Elizabeth L. Mal<strong>on</strong>e <strong>and</strong> Steve Rayner, ‘TenSuggesti<strong>on</strong>s for Policymakers’ in Mal<strong>on</strong>e <strong>and</strong>Rayner, eds, Human Choice <strong>and</strong> <strong>Climate</strong> <strong>Change</strong>,Battelle Press, Seattle, 1998, vol. 4. See also DavidG. Victor <strong>and</strong> Lesley A. Coben, ‘A Herd Mentalityin the Design of Internati<strong>on</strong>al Envir<strong>on</strong>mentalAgreements?’, Global Envir<strong>on</strong>mental Politics 5, 1,February 2005, pp. 24-57.66 Richard L. S<strong>and</strong>or et al., ‘An Overview of aFree-Market Approach to <strong>Climate</strong> <strong>Change</strong> <strong>and</strong>C<strong>on</strong>servati<strong>on</strong>’, in I. R. Swingl<strong>and</strong>, ed., CapturingCarb<strong>on</strong> <strong>and</strong> C<strong>on</strong>serving Biodiversity: The MarketApproach, Earthscan, L<strong>on</strong>d<strong>on</strong>, 2003, pp. 56-69, p. 57.67 Michael Zammit Cutajar, ‘Reflecti<strong>on</strong>s <strong>on</strong> the KyotoProtocol – Looking Back to See Ahead’ Internati<strong>on</strong>alReview for Envir<strong>on</strong>mental Strategies 5, 2004, pp.61-70.68 R<strong>on</strong>ald H. Coase, ‘The Problem of Social Cost’,Journal of Law <strong>and</strong> Ec<strong>on</strong>omics 3, 1960, pp. 1-44;Coase, The Firm, the Market <strong>and</strong> the Law, Universityof Chicago Press, Chicago, 1988; J. H. Dales,‘L<strong>and</strong>, Water <strong>and</strong> Ownership, Canadian Journal ofEc<strong>on</strong>omics 1, November 1969, pp. 791-804.69 A. Denny Ellerman et al., Emissi<strong>on</strong>s Trading in theUS: Experience, Less<strong>on</strong>s <strong>and</strong> C<strong>on</strong>siderati<strong>on</strong>s forGreenhouse Gases, Pew Centre <strong>on</strong> Global <strong>Climate</strong><strong>Change</strong>, Washingt<strong>on</strong>, 2003; Robert W. Hahn <strong>and</strong>Robert N. Stavins, ‘Trading in Greenhouse Permits: A<str<strong>on</strong>g>Critical</str<strong>on</strong>g> Examinati<strong>on</strong> of Design <strong>and</strong> Implementati<strong>on</strong>Issues’ in H. Lee, ed., Shaping Nati<strong>on</strong>al Resp<strong>on</strong>sesto <strong>Climate</strong> <strong>Change</strong>, Isl<strong>and</strong> Press, Washingt<strong>on</strong>,1995; Dallas Burtraw et al., ‘Ec<strong>on</strong>omics of Polluti<strong>on</strong>Trading for SO 2 <strong>and</strong> NO x ’, Resources for the FutureDiscussi<strong>on</strong> Paper 5-05, RFF, Washingt<strong>on</strong>, 2005;Robert W. Hahn <strong>and</strong> Gord<strong>on</strong> L. Hester, ‘MarketablePermits: Less<strong>on</strong>s for Theory <strong>and</strong> Practice’, EcologyLaw Quarterly 16, 1989, pp. 361, 381-91; David M.Driesen, ‘Is Emissi<strong>on</strong>s Trading an Ec<strong>on</strong>omic IncentiveProgram? Replacing the Comm<strong>and</strong> <strong>and</strong> C<strong>on</strong>trol/Ec<strong>on</strong>omic Incentive Dichotomy’, Washingt<strong>on</strong> <strong>and</strong>Lee Law Review 55, 289, 1998; Susan A. Austin,‘Designing a N<strong>on</strong>point Source Selenium LoadTrading Program’, Harvard Envir<strong>on</strong>mental LawReview 25, 337, 2001; Rena I. Steinzor, ‘Toward BetterBubbles <strong>and</strong> Future Lives: A Progressive Resp<strong>on</strong>seto the C<strong>on</strong>servative Agenda for ReformingEnvir<strong>on</strong>mental Law’, Envir<strong>on</strong>mental Law ReporterNews <strong>and</strong> Analysis 32, 11421, 2002; Lisa Heinzerling<strong>and</strong> Rena I. Steinzor, ‘A Perfect Storm: Mercury <strong>and</strong>the Bush Administrati<strong>on</strong>’ (2004)), Envir<strong>on</strong>mentalLaw Reporter News <strong>and</strong> Analysis 34, 10297, 10485;Carol M. Rose, ‘Exp<strong>and</strong>ing the Choices for the
‘made in the usa’ – a short history of carb<strong>on</strong> trading 67Global Comm<strong>on</strong>s: Comparing Newfangled TradableAllowance Schemes to Old-Fashi<strong>on</strong>ed Comm<strong>on</strong>Property Regimes’, Duke Envir<strong>on</strong>mental Law <strong>and</strong>Policy Forum 45, 1999; Richard Toshiyuki Drury et al.,‘Polluti<strong>on</strong> Trading <strong>and</strong> Envir<strong>on</strong>mental Injustice: LosAngeles’ Failed Experiment in Air Quality Policy’,Duke Envir<strong>on</strong>mental Law <strong>and</strong> Policy Forum 45, 1999.70 Cutajar, op. cit. supra note 67; Michael Grubb etal., The Kyoto Protocol: A Guide <strong>and</strong> Assessment,Royal Institute for Internati<strong>on</strong>al Affairs, L<strong>on</strong>d<strong>on</strong>,1999, pp. 108-09; Loren Cass, ‘Norm Entrapment <strong>and</strong>Preference <strong>Change</strong>: The Evoluti<strong>on</strong> of the EuropeanUni<strong>on</strong> Positi<strong>on</strong> <strong>on</strong> Internati<strong>on</strong>al Emissi<strong>on</strong>s Trading’,Global Envir<strong>on</strong>mental Politics 5, 2, pp. 38-60.71 Including soil carb<strong>on</strong> sequestrati<strong>on</strong> in a tradingsystem is favoured both by biotechnologycompanies hoping to exp<strong>and</strong> the market forproducts that allegedly reduce the need forploughing <strong>and</strong> by some researchers who hopeto harness carb<strong>on</strong> trading in the service of soilmanagement practices that better c<strong>on</strong>serve organiccarb<strong>on</strong> <strong>and</strong> thereby enhance food security. See, e.g.,R. Lal, ‘Soil Carb<strong>on</strong> Sequestrati<strong>on</strong> <strong>and</strong> Impacts <strong>on</strong>Global <strong>Climate</strong> <strong>Change</strong> <strong>and</strong> Food Security’, Science304, 11 June 2004, pp. 1623-27.72 Grubb et al., op. cit supra note 70; Cass, op. cit.supra note 70.73 Grubb, op. cit. supra note 70, pp. xxxvi, 246.74 S. Vedantam, ‘Kyoto Credits System Aids the Rich,Some Say’, Washingt<strong>on</strong> Post, 12 March 2005.75 Bangkok Post, 24 February 2005. See also LarryLohmann, ‘Marketing <strong>and</strong> Making Carb<strong>on</strong> Dumps:Commodificati<strong>on</strong>, Calculati<strong>on</strong> <strong>and</strong> Counterfactualsin <strong>Climate</strong> <strong>Change</strong> Mitigati<strong>on</strong>’, Science as Culture 14,3, September 2005, pp. 203-235.76 Schnews (Bright<strong>on</strong>, UK), 1 December 2000.77 Lohmann, op. cit. supra note 28.78 Interview with Wolfgang Sachs, supra note 14.79 Joyeeta Gupta, ‘North-South Aspects of the <strong>Climate</strong><strong>Change</strong> Issue: Towards a Negotiating Theory <strong>and</strong>Strategy for Developing Countries’, Internati<strong>on</strong>alJournal of Sustainable Development 3, 2, 2000, pp.125-26.80 Jacob Werksman, ‘The Clean DevelopmentMechanism: Unwrapping the “Kyoto Surprise”’,Review of European Community <strong>and</strong> Internati<strong>on</strong>alEnvir<strong>on</strong>mental Law 7, 2, 1998, pp. 147-158, p. 152. Asimilar neoliberal move from ‘penalty’ to ‘payment’occurred recently in Nigeria when Shell lawyersinsisted that official penalties levied <strong>on</strong> the companyfor gas flaring should be interpreted not as evidenceof having broken Nigerian law, but as costs of doingbusiness.81 Jørgen Wettestad, ‘The Making of the 2003 EUEmissi<strong>on</strong>s Trading Directive: An Ultra-Quick Processdue to Entrepreneurial Proficiency?’, GlobalEnvir<strong>on</strong>mental Politics 5, 1, February 2005.82 Ken Newcombe, presentati<strong>on</strong> during the meetingsof the Subsidiary Body <strong>on</strong> Science <strong>and</strong> TechnologyAssessment, B<strong>on</strong>n, 6 June 2000. See also http://www.carb<strong>on</strong>finance.org.83 See http://www.ieta.org/ieta/www/pages/index.php?IdSiteTree=9.84 Loren Cass, op. cit. supra note 70.85 J<strong>on</strong> Hovi et al., ‘The Persistence of the KyotoProtocol: Why Other Annex I Countries Move <strong>on</strong>without the United States’, Global Envir<strong>on</strong>mentalPolitics 3, 4, November 2003. For other views <strong>on</strong>the EU’s turnaround <strong>on</strong> emissi<strong>on</strong>s trading, see AtleC. Christiansen <strong>and</strong> Jorgen Wettestad, ‘The EU as aFr<strong>on</strong>trunner <strong>on</strong> Greenhouse Gas Emissi<strong>on</strong>s Trading:How did it Happen <strong>and</strong> will the EU Succeed?’,<strong>Climate</strong> Policy 3, 2003, pp. 3-18 <strong>and</strong> Chad Damro<strong>and</strong> Pilar Luaces Mendez, ‘Emissi<strong>on</strong>s Trading atKyoto: From EU Resistance to Uni<strong>on</strong> Innovati<strong>on</strong>’,Envir<strong>on</strong>mental Politics 12, 2, 2003, pp. 71-94.86 Directive 2004/101/EC of the EuropeanParliament <strong>and</strong> of the Council, http://ec.europa.eu/envir<strong>on</strong>ment/climat/emissi<strong>on</strong>/pdf/dir_2004_101_en.pdf.87 See, for instance, E. P. Thomps<strong>on</strong>, ‘Time, WorkDiscipline <strong>and</strong> Industrial Capitalism’ in Customs inComm<strong>on</strong>: Studies in Traditi<strong>on</strong>al Popular Culture,New Press, New York, 1992, pp. 352-403.88 The term ‘resource’ was invented around the timeof the Industrial Revoluti<strong>on</strong>. Before the eighteenthcentury or so, there were no such things. SeeLarry Lohmann, ‘Re-Imagining the Populati<strong>on</strong>Debate’, Corner House Briefing No. 28, http://www.thecornerhouse.org.uk/item.shtml?x=51980.89 This insight about the Earth Summit is due to RajPatel, ‘Faulty Shades of Green’, 2002, http://www.voiceoftheturtle.org/show_article.php?aid=201.90 Coase, The Firm, the Market <strong>and</strong> the Law, op. cit.supra note 68, p. 155.91 ‘Looking for Results: Nobel Laureate R<strong>on</strong>ald Coase<strong>on</strong> Rights, Resources <strong>and</strong> Regulati<strong>on</strong>’, Reas<strong>on</strong>magazine, January 1997, http://reas<strong>on</strong>.com/9701/int.coase.shtml.92 Patrick B<strong>on</strong>d, ‘The World Bank in the Time ofCholera’, Z Net Commentary, 13 April 2001, http://www.zmag.org/sustainers/c<strong>on</strong>tent/2001-04/13b<strong>on</strong>d.htm.93 Douglas Kysar, ‘Law, Envir<strong>on</strong>ment <strong>and</strong> Visi<strong>on</strong>’,Northwestern University Law Review 675, 2003, p.686.
68 development dialogue september 2006 – carb<strong>on</strong> trading94 ‘Take the case of a newly discovered cave,’ Coasesays (‘Looking for Results’, supra note 91). ‘[W]hetherthe law says it’s owned by the pers<strong>on</strong> where themouth of the cave is or whether it bel<strong>on</strong>gs to theman who discovers it or whether it bel<strong>on</strong>gs to theman under whose l<strong>and</strong> it is, it’ll be used for growingmushrooms, storing bank records, or as a gasreservoir according to which of these uses producesthe most value…people will use resources in the waythat produces the most value, that’s all.’95 Dales, op. cit. supra note 68 <strong>and</strong> Polluti<strong>on</strong>, Property<strong>and</strong> Prices, University of Tor<strong>on</strong>to Press, Tor<strong>on</strong>to.See also T. D. Crocker, T. D, ‘The Structuring ofAtmospheric Polluti<strong>on</strong> C<strong>on</strong>trol Systems’ in H.Wolozin, ed., The Ec<strong>on</strong>omics of Air Polluti<strong>on</strong>, Nort<strong>on</strong>,New York, 1966, pp. 61-86.96 Lisa Heinzerling, ‘Selling Polluti<strong>on</strong>, ForcingDemocracy’, Stanford Envir<strong>on</strong>mental Law Journal 14,2, May 1995.97 Drury et al., op. cit. supra note 69.98 Hahn <strong>and</strong> Stavins, op. cit. supra note 69; PeterBarnes, Who Owns the Sky? Our Comm<strong>on</strong>Assets <strong>and</strong> the Future of Capitalism, Isl<strong>and</strong> Press,Washingt<strong>on</strong>, 2001; A. Denny Ellerman et al.,Emissi<strong>on</strong>s Trading in the US: Experience, Less<strong>on</strong>s<strong>and</strong> C<strong>on</strong>siderati<strong>on</strong>s for Greenhouse Gases, PewCentre <strong>on</strong> Global <strong>Climate</strong> <strong>Change</strong>, Arlingt<strong>on</strong>, VA,2003.99 Drury et al., op. cit. supra note 69. See also nextchapter.100 See http://www.priceofoil.org/oil<strong>and</strong>state/.101 J. H. Dales, Polluti<strong>on</strong>, Property <strong>and</strong> Prices,University of Tor<strong>on</strong>to Press, Tor<strong>on</strong>to, 1968; DavidW. M<strong>on</strong>tgomery, ‘Markets in Licenses <strong>and</strong> Effi cientPolluti<strong>on</strong> C<strong>on</strong>trol Programs’, Journal of Ec<strong>on</strong>omicTheory 5, 1972, <strong>and</strong> Tom H. Tietenberg, Emissi<strong>on</strong>sTrading: An Exercise in Reforming Polluti<strong>on</strong> Policy,Resources for the Future, Washingt<strong>on</strong>, 1985.102 Envir<strong>on</strong>mental Defence – known for its partnershipswith corporati<strong>on</strong>s such as McD<strong>on</strong>alds, Citigroup<strong>and</strong> DuP<strong>on</strong>t – is widely credited with writing thoseparts of the 1990 US Clean Air Act amendmentsthat established a nati<strong>on</strong>wide tradeable permitscheme for sulphur dioxide. See Jim Bradley,‘Buying High, Selling Low: Emissi<strong>on</strong>s Trading is aFlop <strong>on</strong> Wall Street, but Is It Reducing Polluti<strong>on</strong>?’,E Magazine 7, 4, July-August 1996; Bob Burt<strong>on</strong>,‘Chilling <strong>and</strong> Gassing with the Envir<strong>on</strong>mentalDefence Fund’, PR Watch 6, 1, 1999, http://www.sourcewatch.org/index.php?title=Chilling_<strong>and</strong>_Gassing_with_the_Envir<strong>on</strong>mental_Defense_Fund;John Kinsman, ‘Emissi<strong>on</strong>s Trading, The Ec<strong>on</strong>omy <strong>and</strong>The Envir<strong>on</strong>ment’, Envir<strong>on</strong>mental Finance, October2002, pp. 26-27; Envir<strong>on</strong>mental Defence, ‘OrientExpress: Emissi<strong>on</strong>s Trading Gets Fast Tracked inChina’, http://www.envir<strong>on</strong>mentaldefense.org/article.cfm?c<strong>on</strong>tentid=2091.103 Corporate Europe Observatory, op. cit. supranote 30.104 Daphne Wysham, ‘Carb<strong>on</strong> Trading: A PlanetaryGamble’, Ft. Worth Star-Telegram, 7 December2005, http://www.carb<strong>on</strong>tradewatch.org/news/m<strong>on</strong>trealdaphne.html.105 See http://www.carb<strong>on</strong>neutral.com.106 At the July 2001 climate talks in B<strong>on</strong>n, for example,five representatives of the Ind<strong>on</strong>esian Associati<strong>on</strong>of Logging Companies sat <strong>on</strong> their country’sdelegati<strong>on</strong>, pushing for schemes which would createcarb<strong>on</strong> credits for logging <strong>and</strong> plantati<strong>on</strong>s.107 See UNFCCC list of observers, http://unfccc.int/parties_<strong>and</strong>_observers/items/2704.php.108 World Bank, ‘Carb<strong>on</strong> Finance Annual Report2005’, World Bank, Washingt<strong>on</strong>, 2006, http://carb<strong>on</strong>finance.org/docs/2005_CFU_Annual_Report.pdf.109 Corporate Europe Observatory, op. cit. supranote 30.110 United Nati<strong>on</strong>s Development Programme <strong>and</strong>World Resources Institute, Promoting Developmentwhile Limiting Greenhouse Gas Emissi<strong>on</strong>s: Trends<strong>and</strong> Baselines, UNDP, New York, 1999; Food <strong>and</strong>Agriculture Organizati<strong>on</strong>, ‘Carb<strong>on</strong> Sequestrati<strong>on</strong>Opti<strong>on</strong>s under the Clean Development Mechanism’,World Soil Resources Report 92, Rome, 2000.111 Philip Thornt<strong>on</strong>, ‘UN unveils plan to releaseuntapped wealth of USD 7 trilli<strong>on</strong>’, The Independent,30 January 2006.112 Equity Watch, Centre for Science <strong>and</strong> Envir<strong>on</strong>ment,New Delhi, 15 November 2000.113 Corporate Europe Observatory, op. cit. supranote 30.114 All Party Parliamentary <strong>Climate</strong> <strong>Change</strong> Group,‘Group Objectives’, L<strong>on</strong>d<strong>on</strong>, 6 September 2005; seealso http://www.carb<strong>on</strong>neutral.com/features/APPG.asp. See Chapter 4 for informati<strong>on</strong> <strong>on</strong> SELCO, afirm that the Carb<strong>on</strong> Neutral Company works within Sri Lanka.115 Adam Ma’anit, ‘The Sky’s No Limit’, NewInternati<strong>on</strong>alist 375, January/February 2005.116 <strong>Climate</strong> <strong>Change</strong> Capital website, http://www.climatechangecapital.com/pages/senior.asp.117 Lohmann, op. cit. supra note 28.118 James Camer<strong>on</strong>, lecture to the Royal Society ofArts, 15 May 2005, http://www.climatechangecapital.com..
‘made in the usa’ – a short history of carb<strong>on</strong> trading 69119 See Real <strong>Climate</strong> website, http://www.realclimate.org/index.php/archives/2006/05/buying-a-stairwayto-heaven/#more-313.120 Carb<strong>on</strong> Trade Watch, ‘Hoodwinked in the Hothouse’,www.sinkswatch.org/pubs/hothousebw.pdf.121 Lohmann, op. cit. supra note 28, p. 26.
Chapter 3Less<strong>on</strong>s unlearnedIn which carb<strong>on</strong> trading, c<strong>on</strong>trary to slogans about the universal eff ectivenessof markets in dealing with envir<strong>on</strong>mental <strong>and</strong> social problems, is shown to beill-suited to addressing climate change. The experience of the US in polluti<strong>on</strong>trading is dem<strong>on</strong>strated to be an argument not for, but rather against, makingcarb<strong>on</strong> markets the centrepiece of acti<strong>on</strong> <strong>on</strong> global warming.Introducti<strong>on</strong>Polluti<strong>on</strong> trading, the last chapter has pointed out, is a US inventi<strong>on</strong>now at the centre of efforts to address climate change worldwide. It’sbeing enthusiastically pushed by governments, internati<strong>on</strong>al organisati<strong>on</strong>s,business <strong>and</strong> even many NGOs.The rest of this special report will argue that this approach isn’t working,<strong>and</strong> even threatens to derail more c<strong>on</strong>structive movements to addressglobal warming. The US experience with polluti<strong>on</strong> trading isan argument not for, but rather against, greenhouse-gas trading programmessuch as the Kyoto Protocol <strong>and</strong> the European Uni<strong>on</strong> Emissi<strong>on</strong>sTrading Scheme.But I thought polluti<strong>on</strong> trading was a huge success in the US!That’s what carb<strong>on</strong> trading prop<strong>on</strong>ents often say. The reality is morecomplicated. US polluti<strong>on</strong> trading schemes have produced no morereducti<strong>on</strong>s, <strong>and</strong> spurred less innovati<strong>on</strong>, than traditi<strong>on</strong>al regulati<strong>on</strong>,to say nothing of other possible programmes for cutting emissi<strong>on</strong>s.US polluti<strong>on</strong> trading schemes have cut <strong>on</strong>ly short-term costs, <strong>and</strong><strong>on</strong>ly for some actors, have raised many questi<strong>on</strong>s of equity, <strong>and</strong> inmany ways have distracted attenti<strong>on</strong> from fundamental issues.Equally importantly, the c<strong>on</strong>diti<strong>on</strong>s that made possible the bestdesignedUS emissi<strong>on</strong>s trading scheme – the US’s sulphur dioxideprogramme – are simply not present in global regimes for c<strong>on</strong>trollinggreenhouse gases.I d<strong>on</strong>’t underst<strong>and</strong>. What could be wr<strong>on</strong>g with trading? Isn’t trading alwaysthe most effi cient way of reaching a given goal?
72 development dialogue september 2006 – carb<strong>on</strong> tradingCarb<strong>on</strong> trading’s claim to be ‘efficient’ is certainly its main attracti<strong>on</strong>– together with its claim to be able to stimulate change in a relativelypolitically ‘easy’ way. But to decide whether such claims are true, youneed to look carefully at specific cases. 2Trading’s ‘efficiencies’ tend to c<strong>on</strong>ceal a lot of ‘inefficient’ stagesetting:arranging infrastructure, working up a legal framework, <strong>and</strong>so forth. Global trade in paper pulp, for instance, becomes ‘efficient’<strong>on</strong>ly after subsidies or violence have g<strong>on</strong>e into building roads <strong>and</strong>ports; securing large-scale, c<strong>on</strong>tiguous areas for producing raw material;finding ways of c<strong>on</strong>vincing people that local l<strong>and</strong> is of ‘greaterec<strong>on</strong>omic value’ when under tree plantati<strong>on</strong>s than when treated asa comm<strong>on</strong>s; hiring <strong>and</strong> training police; ensuring sustained high dem<strong>and</strong>;<strong>and</strong> so <strong>on</strong>. 3At the same time, trading is often a singularly inefficient way of attaininggoals that require sweeping structural changes in society, orthat place local rights before accumulati<strong>on</strong>. It’s also inefficient whenthe necessary c<strong>on</strong>diti<strong>on</strong>s for trading – measurement instruments,legal instituti<strong>on</strong>s <strong>and</strong> so forth – are inadequate.Where polluti<strong>on</strong> trading is possible at all, it can get in the way ofachieving changes of the kind required for breaking industrialised societies’addicti<strong>on</strong> to fossil fuels. Its cost savings, while often real, tendto fall <strong>on</strong>ly to some members of society. In additi<strong>on</strong>, it can exacerbatepolitical c<strong>on</strong>fl ict. Polluti<strong>on</strong> trading, in short, <strong>on</strong>ly makes harder thedifficult job of broad-based political organising required for copingwith global warming. To put it another way, the ‘efficiency’ that isfostered by trading is often not eff ective.‘Emissi<strong>on</strong>s trading derivesfrom ec<strong>on</strong>omic theory<strong>and</strong> a small amount ofempirical evidence fromUS practice, untested <strong>on</strong> aglobal scale, <strong>and</strong> certainlyuntested in the variousec<strong>on</strong>omies in which thesemechanisms must work.’ 1Ruth Greenspan Bell,Resources for theFuture, 2006Why is that?Broadly, there are five reas<strong>on</strong>s, <strong>and</strong> they are what this chapter is about.First, in order to work, greenhouse gas trading has to create a specialsystem of property rights in the earth’s carb<strong>on</strong>-cycling capacity. Thissystem sets up deep political c<strong>on</strong>fl icts <strong>and</strong> makes effective climate acti<strong>on</strong>exceedingly difficult. Sec<strong>on</strong>d, polluti<strong>on</strong> trading is a poor mechanismfor stimulating the social <strong>and</strong> technical changes needed to addressglobal warming. Third, the attempt to build new carb<strong>on</strong>-cyclingcapacity is interfering with genuine climate acti<strong>on</strong>. Fourth, globaltrading systems for greenhouse gases can’t work without much betterglobal enforcement regimes than are likely in the near future. Andfi f th, building a trading system reduces the political space available foreducati<strong>on</strong>, movement-building <strong>and</strong> planning around the needed fairtransiti<strong>on</strong> away from fossil fuels.
less<strong>on</strong>s unlearned 73Property rights <strong>and</strong> privatisati<strong>on</strong>In any trading system, traders need to own what they sell. Polluti<strong>on</strong>traders are no excepti<strong>on</strong>.The very ‘basis of emissi<strong>on</strong>s trading,’ says former World Bank chiefec<strong>on</strong>omist Sir Nicholas Stern, ‘is assigning property rights to emitters,<strong>and</strong> then allowing these to be traded’. 4 As University of TexasLaw School property specialist Gerald Torres explains, in emissi<strong>on</strong>strading systems ‘an emitter is not <strong>on</strong>ly legally obligated to reduceemissi<strong>on</strong>s down to the limit specified <strong>on</strong> its permit; it is also legallyentitled to emit up to that amount’. 5 As a result, ‘legal instrumentsproviding evidence of ownership’ 6 are a universal requirement of alltradable permit systems.Who gets these property rights? And how do they get them?That depends.Under a scheme advocated by many ec<strong>on</strong>omists, they are sold to pollutersby government. Under a scheme backed by many envir<strong>on</strong>mentalists,they are given to a trust which sells them to polluters at intervals<strong>and</strong> distributes the revenue to citizens. But under most realworldtrading schemes, including US polluti<strong>on</strong> trading programmes,the Kyoto Protocol <strong>and</strong> the EU Emissi<strong>on</strong>s Trading Scheme, they aregiven to a selecti<strong>on</strong> of historical polluters – wealthy countries <strong>and</strong>companies – for free.The US acid rain programme, for instance, h<strong>and</strong>ed out sulphur dioxideemissi<strong>on</strong>s rights free of charge to several hundred large industrialpolluters – companies such as Illinois <strong>Power</strong> <strong>and</strong> Comm<strong>on</strong>wealth Edis<strong>on</strong>.The Kyoto Protocol dispensed greenhouse gas emissi<strong>on</strong>s rightsto 38 industrialised countries who were polluting the most already.Although the South was allowed to c<strong>on</strong>tinue emitting greenhousegases unimpeded for time being, it got no allowances to trade. Thefirst phase of the European Uni<strong>on</strong> Emissi<strong>on</strong>s Trading Scheme, whichgot under way in 2005, d<strong>on</strong>ated carb<strong>on</strong> dioxide emissi<strong>on</strong>s rights to11,428 industrial installati<strong>on</strong>s, mostly in the high-emitting privatesector. 7In other words, like rights to many other things that have becomevaluable – oil fields, mining c<strong>on</strong>cessi<strong>on</strong>s, the broadcast spectrum –rights to the earth’s carb<strong>on</strong>-cycling capacity are gravitating into theh<strong>and</strong>s of those who have the most power to appropriate them <strong>and</strong> themost financial interest in doing so.
74 development dialogue september 2006 – carb<strong>on</strong> tradingWhoa, whoa, whoa! I d<strong>on</strong>’t believe it. The United Nati<strong>on</strong>s would never giveaway a public good to rich nati<strong>on</strong>s. European governments would never giveaway rights to the global carb<strong>on</strong> dump to its own corporati<strong>on</strong>s. Who would allowsuch a thing to happen?It’s already happened. The Kyoto Protocol gives Germany, France,Sweden <strong>and</strong> the rest of the European Uni<strong>on</strong> formal, transferable rightsto emit, in 2012, 92 per cent of what they were emitting in 1990. Japan<strong>and</strong> Canada get 94 per cent, Russia 100 per cent, Norway 101 percent, Icel<strong>and</strong> 110 per cent. Under the EU Emissi<strong>on</strong>s Trading System,the UK government al<strong>on</strong>e h<strong>and</strong>s out free, transferable global carb<strong>on</strong>dump assets worth around €4 billi<strong>on</strong> yearly (at June 2006 prices)to approximately a thous<strong>and</strong> installati<strong>on</strong>s resp<strong>on</strong>sible for around 46per cent of the country’s emissi<strong>on</strong>s (see table 2, p. 89). Saleable rightsto emit 145.3 milli<strong>on</strong> t<strong>on</strong>nes of carb<strong>on</strong> dioxide per year were givenout to power generators, 23.3 milli<strong>on</strong> t<strong>on</strong>nes to ir<strong>on</strong> <strong>and</strong> steel manufacturers,<strong>and</strong> so forth.‘The road to the freemarket [had to be]opened <strong>and</strong> kept openby an enormous increasein c<strong>on</strong>tinuous, centrallyorganised<strong>and</strong> c<strong>on</strong>trolledinterventi<strong>on</strong>ism... laissezfaireec<strong>on</strong>omy was theproduct of deliberate stateacti<strong>on</strong>.’ 15Karl Polanyi (1944)But surely this is a misunderst<strong>and</strong>ing. These emissi<strong>on</strong>s trading programmes aregiving out ‘allowances’, not rights to pollute. The Marrakech Accords – the‘rule book’ for the Kyoto Protocol – states clearly that the Protocol ‘has notcreated or bestowed any right, title or entitlement to emissi<strong>on</strong>s of any kind <strong>on</strong>Parties included in Annex I’. 8 The EU ETS creates discrete permits under aregulati<strong>on</strong>, not property rights. And the US Clean Air Act Amendments of1990 are likewise careful to specify that a sulphur dioxide allowance ‘does notc<strong>on</strong>stitute a property right’, 9 while a proposed US law setting up a greenhousegas trading scheme also stipulates that ‘tradeable allowances are not a propertyright’. 10 So relax! No <strong>on</strong>e’s giving anything away to polluters. The world’s capacityto recycle carb<strong>on</strong> is not being privatised.If <strong>on</strong>ly it were so! In fact, things are more complicated – <strong>and</strong> moredisturbing. When governments say they are not giving out propertyrights, what they mean is that they are not giving out a particularkind of property rights. But they are giving out property rights of anotherkind – <strong>on</strong>es which do c<strong>on</strong>tribute to the privatisati<strong>on</strong> of a globalgood.You’d better explain what you mean.Let’s begin by acknowledging that there are good reas<strong>on</strong>s why governmentsare afraid to menti<strong>on</strong> the words ‘property’ <strong>and</strong> ‘rights’ inlaws <strong>and</strong> treaties governing emissi<strong>on</strong>s trading.An emissi<strong>on</strong>s trading system has to cut emissi<strong>on</strong>s <strong>and</strong> prove it is doingso. 11 It can do that <strong>on</strong>ly if it reduces the amount of polluti<strong>on</strong> allowancesin circulati<strong>on</strong>. Governments have to be able to c<strong>on</strong>fiscate some
less<strong>on</strong>s unlearned 75of the emissi<strong>on</strong>s allowances they gave out previously. And they haveto be able to c<strong>on</strong>fiscate them without compensating their holders. 12Why?Imagine what would happen if the government had to compensatepermit-holders every time it tightened an emissi<strong>on</strong>s ‘cap’ by takingaway some of their allowances. Taxpayers would have to pick up thebill for every emissi<strong>on</strong>s reducti<strong>on</strong> that corporati<strong>on</strong>s made, <strong>and</strong> the billwould be ‘prohibitively high’. 13In a housing market, homeowners need to know that the governmentcan’t simply take their rights to their houses away from them withoutcompensati<strong>on</strong> <strong>and</strong> sell the houses, pocketing the proceeds itself. Butin an emissi<strong>on</strong>s market, it’s essential that the government does havethe power to take away some of the rights to pollute it has given orsold to companies or individuals. The property rights in an emissi<strong>on</strong>smarket, in other words, must be less ‘absolute’ than the propertyrights in a car market. And in the case of carb<strong>on</strong> trading, it’s especiallyimportant that governments be tough about taking away allowances.Why?Because they’re going to have to take away so many in order to forestallclimate chaos.In the first phase of the Kyoto Protocol, governments have h<strong>and</strong>edout, to industrialised countries al<strong>on</strong>e, several times more rights to theworld’s carb<strong>on</strong> cycling capacity than are available if global temperaturesare not to rise by more than, say, 2 degrees Celsius. 14 Havinggiven a temporary stamp of approval to this huge overflow, governmentswill have to commit themselves to taking away an especiallylarge proporti<strong>on</strong> of those rights in the future.Unfortunately, the rightsholders in questi<strong>on</strong> – powerful Northerngovernments <strong>and</strong> their heavy industries – are not going to give themup without a fight. In fact, the fight has already started (see below).So the job of dispossessing them of their carb<strong>on</strong> emissi<strong>on</strong>s permitsnot <strong>on</strong>ly carries much higher stakes, but will also be politically muchharder for the UN <strong>and</strong> world governments to carry out, than the jobthe US government faced in taking away sulphur dioxide permits.That means governments will have to make it especially clear in thecase of global warming that emissi<strong>on</strong>s allowances are <strong>on</strong>ly temporary.Exactly! And if allowances are temporary, they’re not property rights. Thereforenothing is being given to Northern countries, or their polluting industries.
76 development dialogue september 2006 – carb<strong>on</strong> tradingSir Henry Maine <strong>and</strong> the Right to PolluteIn order to use, defend,steal or appropriatethe thingsthey want <strong>and</strong> need,people have inventedproperty rightsof many differentkinds. Today, thereare property rightsgoverning everythingfrom l<strong>and</strong> <strong>and</strong> water to birds’ nests,ideas <strong>and</strong> DNA. There are rights to exclude,to use, to benefit from, to inherit, tomanage, to transfer. There are rights thatare held by communities, rights that areheld by individuals, <strong>and</strong> rights that are heldby the state. There are permanent rights<strong>and</strong> temporary rights. There are freeholds,leaseholds, licenses, patents, easements,quotas, copyrights, c<strong>on</strong>cessi<strong>on</strong>s, <strong>and</strong> usufructs.There are formal rights <strong>and</strong> informalrights, written <strong>and</strong> unwritten. Thereare hundreds of kinds of comm<strong>on</strong>s rights.Such systems of rights overlap <strong>and</strong> even interpenetrate.A single plot of l<strong>and</strong> may beseen as private, public <strong>and</strong> comm<strong>on</strong> propertyby different groups. Private propertyis guaranteed by but subject to the authorityof the state <strong>and</strong> the public; individualuser rights of comm<strong>on</strong>ers tend to be grantedat the will of the community.A century <strong>and</strong> a half ago, the British juristSir Henry Maine recognised somethingof this diversity <strong>and</strong> complexity when hecompared different kinds of property systemsto different ‘bundles of sticks.’ Somebundles include the right to pass <strong>on</strong> thegood in questi<strong>on</strong> to your heirs, some d<strong>on</strong>ot. Some bundles include the right to buy<strong>and</strong> sell, some do not. And there are manyother rights, or ‘sticks’, as well, each ofwhich may or may not be in any particularbundle: rights to use, to have access to,to manage, to exclude, <strong>and</strong> so forth. Thenumber of possible ‘bundles’ is dizzying.And some may have few or no sticks incomm<strong>on</strong> with other bundles. As politicalscientist Elinor Ostrom notes, ‘N<strong>on</strong>e ofthese rights is strictly necessary… Even if<strong>on</strong>e or more sticks are missing, some<strong>on</strong>emay still be said to “own” property… <strong>on</strong>emust… specify just what rights <strong>and</strong> corresp<strong>on</strong>dingduties [a] regime would entail.’ 16Tradeable polluti<strong>on</strong> allowances <strong>and</strong> creditsfit easily into this c<strong>on</strong>cepti<strong>on</strong> of property.They are• ‘Enforceable claims to use something’ 17 –to pour carb<strong>on</strong> dioxide into the oceans,soil <strong>and</strong> vegetati<strong>on</strong>;• ‘Enforceable rights to benefit from something’18 – to make m<strong>on</strong>ey through tradingallowances, for example, or to gain acompetitive advantage through access tofree carb<strong>on</strong> dump space that others haveto pay for;Polluti<strong>on</strong> allowances <strong>and</strong> credits also c<strong>on</strong>tainother ‘sticks’ such as• Tradability;• Excludability – for example, Scottish<strong>Power</strong> cannot use Ineos Fluor’s allowancesor credits. 19So when a law says that emissi<strong>on</strong>s allowancesare not property rights – meaningmerely that they are not permanent – itshould not be taken literally.
less<strong>on</strong>s unlearned 77It’s not so simple. Just because something is temporary doesn’t meanit’s not a property right.Property rights come in many shapes <strong>and</strong> sizes (see box: ‘Sir HenryMaine <strong>and</strong> the Right to Pollute’, opposite). A lot of property rightsare temporary. Think of m<strong>on</strong>thly or yearly leases. Think of mining,logging or grazing c<strong>on</strong>cessi<strong>on</strong>s that governments give out to corporati<strong>on</strong>sfor 30 years or 75 years. Think of copyrights, trademarks, <strong>and</strong>licenses. Think of fishing quotas or seed, gene or drug patents, all ofwhich expire after a certain length of time.All of these temporary property rights have been used to privatise orenclose various goods. All have been used to make billi<strong>on</strong>s for privatecompanies. And all have been used to transfer wealth <strong>and</strong> power tothe rich, sometimes igniting bitter c<strong>on</strong>fl ict over democracy <strong>and</strong> howhuman beings’ envir<strong>on</strong>ments are to be treated.Emissi<strong>on</strong>s allowances are no different. Industry, ec<strong>on</strong>omists, governments<strong>and</strong> legal scholars all agree that, in giving away these allowances,emissi<strong>on</strong>s trading schemes do give away something quite substantial.As the Internati<strong>on</strong>al Accounting St<strong>and</strong>ards Board notes with regardto the EU ETS, allowances are ‘assets…owned by the company c<strong>on</strong>cerned…<strong>and</strong>as such represent a significant <strong>and</strong> immediate creati<strong>on</strong>of value to companies’. They should be seen as a ‘government grant,<strong>and</strong> accounted for as such, i.e. treated as deferred income in the balancesheet <strong>and</strong> recognised as income <strong>on</strong> a systematic basis’. 20 Temporaryor not, emissi<strong>on</strong>s permits c<strong>on</strong>stitute a ‘major input factor toproducti<strong>on</strong>.’ 21Allowances aren’t valuable just because they enable polluters to avoidhaving to spend m<strong>on</strong>ey <strong>on</strong> polluti<strong>on</strong> c<strong>on</strong>trol. They also enable corporati<strong>on</strong>sto borrow m<strong>on</strong>ey more easily <strong>and</strong> give them a better shareprice. And they set a precedent for granting them further entitlements.They can also be bought <strong>and</strong> sold for clear profit. They havemarket value. It matters who they are given to.I still d<strong>on</strong>’t underst<strong>and</strong>. How can you have rights over something as intangibleas the earth’s carb<strong>on</strong>-cycling capacity?Companies have legal rights over all sorts of intangible things. Drugcompanies own genes. The Disney Company owns the Winnie-the-Pooh story. General Electric <strong>and</strong> Rupert Murdoch hold temporaryrights over parts of the broadcast spectrum – rights that they are nowtrying to make permanent. 22 Other companies own new ideas fortheir producti<strong>on</strong> lines.
78 development dialogue september 2006 – carb<strong>on</strong> tradingWhat’s Property Got to Do with It?Transforming the earth’s capacity to maintaina liveable climate into formal propertyhas practical c<strong>on</strong>sequences. As the Canadianpolitical scientist C. B. Macphers<strong>on</strong><strong>on</strong>ce put it, a property right is a ‘right inthe sense of an enforceable claim to someuse or benefit from something’.That word ‘enforceable’ is crucial. Rightsgive access; rights give power. Property isnot a relati<strong>on</strong> between an individual <strong>and</strong>a thing, but, crudely speaking, betweenpeople <strong>and</strong> people. Individuals hold objects<strong>on</strong>ly through the sancti<strong>on</strong> of somecommunity or government. The law mayor may not be involved, but realising propertyrights depends <strong>on</strong> a whole raft of socialfactors that include trust, access to authority<strong>and</strong> knowledge, <strong>and</strong> perhaps alsoaccess to markets, capital, measurementtechnology, records, accounts, labour <strong>and</strong>identity.So when systems of private property are introducedin a good like l<strong>and</strong> or the earth’scarb<strong>on</strong>-cycling capacity, the changes arenot abstract. They involve the physicalmobilisati<strong>on</strong> of lawmakers, accountants,lawyers, surveyors, c<strong>on</strong>sultants, journalists,engineers, police, banks <strong>and</strong> all theassociated paraphernalia of offices, maps,calculators <strong>and</strong> so <strong>on</strong>. In the process, newmeans of persuasi<strong>on</strong> <strong>and</strong> coerci<strong>on</strong> becomepossible. New groups or professi<strong>on</strong>s gainnew powers <strong>and</strong> privileges. <strong>Power</strong> <strong>and</strong>knowledge are redistributed. Some gain,others lose.Take the system of private property forl<strong>and</strong> introduced in Egypt in the 1850s.The system recognised existing claims tothe l<strong>and</strong> under Ottoman <strong>and</strong> local law,but added new courts, property registers,mechanisms of enforcement, instituti<strong>on</strong>smaking possible acquisiti<strong>on</strong> <strong>and</strong> transfer,<strong>and</strong> sources of credit for those who wishedto use their property as collateral. 23 Europeancapital poured into the country. Locall<strong>and</strong>owners <strong>and</strong> European entrepreneursinvested in new irrigati<strong>on</strong> schemes<strong>and</strong> l<strong>and</strong> reclamati<strong>on</strong> in the countryside<strong>and</strong> housing <strong>and</strong> modern infrastructurein the cities. By the turn of the twentiethcentury the Egyptian stock market, whoselargest share holdings were in mortgagecompanies <strong>and</strong> property development, was<strong>on</strong>e of the most active in the world. Meanwhile,small farmers faced rapidly risingprices. Tax payments increased sharply, tocover mortgage payments <strong>on</strong> the estates ofthe ruling family. To obtain loans to survivecrises such as cattle epidemics, farmersnow had to mortgage their own l<strong>and</strong>, givingcreditors the power to seize the fields,animals, ploughs <strong>and</strong> houses of those unableto keep up debt payments. Farmersdescribed the courts that enforced foreclosuredecisi<strong>on</strong>s as ‘a machine for transferringthe l<strong>and</strong>’ from small farmers to thewealthy. 24The machinery of debt provided leveragefor col<strong>on</strong>ial occupati<strong>on</strong>. When a globaldepressi<strong>on</strong> struck in 1874, the Ottomanviceroy in Cairo was forced to foreclose<strong>on</strong> his large cott<strong>on</strong> <strong>and</strong> sugar caneestates. British <strong>and</strong> French banking housesestablished a Debt Commissi<strong>on</strong> in Cairo,which took c<strong>on</strong>trol of the country’s finances<strong>and</strong> used the new courts to takepossessi<strong>on</strong> of the viceroy’s estates. Whenhe resisted the takeover, the British <strong>and</strong>French governments installed his s<strong>on</strong> in
less<strong>on</strong>s unlearned 79his place. The subsequent rise of a c<strong>on</strong>stituti<strong>on</strong>alistmovement led by junior armyofficers <strong>and</strong> disaffected notables provokeda British invasi<strong>on</strong> in 1882 that reassertedEuropean c<strong>on</strong>trol over both finances <strong>and</strong>mortgaged property, including the extensivevice regal estates. 25 The private propertysystem was further c<strong>on</strong>solidated witha l<strong>and</strong> survey more comprehensive thananything known at that time in Britain. 26Despite belated attempts to slow down therate at which villagers were losing theirl<strong>and</strong> <strong>and</strong> their homes to creditors, by the1920s it was estimated that more than <strong>on</strong>ethird of the agricultural populati<strong>on</strong> in theNile Delta had become l<strong>and</strong>less. 27For Egyptian villagers, private propertymeshed with <strong>and</strong> modified existing powerrelati<strong>on</strong>s in ways that benefited some<strong>and</strong> harmed others. The same is true ofthe early ages of enclosure of comm<strong>on</strong>sin Europe’s col<strong>on</strong>ies <strong>and</strong> in Europe itself.And it remains true today. A World Banksupportedprogramme that issued 8.7 milli<strong>on</strong>l<strong>and</strong> titles in Thail<strong>and</strong> beginning in1984 paved the way for corrupt acquisiti<strong>on</strong>sof l<strong>and</strong> by speculators, underminingvillagers’ tenure security <strong>and</strong> causingwidespread rural c<strong>on</strong>fl ict. 28 In ThatcheriteBritain, privatisati<strong>on</strong> of social housing ultimatelyturned ‘working class housing estatesinto centres of intense gentrificati<strong>on</strong>’while producing ‘homelessness <strong>and</strong> socialanomie in many urban neighbourhoods.’Privatisati<strong>on</strong> of utilities redistributed assetsin a way that ‘increasingly favoured theupper rather than the lower classes’. Argentinianprivatisati<strong>on</strong> resulted in a ‘hugeinflow of overaccumulated capital <strong>and</strong> asubstantial boom in asset values, followedby a collapse into massive impoverishment.’29 Not l<strong>on</strong>g after the Mexican governmentpassed a reform law in 1991 thatboth permitted <strong>and</strong> encouraged privatisati<strong>on</strong>of the ejido l<strong>and</strong>s, ‘divesting itself ofits resp<strong>on</strong>sibilities to maintain the basis’ forindigenous security, the Zapatista rebelli<strong>on</strong>broke out. Extending intellectual privateproperty rights over biological assetsto communities whose ‘political re sourcesare not commensurate with their newfoundec<strong>on</strong>omic resources’ 30 may wind updamaging, not improving, livelihoods.So it is <strong>on</strong>ly to be expected that currentmoves to turn the earth’s carb<strong>on</strong>-cyclingcapacity into a tradable asset are viewedcautiously by many groups, out of c<strong>on</strong>cernfor their practical effects. To bringthe world’s carb<strong>on</strong>-cycling capacity undera new system of property sparks socialchange <strong>and</strong> shifts the political characterof the atmosphere <strong>and</strong> the earth’s abilityto regulate its climate. It has alreadytransformed or reinforced a wide range ofpower relati<strong>on</strong>s – by, for example, creatingnew instituti<strong>on</strong>s to quantify, h<strong>and</strong>le, regulate,distribute <strong>and</strong> police the new assetsthat are being given away.The new carb<strong>on</strong> commodity is ghostly <strong>on</strong>ly in the sense that it’s up togovernments <strong>and</strong> governments al<strong>on</strong>e to decide – <strong>on</strong> whatever groundsthey choose, scientific or not – how scarce it is, <strong>and</strong> how much canbe distributed, bought, sold <strong>and</strong> used. Tradable permits to pollute arewhat law professor <strong>and</strong> polluti<strong>on</strong> trading advocate Richard Stewartcalls ‘hybrid property’ – property c<strong>on</strong>jured up by regulati<strong>on</strong> <strong>and</strong> thus
80 development dialogue september 2006 – carb<strong>on</strong> tradingdependent, even more than ordinary private property is, <strong>on</strong> a centralised,complex system of government c<strong>on</strong>trol. 31One reas<strong>on</strong> why talking about ownership is important is that someof the devastating climate dilemmas that governments <strong>and</strong> the UNare now caught in are a result of the property system that emissi<strong>on</strong>strading requires.A matter of realismHow’s that?For the market to work at all, ‘interests in allowances must be sufficientlyprotected to protect investment’. 32 Indeed, guaranteeing that‘property rights can be assigned <strong>and</strong> enforced to ensure that trades canRent-Seeking <strong>and</strong> Carb<strong>on</strong> TradingRent-seeking, a phenomen<strong>on</strong> first namedby ec<strong>on</strong>omists Gord<strong>on</strong> Tullock <strong>and</strong> AnneKrueger, is the process by which a firm seeksto extract ‘uncompensated value from othersthrough manipulati<strong>on</strong> of the ec<strong>on</strong>omic envir<strong>on</strong>mentrather than through trade <strong>and</strong>the producti<strong>on</strong> of added wealth’. 35Gord<strong>on</strong>Tullock<strong>and</strong>AnneKrugerLobbying for favourable ec<strong>on</strong>omic regulati<strong>on</strong>is <strong>on</strong>e way of rent-seeking, especiallywhen the regulator must rely <strong>on</strong> privatefirms for knowledge about the market.If firms can calculate the cost of lobbying,bribing or otherwise causing the governmentto enact favourable regulati<strong>on</strong>, thenit can compare this cost with that neededto gain similar benefits through capitalimprovements or increased efficiency. If‘buying’ a favourable regulatory envir<strong>on</strong>mentis cheaper than improving producti<strong>on</strong>lines, then firms may reap uncompensatedincome. Spending m<strong>on</strong>ey <strong>on</strong> influencepeddlersinstead of improved business practiceslows down growth in productivity. 36Rent-seeking is therefore often c<strong>on</strong>sideredan example of corrupti<strong>on</strong> or the undue influenceof special interests.Carb<strong>on</strong>-trading programmes such as theEU ETS, in which polluti<strong>on</strong> rights aregiven to private companies depending <strong>on</strong>how much they say they have been pollutingin the past, are fertile grounds for rentseeking.The notorious horse-trading overthe allocati<strong>on</strong> of polluti<strong>on</strong> rights to nati<strong>on</strong>algovernments under the Kyoto Protocolis an analogous case.As financial journalist John Kay writes inthe Financial Times, ‘When a market is createdthrough political acti<strong>on</strong> rather thanemerging sp<strong>on</strong>taneously from the needs ofbuyers <strong>and</strong> sellers, business will seek to influencemarket design for commercial advantage.’37
less<strong>on</strong>s unlearned 81‘The creati<strong>on</strong> of formallegal title <strong>and</strong> propertyregistrati<strong>on</strong> becomes amachinery for transferringproperty from small owners<strong>and</strong> c<strong>on</strong>centrating it intolarger <strong>and</strong> larger h<strong>and</strong>s.’ 39Timothy Mitchell, 2002take place in an ordered fashi<strong>on</strong> <strong>and</strong> with a high degree of certainty’is the ‘key role of the policy system’ in an emissi<strong>on</strong>s trading scheme. 33Nobody who holds emissi<strong>on</strong>s allowances, or is thinking of buying orselling them – whether polluter, broker, banker or investor – is goingto want anybody to be able to take them away arbitrarily.So just as corporati<strong>on</strong>s lobby for exempti<strong>on</strong> from polluti<strong>on</strong> regulati<strong>on</strong>s,they lobby to make sure emissi<strong>on</strong>s allowances amount to secureproperty rights <strong>and</strong> to get as many as they can. As ‘semi-permanentproperty rights,’ in the words of David Victor of the US Council <strong>on</strong>Foreign Relati<strong>on</strong>s, emissi<strong>on</strong>s permits are ‘assets that, like other propertyrights, owners will fight to protect’. 34Luckily for corporati<strong>on</strong>s, their privileged access to legislators enablesthem to secure carb<strong>on</strong> dump commodity for themselves merely bylobbying <strong>and</strong> pressure politics. Just as systems of private property inl<strong>and</strong> give new m<strong>on</strong>eymaking powers to surveyors, officials <strong>and</strong> firmswith access to titling <strong>and</strong> licensing mechanisms, the property systemsof polluti<strong>on</strong> trading schemes give new commercial powers to thosewith access to legislators.As ec<strong>on</strong>omists Peter Cramt<strong>on</strong> <strong>and</strong> Suzi Kerr point out, the ‘enormousrents’ at stake ‘mean that interest groups will c<strong>on</strong>tinue to seek changesin the allocati<strong>on</strong> over time’:Firms may end up putting as much effort into rent capture as intofinding efficient ways to reduce carb<strong>on</strong> usage. Investments may bedelayed in the hope that high observed marginal costs would leadto more generous allowance allocati<strong>on</strong>s as compensati<strong>on</strong>. The increasedcomplexity of the programme… may lead some groups toseek exempti<strong>on</strong>s or b<strong>on</strong>us allowances… [I]nterest groups will fightbitterly for a share of annual rents. This fight will lead to direct costsduring the design of the policy. Groups will invest in lawyers, governmentlobbying, <strong>and</strong> public relati<strong>on</strong>s campaigns. Government officialswill spend enormous amounts of time preparing <strong>and</strong> analysingopti<strong>on</strong>s <strong>and</strong> in negotiati<strong>on</strong>s. This will lead to high administrativecosts <strong>and</strong> probably c<strong>on</strong>siderable delays in implementati<strong>on</strong>. 38Governments eager to placate industry are almost sure to give out toomany emissi<strong>on</strong>s rights. This in turn will make future cuts even moredifficult, while increasing pressures to reduce emissi<strong>on</strong>s in sectors thathave not been awarded rights (for example, domestic households, thetransport sector <strong>and</strong> the state).But hang <strong>on</strong> a minute. Regulators can be infl uenced into h<strong>and</strong>ing out resourcesto big companies even without envir<strong>on</strong>mental trading schemes. You can’t pinthat problem <strong>on</strong> emissi<strong>on</strong>s markets.
82 development dialogue september 2006 – carb<strong>on</strong> tradingNo, of course not. Under any kind of regulati<strong>on</strong>, regulators can be‘captured’ by those they are regulating. 40 But emissi<strong>on</strong>s trading addsnew complicati<strong>on</strong>s. In extreme cases, governments under heavy corporatepressure to h<strong>and</strong> out large numbers of emissi<strong>on</strong>s permits maywind up creating too little scarcity even to make a market possible.Of course, some governments may be able to resist more short- sightedtypes of business pressure <strong>and</strong>, bit by bit, cut the amount of propertyrights granted to the private sector. But questi<strong>on</strong>s about equalitywill remain, since whatever rights are left will still be in the h<strong>and</strong>sof business <strong>and</strong> will now be worth even more in m<strong>on</strong>etary terms. AsMassachusetts Institute of Technology ec<strong>on</strong>omist <strong>and</strong> cap-<strong>and</strong>-tradeenthusiast A. Danny Ellerman admits, ‘there is likely to be agreement<strong>on</strong> the creati<strong>on</strong> of the scarcity <strong>on</strong>ly as there is agreement <strong>on</strong> the allocati<strong>on</strong>of the rents thereby created’. 41Already, envir<strong>on</strong>mentalists are facing a battle to stop governments fromgiving out too many property rights much like the battles they’ve facedto organise movements for stricter c<strong>on</strong>venti<strong>on</strong>al regulati<strong>on</strong>. Emissi<strong>on</strong>smarkets are no less ‘political’ a form of climate acti<strong>on</strong> than any other.It sounds like you’re suggesting that governments setting up emissi<strong>on</strong>s tradingschemes are caught in a diffi cult bind. Any desire they might have to reduceemissi<strong>on</strong>s in line with scientifi c knowledge <strong>and</strong> the public interest pulls tradingsystems <strong>on</strong>e way – toward giving regulators a free h<strong>and</strong> to modify allowances.Governments’ need to reassure traders that they will not be expropriated unfairlypulls another way – towards protecting allowances against governmentmodifi cati<strong>on</strong> <strong>and</strong> making them as much like full title as possible.Yes. As legal scholar David M. Driesen of Syracuse University’s Schoolof Law puts it, there is a ‘tradeoff ’ between the ‘need to protect thepublic properly from envir<strong>on</strong>mental harms that may grow over time’<strong>and</strong> ‘stability to encourage cost-decreasing trades’. 46How do governments h<strong>and</strong>le this dilemma?With difficulty. Take the US Clean Air Act Amendments of 1990,which launched the sulphur dioxide trading programme. In orderto keep from having to pay legal penalties to corporati<strong>on</strong>s for makingthem reduce their emissi<strong>on</strong>s, the government had to find a wayaround the so-called ‘takings clause’ of the Fifth Amendment of theUS C<strong>on</strong>stituti<strong>on</strong>, which prohibits ‘private property’ from being ‘takenfor public use, without just compensati<strong>on</strong>’.Yet to deny that emissi<strong>on</strong>s permits were property, as the law specified,worried members of C<strong>on</strong>gress c<strong>on</strong>cerned to defend corporate privilegein a working market. A stable market, they said, depended <strong>on</strong> trust that
less<strong>on</strong>s unlearned 83‘Temporary’ Property Rights that Become PermanentIn many circumstances, governmentgrantedopen-ended ‘temporary’ propertyrights become permanent in all butname. In countries around the world, ‘temporary’commercial mining <strong>and</strong> loggingc<strong>on</strong>cessi<strong>on</strong>s, leases <strong>and</strong> licenses – valid <strong>on</strong>paper for, say, 20, 30, 40 years or more –have frequently in effect resulted in h<strong>and</strong>ingover public or community l<strong>and</strong>s to theprivate sector for good. 42 In Indo nesia, forinstance, wealthy interests have often held<strong>on</strong> to their vast timber leaseholds by c<strong>on</strong>vertingthem to plantati<strong>on</strong> crops or exploitingtheir minerals, often using oldlogging roads <strong>and</strong> dispossessing hundredsof thous<strong>and</strong>s of local residents who havelittle access to the judicial system.The US example of grazing permits offersanother illustrati<strong>on</strong> of how distributi<strong>on</strong> ofpermits that the government nominallyretains ‘c<strong>on</strong>trol’ over can in effect privatisea resource.Under the Taylor Grazing Act of 1934,grazing permits were given to those whowere already the biggest users of rangel<strong>and</strong>– just as today’s Kyoto Protocol <strong>and</strong> EUETS allowances are given to those who arethe biggest users of the atmospheric carb<strong>on</strong>dump. Like today’s polluti<strong>on</strong> allowances,too, grazing permits could be both limited<strong>and</strong> revoked. And like today’s polluti<strong>on</strong> allowances,they were explicitly claimed notto amount to ‘rights, title, interest or estatein or to l<strong>and</strong>s’. They were not protectedagainst being taken away by governmentwithout compensati<strong>on</strong>. C<strong>on</strong>gressviewed them as mere privileges, not rights,<strong>and</strong> wanted the Department of the Interiorto regulate the rangel<strong>and</strong>s by adjusting thenumber of permits periodically.Yet in the end, the permits ‘essentially privatisedthe public ranges’. What they createdwas ‘an odd species of property’, ‘lessthan a right but more than a mere revocableprivilege’. 43 Ranchers’ political cloutmeant that the Bureau of L<strong>and</strong> Management‘acquiesced in the creati<strong>on</strong> of de factoprivate rights in the public rangel<strong>and</strong>swhile neglecting to improve range c<strong>on</strong>diti<strong>on</strong>’.44 Rather than hastening, tightening,streamlining <strong>and</strong> ec<strong>on</strong>omising <strong>on</strong> envir<strong>on</strong>mentalprotecti<strong>on</strong>, the permits merelyresulted in a different dynamic betweenregulators <strong>and</strong> regulated, 45 in which thoseto be regulated gained some new <strong>and</strong> differentpowers.the government would not interfere with ‘the property interest’, whichmust be allowed to have recourse to the courts. 47 The Envir<strong>on</strong>mentalProtecti<strong>on</strong> Agency’s power to ‘terminate or limit authorisati<strong>on</strong>’ of anallowance undermined ‘the very c<strong>on</strong>cept of allowance trading’ 48 <strong>and</strong>would make investment in excess allowances too risky.
84 development dialogue september 2006 – carb<strong>on</strong> tradingWhat did the US lawmakers do about this c<strong>on</strong>tradicti<strong>on</strong>?They wished it away. On the <strong>on</strong>e h<strong>and</strong>, they dutifully specified in theClean Air Act Amendments that an emissi<strong>on</strong>s allowance ‘does notc<strong>on</strong>stitute a property right’ <strong>and</strong> can be ‘terminated’ or ‘limited’ bythe government without compensati<strong>on</strong> being due. 49Yet at the same time, they went out of their way to reassure pol luters<strong>and</strong> utility investors that they ‘should expect that allowances will partakeof durable ec<strong>on</strong>omic value <strong>and</strong> that commercial <strong>and</strong> other relevantlaw will apply to allowances <strong>and</strong> functi<strong>on</strong> to protect their value’. 50A senator inserted an explanati<strong>on</strong> into the record stating that allowanceswere commodities. 51 The Envir<strong>on</strong>mental Protecti<strong>on</strong> Agencyexpressed its ‘intenti<strong>on</strong> to treat emissi<strong>on</strong>s allowances as if they wereabsolute property rights, except in exigent circumstances’. 52As ec<strong>on</strong>omist A. Danny Ellerman <strong>and</strong> colleagues note,For [most] intents <strong>and</strong> purposes, the allowances are treated as [homogeneous<strong>and</strong> valuable] property rights. They are freely tradable,there are a variety of market mechanisms that mediate transacti<strong>on</strong>s,<strong>and</strong> the Envir<strong>on</strong>mental Protecti<strong>on</strong> Agency c<strong>on</strong>sciously allocatedallowances to eligible parties for years bey<strong>on</strong>d 2010 to providec<strong>on</strong>fidence that they would be treated essentially as propertyrights. All this will clearly make it difficult politically to alter allowanceallocati<strong>on</strong>s in the future. 53After all, as Ellerman <strong>and</strong> company explain, ‘whenever valuable propertyrights are created by legislati<strong>on</strong>, the associated allocati<strong>on</strong> decisi<strong>on</strong>sare likely to be highly politicised in much the same way as is taxlegislati<strong>on</strong> or appropriati<strong>on</strong>s bills.’ 54 In the US, C<strong>on</strong>gress used up mostof the time it spent debating the sulphur dioxide trading programmenot <strong>on</strong> discussing envir<strong>on</strong>mental targets but <strong>on</strong> ‘allocating valuableprivate property rights created under the scheme am<strong>on</strong>g clamouringinterest groups ... dividing up the pork’. 55 Once these ‘liquid, federally-createdintangible property right[s]’ 56 had been distributed, asec<strong>on</strong>omist Dallas Burtraw notes, they appeared in company accountsas gifts amounting to usd 2 billi<strong>on</strong> in zero-cost assets yearly.Companies were prevented from charging customers for somethingthey had received for free, but they were allowed to pass through tocustomers costs of reducing emissi<strong>on</strong>s <strong>and</strong> of any extra allowancesthey had to buy to comply with the law. And they were allowed tomake m<strong>on</strong>ey by selling them; as Burtraw observes, ‘if you discover oil<strong>on</strong> your property, you’re not going to give it away for free’. 57No surprise, then, that squabbles over allowances early <strong>on</strong> led to civillitigati<strong>on</strong> <strong>and</strong> other disputes. 58 At <strong>on</strong>e point, the Wisc<strong>on</strong>sin Public
less<strong>on</strong>s unlearned 85Utility Commissi<strong>on</strong> had to rule that profits from sales of allowancesshould go to ratepayers, not stockholders. 59 Sulphur dioxide levels inthe US actually increased by 4 per cent in 2003 as a result of the programme’sbanking mechanisms. 60Similarly for Los Angeles’s Regi<strong>on</strong>al Clean Air Incentives Market(RECLAIM). Emboldened by ec<strong>on</strong>omic theory <strong>and</strong> the Clean AirAct Amendments of 1990 authorising states <strong>and</strong> local air districts todevelop market incentive programs, Los Angeles industry successfullylobbied local government to replace existing <strong>and</strong> proposed airquality regulati<strong>on</strong>s with a trading programme.The South Coast Air Quality Management District (SCAQMD)allocated polluti<strong>on</strong> allowances to 370 big polluters including oil refineries,power plants, aerospace companies, asphalt batch plants,chemical plants <strong>and</strong> cement plants. In resp<strong>on</strong>se to industry pressure,the aggregate number of polluti<strong>on</strong> permits issued was generously setequal to the amount of total polluti<strong>on</strong> that would enter the air duringperiods of peak producti<strong>on</strong> <strong>and</strong> ec<strong>on</strong>omic boom, when emissi<strong>on</strong>swere highest. Over 40,000 t<strong>on</strong>nes more permits to pollute with nitrogenoxides (NO x ) <strong>and</strong> sulphur dioxide were allocated in the first yearthan there was actual polluti<strong>on</strong>.As a result, reducing the number of credits in circulati<strong>on</strong> at first didn’tactually reduce emissi<strong>on</strong>s. In the first three years of the programme,the ‘cap’ was tightened by 30 per cent, but actual industrial NO xemissi<strong>on</strong>s declined by at most 3 per cent, compared to a 13 per centdecline in the preceding three-year period. In 1999, ambient levelsof NO x actually increased, following a decade of c<strong>on</strong>secutive reducti<strong>on</strong>s.RECLAIM arguably wound up reducing polluti<strong>on</strong> moreslowly than previous regulati<strong>on</strong>s that assigned c<strong>on</strong>trol technologiesor emissi<strong>on</strong>s levels for particular firms would have d<strong>on</strong>e if they hadbeen c<strong>on</strong>tinued. For example, RECLAIM allocati<strong>on</strong>s for NO x weregreater in most years of the program than the comparable allocati<strong>on</strong>sfrom the 1991 Air Quality Management Plan that RECLAIM replaced.Dismantling the previous regulatory regime also took time,costing lives. 61Emissi<strong>on</strong>s trading has also slowed down reducti<strong>on</strong>s elsewhere. For example,the US required 23 years to eliminate leaded gasoline througha trading programme, a task that took China three <strong>and</strong> Japan 10,without trading. 62 Even in the short term, the US lead trading programmecan be said to have slowed the phase-out of lead in gasoline.Lead trading allowed refiners that banked purchased lead credits toc<strong>on</strong>tinue exceeding lead limits through 1987, whereas the previousregulati<strong>on</strong> had required refiners to meet the st<strong>and</strong>ard by 1986. 63
86 development dialogue september 2006 – carb<strong>on</strong> tradingOK, so maybe RECLAIM <strong>and</strong> other schemes may have slowed down polluti<strong>on</strong>c<strong>on</strong>trol a bit <strong>and</strong> given away a lot of assets in the atmosphere to big privatecompanies. But didn’t they work in the end?They worked in the sense that they were part of a programme that reducedpolluti<strong>on</strong>. But c<strong>on</strong>tinuing <strong>and</strong> strengthening previous regulati<strong>on</strong>would have worked, too – <strong>and</strong> perhaps in a way that would havebeen less costly for society as a whole in the l<strong>on</strong>g term.For example, lead could have also been virtually eliminated from petrolthrough c<strong>on</strong>venti<strong>on</strong>al performance-st<strong>and</strong>ard regulati<strong>on</strong>. And itmight have been eliminated faster. The questi<strong>on</strong> is not <strong>on</strong>ly whetherpolluti<strong>on</strong> c<strong>on</strong>trol methods work, but how, how effectively, <strong>and</strong> forwhose advantage.History repeats itselfAnd you’re suggesting that a history of problems with property rights in USpolluti<strong>on</strong> markets is being repeated with greenhouse gas emissi<strong>on</strong>s tradingschemes?Unfortunately, yes. Following in the footsteps of the US, parties tothe UNFCCC have tried to paper over the dilemma that pits envir<strong>on</strong>mentaleffectiveness against the market’s need for secure propertyrights. While wanting to give away rights to the global carb<strong>on</strong> sink,many signatories to the Kyoto Protocol are worried about being heldliable for the resulting damages.All al<strong>on</strong>g, too, the UNFCCC has had to fend off objecti<strong>on</strong>s Southerngovernments <strong>and</strong> critical envir<strong>on</strong>mentalists have made to the giveawayof atmospheric assets to big polluters. One example was India’sbelated, quixotic 1999 dem<strong>and</strong> for assurances that the Kyoto Protocol‘has not created any asset, goods or commodity for exchange’. 64 Someare also c<strong>on</strong>cerned that governments’ gifts of allowances to businessmay amount to subsidies acti<strong>on</strong>able under the World Trade Organisati<strong>on</strong>.65Governments know, in other words, that admitting openly thatthey’re giving billi<strong>on</strong>s of dollars in assets to the worst greenhouse gaspolluters could be both legal <strong>and</strong> political pois<strong>on</strong>. That’s why, in the2001 Marrakech Accords, the parties to the UNFCCC were drivento stipulate that the ‘Kyoto Protocol has not created or bestowed anyright, title or entitlement to emissi<strong>on</strong>s of any kind <strong>on</strong> Parties includedin Annex I.’ 66But – just as in the US – the pretence is hard to maintain. OutsideUN meeting halls, nearly every instituti<strong>on</strong> involved in carb<strong>on</strong>
less<strong>on</strong>s unlearned 87trading, including the World Bank <strong>and</strong> the EU, acknowledges thatboth the EU Emissi<strong>on</strong>s Trading Scheme <strong>and</strong> various programmescreated by the parties to the UNFCCC under the Kyoto Protocolhave in fact created rights <strong>and</strong> assets worth billi<strong>on</strong>s of dollars. 67 Price-WaterhouseCoopers, in an analysis of the tax implicati<strong>on</strong>s of the EUETS, has observed that ‘trade in CO 2 [carb<strong>on</strong> dioxide] emissi<strong>on</strong>s isequated with the transfer of similar rights such as copyrights, patents,licensing rights <strong>and</strong> commercial <strong>and</strong> industrial trademarks’. 68 In 2005,a Dutch banker involved in carb<strong>on</strong> trading noted his satisfacti<strong>on</strong> thatEuropean Uni<strong>on</strong> emissi<strong>on</strong>s allowances had become ‘real property’ inthat governments had to compensate corporati<strong>on</strong>s in case of default.Both the EU ETS <strong>and</strong> various trading-related instituti<strong>on</strong>s brought intobeing by the Kyoto Protocol are therefore arguably in breach of theMarrakech Accords, although no court case has yet been brought.So carb<strong>on</strong> dioxide emissi<strong>on</strong>s trading schemes are putting more <strong>and</strong> more rights– <strong>and</strong> more <strong>and</strong> more power over climate – in private polluters’ h<strong>and</strong>s.‘The allocati<strong>on</strong> of marketable polluti<strong>on</strong> permits c<strong>on</strong>stitutes a form oflimited privatisati<strong>on</strong>’, Indiana University law professor Daniel Coleobserves, ‘as the government c<strong>on</strong>veys to private parties limited entitlementsto use the public’s atmosphere.’ 69The politics is playing out exactly as it did in US polluti<strong>on</strong> tradingschemes. The Kyoto Protocol’s effectiveness, for instance, has l<strong>on</strong>gbeen acknowledged to have been undermined by the granting oflarge amounts of excess allowances to countries like Russia for politicalreas<strong>on</strong>s. 137 Giving huge amounts of rights to industrialised countriesas a whole has meanwhile entrenched their expectati<strong>on</strong>s for furtherprivileges – expectati<strong>on</strong>s that Southern countries are bound toupset if they ever agree to similar emissi<strong>on</strong>s limitati<strong>on</strong>s under a tradingscheme. 70The EU Emissi<strong>on</strong>s Trading Scheme is plagued by similar problems.In April 2006, it became clear that corporate participants in the EUETS had been granted around 10 per cent more allowances than theyneeded to cover their 2005 emissi<strong>on</strong>s. That translated to between44 <strong>and</strong> 150 milli<strong>on</strong> t<strong>on</strong>nes of surplus carb<strong>on</strong> permits, 71 or, at €13 pert<strong>on</strong>ne, up to ‘€1.8bn of free m<strong>on</strong>ey’. 72In the UK, when envir<strong>on</strong>ment secretary Margaret Beckett publishedher draft EU ETS allocati<strong>on</strong>s for British industry in May 2004, theyadded up to a total of 736 milli<strong>on</strong> t<strong>on</strong>nes of carb<strong>on</strong> dioxide for the nextthree years. The plan called for no emissi<strong>on</strong>s cuts whatsoever: industryhad w<strong>on</strong> tradable rights to emit yearly at least as much carb<strong>on</strong> dioxideas it had annually emitted de facto between 1998 <strong>and</strong> 2003.
88 development dialogue september 2006 – carb<strong>on</strong> tradingEven so, ‘intense lobbying by industry followed, apparently supportedby industry minister Patricia Hewitt, <strong>and</strong> in October 2004, the expectedbusiness-as-usual emissi<strong>on</strong>s were substantially increased, <strong>and</strong>the permitted emissi<strong>on</strong>s raised to 756 milli<strong>on</strong> t<strong>on</strong>nes’. 73 This led to aprol<strong>on</strong>ged legal row with the European Uni<strong>on</strong> which ended <strong>on</strong>ly inMay 2006 with a British defeat.In 2004, <strong>on</strong>ly a minority of companies believed that the EU ETSwould result in any reducti<strong>on</strong> in emissi<strong>on</strong>s at all. 74 By 2005, climateec<strong>on</strong>omist Michael Grubb was warning that the huge numberof allowances being d<strong>on</strong>ated to industry would render them almostworthless, destroying any incentive for cleaning up. 75 By April 2006,Grubb’s predicti<strong>on</strong> looked to have some chance of coming true. Assurplus emissi<strong>on</strong>s rights flooded the market, prices crashed 60 percent within a week, from a high of around €30 per t<strong>on</strong>ne of carb<strong>on</strong>dioxide to €11. Traders began to express the fear that the emissi<strong>on</strong>sprice would drop to zero <strong>and</strong> that the first phase of the market ‘woulddie.’ 76 A European Commissi<strong>on</strong> representative refused to comment<strong>on</strong> whether member governments had ‘allowed companies to wilfullyoverstate historical emissi<strong>on</strong>s when they were compiling their… nati<strong>on</strong>alallocati<strong>on</strong> plans, in order to receive more free allowances.’ 77‘The obvious thing to say now’, observed <strong>on</strong>e market analyst in May2006, ‘is that the caps must be corrected in the sec<strong>on</strong>d phase, but whathas happened recently makes us realise that if regulators are off withtheir estimates, prices will be either very high or very low. I am notsure that something with such an inherently unstable price is an incentivefor people to invest. It is a fundamental fl aw in the scheme.’ 78With so many allowances being given out, even factors such as thefluctuati<strong>on</strong>s in fossil fuel use associated with yearly variati<strong>on</strong>s inweather are now playing havoc with dem<strong>and</strong>, putting future prices indoubt. And prices may well stay volatile, especially since no Europeangovernment wants to be the first to reduce radically the number of allowancesgranted to industry. All the signs are that EU governmentsare going to be pressured into h<strong>and</strong>ing out too many allow ances inthe sec<strong>on</strong>d phase of the scheme, just as they did in the first. 79
less<strong>on</strong>s unlearned 89Table 2. Quasi-Privatisati<strong>on</strong> of the Existing Global Carb<strong>on</strong> Dump by the UKNati<strong>on</strong>al Yearly Allocati<strong>on</strong> under the EU Emissi<strong>on</strong>s Trading Scheme, 2005Industrial Sector(UK Only)Annual Gift ofEmissi<strong>on</strong>s Rights(Milli<strong>on</strong> T<strong>on</strong>nesof CO 2 )Increase/Decreasefrom ActualAverageEmissi<strong>on</strong>s1998–2003Fracti<strong>on</strong> of‘Available’World AbovegroundCarb<strong>on</strong>Dump aApprox.AnnualValue at€16/t<strong>on</strong>neof CO 2b<strong>Power</strong> Generators 145.3 -6% 1.5-3.0% €2.325bIr<strong>on</strong> <strong>and</strong> Steel 23.3 +16% 0.2-0.5% 373mRefineries 19.8 +11% 0.2-0.4% 317mOffshore Oil <strong>and</strong> Gas 19.1 +14% 0.2-0.4% 306mCement 10.7 +18% 0.1-0.2% 171mChemicals 10.1 +12% 0.1-0.2% 162mPulp <strong>and</strong> Paper 4.7 +18% 0.0-0.1% 75mFood <strong>and</strong> Drink 3.9 +26% 0.0-0.1% 62mOther Industries 15.1 +16% 0.2-0.3% 242mTotal 252.0 +2% 2.6-5.1% €4.032baFigures in this column are not based <strong>on</strong> any attempt to estimate the earth’s capacity torecycle transfers of fossil carb<strong>on</strong> with no remainder, which, even if initial assumpti<strong>on</strong>scould be agreed <strong>on</strong>, would probably be impossible in technical terms. Rather, they take asa point of reference the Intergovernmental Panel <strong>on</strong> <strong>Climate</strong> <strong>Change</strong> finding that anthropogenicCO 2 emissi<strong>on</strong>s from fossil fuel combusti<strong>on</strong> <strong>and</strong> flaring must be reduced by 60–80per cent from current levels of 24,533 milli<strong>on</strong> metric t<strong>on</strong>nes/year to achieve eventual stabilizati<strong>on</strong>of CO 2 levels at twice Industrial Revoluti<strong>on</strong> levels.bApproximate price in early June 2006. For every t<strong>on</strong>ne of uncompensated-for CO 2 emittedabove the limit, companies face a fine of €40, rising to €100 from 2008 <strong>on</strong>wards. Columnsmay not add up due to rounding.Sources: UK Department of Envir<strong>on</strong>ment, Food <strong>and</strong> Rural Affairs, Carb<strong>on</strong> Market News.But if emissi<strong>on</strong>s caps are ever tightened, companies will need either to makereducti<strong>on</strong>s or to pay up, w<strong>on</strong>’t they? And surely eventually it is the biggest polluterswho will lose out at that point, no?Yes, many corporati<strong>on</strong>s are so<strong>on</strong>er or later probably going to have togive something up. But emissi<strong>on</strong>s trading encourages them to treatglobal warming not as a social <strong>and</strong> envir<strong>on</strong>mental problem to besolved but as a business <strong>and</strong> public relati<strong>on</strong>s problem to be kept out ofordinary people’s h<strong>and</strong>s <strong>and</strong> to be managed at the least possible relativefinancial <strong>and</strong> market loss to themselves. And it gives them themeans to make sure caps are not tightened very much or very swiftly.Far-sighted companies treat the carb<strong>on</strong> trading as an opportunity togain new property rights, assets <strong>and</strong> openings for capital accumulati<strong>on</strong>,even if climate change is accelerated in the process.
90 development dialogue september 2006 – carb<strong>on</strong> tradingBut isn’t it the South <strong>and</strong> other parties currently not included in emissi<strong>on</strong>strading schemes that will reap more benefi ts, fi nancially speaking, as l<strong>on</strong>g asthey d<strong>on</strong>’t have to pay for allowances?As of now, the biggest polluters are granted the maximum possibleadvantages relative to smaller polluters. It is they who hold rightsto the global carb<strong>on</strong> dump – not renewable energy system manufacturers,not n<strong>on</strong>-polluting firms, not communities, not trusts, notcampaigners who have prevented hydrocarb<strong>on</strong> development in theirregi<strong>on</strong>s, not socially-resp<strong>on</strong>sible actors who have kept their societies<strong>on</strong> existing low-carb<strong>on</strong> paths, not (in Europe) the state sector, <strong>and</strong> notordinary members of the public, North or South.If emissi<strong>on</strong>s caps are tightened, moreover, when will they be tightened,<strong>and</strong> by how much? Politicians like to say that ‘market approaches’like emissi<strong>on</strong>s trading will prevent the pain of other kinds of regulati<strong>on</strong>.But if there isn’t enough political pressure to reduce emissi<strong>on</strong>sin the first place, the result will be merely a gaming of the system <strong>and</strong>c<strong>on</strong>tinual over-allocati<strong>on</strong> of polluti<strong>on</strong> rights. Carb<strong>on</strong> trading doesnot offer a way around the tough political decisi<strong>on</strong>s.But surely some day the necessary political movement will come into being.And surely it will some day become more costly to emit carb<strong>on</strong> dioxide. Andwhen it does, renewable energy companies will win out, because dem<strong>and</strong> fortheir products will rise.It’s going to be a tough slog for renewable energy companies in themeantime, as l<strong>on</strong>g as they are deprived not <strong>on</strong>ly of the large subsidies<strong>and</strong> research <strong>and</strong> development m<strong>on</strong>ey that c<strong>on</strong>tinue to go into ‘sunset’fossil fuel <strong>and</strong> nuclear technologies, but also of any assets h<strong>and</strong>edout under emissi<strong>on</strong>s trading schemes. 80Well, all right. But I still can’t get my head around the idea that the KyotoProtocol <strong>and</strong> the EU ETS are simply ‘polluter earns’ programmes. After all,it’s not as if European utilities, oil companies <strong>and</strong> steel manufacturers are justbeing h<strong>and</strong>ed free cash to do whatever they want with. They have to use theirallowances to cover their emissi<strong>on</strong>s, no? They’re not making any m<strong>on</strong>ey outof them.Well, it’s funny you should menti<strong>on</strong> that, because, actually, manyof them are. As Garth Edwards of Shell explains, the ‘opportunitycost of allowances is incorporated into the power price in countrieswith liberalised energy markets... . The largely free allocati<strong>on</strong> of allowancesmeans that power generators receive a windfall profit sincetheir compliance costs are far less than their revenue increase’ 81 fromincreased c<strong>on</strong>sumer prices.
less<strong>on</strong>s unlearned 91While most assets given to companies under the EUETS do go towardcovering emissi<strong>on</strong>s, their sheer volume guarantees new profitmakingopportunities as well. Costs of buying extra polluti<strong>on</strong> permitsare being passed <strong>on</strong> to c<strong>on</strong>sumers without any incentives for systemicchange being created, generating new profits for utilities <strong>and</strong>other corporati<strong>on</strong>s. Let’s look at the facts:• The big six UK electricity generators are getting around usd 1.2billi<strong>on</strong> per year in windfall profits from the EU ETS – even morethan the GBP 500 milli<strong>on</strong> per year the UK Parliament’s Envir<strong>on</strong>mentalAudit Committee had earlier estimated. 82 N<strong>on</strong>e ofthis ‘valuable income <strong>on</strong> their balance sheets’ 83 need be spent <strong>on</strong>a structural transiti<strong>on</strong> away from fossil fuels. 84 ‘A combinati<strong>on</strong> offree allocati<strong>on</strong> to power stati<strong>on</strong>s <strong>and</strong> full pass-through of marginalcosts to c<strong>on</strong>sumers has led to a massive increase in the electricityindustry’s profitability,’ c<strong>on</strong>sultants IPA Energy noted recently.• In the UK, oil companies BP, Esso <strong>and</strong> Shell have made milli<strong>on</strong>sof pounds by selling off surplus free EU ETS allowances, whileNati<strong>on</strong>al Health Service hospitals have had to pay tens of thous<strong>and</strong>sof pounds to buy extra allowances. 85• In Germany, where power prices rose from €30 to €47 per megawatt-hourfrom 2005 to 2006, heavily-polluting power companiesare being accused of profiteering off carb<strong>on</strong> trading. Major utilityRWE is al<strong>on</strong>e said to have made €1.8 billi<strong>on</strong> in windfall profits in<strong>on</strong>e year by adding the current market value of the EU allowancesit had received for free to its customers’ bills. 86• In Belgium, France <strong>and</strong> the Netherl<strong>and</strong>s, some 40 to 70 per cent ofthe cost of freely-allocated EU ETS allowances is passed throughto large <strong>and</strong> small c<strong>on</strong>sumers. C<strong>on</strong>trary to the stated objective ofemissi<strong>on</strong>s trading, the system is stimulating investments in carb<strong>on</strong>dioxide-intensive power plants, according to the Energy ResearchCentre of the Netherl<strong>and</strong>s. 87• In the Czech Republic, the electricity giant CEZ received <strong>on</strong>ethirdof the 97.6 milli<strong>on</strong> metric t<strong>on</strong>nes of carb<strong>on</strong> dioxide emissi<strong>on</strong>allowances issued to the country. (Only around 90 milli<strong>on</strong> t<strong>on</strong>nesof carb<strong>on</strong> dioxide were produced yearly in the country before2005.) This will enable the company to make as much as usd 187milli<strong>on</strong> from trading in carb<strong>on</strong> credits between 2005 <strong>and</strong> 2007, accordingto an analyst at Atlantik Financní trhy. After having madeprofits off carb<strong>on</strong> allowance sales in 2005 when prices were high,the company is looking to buy them back now that prices havedropped. As a result, ‘we’ve also launched more coal producti<strong>on</strong>,’said Chief Executive Officer Martin Roman. 88
92 development dialogue september 2006 – carb<strong>on</strong> trading• According to UBS Investment Research, the first phase of the EUETS ‘has probably c<strong>on</strong>tributed to €10–20/megawatt-hour higherpower prices with a very significant redistributi<strong>on</strong> of value fromc<strong>on</strong>sumers to producers <strong>and</strong> between companies.’ In May 2006,Est<strong>on</strong>ian Energy declared a €74 milli<strong>on</strong> pre-tax profit from net salesof emissi<strong>on</strong>s rights in 2005, more than a third of its total profits.Based <strong>on</strong> the company’s own envir<strong>on</strong>mental reporting, <strong>on</strong>ly €6–9milli<strong>on</strong> can be explained by ‘real emissi<strong>on</strong>s reducti<strong>on</strong>s’. 89• In the very first publicised spot trade of EU allowances in February2005, Danish power utility Energi E2 was able to sell a blockof rights it had been granted free by its government to Shell simplybecause a spell of mild temperatures had happened to keep theutility’s carb<strong>on</strong> emissi<strong>on</strong>s slightly below expected levels. 90 The followingyear, Norway’s Fortum Corporati<strong>on</strong> bagged usd 25 milli<strong>on</strong>from selling carb<strong>on</strong> dioxide allowances due to the fact that thereservoirs behind its hydropower dams happened to be excepti<strong>on</strong>allyfull in 2005. 91• In Australia, New South Wales taxpayers are being charged milli<strong>on</strong>sof dollars by a state government trading scheme that ‘aims tocut greenhouse gases but has d<strong>on</strong>e little other than provide windfallgains for some of Australia’s dirtiest power stati<strong>on</strong>s’. 92N<strong>on</strong>e of this should have been a surprise. Under Los Angeles’sRECLAIM polluti<strong>on</strong> trading scheme as well, high prices of nitrogenoxides (NO x ) credits c<strong>on</strong>tributed to large increases in wholesaleelectricity prices. 93 Liberalised energy markets made the US sulphurdioxide programme vulnerable to a similar problem. Looking furtherback, members of the Organisati<strong>on</strong> of Petroleum Exporting Countriesgarnered windfall profits by limiting carb<strong>on</strong> extracti<strong>on</strong> in the1970s.But d<strong>on</strong>’t power utilities have to buy at least a few permits in order to c<strong>on</strong>tinuebusiness as usual?Often they do – particularly utilities dependent <strong>on</strong> coal. But, as IPAEnergy c<strong>on</strong>sultants found in a detailed report d<strong>on</strong>e for the UK government,large utilities are being allowed to ‘over-recover carb<strong>on</strong> costs’by charging customers for the extra emissi<strong>on</strong>s permits that would beneeded if their ‘baseline’ generating capacity were carb<strong>on</strong>-intensivecoal plants rather than the less polluting mixture of technologies theyactually use. (Coal’s ratio of carb<strong>on</strong> c<strong>on</strong>tent to heat producti<strong>on</strong> in kilogrammesof carb<strong>on</strong> dioxide to milli<strong>on</strong> British Thermal Units is 94, asopposed to oil’s 78 <strong>and</strong> natural gas’s 53. Producti<strong>on</strong> of carb<strong>on</strong> dioxideper megawatt-hour is 698–975 kilogrammes for coal, 470–820 for oil,
less<strong>on</strong>s unlearned 93<strong>and</strong> 290–545 for gas, depending <strong>on</strong> the technology used.) 94 Last yearthe carb<strong>on</strong> price added about GBP 3.50 per megawatt-hour to wholesaleelectricity prices in the UK. To halt this gravy train for pollutingpower companies, their allocati<strong>on</strong>s of allowances would have to becut by two-thirds, IPA c<strong>on</strong>cludes. 95At present, the EU ETS is unlikely to do anything for the climateother than affect the timing of the transiti<strong>on</strong> to more gas generati<strong>on</strong>capacity. (Gas-fired power is less carb<strong>on</strong>-intensive than coal, althoughstill a ‘sunset’ industry, since it too will have to be phased outso<strong>on</strong>.) By 2015, IPA suggests, ‘the UK’s electricity system will lookremarkably similar regardless of assumpti<strong>on</strong>s <strong>on</strong> how the EU ETSplays out’. 96In fact, the EU ETS is rendering even the switch to gas doubtful. Uncertaintyabout how many allowances will be available in the future– resulting, again, from EU governments’ policy of leaving decisi<strong>on</strong>s<strong>on</strong> allocati<strong>on</strong>s largely to a process of corporate rent-seeking – combinedwith current high gas prices, is causing utilities to delay investmentin gas rather than coal. And if the government doesn’t give outeven more free rights to the global carb<strong>on</strong> dump to new entrants inthe industry, then investment in new plant will be further deferred,raising emissi<strong>on</strong>s even more.All in all, the EU ETS is likely to have helped delay reducti<strong>on</strong>s inannual UK power sector emissi<strong>on</strong>s to anything below 120 milli<strong>on</strong>t<strong>on</strong>nes of carb<strong>on</strong> dioxide for 15 years, just as the RECLAIM <strong>and</strong> leadtrading schemes slowed polluti<strong>on</strong> c<strong>on</strong>trol in the US.It may be slowing acti<strong>on</strong> <strong>on</strong> climate change in other sectors as well.In all member states except The Netherl<strong>and</strong>s, governments withdrawcompanies’ polluti<strong>on</strong> permits if they close dirty plants. This createsan incentive to keep such installati<strong>on</strong>s open. Yet c<strong>on</strong>tinuing to grantsuch companies polluti<strong>on</strong> rights after they close such plants wouldhardly make their competitors happy. 97 The large cement firm Holcimcomplains that large emitters are not being given incentives toinvest in more efficient installati<strong>on</strong>s. 98 Dutch nitric acid plant operatorshave meanwhile made it known that they want to delay makingcuts in their nitrous oxide emissi<strong>on</strong>s in order to be in a better positi<strong>on</strong>to gain from the EU ETS from 2008. 99The practical outcome of the EU ETS is so clearly the opposite ofwhat was advertised that even financial analysts state baldly that the‘competitive advantages’ bestowed by h<strong>and</strong>outs of assets under theEU Emissi<strong>on</strong>s Trading System simply ‘cannot be justified from a climatepolicy point of view.’ 100 As Citigroup Smith Barney <strong>and</strong> otheranalysts predicted as early as 2003, 101 governments are beginning to
94 development dialogue september 2006 – carb<strong>on</strong> tradinghave to think about stepping in to prevent the EU ETS from h<strong>and</strong>ingout enormous windfalls to the worst polluters. Even the investmentbank UBS Warburg – not normally noted for its envir<strong>on</strong>mentalist enthusiasms– has questi<strong>on</strong>ed the wisdom of providing a multi- billi<strong>on</strong>dollarwindfall to EU energy utilities, asking ‘whatever happened tothe principle of “polluter pays”?’ 102 In May 2006, T<strong>on</strong>y Ward, energydirector at Ernst <strong>and</strong> Young, stated fl atly that the EU ETS ‘has notencouraged meaningful investment in carb<strong>on</strong>-reducing technologies’.103Unfortunately, this is <strong>on</strong>ly the beginning of the c<strong>on</strong>tradicti<strong>on</strong>s thatresult from the attempt to traffic in property rights to carb<strong>on</strong> dumps.Uh-oh. What else is there?A questi<strong>on</strong> of quantificati<strong>on</strong>One of the most difficult problems is measurement. Property rightsrequire quantificati<strong>on</strong>. L<strong>and</strong> titles require that territory be demarcated,mapped <strong>and</strong> surveyed. Fishing quotas require that catches bem<strong>on</strong>itored <strong>and</strong> populati<strong>on</strong>s checked. Broadcast spectrum rights presupposethe ability to quantify frequencies, <strong>and</strong> permits to dump hazardouschemicals w<strong>on</strong>’t work unless the authorities are strict aboutamounts.That’s why, as Yale University property specialist Carol Rose pointsout, it is <strong>on</strong>ly recent ‘[g]overnmental advances in measurement,record-keeping, <strong>and</strong> legal enforcement’ that have made possible the‘dramatic turn in the “propertisati<strong>on</strong>” of what might seem to be “unownable”diffuse resources or res communes in the tangible world’.And it is this ‘propertisati<strong>on</strong>’ that has enabled the rise of tradable polluti<strong>on</strong>permit systems. 104For instance, the US sulphur dioxide trading scheme <strong>on</strong> which theKyoto Protocol is based, as Daniel Cole of Indiana University haspointed out, would never have been possible before particular bits ofhigh-tech measuring equipment called c<strong>on</strong>tinuous emissi<strong>on</strong>s m<strong>on</strong>itoringsystems came into existence in the 1980s <strong>and</strong> 1990s.The problem is that the fad for tradable permit systems has now faroutstripped measurement ability, at least as far as greenhouse gases go.The level of quantificati<strong>on</strong> technology that made the sulphur dioxideprogramme in the US possible isn’t available for greenhouse gases.Here again, the US model should have provided more discouragementthan encouragement to the project to frame a market-orientedKyoto Protocol.
less<strong>on</strong>s unlearned 95What do you mean?If the US can offer any model at all for polluti<strong>on</strong> c<strong>on</strong>trol schemes relevantto global warming, it should not be the 1990 Act which launchedthe sulphur dioxide trading programme, but rather the original USClean Air Act of 1970.Although the theory of tradable permits had been formulated by thelate 1960s, the US’s pi<strong>on</strong>eer 1970 Act had no provisi<strong>on</strong>s for polluti<strong>on</strong>trading. And it was a good thing that it didn’t, at least with respect tosulphur dioxide. In 1970, there would have been no way of making asulphur dioxide market work, because at the time there was no way ofmeasuring how much sulphur dioxide each firm was releasing at anyparticular time. As <strong>on</strong>e specialist noted, ‘emissi<strong>on</strong> measurement technologyis presently inadequate to meet the requirement that a regulatoryagency be able to determine with some precisi<strong>on</strong> just how muchan individual polluter is c<strong>on</strong>tributing to the atmospheric burden’. 105In 1970, there were <strong>on</strong>ly 86 ambient sulphur dioxide m<strong>on</strong>itors in theentire US, <strong>and</strong> those were <strong>on</strong>ly crudely accurate. 106 M<strong>on</strong>itoring at thepoint of emissi<strong>on</strong> was in an even more primitive state.But that means there would have been no way of either verifying independentlywhat each fi rm’s original emissi<strong>on</strong>s level was or m<strong>on</strong>itoring emissi<strong>on</strong>safterwards to fi nd out how much they were exceeding or falling short of theirquotas.Exactly. And even if firms had been allocated quotas, they wouldhave had no means of finding out whether their emissi<strong>on</strong>s were inline with them, nor any incentive to do so. So there would have beenno point in allocating different amounts of atmospheric ‘dump space’to each firm to put its sulphur dioxide emissi<strong>on</strong>s in.Still less would there have been any ability or incentive <strong>on</strong> the partof firms buying quotas to verify what they were buying. As DavidDriesen notes,Polluters purchasing emissi<strong>on</strong>s allowances have no interest in thequality of the goods. Buyers of blue jeans care about whether theywear out; buyers of polluti<strong>on</strong> reducti<strong>on</strong> credits <strong>on</strong>ly care aboutwhether regulators will accept them in lieu of local compliance. 107In short, debits, credits <strong>and</strong> trading would have been impossible at thetime – as would have been taxes.How did the 1970 law reduce emissi<strong>on</strong>s, then?The 1970 Act worked <strong>on</strong>ly because it took a different, directly regulatoryapproach. Instead of trying to m<strong>on</strong>itor each firm’s emissi<strong>on</strong>s,
96 development dialogue september 2006 – carb<strong>on</strong> tradingit insisted that each firm install technology of a certain st<strong>and</strong>ard. Asl<strong>on</strong>g as each firm did so, the government could be assured that someemissi<strong>on</strong>s reducti<strong>on</strong>s were being made, even if it could not preciselymeasure them, because officials could easily visit each installati<strong>on</strong> <strong>and</strong>see whether the right technology was in place. In the early 1970s, forinstance, the Los Angeles County Air Polluti<strong>on</strong> C<strong>on</strong>trol District managedto inspect the technology at every major source <strong>on</strong>ce a m<strong>on</strong>th, ata time when it would not have been possible for it to m<strong>on</strong>itor pointsourceemissi<strong>on</strong>s for all regulated pollutants at finite cost. 108Polluti<strong>on</strong> trading theorists might assume that this approach was necessarilyless efficient in achieving the Act’s goals than trading wouldhave been. But, in c<strong>on</strong>text, it was more efficient, given the state of polluti<strong>on</strong>measurement at the time. 109 Trying to trade would have been,in effect, infinitely costly, due to the lack of the necessary measurementtechnology. 110 With technology-based regulati<strong>on</strong>, <strong>on</strong> the otherh<strong>and</strong>, the technology itself was the m<strong>on</strong>itoring device. As Michael T.Mal<strong>on</strong>ey <strong>and</strong> Bruce Y<strong>and</strong>le explain, ‘If the approved technique wasin place, <strong>and</strong> working order documented, emissi<strong>on</strong> c<strong>on</strong>trol was beingaccomplished.’ 111 Similarly, the Corporate Average Fuel Ec<strong>on</strong>omyregulati<strong>on</strong> enacted by the US C<strong>on</strong>gress in 1975, which doubled autoefficiency, did not prove either ‘costly, inefficient or unsafe’. 112This points up a general less<strong>on</strong> summarised by Daniel Cole: ‘[The]comparative efficiency of alternative envir<strong>on</strong>mental instruments cannotbe determined in isolati<strong>on</strong> from the instituti<strong>on</strong>al <strong>and</strong> technologicalcircumstances in which they operate.’ 113 Trading systems are‘quantificati<strong>on</strong>-heavy’. They can’t reduce the costs of achieving anemissi<strong>on</strong>s reducti<strong>on</strong> goal except in the presence of an extensive, far-Oil extracti<strong>on</strong>in the US.
less<strong>on</strong>s unlearned 97reaching, uniform <strong>and</strong> accurate system of measurement <strong>and</strong> m<strong>on</strong>itoring.Although, as Marc Roberts observes, ‘[w]hen ec<strong>on</strong>omists discusssuch matters as emissi<strong>on</strong>s trading they sometimes talk as if m<strong>on</strong>itoringdevices were widely available to cheaply <strong>and</strong> reliably record theamount of all polluti<strong>on</strong> emissi<strong>on</strong>s’, 114 such devices can’t be taken forgranted. If they are not available, giving polluters polluti<strong>on</strong> quotasmakes little sense.So this is <strong>on</strong>e of those cases in which emissi<strong>on</strong>s trading would have been inefficient, not effi cient.Yes. Although measurement technologies improved (there were sixtimes as many ambient c<strong>on</strong>centrati<strong>on</strong> m<strong>on</strong>itors in 1977 as in 1970, <strong>and</strong>they were more reliable), they weren’t good enough or cheap enoughto support an efficient trading system (or taxes) until much later. Thefirst c<strong>on</strong>tinuous emissi<strong>on</strong>s m<strong>on</strong>itoring systems (CEMs) became available<strong>on</strong>ly in 1975, <strong>and</strong> it was <strong>on</strong>ly the succeeding two decades of furthertechnological development that made sulphur dioxide tradingpossible in the 1990s. Today, CEMs used by major SO 2 sources arecapable of collecting data every fifteen minutes, <strong>and</strong> real-time datafrom every plant are sent via computer to Envir<strong>on</strong>mental Protecti<strong>on</strong>Agency headquarters in Washingt<strong>on</strong>. 115 The whole process is fullyauto mated, minimising opportunities for cheating. On-site inspecti<strong>on</strong>sare also made periodically. 116In sum, the sulphur dioxide market was less a matter of C<strong>on</strong>gresssuddenly grasping the ec<strong>on</strong>omic theory of tradeable permits than ofa change in the technological <strong>and</strong> instituti<strong>on</strong>al c<strong>on</strong>diti<strong>on</strong>s that madea market possible. 117With respect to measurement of producti<strong>on</strong> <strong>and</strong> absorpti<strong>on</strong> of carb<strong>on</strong>dioxide <strong>and</strong> other greenhouse gases, the United Nati<strong>on</strong>s today isin a positi<strong>on</strong> similar to that the US was in 1970 with sulphur dioxide– <strong>on</strong>ly worse.Like Marc Roberts’s naïve ec<strong>on</strong>omic theorists, the framers of theKyoto Protocol ‘simply presumed that a trading system would providea lower cost mechanism than traditi<strong>on</strong>al comm<strong>and</strong> <strong>and</strong> c<strong>on</strong>trolfor meeting the Protocol’s goal’ 118 without looking carefully atwhether the c<strong>on</strong>diti<strong>on</strong>s for such a market – <strong>and</strong> thus for such savings –existed. As quickly became clear, the measurement systems requiredfor the Kyoto market were simply not there.In fact, the prospects of a quantificati<strong>on</strong> system robust enough to supportproperty rights in a market are even less promising for the KyotoProtocol than they were for a sulphur dioxide trading system in theUS in 1970.
98 development dialogue september 2006 – carb<strong>on</strong> tradingWhy?With respect to trading in emissi<strong>on</strong>s themselves, the problem is deficientdirect polluti<strong>on</strong> measurement <strong>and</strong> m<strong>on</strong>itoring systems. Manycountries – <strong>and</strong> not just Southern countries – lack the technical <strong>and</strong>instituti<strong>on</strong>al capability to quantify <strong>and</strong> m<strong>on</strong>itor industrial greenhousegas emissi<strong>on</strong>s precisely <strong>and</strong> regularly. Uncertainties about the quantityof greenhouse gases being emitted by nati<strong>on</strong>al energy systems ‘are inthe range of plus or minus 10–30 per cent,’ according to <strong>on</strong>e survey. 119Another survey puts uncertainties about overall greenhouse gas emissi<strong>on</strong>sin selected industrialised countries between 4 to 21 per cent. 120Either figure is inadequate for the purpose of detecting the small reducti<strong>on</strong>signal needed to dem<strong>on</strong>strate compliance with Kyoto. IPCCcountry inventory guidelines calculate that uncertainties come to 10per cent for electricity generati<strong>on</strong>, 10 per cent for industrial processesincluding cement <strong>and</strong> fertiliser producti<strong>on</strong> <strong>and</strong> 60 per cent for l<strong>and</strong>usechange <strong>and</strong> forestry. For methane, the figures are even higher:100 per cent for biomass burning, 60 per cent for oil <strong>and</strong> natural gasactivities, 60 per cent for coal-mining <strong>and</strong> h<strong>and</strong>ling, <strong>and</strong> greater than60 per cent for rice cultivati<strong>on</strong>, waste, animals <strong>and</strong> animal waste. Fornitrogen dioxide, they are 50 per cent for industrial processes, 100 percent for biomass burning, <strong>and</strong> two orders of magnitude for agriculturalsoils. 121 In 2004, <strong>on</strong>e author foresaw a ten-year delay prior to theestablishment of adequate biotic carb<strong>on</strong> nati<strong>on</strong>al m<strong>on</strong>itoring systemsin industrialised countries such as the US. 122In additi<strong>on</strong>, in most countries, data <strong>on</strong> industrial emissi<strong>on</strong>s is providedby polluting companies themselves, not by an impartial authority,often calling the figures into questi<strong>on</strong>. In Los Angeles’s RECLAIMscheme, companies’ widespread use of emissi<strong>on</strong> factors developed bythe Western States Petroleum Associati<strong>on</strong> instead of measurements ofactual emissi<strong>on</strong>s allowed margins of error in reporting ranging from50–100 per cent. Oil companies underreported their tanker emissi<strong>on</strong>sby factors between 10 <strong>and</strong> 1000 123 – <strong>on</strong>e of several problems with theprogramme discovered <strong>on</strong>ly through a time-c<strong>on</strong>suming investigati<strong>on</strong>by an NGO, Communities for a Better Envir<strong>on</strong>ment. 124 In March2002, Anne Scholtz, architect of RECLAIM <strong>and</strong> Chief ExecutiveOfficer of the emissi<strong>on</strong>s broker ACE, was issued citati<strong>on</strong>s for filingfalse trading reports. 125In Engl<strong>and</strong> <strong>and</strong> Wales, the Integrated Polluti<strong>on</strong> Preventi<strong>on</strong> <strong>and</strong> C<strong>on</strong>trolSystem that m<strong>on</strong>itors <strong>and</strong> c<strong>on</strong>trols industrial emissi<strong>on</strong>s relies heavily<strong>on</strong> emitters taking samples of their emissi<strong>on</strong>s <strong>and</strong> reporting the resultsto the British Envir<strong>on</strong>ment Agency. A report from the Agencysuggested that 40 per cent of sites did not have satisfactory m<strong>on</strong>itoringprocedures in place. Yet from 2001 to 2005, the level of independent
less<strong>on</strong>s unlearned 99m<strong>on</strong>itoring of industrial sites’ emissi<strong>on</strong>s dropped by three- quarters. 126California’s Envir<strong>on</strong>mental Protecti<strong>on</strong> Agency noted in late 2005,meanwhile, that the state simply did not yet have the ‘accurate inventoryof greenhouse gas emissi<strong>on</strong>s’ required for a cap-<strong>and</strong>-tradeprogramme. 127 BP, for its part, has acknowledged an uncertainty of30–40 per cent in the 1990 baseline it uses in determining whether ithas reached the 10 per cent reducti<strong>on</strong> target of its in-house emissi<strong>on</strong>strading programme, <strong>and</strong> the margin of uncertainty of its operati<strong>on</strong>s’current emissi<strong>on</strong>s, it admits, is still 5 per cent. 128Trading expert Ruth Greenspan Bell of the Washingt<strong>on</strong> think tankResources for the Future observes that ‘many highly industrialisedcountries such as China, Russia, <strong>and</strong> many of the other countries ofthe former Soviet Bloc do not have adequate m<strong>on</strong>itoring equipmentto detect what pollutants, <strong>and</strong> in what amounts, particular factories<strong>and</strong> power plants are releasing into the atmosphere. They have weakenvir<strong>on</strong>mental enforcement systems <strong>and</strong> cannot really say whetherparticular plants comply with envir<strong>on</strong>mental requirements.’ 129 Southerncountries, Greenspan Bell says, are ‘not the right places to inserttheories that have <strong>on</strong>ly been tested in models <strong>and</strong> in the minds of thepeople who thought of them, where c<strong>on</strong>founding facts <strong>and</strong> poor c<strong>on</strong>diti<strong>on</strong>scan be assumed away.’ 130Also, there are more carb<strong>on</strong> dioxide sources to watch over than there ever weresulphur dioxide sources, aren’t there?A lot more. 131 So many more, in fact, that <strong>on</strong>e businessman with successfulexperience in brokering US sulphur dioxide trading allotments,John Henry, Chief Executive Officer of <strong>Power</strong> Navigator inWashingt<strong>on</strong>, DC, is c<strong>on</strong>cerned that internati<strong>on</strong>al carb<strong>on</strong> trading –given the lack of ability to m<strong>on</strong>itor so many source points <strong>and</strong> theabsence of a nati<strong>on</strong>al regulatory enforcement mechanism – will ‘givethe mechanism of emissi<strong>on</strong>s trading a bad name.’ 132 In the US al<strong>on</strong>e,hundreds of thous<strong>and</strong>s of industrial sources would have to be m<strong>on</strong>itoredin a comprehensive carb<strong>on</strong> trading system, compared to a fewthous<strong>and</strong> in the sulphur dioxide programme. 133‘This is not a problem that will be solved like acid rain,’ agrees PhilClapp of the US Nati<strong>on</strong>al Envir<strong>on</strong>mental Trust. ‘Acid rain dealt witha specific number of facilities in <strong>on</strong>e industry that was already regulated…Globalwarming is not an issue that will be resolved by thepassage of <strong>on</strong>e statute. This is nothing short of the beginning of aneffort to transform the world energy ec<strong>on</strong>omy.’ 134Technicians’ ability to measure releases from the milli<strong>on</strong>s of bioticsources scattered over the surface of the planet is also c<strong>on</strong>stantly being
100 development dialogue september 2006 – carb<strong>on</strong> tradingcalled into questi<strong>on</strong>. One recent example of many is the unexpecteddiscovery in 2005 that the carb<strong>on</strong> c<strong>on</strong>tent of British soils has beendropping steeply since 1978. Annual releases, scientists were surprisedto find, were higher than the entire reducti<strong>on</strong> in greenhousegas emissi<strong>on</strong>s the UK has achieved between 1990 <strong>and</strong> 2002 as part ofits commitment to the Kyoto Protocol – some 12.7 milli<strong>on</strong> t<strong>on</strong>nesannually. 135And it’s not <strong>on</strong>ly carb<strong>on</strong> dioxide that needs to be measured, is it?No, <strong>and</strong> that makes measurement even harder for schemes that haveto measure half a dozen greenhouse gases at <strong>on</strong>ce. Each gas affectsthe climate in different ways, to different degrees, for different timeperiods. Although scientists try to aggregate all the gases into <strong>on</strong>eomnibus category of ‘carb<strong>on</strong> dioxide equivalent’, their n<strong>on</strong>comparabilityis widely acknowledged. The lack of an adequate measurementsystem can <strong>on</strong>ly exacerbate the opportunities for cheating thatare already inherent in emissi<strong>on</strong>s trading systems, where both buyers<strong>and</strong> sellers have str<strong>on</strong>g incentives to c<strong>on</strong>ceal whether reducti<strong>on</strong>s haveactually been made.Some of these problems might be avoided with an ‘upstream’ ratherthan a ‘downstream’ system of m<strong>on</strong>itoring – that is, <strong>on</strong>e that measuredthe amounts of fossil fuels coming out of the ground rather thanthe amounts being burned. 136 And measurement technology is boundto improve over time. But there is ‘no reas<strong>on</strong> to expect that countrieswill reduce their greenhouse gas emissi<strong>on</strong>s to comply with quotasthat cannot be effectively m<strong>on</strong>itored <strong>and</strong> enforced’. 137That seems a decisive objecti<strong>on</strong> to greenhouse gas emissi<strong>on</strong>s trading of any kind.But if specialists in the IPCC <strong>and</strong> elsewhere knew about this, why didn’t themessage get across in the UN <strong>and</strong> the EU? And how could the US be so cynicalas to cite its own permit trading systems as models for the Kyoto Protocol?These are important questi<strong>on</strong>s, <strong>and</strong> <strong>on</strong>es that should perhaps be subjectsof a special inquiry. The answers aren’t completely clear, althoughthe phrase ‘wishful thinking’ comes to mind, al<strong>on</strong>g with lesscharitable expressi<strong>on</strong>s. As in every aspect of carb<strong>on</strong> trading, the tailof free-market ideology is wagging the dog of science, political comm<strong>on</strong>sense, <strong>and</strong> technical possibility.Still, isn’t it true that if we could put the necessary measuring instruments<strong>and</strong> bureaucracies in place, emissi<strong>on</strong>s trading could help reduce greenhouse gasemissi<strong>on</strong>s more effi ciently? Isn’t the US sulphur dioxide programme regarded ashaving saved m<strong>on</strong>ey <strong>and</strong> been more effi cient than c<strong>on</strong>venti<strong>on</strong>al regulati<strong>on</strong>?
less<strong>on</strong>s unlearned 101Yes. But that brings up a difficulty best dealt with in the next secti<strong>on</strong>– the meaning <strong>and</strong> value of ‘efficiency’ when set against the need for effectivestrategies to reduce <strong>and</strong> ultimately halt the use of fossil fuels.Emissi<strong>on</strong>s trading vs.structural changeCarb<strong>on</strong> trading is often said to be a ‘more efficient’ way of reachingenvir<strong>on</strong>mental goals. The trouble with terms like ‘more efficient’,though, is that they’re vague. Efficient in what? And for whom?Well, effi cient in providing good things for all of us, no?That’s the theory. But you have to go through a lot of steps to getthere, <strong>and</strong> each of those steps can be challenged.For example, in the US sulphur dioxide case, most experts say withsome c<strong>on</strong>fidence that trading saved the energy sector m<strong>on</strong>ey, or oughtto have d<strong>on</strong>e. To reformulate the example from the last chapter, autility in North Carolina might use coal with a pound of sulphur ineach t<strong>on</strong>ne, <strong>and</strong> <strong>on</strong>e in Indiana coal with three times that amount. Soa scrubber installed at the Indiana plant would remove a lot more sulphurper dollar invested than the same scrubber in North Carolina. Itmight cost the North Carolina company usd 300 to collect a t<strong>on</strong> ofsulphur, but the Indiana generator <strong>on</strong>ly usd 100. As a result, the Indianaoperati<strong>on</strong> could sell its North Carolina counterpart allowancesat usd 200 per t<strong>on</strong>ne, making usd 100 for itself <strong>and</strong> at the same timesaving its sister plant usd 100. In this way, US sulphur dioxide trading,together with emissi<strong>on</strong>s banking, is widely held to have halvedthe cost of keeping emissi<strong>on</strong>s down to the target 9 milli<strong>on</strong> t<strong>on</strong>nelevel, 138 a saving of many billi<strong>on</strong>s of dollars for the firms involved.In reality, it’s unlikely that trading <strong>and</strong> banking al<strong>on</strong>e made this saving.Emissi<strong>on</strong>s were already falling during the decade before the programmebegan. Twenty per cent of the emissi<strong>on</strong>s reducti<strong>on</strong>s often said to be dueto the trading scheme were in fact achieved between 1980 <strong>and</strong> 1990,before it began, 139 <strong>and</strong> were due to such factors as increased availabilityof low sulphur coal <strong>and</strong> a shift of populati<strong>on</strong> toward areas in which itwas easily available. In additi<strong>on</strong>, a number of experts argue that it wasfactors such as the ability to take advantage of fuel-switching technologies,the fortuitous drop in prices of low sulphur coal in many areassince 1985 due to lower rail shipping costs, <strong>and</strong> the similarly fortuitous
102 development dialogue september 2006 – carb<strong>on</strong> tradingeliminati<strong>on</strong> of a legal requirement for redundant scrubbers, that werethe main source of subsequent cost reducti<strong>on</strong>s. 140In the late 1980s, too, officials <strong>and</strong> experts had often overestimated thecost of cutting future emissi<strong>on</strong>s, which made a lot of what happenedafterwards seem like a ‘saving’ even if it wasn’t. The American Electric<strong>Power</strong> Company assumed in 1981 that scrubbers would cost usd 500per t<strong>on</strong>ne of sulphur dioxide removed. The Tennessee Valley Authoritythought usd 155 was closer to the mark; the department of energyusd 153–273, the Office of Technology Assessment usd 116–313. Mostestimates didn’t anticipate the historical accident of cheaper coal fromthe Powder River area. 141 As ec<strong>on</strong>omist Dallas Burtraw points out, thisprice reducti<strong>on</strong>, together with fuel switching cost reducti<strong>on</strong>s <strong>and</strong> othersuch factors that ‘have caused marginal abatement costs to fall wouldalso have lowered the costs of achieving the SO 2 emissi<strong>on</strong>s cap via someform of comm<strong>and</strong> <strong>and</strong> c<strong>on</strong>trol policies’. 142Once the trading scheme got under way, in additi<strong>on</strong>, a lot of installati<strong>on</strong>smanaged to cut emissi<strong>on</strong>s without trading at all. Most of thosewho did trade traded <strong>on</strong>ly within their own firm. Inter-firm tradingamounted to <strong>on</strong>ly two per cent of total emissi<strong>on</strong>s. 143But no <strong>on</strong>e denies that emissi<strong>on</strong>s trading did save the private sector at leastsome m<strong>on</strong>ey, right?No, that’s fairly unc<strong>on</strong>troversial. The questi<strong>on</strong> is what the impacts were<strong>on</strong> others – <strong>and</strong> <strong>on</strong> society <strong>and</strong> its envir<strong>on</strong>ment in the l<strong>on</strong>g term.What do you mean? Surely if the programme saved energy producers m<strong>on</strong>ey,then everybody who used electricity benefi ted. Society as a whole was enabledto produce goods more effi ciently, no?It’s not so simple. Sure, such schemes save specific companies m<strong>on</strong>ey.And in doing so they are supposed to maximise what the gr<strong>and</strong>fatherof emissi<strong>on</strong>s trading, R<strong>on</strong>ald Coase, called ‘total product’ (readGDP), <strong>and</strong> thereby benefit society as a whole (see Chapter 2).But they do so <strong>on</strong>ly by lumping together emissi<strong>on</strong>s with other ec<strong>on</strong>omicgoods. For a Coasean ec<strong>on</strong>omist, the ability of the earth tokeep temperatures within liveable limits has to find a market valuejust like wheat or silver. It must be translated into an ‘abstract’, calculable,alienable form that can live what globalisati<strong>on</strong> guru Hern<strong>and</strong>ode Soto pictures as an ‘invisible, parallel life’ 144 al<strong>on</strong>gside its physicalexistence.Thus creating ‘efficiencies’ in emissi<strong>on</strong>s reducti<strong>on</strong>s, like creatingmost other ‘efficiencies’, is a political process of morphing apples <strong>and</strong>
less<strong>on</strong>s unlearned 103oranges into a single new fruit. In the case of carb<strong>on</strong> dumps, this becomespossible <strong>on</strong>ly by misreading the radical uncertainties, scales<strong>and</strong> irreversibilities c<strong>on</strong>nected with the climate system <strong>and</strong> c<strong>on</strong>fusingsurvival with ec<strong>on</strong>omic benefit (see Chapter 1). As a result, it’sgoing to be harder to make sense of using greenhouse gas emissi<strong>on</strong>strading to create ‘efficiencies’ in abating climate change, even underideal c<strong>on</strong>diti<strong>on</strong>s, than it was to make sense of using sulphur dioxidetrading to create ‘efficiencies’ in attaining a given numerical emissi<strong>on</strong>starget.Emissi<strong>on</strong>s trading becomes ‘efficient’ in additi<strong>on</strong>, <strong>on</strong>ly by commensuratingemissi<strong>on</strong>s at <strong>on</strong>e place or time with emissi<strong>on</strong>s at anotherplace or time, shifting emissi<strong>on</strong>s cuts around over a wide area <strong>and</strong> extendedtime period so that they can be made wherever <strong>and</strong> wheneverthey are cheapest. It makes <strong>on</strong>e place equivalent to another place <strong>and</strong><strong>on</strong>e time equivalent to another time.So? What’s the problem? That’s a virtue, isn’t it? The earth’s carb<strong>on</strong> dumpstraddles all political <strong>and</strong> geographical borders. The atmosphere is c<strong>on</strong>stantlymixing <strong>on</strong> a global scale. Whether you cut emissi<strong>on</strong>s in Tomsk or Toledo, theatmospheric results are the same. Assuming we can perform the measurements,emissi<strong>on</strong>s trading is <strong>on</strong>e way of recognising this reality. The climate doesn’t carewhere we make our cuts, as l<strong>on</strong>g as we make them.No, actually, that’s wr<strong>on</strong>g. It does matter to the climate where cutsare made.What are you talking about? A <strong>on</strong>e-t<strong>on</strong>ne CO 2 cut in Tomsk has the sameclimatic eff ect as a <strong>on</strong>e-t<strong>on</strong>ne CO 2 cut in Toledo. A t<strong>on</strong>ne is a t<strong>on</strong>ne is a t<strong>on</strong>ne.That’s just basic science, isn’t it?Of course. But widen your visi<strong>on</strong> a bit. Doing what is necessary to cut<strong>on</strong>e t<strong>on</strong>ne in Tomsk tomorrow may result in different future emissi<strong>on</strong>sthan doing what is necessary to cut <strong>on</strong>e t<strong>on</strong>ne in Toledo tomorrow.The cut made in Tomsk may be the result of a radical new renewableenergy technology or way of organising social life that will lead tovastly multiplied future cuts, whereas the equal cut made in Toledomay be a routine efficiency improvement that should have been madel<strong>on</strong>g ago <strong>and</strong> leads to nothing else. Where – <strong>and</strong> when – cuts aremade is likely to have knock-<strong>on</strong> effects. How cuts are made now willhave an influence <strong>on</strong> how much can be cut in the future.Precisely because it treats all <strong>on</strong>e-t<strong>on</strong>ne cuts as the same no matterwhere <strong>and</strong> how they occur, <strong>and</strong> results in the cheapest cuts beingmade first, emissi<strong>on</strong>s trading runs the risk of delaying progressin dealing with global warming. Instead of encouraging the type of
104 development dialogue september 2006 – carb<strong>on</strong> tradingNot All Emissi<strong>on</strong>s are the SameIf not all cuts in carb<strong>on</strong> dioxide emissi<strong>on</strong>sare technologically the same (see maintext), neither are they the same pol itically.Sunita Narain <strong>and</strong> the late Anil Agarwalof India’s Centre for Science <strong>and</strong> Envir<strong>on</strong>mentare famous for the distincti<strong>on</strong> theymade in the early 1990s between ‘survivalemissi<strong>on</strong>s’ – what people emit to subsist –<strong>and</strong> ‘luxury emissi<strong>on</strong>s’.Centre for Science<strong>and</strong> Envir<strong>on</strong>mentTrading away a society’s ‘survival CO 2 ’– if that ever became possible in a carb<strong>on</strong>market – would be politically differentfrom trading away its ‘luxury CO 2 ’, evenif, t<strong>on</strong>ne for t<strong>on</strong>ne, the carb<strong>on</strong> market assignedboth the same price. And that differencewould have climatic effects if ittranslated into political c<strong>on</strong>fl ict <strong>and</strong> thefailure of official programmes for tacklingglobal warming.The distincti<strong>on</strong> is analogous to that between‘survival water’ <strong>and</strong> ‘luxury water’.One reas<strong>on</strong> water privatisati<strong>on</strong> has failedin countries such as Bolivia, Tanzania, theUS <strong>and</strong> the Philippines is that the watermarket, in aggregating all water across differentlocati<strong>on</strong>s <strong>and</strong> c<strong>on</strong>texts, makes nodistincti<strong>on</strong> between the two. When thewater ordinary people need to pursue adignified <strong>and</strong> healthy life is priced out oftheir reach, they resist.A privatisati<strong>on</strong> of the world’s carb<strong>on</strong>cyclingcapacity that set survival emissi<strong>on</strong>sequivalent to luxury emissi<strong>on</strong>s would havethe same shortcoming.innovati<strong>on</strong>s, l<strong>on</strong>g-term investments <strong>and</strong> broad restructuring that arecrucial to speeding the transiti<strong>on</strong> to a society that doesn’t use fossilfuels, it discourages them in favour of scattered stopgap measures thatmay ultimately be very costly. ‘Optimising comp<strong>on</strong>ents in isolati<strong>on</strong>’,in the words of energy experts Amory Lovins <strong>and</strong> colleagues, ‘tendsto pessimise the whole system – <strong>and</strong> hence the bottom line’. 145This is another case in which what is typically called ‘efficiency’ isnot eff ective.Emissi<strong>on</strong>s trading <strong>and</strong> innovati<strong>on</strong>That doesn’t make any sense to me at all. What you’re saying seems to goagainst what ec<strong>on</strong>omics teaches us: that markets give people incentives to inventuseful things so they can make m<strong>on</strong>ey.Say what you like about the problems of emissi<strong>on</strong>s trading, the great achievementof projects like the Kyoto Protocol <strong>and</strong> the EU Emissi<strong>on</strong>s Trading Schemeis that they have given carb<strong>on</strong> a price. Maybe the measurements can’t be made
less<strong>on</strong>s unlearned 105yet, maybe no <strong>on</strong>e agrees yet <strong>on</strong> who owns the rights, maybe big polluters arestill being rewarded, maybe the price isn’t high enough yet, maybe there areall sorts of other problems. But at least having a price is better than havingno price, isn’t it? Emissi<strong>on</strong>s trading promises to make it impossible for a lot ofpeople to release greenhouse gases for free, or use the world’s carb<strong>on</strong> dump asif it had no value.Having to pay a price gives industry a new incentive to clean up <strong>and</strong> stop usingso much fossil fuel. The more allowances that industry has to pay for, the moreit will need to shift toward more effi cient, renewable <strong>and</strong> low-carb<strong>on</strong> technologies,which will direct more capital toward green energy suppliers <strong>and</strong> creativetechnology development. The result, as the EC says, is to promote ‘global innovati<strong>on</strong>to combat climate change’. 146Markets in polluti<strong>on</strong> allowances also spurs innovati<strong>on</strong> by providing polluterswith incentives to compete to do even better than they are required to do bylaw. Sure, c<strong>on</strong>venti<strong>on</strong>al regulati<strong>on</strong> can force the private sector to improve technology.But trading encourages even more change, since companies can makem<strong>on</strong>ey by ‘overshooting’ the minimum requirement <strong>and</strong> selling the resultingcredits to fi rms less willing or able to reduce emissi<strong>on</strong>s or banking them for theirown future use. 147 How can emissi<strong>on</strong>s trading be slowing down acti<strong>on</strong> <strong>on</strong> globalwarming?There are all sorts of problems with this argument. But let’s start withthe idea that giving carb<strong>on</strong> a price is a royal road to structural changein energy use.You’re right that prices can provide incentives for change. In fact,there are plenty of ways that, under better regulatory systems, pricescould lead to more efficient uses of energy without carb<strong>on</strong> tradingschemes. This is particularly true in highly energy-wasteful countriessuch as the US. Indeed, according to many analysts, even after acentury of entrenchment of carb<strong>on</strong>-intensive technologies in the US,n<strong>on</strong>-carb<strong>on</strong> or reduced-carb<strong>on</strong> energy generally lowers costs ratherthan raising them, for corporati<strong>on</strong>s, c<strong>on</strong>sumers <strong>and</strong> countries alike. 148Similarly, according to the Intergovernmental Panel <strong>on</strong> <strong>Climate</strong><strong>Change</strong>’s (IPCC’s) c<strong>on</strong>servative Working Group III, using known<strong>and</strong> currently available technologies could reduce global greenhouseemissi<strong>on</strong>s below year 2000 levels by 2010 at zero net costs, with atleast half of this achievable at a profit. 149But the questi<strong>on</strong> here is whether emissi<strong>on</strong>s trading schemes, particularlyas they are currently designed, add any incentives for theparticular kinds of change most needed to combat global warming.Are they, as many governments, businesses <strong>and</strong> large envir<strong>on</strong>mentalNGOs claim, the ‘best opti<strong>on</strong> for the world to make a transiti<strong>on</strong> to alow-carb<strong>on</strong> ec<strong>on</strong>omy’? 150
106 development dialogue september 2006 – carb<strong>on</strong> tradingOne problem is that while emissi<strong>on</strong>s trading provides financial incentivesfor some polluters to seek ways of reducing emissi<strong>on</strong>s, it simultaneouslyprovides financial incentives for other polluters not toreduce emissi<strong>on</strong>s. That is, it gives incentives to industries that canmake polluti<strong>on</strong>-reducing technological changes cheaply <strong>and</strong> easily tomake the most of their advantage, but also gives incentives to industriesthat find it harder <strong>and</strong> more expensive to make such changesto cut emissi<strong>on</strong>s less than they would have to do under c<strong>on</strong>venti<strong>on</strong>alregulati<strong>on</strong>. 151The overall effect is to discriminate against costlier types of innovati<strong>on</strong>.What’s more, rati<strong>on</strong>al sellers will not bother to generate creditsunless they cost less to produce than prospective buyers have to layout in polluti<strong>on</strong> c<strong>on</strong>trol, <strong>and</strong> are also competitive with credits producedby other sellers. 152 Emissi<strong>on</strong>s trading provides ‘equal measureof under-compliance <strong>and</strong> over-compliance incentives, inducing lessinnovati<strong>on</strong> than a performance-based st<strong>and</strong>ard to which every<strong>on</strong>e hasan incentive to comply.’ 153But in most polluti<strong>on</strong> trading systems, the number of available permits is supposedto be gradually ratcheted down over time, isn’t it? As allowances becomescarcer <strong>and</strong> the price goes up, so do incentives for companies to reduce polluti<strong>on</strong>themselves rather than buy credits from others. So eventually there are incentivesto undertake more expensive or diffi cult types of technological change.That’s right. However, the number of allowances available is not reducedby trading, but by the ratcheted-down ‘cap’ imposed by thestate, sometimes through internati<strong>on</strong>al agreement. Whatever envir<strong>on</strong>mentalbenefits result depend in the end not <strong>on</strong> trading but <strong>on</strong>government acti<strong>on</strong>: how strict a cap the government imposes, howstrictly it ratchets it down, whether it is committed to c<strong>on</strong>tinue challengingindustry to make improvements, <strong>and</strong> so forth. The US sulphurdioxide trading scheme, for example, is ‘no more than a techniqueto increase the ec<strong>on</strong>omic efficiency of a classic comm<strong>and</strong>-<strong>and</strong>c<strong>on</strong>trolregulatory program’. 154‘Trading is nothing morethan a tool to reach anindependently established<strong>and</strong> enforced regulatoryobjective. Focusing <strong>on</strong>ly<strong>on</strong> the trade is like givingcredit for a good haircutto the scissors rather thanthe barber... [C]reditfor polluti<strong>on</strong> reducti<strong>on</strong>sproperly goes to the…cap, not the trade… Theprevailing wisdom is thatgreenhouse gas emissi<strong>on</strong>scan be c<strong>on</strong>trolled byinstituting an incentivesystem based <strong>on</strong> emissi<strong>on</strong>strading, rather thanfocusing <strong>on</strong> regulatorybasics. But this is a stepentirely in the wr<strong>on</strong>gdirecti<strong>on</strong>.’ 155Ruth Greenspan Bell,2006OK, so trading favours cheaper kinds of innovati<strong>on</strong>. What’s wr<strong>on</strong>g with that?Whether anything’s wr<strong>on</strong>g with it depends what kind of change youneed. What the climate crisis requires is the fastest, most radical cuts<strong>and</strong> the most sustainable <strong>and</strong> envir<strong>on</strong>mentally desirable results (seeChapter 1).But will the prospect of having to spend a lot of m<strong>on</strong>ey spur corporati<strong>on</strong>s to innovati<strong>on</strong>of a more relevant sort than the prospect of having to spend little?
less<strong>on</strong>s unlearned 107It’s hard to generalise, but the old saw ‘necessity is the mother of inventi<strong>on</strong>’suggests that it should. So does what ec<strong>on</strong>omists call the‘induced innovati<strong>on</strong> hypothesis’, according to which the lower costsassociated with polluti<strong>on</strong> trading schemes should result in less innovati<strong>on</strong>,not more.Many policymakers <strong>and</strong> businesses are aware of this. In 2005, theleaders of two dozen of the world’s most prominent corporati<strong>on</strong>s c<strong>on</strong>venedat a G8 <strong>Climate</strong> <strong>Change</strong> roundtable acknowledged openly thatemissi<strong>on</strong>s trading schemes are ‘less likely to stimulate major technologicalchange or breakthroughs’ than to promote mere ‘efficienciesin energy use or manufacturing processes’, <strong>and</strong> that other ‘public <strong>and</strong>private sector programmes’ were necessary to ‘stimulate the development<strong>and</strong> commercialisati<strong>on</strong> of new low carb<strong>on</strong> technologies’. 156What this means is that emissi<strong>on</strong>s trading may favour emissi<strong>on</strong>s reducti<strong>on</strong>sthat are lower-cost <strong>and</strong> more ‘efficient’ over a short time yetmilitate against approaches that are ‘efficient’ over a l<strong>on</strong>ger period.Could you give some examples?Suppose a company can reduce carb<strong>on</strong> dioxide emissi<strong>on</strong>s by installingan end-of-pipe technology that requires an initial outlay of usd100,000 <strong>and</strong> usd 1,000 a year in operati<strong>on</strong>al costs thereafter. But alsosuppose that for usd 200,000 the company could reengineer its wholeindustrial process in a way that cut back <strong>on</strong> its need for fossil fuels,generating a usd 1,000 in cost savings every year.The more expensive soluti<strong>on</strong> would be better for the climate. Overthe l<strong>on</strong>g term, it would also be more ‘efficient’. The cumulative costof the reengineering soluti<strong>on</strong> would decline over time, while that ofthe end-of-pipe soluti<strong>on</strong> would <strong>on</strong>ly increase. No matter how highthe discount rate was set, the reengineering soluti<strong>on</strong> would at somepoint begin to save the company m<strong>on</strong>ey.Yet it would be companies that chose the end-of-pipe soluti<strong>on</strong> thatwould benefit most from an emissi<strong>on</strong>s trading system. They couldsell allowances more cheaply during the first years of the market thancompanies that undertook reengineering. They would be the winnersof the short-term ‘efficiency’ sweepstakes. 171In a sense, a whole multitude of n<strong>on</strong>-carb<strong>on</strong> technologies, no matterhow expensive, will in the l<strong>on</strong>g term prove more ‘efficient’ thancarb<strong>on</strong>-intensive technologies – insofar as they help prevent a climatecatastrophe. Yet emissi<strong>on</strong>s trading cannot select for this ‘efficiency’over the c<strong>on</strong>venti<strong>on</strong>al efficiencies enabled by short-term tweaks thatmerely reinforce an entrenched fossil fuel-intensive technological
108 development dialogue september 2006 – carb<strong>on</strong> tradingEmissi<strong>on</strong>s Trading vs. Innovati<strong>on</strong>: A Less<strong>on</strong> Not Yet LearnedIn the US, polluti<strong>on</strong> trading schemes, withtheir bias toward cheaper reducti<strong>on</strong>s, havebeen unfriendly to more interesting, radical<strong>and</strong> sustainable types of technologicalchange that require l<strong>on</strong>g-term, broadrangingefforts.Even the better-designed US polluti<strong>on</strong>markets, while encouraging certain technologicaladjustments, have provided fewerincentives for fruitful innovati<strong>on</strong> than,say, performance st<strong>and</strong>ard programmes ofidentical stringency with no trading. Bylowering rather than raising the cost ofobeying polluti<strong>on</strong> laws, they have tendedto take advantage of differences am<strong>on</strong>gtechnologies that already exist for a particularpurpose more than to stimulate thedevelopment of new or more broadly effectivetechnologies. They improve currentstate-of-the-art technology ratherthan lead to a new state of the art.The US sulphur dioxide programme institutedin 1990, for instance, produced <strong>on</strong>ly<strong>on</strong>e or two main technological resp<strong>on</strong>ses.These involved old technologies. One wasscrubbers – a st<strong>and</strong>ard end-of-pipe approach.The program did produce some innovati<strong>on</strong>sin scrubber design. But so had previousregulati<strong>on</strong>, so these cannot be attributedto any special innovati<strong>on</strong>-producing powerof trading. 157 Another technological changewas the wider use of low-sulphur coal. Butin additi<strong>on</strong> to not being a real innovati<strong>on</strong>,this change probably came about as a resultof railroad deregulati<strong>on</strong>, not trading. 158The c<strong>on</strong>clusi<strong>on</strong>s of Margaret Taylor of theGoldman School of Public Policy at theUniversity of California, Berkeley <strong>and</strong> hercolleagues are unambiguous:‘... the weight of evidence of the his toryof innovati<strong>on</strong> in SO 2 c<strong>on</strong>trol technologydoes not support the superiority of the 1990Clean Air Act (CAA) – the world’s biggestnati<strong>on</strong>al experiment with emissi<strong>on</strong>s trading– as an inducement for envir<strong>on</strong>mental technologicalinnovati<strong>on</strong>, as compared with theeffects of traditi<strong>on</strong>al envir<strong>on</strong>mental policyapproaches… . In additi<strong>on</strong>, traditi<strong>on</strong>al envir<strong>on</strong>mentalpolicy instruments had supportedinnovati<strong>on</strong> in alternative technologies,such as dry flue-gas desulphurisati<strong>on</strong>(FGD) <strong>and</strong> sorbent injecti<strong>on</strong> systems, whichthe 1990 CAA provided a disincentive for, asthey were not as cost-effective in meetingits provisi<strong>on</strong>s as low-sulphur coal combinedwith limit ed wet FGD applicati<strong>on</strong>.’ 159There was some tweaking of operatingprocedures – for instance, plants might runtheir less-polluting units more frequentlythan their highly-polluting units in orderto generate saleable credits. 160 But therewere no radical innovati<strong>on</strong>s addressed at,say, supplanting coal-fired capacity or reducingdem<strong>and</strong> <strong>and</strong> no innovati<strong>on</strong> in technologiessuch as wind turbines, or c<strong>on</strong>servati<strong>on</strong>programmes that can reduce manydifferent pollutants simultaneously. Whatthe market encouraged, at most, wasshrewd use of existing technology to savem<strong>on</strong>ey to meet an isolated st<strong>and</strong>ard for <strong>on</strong>esubstance, not the opening of new envir<strong>on</strong>mentalhoriz<strong>on</strong>s for society. 161The fact that the US’s sulphur dioxide programmeovershot its modest target in 1995may seem to show that trading stimulatedinnovati<strong>on</strong>. In fact, what happened was thatcompanies wanted to ‘bank’ credits for futureuse in the next, more dem<strong>and</strong>ing phaseof the programme. 162 Little trading was in
less<strong>on</strong>s unlearned 109fact involved 163 <strong>and</strong> even less innovati<strong>on</strong>. Inadditi<strong>on</strong>, the overachievement was small inabsolute terms. The US programme is expectedto cut sulphur dioxide emissi<strong>on</strong>s by<strong>on</strong>ly about 35 per cent by its 20th anniversaryin 2010. In c<strong>on</strong>trast, Germany cut powerplant emissi<strong>on</strong>s by 90 per cent from the firstproposal in 1982 to completi<strong>on</strong> of its programmein 1998, without trading. 164Trading does not seem to have encouragedthe development of innovative technologiesunder the US’s less well-designed polluti<strong>on</strong>programmes, either. Southern California’sRECLAIM market, for instance, appears tohave sidelined the development of fuel cells,low-emitting burners <strong>and</strong> turbines, <strong>and</strong> soforth, whose development had previouslybeen subsidised by a percentage of car registrati<strong>on</strong>fees. At least <strong>on</strong>e innovative entrepreneurmaking low-NO x burners, Alzeta,probably lost rather than gained sales as aresult of the programme. 165 An emergingmethod of reducing NO x , SCONO x , wasalso thwarted. SCONO x is more expensivethan the dominant selective catalytic reducti<strong>on</strong>method, but arguably could have penetratedthe market if there had been stringentregulati<strong>on</strong> generating less ‘spatial flexibility’about where reducti<strong>on</strong>s were made.Innovati<strong>on</strong>s under the ‘bubbles’ of earlyUS polluti<strong>on</strong> trading programs also tendedmerely to be rearrangements of c<strong>on</strong>venti<strong>on</strong>altechnologies rather than the inventi<strong>on</strong>,development or commercialisati<strong>on</strong> ofthe n<strong>on</strong>-obvious technologies necessaryfor achieving a l<strong>on</strong>ger-term social or envir<strong>on</strong>mentalgoal. 166Similar less<strong>on</strong>s can be drawn from theinternal system of emissi<strong>on</strong>s trading institutedin 2000 by the Anglo-Americanoil firm BP Amoco, which committed itsbusiness units collectively to shaving 10per cent off their 1990s greenhouse gasemissi<strong>on</strong>s by 2010. (The emissi<strong>on</strong>s resultingfrom sales of the hydrocarb<strong>on</strong>sthe company extracted <strong>and</strong> refined werenot counted, although they of course arehundreds of times greater than the firm’sin-house releases.) 167BP Amoco’s trading system did help thecompany make the easy <strong>on</strong>e-third of thecuts required more cheaply. These cutswere mostly in obvious areas like processefficiencies – finding <strong>and</strong> shutting downspare turbine generators, minimisingdowntime by cleaning machinery withoutshutting it down, steam <strong>and</strong> power cogenerati<strong>on</strong>,<strong>and</strong> so forth.But in attempting to make the rest of thecuts, company divisi<strong>on</strong>s were able to avoidmore radical change simply by looking‘outside [BP’s] operati<strong>on</strong>s [to] see whatcan be d<strong>on</strong>e by working with others’ – forexample, by setting up cheap, low-tech,‘offsite carb<strong>on</strong> reducti<strong>on</strong>’ schemes like allegedlycarb<strong>on</strong> dioxide-absorbing treeplantati<strong>on</strong>s in distant locati<strong>on</strong>s. 168 By 2002,the company expected half of its so-called‘emissi<strong>on</strong>s reducti<strong>on</strong>s’ to come from creditsbought in from outside. 169 At no point wasthere any move toward genuinely innovativetechnology.
110 development dialogue september 2006 – carb<strong>on</strong> tradingregime. It fails to register the rising <strong>and</strong> ultimately overwhelming,but incalculable, costs of c<strong>on</strong>tinued reliance <strong>on</strong> fossil fuels to all enterprise<strong>and</strong> indeed most livelihoods (see Chapter 1). Emissi<strong>on</strong>s tradingmay coax a bit more out of the fossil ec<strong>on</strong>omy, but it is not going tohelp the world get past it.Why is that?Partly because of what is known as ‘lock-in’, or ‘path-dependence.’What’s ‘lock-in’?A simple example is the order of letters <strong>on</strong> an English-language computerkeyboard. From the upper left, the keyboard reads ‘Q,W,E,R,T,Y’.The reas<strong>on</strong> why the letters were put in this fairly awkward order isthat when typewriters were first invented, the keys would often jam<strong>and</strong> it was advantageous to slow down the speed of typing. Of course,jamming keys are not a problem <strong>on</strong> modern computers. Yet despitethe fact that the QWERTY letter order slows down typing, society is‘locked in’ to using the system.‘We ought not refl exivelyto assume that thecheapest method is alwaysthe best method. Forsome envir<strong>on</strong>mentalproblems, we maywant to give initiallyexpensive technologicaltransformati<strong>on</strong> morepriority than costeffectiveness.’ 170David M. Driesen,Syracuse UniversityCollege of Law, 2006An awkward letterarrangement <strong>on</strong>English-languagekeyboards hasbecome tooentrenched tochange easily.In general, technologies become ‘locked in’ when, for whatever reas<strong>on</strong>,they gain a historical head start <strong>on</strong> other technologies <strong>and</strong> becomeentrenched in far-reaching technological, political <strong>and</strong> culturalwebs. These webs give them the advantage of ec<strong>on</strong>omies of scale,synergies with other industries, access to policymakers, accumulatedspecialist expertise, <strong>and</strong> subsidies of various kinds. Locked-in systemstend to be able to absorb or deflect incremental attempts to institute
less<strong>on</strong>s unlearned 111‘Locking in’ Fossil Fuels in the USThe US is so thoroughly organised, technologically<strong>and</strong> politically, around a highlevel of fossil fuel use that even PresidentGeorge W. Bush has acknowledged an ‘addicti<strong>on</strong>’that needs to be ‘broken.’By triumphing in early political <strong>and</strong> culturalstruggles, US fossil-dependent technologiesgot first crack at ec<strong>on</strong>omies ofscale; were able to begin building a baseof skills, research <strong>and</strong> resources that guaranteedrapid development; managed tointegrate themselves first into transport,producti<strong>on</strong>, c<strong>on</strong>sumpti<strong>on</strong> <strong>and</strong> other culturalsystems, building up a rich web ofnew habits <strong>and</strong> lifestyles; starved competingtechnologies of research <strong>and</strong> resources;helped build <strong>and</strong> ensure dem<strong>and</strong>; <strong>and</strong> ultimatelyw<strong>on</strong> adherents in subsidy-providingstate bureaucracies.Petroleum-fuelled internal combusti<strong>on</strong>engines, for instance, were c<strong>on</strong>sidered theleast promising source of automobile propulsi<strong>on</strong>in 1885. But chance events such asthe closing of horse troughs used to supplysteam vehicles led <strong>on</strong>e manufacturer toshift to petrol engines, providing a massproducti<strong>on</strong> base that drove prices down,improved performance, <strong>and</strong> locked indominance.At around the same time, alternatingcurrent(AC) electricity technology, whichallowed l<strong>on</strong>g-distance transmissi<strong>on</strong> <strong>and</strong> centralisedgenerati<strong>on</strong> close to large fossil-fuelsources, closed out more efficient directcurrenttechnology because it w<strong>on</strong> judicial,political <strong>and</strong> public relati<strong>on</strong>s battles <strong>and</strong> wasmore attractive to aspiring m<strong>on</strong>opolists.AC’s advantage then snowballed into technological<strong>and</strong> ec<strong>on</strong>omic hegem<strong>on</strong>y.Through such processes, fossil fuels became‘locked in’ to the US’s transport <strong>and</strong> electricitygenerati<strong>on</strong> sectors. Together, thesesectors today account for approximatelytwo-thirds of global carb<strong>on</strong> emissi<strong>on</strong>s. 174A set of subsidised structures engineeredfor high fossil fuel use – interstate highwaysystems, automobile industries, re fineries,suburban sprawl, centralised power plants,supermarket-centred food systems <strong>and</strong> soforth – became inextricable from the livelihoodsof milli<strong>on</strong>s of people, while a subsidisedextracti<strong>on</strong> network employing manymore, ranging from military machines tolobbyists to university geology departments,175 emerged to locate, secure <strong>and</strong> exploitfossil fuel fields around the world. 176It was <strong>on</strong>ly as a result of such political <strong>and</strong>social processes, which included far-reachingchanges in both individual <strong>and</strong> societalgoals, that it became possible to talkabout fossil-fuelled technologies as cheaperor ‘more efficient’ than certain other alternatives.Orthodox ec<strong>on</strong>omics hides thishistory.In this situati<strong>on</strong>, higher energy prices aremore likely to spur a search for more oil<strong>and</strong> gas than a search for better sources ofenergy. And even though the search formore fossil fuels is likely to yield smaller<strong>and</strong> smaller returns, the market still w<strong>on</strong>’tprovide enough incentives to lay thegroundwork for structural change in theenergy sector. On the other h<strong>and</strong>, if, inresp<strong>on</strong>se to infl ati<strong>on</strong>, interest rates are putup <strong>and</strong> dem<strong>and</strong> falls, the resulting dropin prices may well <strong>on</strong>ly lead to renewedc<strong>on</strong>sumpti<strong>on</strong> of fossil fuels.
112 development dialogue september 2006 – carb<strong>on</strong> trading‘Lock-in’ is <strong>on</strong>e reas<strong>on</strong> why addressing theclimate crisis requires not just clever inventi<strong>on</strong>sthat use carb<strong>on</strong> more efficiently oreven get the carb<strong>on</strong> out of energy entirely,but also political movements that get energycompanies out of fossil fuel de posits,Northern military establishments out ofoil-rich regi<strong>on</strong>s, oil <strong>and</strong> car manufacturers’lobbyists out of positi<strong>on</strong>s of politicalpower in Washingt<strong>on</strong>, <strong>and</strong> Northern agribusinessout of Southern l<strong>and</strong>s needed forbasic local requirements.broader change because they c<strong>on</strong>strain ‘available’ choices. ‘Very seldomdoes optimising each comp<strong>on</strong>ent in isolati<strong>on</strong> ... optimise the systemas a whole’. 172 An inertia takes hold that is difficult to break.Fossil fuel-based energy systems are no different. They weren’t chosenbecause they were a rati<strong>on</strong>al, low-cost, efficient means of meetingpre-existing ends, but for other reas<strong>on</strong>s (see box, above: Locking inFossil Fuels in the US). ‘Timing, strategy <strong>and</strong> historic circumstance,as much as optimality, determined the winner’ 173 of the competiti<strong>on</strong>to determine what energy system would be used.Lock-in is as much social as technological. In the UK, for instance,transport has become locked into what energy c<strong>on</strong>sultant RogerLevett describes as a complex ‘vicious circle’ involving habits <strong>and</strong>community structure as much as fuels <strong>and</strong> engines (see Figure 3). 177Without this locked-in structure, Levett estimates that fuel use in theUK could be cut by 87 per cent <strong>and</strong> carb<strong>on</strong>-based fuels eliminatedaltogether using existing technologies. Similar assessments have comefrom the US <strong>and</strong> elsewhere. 178In sum, ‘locked-in’ technologies <strong>and</strong> social structures – including fossildependentenergy <strong>and</strong> transport systems – are likely to be difficult tochange in the short term even when they were not originally adoptedfor efficiency reas<strong>on</strong>s <strong>and</strong> are ec<strong>on</strong>omic dead ends in the l<strong>on</strong>g term.C<strong>on</strong>versely, alternative technologies may be expensive or difficult todevelop in the short term even when they promise to be cheaper in thel<strong>on</strong>g term; many success stories have failed early efficiency tests. 179Even when they can provide starting points toward restructuring societyaway from fossil fuel dependence, they are penalised by beingdeprived of ec<strong>on</strong>omies of scale, synergies <strong>and</strong> political <strong>and</strong> culturalentrenchment. The ec<strong>on</strong>omic calculati<strong>on</strong>s characteristic of emissi<strong>on</strong>strading work best within a given social <strong>and</strong> technological regime, <strong>and</strong>d<strong>on</strong>’t provide good incentives for changing that regime.‘Entrepreneurial discoveryc<strong>on</strong>sists not in achievingeffi ciency in dealingwith a given situati<strong>on</strong>but in alertness to thepossibility that the truesituati<strong>on</strong> (with respect towhich effi ciency would beworth pursuing) is in factdiff erent from the situati<strong>on</strong>that had been assumed tobe given.’ 180Israel M. Kirzner, 1985
less<strong>on</strong>s unlearned 113Figure 3. A Vicious Circle in UK TransportSource: Levett-Therivel Sustainability C<strong>on</strong>sultantsDrivers lessbike- awareHostile roadenvir<strong>on</strong>mentMorec<strong>on</strong>gesti<strong>on</strong>Worse busservicePeople avoidwalking & cyclingSchool runL<strong>on</strong>gerjourneysUnfitness,obesityTown centresdegeneratePeople moveto suburbsMore carjourneysCar moreattractiveShops etc moveto car accesiblelocati<strong>on</strong>sFewer buspassangersOnce you have acar, driving ischeapestMore diffusejourney patternsBus safetyworriesMore peoplebuy carsLess ticketincomeBut w<strong>on</strong>’t really steep price increases provide enough incentive for changinglocked-in technologies?Not if people are highly dependent <strong>on</strong> them <strong>and</strong> no clear alternativesare available. For example, because the ‘current vehicle stock<strong>and</strong> the road infrastructure’ in Northern countries ‘makes individualcar ownership <strong>and</strong> use very easy’ 181 <strong>and</strong> because people still have togo to work, however much it costs, rising petrol prices may leave dem<strong>and</strong>relatively unaffected. According to energy ec<strong>on</strong>omist PhilipVerleger, ‘it would take a doubling of petrol prices to reduce Americanpetrol c<strong>on</strong>sumpti<strong>on</strong> by just 5 per cent’. 182 Citizens in countriessuch as the US do use less energy when it grows more expensive, butthat use changes very slowly. 183 The other side of this coin is popularprotests against petrol price increases of the kind that have swept theUK <strong>and</strong> the US recently.Bey<strong>on</strong>d a certain point, systems analyst Gar Lipow suggests, commodityprices – including the prices of polluti<strong>on</strong> permits – can’t playmuch of a role in the North’s transiti<strong>on</strong> to a lower-carb<strong>on</strong> ec<strong>on</strong>omy.Public investment <strong>and</strong> regulati<strong>on</strong> are needed to facilitate better individualchoices:Look at the U.S. – where automobile efficiency more than doubledfrom around 14 to around 25 miles per gall<strong>on</strong> when [government]st<strong>and</strong>ards were imposed – then stopped rising when trade decisi<strong>on</strong>s,c<strong>on</strong>gressi<strong>on</strong>al acti<strong>on</strong>s, <strong>and</strong> light truck loopholes stalled st<strong>and</strong>ards.
114 development dialogue september 2006 – carb<strong>on</strong> tradingAgain, look at home insulati<strong>on</strong> in most states; generally average levelsof attic insulati<strong>on</strong> hover around the minimum state regulati<strong>on</strong>srequire; a few people may get more, a few are [allowed to makedo with] less; but within a few percentage points, regulatory minimumsare a fair predictor of actual insulati<strong>on</strong>. In European Uni<strong>on</strong>nati<strong>on</strong>s, regulati<strong>on</strong> <strong>and</strong> public spending (especially <strong>on</strong> rail) are betterpredictors of carb<strong>on</strong> efficiency than price policies. Again, this is notto say that raising the price of energy does not reduce use; merelythat regulati<strong>on</strong> <strong>and</strong> public works do so more quickly, more efficiently<strong>and</strong> with fewer unintended c<strong>on</strong>sequences. 184In the EU ETS, prices for emissi<strong>on</strong>s allowances are currently beingdriven by increases in the price of natural gas, or, more fundamentally,the cost of shifting from coal to natural gas – <strong>and</strong> also by weather.185 Even relatively high allowance prices can do little more thanprovide a moderate disincentive to shift from gas to coal in resp<strong>on</strong>seto high gas prices. The UK firm Enviros says that even carb<strong>on</strong> permitprices of €50 per t<strong>on</strong>ne are unlikely to ‘provide the stimulus necessary’for firms to invest ‘to drive down greenhouse gases’. 186One weakness of carb<strong>on</strong> permit prices as drivers of change is that theyare likely to be ‘extremely volatile because of the complete inelasticityof supply of permits’ al<strong>on</strong>g with ‘inelastic dem<strong>and</strong> for permitsin the short run’. 187 In the US, ‘sulphur dioxide trading prices havevaried from a low of usd 70 per t<strong>on</strong> in 1996 to usd 1500 per t<strong>on</strong> inlate 2005. Sulphur dioxide allowances have a m<strong>on</strong>thly volatility of 10percent <strong>and</strong> an annual volatility of 43 percent over the last decade’.In Los Angeles’s RECLAIM trading scheme, NO x prices suddenlywent through the roof in 2001 due to industry procrastinati<strong>on</strong>, a hotsummer, <strong>and</strong> a cutoff of supplies of electricity purchased from outof-state.The price of the right to emit <strong>on</strong>e pound of nitrogen oxidezoomed from usd 0.13 in 1999 to usd 37 in July 2001, before settlingback to usd 13 in September 2001. 188 In 2005 <strong>and</strong> 2006, EU ETS pricesfor carb<strong>on</strong> dioxide jiggled over a wide range between €7 <strong>and</strong> €30before crashing to €9 in May 2006. According to Vincent de Rivaz,Chief Executive of EDF Energy in the UK, ‘the l<strong>on</strong>g-term price oftradable emissi<strong>on</strong>s allowances is too uncertain to be a driver of systemictechnological change in an industry whose generating capacityinvestments must be planned over 30-year periods’. 189Yale University ec<strong>on</strong>omist William D. Nordhaus warns that suchvolatility might make trading ‘extremely unpopular with market participants<strong>and</strong> ec<strong>on</strong>omic policymakers’ if it caused ‘significant changesin infl ati<strong>on</strong> rates, energy prices, <strong>and</strong> import <strong>and</strong> export values’. Ananalogy would be the volatile prices associated with the ‘peaking’ ofoil producti<strong>on</strong>, which are not expected to provide signals that could
less<strong>on</strong>s unlearned 115<strong>Climate</strong> <strong>and</strong> the Price SignalAccording to ec<strong>on</strong>omists, prices send out‘signals’. But what exactly do they c<strong>on</strong>tributeto the c<strong>on</strong>versati<strong>on</strong> about climate change?Prices are notorious for the strange thingsthey say about irreversible events, unknowns<strong>and</strong> the l<strong>on</strong>g term. Even the mostorthodox ec<strong>on</strong>omists’ estimates of the costs<strong>and</strong> benefits of doing something about globalwarming differ by many hundreds ofbilli<strong>on</strong>s of dollars per year, depending <strong>on</strong>variati<strong>on</strong>s in the assumpti<strong>on</strong>s plugged intoc<strong>on</strong>venti<strong>on</strong>al ec<strong>on</strong>omic models. 192Sometimes prices are positively t<strong>on</strong>guetied.‘The carb<strong>on</strong> market is not going tobe able to put sustainable development <strong>and</strong>everything else into <strong>on</strong>e price,’ says JackCogen, president of Natsource, the largestprivate buyer of carb<strong>on</strong> credits. ‘The carb<strong>on</strong>market doesn’t care about sustainabledevelopment.’ 193 Cogen’s view is reinforcedby many other carb<strong>on</strong> businesspeople, whoacknowledge privately that their incipientmarket actually has little or nothing to dowith climate.There are other ways, too, in which pricestend to keep to themselves the informati<strong>on</strong>needed to make climate-friendly choices,even in as mundane a matter as home-buying.Says activist <strong>and</strong> systems analyst GarLipow:‘Levels of insulati<strong>on</strong> that pay for themselvesin four m<strong>on</strong>ths to three years willseem a good deal when buying a house <strong>on</strong>a 30- or 15-year mortgage, given energysavings al<strong>on</strong>e. But a problem arises whenmost homes d<strong>on</strong>’t offer that level of insulati<strong>on</strong>.After all, there are more importantc<strong>on</strong>siderati<strong>on</strong>s than energy costs. Is thehouse close to work, schools <strong>and</strong> shops?Also, there are the questi<strong>on</strong>s of layout, <strong>and</strong>appearance. If all homebuilders were requiredto offer this level of insulati<strong>on</strong> theycould easily recover their costs <strong>and</strong> a significantprofit besides at a price that wouldstill lower overall cost of ownership tobuyers. But in the absence of regu lati<strong>on</strong>requiring this, homebuilders may offerhomes without such features. So l<strong>on</strong>g asmost homes d<strong>on</strong>’t offer them, they sufferlittle loss in bargaining power. The oddsare homes with a similar locati<strong>on</strong>, layout<strong>and</strong> appearance w<strong>on</strong>’t be available with theadded energy c<strong>on</strong>servati<strong>on</strong> features. Withoutregulati<strong>on</strong>, builders rati<strong>on</strong>ally believethey w<strong>on</strong>’t gain enough bargaining powerin selling their product to make extra insulati<strong>on</strong>worth adding. This is so eventhough the buyer would get a good deal bypaying enough for the added energy savingsfeature to allow the builder a significantextra profit.’ 194stimulate the development of alternative liquid fuels in time. ‘Waitinguntil world oil producti<strong>on</strong> peaks before taking crash program acti<strong>on</strong>leaves the world with a significant liquid fuel deficit for more thantwo decades’, which would cause problems ‘unlike any yet faced bymodern industrial society,’ according to <strong>on</strong>e US study. 190
116 development dialogue september 2006 – carb<strong>on</strong> tradingUnless the groundwork for fundamental change is laid beforeh<strong>and</strong>,corporati<strong>on</strong>s may simply not resp<strong>on</strong>d to high prices. They may redoubletheir pressure <strong>on</strong> the government not to reduce its allowanceh<strong>and</strong>outs. Or they may just pay the fines for not being able tofind enough allowances to cover their emissi<strong>on</strong>s. In Los An geles’sRECLAIM programme, many polluters c<strong>on</strong>tinued operating oldequipment, didn’t have enough allowances to cover the resulting polluti<strong>on</strong>,<strong>and</strong> simply incurred multi-milli<strong>on</strong> dollar fines. 191 In the end,local government had to bring wayward electric generating facilitiesback under c<strong>on</strong>venti<strong>on</strong>al regulati<strong>on</strong> that allowed them to pay a feeper t<strong>on</strong>ne rather than buy credits. Only then was catalytic reducti<strong>on</strong>technology retrofitted into 17 generating facilities. With the tradingprogramme in a shambles, no assessment of whether it had savedm<strong>on</strong>ey was even attempted.Emissi<strong>on</strong>s trading’s blindness to the l<strong>on</strong>g term is also damaging inother ways. For example, emissi<strong>on</strong>s trading is incapable of taking accountof the society-wide ec<strong>on</strong>omic benefits that can result from lettingstiff costs fall <strong>on</strong> heavily-polluting industrial sectors rather thanallowing them to buy cheap polluti<strong>on</strong> permits as a way out. Suchcosts can lead to savings associated with well-known side benefitsof n<strong>on</strong>-fossil technologies, such as relief from the damage caused bypollutants other than greenhouse gases, destructi<strong>on</strong> of l<strong>and</strong> due to oildrilling <strong>and</strong> coal mining, water polluti<strong>on</strong>, <strong>and</strong> so forth, but also toinnovati<strong>on</strong>s that lower the prices of products from cleaner competingsectors. 195 Michael Porter of Harvard Business School argues thatinnovati<strong>on</strong>s spurred by stringent envir<strong>on</strong>mental regulati<strong>on</strong> that imposesextra costs in the short term may enhance competitiveness toa greater degree in the l<strong>on</strong>g term than merely maximising static efficiency,gaining access to cheaper inputs, or increasing scale. 196What’s more, individual <strong>and</strong> societal goals are themselves likely tochange as costs come down as a result of new technological <strong>and</strong> socialpatterns becoming ‘locked in’. 197 That could mean less dem<strong>and</strong> for thethings that today <strong>on</strong>ly fossil fuels can provide. Such a shift in goals isunlikely to occur within the previous locked-in fossil-dependent system.Again, emissi<strong>on</strong>s trading can’t help select for it.‘Emissi<strong>on</strong>s trading doesnot stimulate competiti<strong>on</strong>to maximise envir<strong>on</strong>mentalperformance. It simplyauthorises some tradingaround of obligati<strong>on</strong>s thegovernment has created.’ 198David M. Driesen, 2003It sounds as if envir<strong>on</strong>mentally superior technologies such as solar power are notgoing to benefi t much from emissi<strong>on</strong>s trading.No. Emissi<strong>on</strong>s trading might even slow down their development.Once produced <strong>on</strong> a large enough scale, photovoltaics would becomea far cheaper source of electricity per unit cost than fossil-fuelled technologies,199 <strong>and</strong> cheaper still if other parts of the technological <strong>and</strong> politicalc<strong>on</strong>text were changed – if subsidies were shifted from nuclear
less<strong>on</strong>s unlearned 117power, for instance. Already, costs of various types of n<strong>on</strong>-fossil energytechnology are declining. (See Figure 4.) But without opportunitiesto get ‘locked-in’ through more state-backed research, public investment,ec<strong>on</strong>omies of scale, <strong>and</strong> other processes, solar power is stilltoo expensive to get much of a boost from emissi<strong>on</strong>s trading.Figure 4. Renewable Energy Cost Trends, USSource: Rocky Mountain InstituteRenewable energy cost trendsLevelised cents/kWhin c<strong>on</strong>stant $2001453015Wind1980 1990 2000 2010 2020GeothermalPhotovoltaic101008806604402201980 1990 2000 2010 20201980 1990 2000 2010 2020BiomassSolar thermal12100980606403201980 1990 2000 2010 20201980 1990 2000 2010 2020So there’s no way around it. Emissi<strong>on</strong>s markets are structurally biased againstthe kind of radical change needed to tackle global warming.That’s certainly what the evidence suggests. As the Heinrich BöllFoundati<strong>on</strong>’s Jo’Burg Memo observes,[T]he ‘polluter pays’ principle has been turned into a ‘polluter buyshis way out’ principle. Decarb<strong>on</strong>isati<strong>on</strong> will not really take placein this manner, since the resource base of Northern ec<strong>on</strong> omies is
118 development dialogue september 2006 – carb<strong>on</strong> tradingTo sum up the story so far, while trading schemes can in theory• save participating private fi rms m<strong>on</strong>ey in• reducing emissi<strong>on</strong>s of specifi c substances• to a particular degree• over particular time periods <strong>and</strong>• within a particular larger technological system,the same schemes are unlikely to be the best choice if the objective is to• save m<strong>on</strong>ey for society or industry as a whole, or• attain a more general envir<strong>on</strong>mental improvement, or• make more drastic reducti<strong>on</strong>s• with l<strong>on</strong>g-term goals in mind, or• bring about a change in a larger technological system.When trading advocates assert that trading systems are ‘cost-effective’without specifying for whom, in what, <strong>and</strong> over what time period,they’re being so vague that they court irrelevance. 201But maybe in helping private fi rms save m<strong>on</strong>ey <strong>on</strong> incremental improvements incarb<strong>on</strong>-intensive technology, emissi<strong>on</strong>s trading can help buy time for the research<strong>and</strong> development that is needed to shift industrialised societies away from dependence<strong>on</strong> fossil fuels entirely. Maybe the market can help make the world’s fossilfuel technologies state-of-the-art, or moderate their climatic eff ects, while solar <strong>and</strong>other renewable technologies are being developed to replace them.There are several problems with this argument. First, shifts in technological<strong>and</strong> industrial structure d<strong>on</strong>’t just happen <strong>on</strong> their own.Solar energy technology, for example, is not ‘advancing’ busily byitself in a bubble independent of politics, funding <strong>and</strong> society. Its developersstruggle c<strong>on</strong>tinually to develop a network of research <strong>and</strong>investment against a structure of large competing subsidies <strong>and</strong> otherencouragement still being given to fossil or nuclear energy <strong>and</strong> otherarguably ‘sunset’ technologies. A shift in this pattern of support w<strong>on</strong>’tbe delivered by emissi<strong>on</strong>s trading.Sec<strong>on</strong>d, emissi<strong>on</strong>s trading schemes, even the better-designed <strong>on</strong>es,rather than buying time for governments or corporati<strong>on</strong>s to makestructural changes, actually slow or block many technological developmentsby squ<strong>and</strong>ering ingenuity <strong>and</strong> resources <strong>on</strong> making small refinementsthat extend the life of an overwhelmingly fossil-oriented energy<strong>and</strong> transport structure. And in doing so, they make it more likely that‘Greenhouse gas emissi<strong>on</strong>sfrom aircraft, increasinglyimplicated in climatechange, will c<strong>on</strong>tinue togrow even if the airlinesjoin Europe’s emissi<strong>on</strong>strading scheme, whichis designed to cut them,British Airways’ chiefec<strong>on</strong>omist admittedyesterday.’ 204News item, L<strong>on</strong>d<strong>on</strong>Independent, 2006
less<strong>on</strong>s unlearned 119Does Emissi<strong>on</strong>s Trading Reward Effi cient Actors?Emissi<strong>on</strong>s trading can help big polluterssave short-term emissi<strong>on</strong>s-reducti<strong>on</strong> costs.But does it reward companies <strong>and</strong> countriesthat are already more efficient, evenby c<strong>on</strong>venti<strong>on</strong>al st<strong>and</strong>ards? Not so far.Under the EU Emissi<strong>on</strong>s Trading Scheme,global public assets which presumablyshould be used to foster the fastest transiti<strong>on</strong>to a n<strong>on</strong>-fossil energy regime worldwideare being h<strong>and</strong>ed to the biggest carb<strong>on</strong>emitters in the most carb<strong>on</strong>-intensivecountries.So far, these big polluters have resp<strong>on</strong>dedto the scheme mainly by lobbying formore emissi<strong>on</strong>s permits or more advantageousways of distributing them withintheir sectors; by massaging baseline figures;by seeking carb<strong>on</strong> credits from abroad thatwill help them evade structural change; bylooking more closely at gas; <strong>and</strong> by passing<strong>on</strong> any costs to customers.The Kyoto Protocol, meanwhile, awardsthe most emissi<strong>on</strong>s rights per capita tocountries that are, even by very c<strong>on</strong>venti<strong>on</strong>alec<strong>on</strong>omic yardsticks, relatively inefficientusers of energy.Australia, for example, is <strong>on</strong>e of the most‘carb<strong>on</strong>-inefficient’ countries in the world.It ranks 109th am<strong>on</strong>g 141 nati<strong>on</strong>s in its carb<strong>on</strong>efficiency, or ratio of t<strong>on</strong>nes of carb<strong>on</strong>dioxide emitted per US dollar of GDP. Yetunder the Kyoto Protocol, Australia, hadit signed the treaty, would have been generouslygranted emissi<strong>on</strong>s rights amountingto around 27 t<strong>on</strong>nes per capita. Othernotably carb<strong>on</strong>-inefficient countries(the Czech Republic, ranked 115th; theUS, ranked 100th; Canada, ranked 98th;Finl<strong>and</strong>, ranked 80th; The Netherl<strong>and</strong>s,ranked 78th; Germany, ranked 76th; theUK, ranked 74th) get rights to betweenapproximately 10–17 t<strong>on</strong>nes of carb<strong>on</strong> dioxideequivalent per capita.At the same time, the world’s most carb<strong>on</strong>efficientcountries (including Namibia, theLao PDR, Nepal <strong>and</strong> Bangladesh, ranked1st, 5th, 18th <strong>and</strong> 23rd respectively) receivezero tradable rights under the Protocol.Sweden, a moderately carb<strong>on</strong>-efficientnati<strong>on</strong> (ranked 42nd out of 141), gets <strong>on</strong>lyabout seven t<strong>on</strong>nes per capita, around thesame as Japan <strong>and</strong> Spain, ranked 61st <strong>and</strong>62nd (see Table 3, next page). 207when governments such as that of the US are finally panicked into takingacti<strong>on</strong> <strong>on</strong> global warming, they will grasp at extreme, technicalfixsoluti<strong>on</strong>s such as creating new life forms to produce hydrogen, reengineerhurricane-pr<strong>on</strong>e seas, or absorb carb<strong>on</strong> dioxide; seeding theoceans with nanoparticles to promote plant growth; dispersing nanoparticlesin the upper atmosphere to reflect light; or putting c<strong>on</strong>tinentsizedmirrors into space (see Chapter 2). 202Third, far from being a quick ‘stopgap soluti<strong>on</strong>’ that can be appliedimmediately while more difficult measures are prepared, emissi<strong>on</strong>strading is the ‘most difficult of the ec<strong>on</strong>omic instruments’ 203 availablefor envir<strong>on</strong>mental protecti<strong>on</strong>, <strong>and</strong> requires an enormous amountof legal, instituti<strong>on</strong>al <strong>and</strong> technological stage-setting to get off theground, even in a country like the US.
120 development dialogue september 2006 – carb<strong>on</strong> tradingTable 3. ‘Carb<strong>on</strong>-Effi cient’ <strong>and</strong> ‘Carb<strong>on</strong>-Ineffi cient’ Nati<strong>on</strong>sCountryCarb<strong>on</strong> Effi ciency(T<strong>on</strong>nes of CO 2Emissi<strong>on</strong>s perUS Dollar of GDP)Carb<strong>on</strong> Effi ciencyRank am<strong>on</strong>g 141Nati<strong>on</strong>sNamibia 0.00 1Lao PDR 0.14 5Nepal 0.30 18Bangladesh 0.36 23Sweden 0.70 42Brazil 0.71 43Norway 0.74 45Philippines 0.77 47France 0.78 48Italy 0.91 57Spain 1.00 61Japan 1.00 62Denmark 1.08 66Ind<strong>on</strong>esia 1.11 69UK 1.17 74NZ 1.19 75Germany 1.19 76Netherl<strong>and</strong>s 1.23 78Finl<strong>and</strong> 1.28 80India 1.35 85Egypt 1.45 86South Korea 1.51 94Canada 1.69 98US 1.77 100China 2.03 107Australia 2.07 109Czech R. 2.43 115South Africa 2.56 119Saudi Arabia 3.60 129The Carb<strong>on</strong> Market as EpicycleFrom about the sec<strong>on</strong>d century <strong>on</strong>ward,the European astr<strong>on</strong>omical model thatplaced the earth at the centre of the universehad to add more <strong>and</strong> more squiggles<strong>and</strong> refinements (‘epicycles’) in order to accountfor observati<strong>on</strong>s of planetary movements.Only in the 16 th century was thewhole complex model <strong>and</strong> all its epicyclesfinally ab<strong>and</strong><strong>on</strong>ed in favour of a simpler<strong>and</strong> more elegant sun-centred model.The carb<strong>on</strong> market is like <strong>on</strong>e of the epicyclesadded to the earth-centred modelto preserve it. It helps keeps the obsoletefossil-centred industrial model going at atime when society should already be ab<strong>and</strong><strong>on</strong>ingit.
less<strong>on</strong>s unlearned 121No empirical evidence exists that current greenhouse gas tradingprogrammes are functi<strong>on</strong>ing as transiti<strong>on</strong>al soluti<strong>on</strong>s <strong>on</strong> the way to afossil carb<strong>on</strong>-free future. In fact, all the available evidence is <strong>on</strong> theother side. Major oil corporati<strong>on</strong>s such as BP <strong>and</strong> Shell, both enthusiasticinitiators of internal trading schemes, have never voiced anyserious intenti<strong>on</strong> to curb their main activities of oil explorati<strong>on</strong> orproducti<strong>on</strong> at any time. Although it has changed its name to ‘Bey<strong>on</strong>dPetroleum’, BP committed itself in 2002 to exp<strong>and</strong> its oil <strong>and</strong> gas outputby 5.5 per cent per year over the succeeding five years. Its emissi<strong>on</strong>sin 2001 were equivalent to almost two years’ carb<strong>on</strong> dioxideemissi<strong>on</strong>s from the UK. 205 The firm’s investment in renewable energyremains at a mere 1 per cent of the usd 8 billi<strong>on</strong> it spends <strong>on</strong> fossil fuelexplorati<strong>on</strong> <strong>and</strong> producti<strong>on</strong> every year. 206Similarly, the World Bank treats its carb<strong>on</strong> trading wing as what <strong>on</strong>eprominent former staff member scathingly refers to as a mere ‘epicycle’208 of an overwhelmingly fossil-oriented approach to energy <strong>and</strong>transport.Karl PolanyiEfficiency <strong>and</strong> hot spotsThere’s another problem with the procedure of creating ‘efficiencies’by spreading emissi<strong>on</strong>s cuts around so that the cheapest can be madefirst: it tends to harm the weak <strong>and</strong> benefit the powerful. That meansthere are going to be political limits – defined by popular resistance,am<strong>on</strong>g other things – to the extent that polluti<strong>on</strong> in locati<strong>on</strong> A canbe made ‘the same as’ polluti<strong>on</strong> in locati<strong>on</strong> B.Similar problems arise with the privatisati<strong>on</strong> of l<strong>and</strong>, privatisati<strong>on</strong> ofhealth care <strong>and</strong> the privatisati<strong>on</strong> of biodiversity. As the great ec<strong>on</strong>omichistorian Karl Polanyi pointed out more than 60 years ago, certainvital things such as l<strong>and</strong>, labour, water <strong>and</strong> medicine are <strong>on</strong>ly ‘pseudo -commodities’. 209 They can never become fully tradable without societyas a whole ceasing to exist.I d<strong>on</strong>’t underst<strong>and</strong>.Take l<strong>and</strong>. From a narrowly ec<strong>on</strong>omic point of view, l<strong>and</strong> is all thesame, wherever it is, just as emissi<strong>on</strong>s reducti<strong>on</strong>s are said to be thesame wherever they are made. L<strong>and</strong> creates ec<strong>on</strong>omic value, whereverit is <strong>and</strong> whatever it is used for, just as, other things being equal,emissi<strong>on</strong>s reducti<strong>on</strong>s are good for the climate, no matter where orhow they are made.But suppose l<strong>and</strong> became completely interchangeable with anythingelse, a completely fluid commodity, so that <strong>on</strong>e piece of l<strong>and</strong> could
122 development dialogue september 2006 – carb<strong>on</strong> tradingbe exchanged for another, or become the ‘equivalent’ of a certainamount of m<strong>on</strong>ey, <strong>and</strong> thus easier to accumulate in large quantitiesin the h<strong>and</strong>s of whoever had power, regardless of the l<strong>and</strong> needs ofothers. Suppose any l<strong>and</strong> could be bought <strong>and</strong> accumulated in anyamount by anybody with the m<strong>on</strong>ey to do so <strong>and</strong> then used for anypurpose. Suppose it could be exchanged for anything with anybody inany amount.In theory, it would then become possible for <strong>on</strong>e pers<strong>on</strong> to own alll<strong>and</strong> <strong>and</strong> everybody else to own n<strong>on</strong>e. It would be possible for anypiece of l<strong>and</strong> to be destroyed if whatever it was exchanged for weretemporarily a source of greater profit. It would be possible for mostl<strong>and</strong> to be treated as a speculative instrument without even beingused, while people went hungry. It would be possible, in short, forpeople who owned the l<strong>and</strong> never to see it or know anything aboutit. It would be possible for them to do anything with their l<strong>and</strong> regardlessof the c<strong>on</strong>sequences to their neighbours. Framing l<strong>and</strong> as acommodity in such a thoroughgoing way would require suppressingmany of the things that makes a piece of l<strong>and</strong> in locati<strong>on</strong> A differentfrom a piece of l<strong>and</strong> in locati<strong>on</strong> B. If carried too far, this would havefatal results. 210But no <strong>on</strong>e would ever carry things that far.Obviously not. ‘To allow the market mechanism to be the sole director’of how l<strong>and</strong> is used, Polanyi wrote, ‘would result in the demoliti<strong>on</strong>of society.’ That’s why, in the real world, all communities <strong>and</strong>states possess rules or customs limiting how far l<strong>and</strong> can be exchanged,commodified, or accumulated, what it can be used for, <strong>and</strong> who canacquire how much of it. 211Equally obviously, there are social limits to how far you can go withpolluti<strong>on</strong> trading. If there were no limits, ‘averaging’ polluti<strong>on</strong> overa large geographical area through a market would mean you couldpollute a few places severely while cleaning up everywhere else, <strong>and</strong>still say you were ‘improving’ society’s well-being. In the words ofNati<strong>on</strong>al Resources Defence Council attorney David D<strong>on</strong>iger, ‘If allyou had was emissi<strong>on</strong>s trading, you could pile up all the polluti<strong>on</strong> in<strong>on</strong>e place.’ 212This is <strong>on</strong>e thing that critics of polluti<strong>on</strong> trading schemes have alwaysworried about: that if a market makes it easier for companies to puttheir polluti<strong>on</strong> anywhere they want, it will wind up <strong>on</strong> the doorstepsof the poor <strong>and</strong> less powerful. In fact, in the US, as across the world,polluti<strong>on</strong> is already c<strong>on</strong>centrated disproporti<strong>on</strong>ately in poor communitiesor communities of colour. Many people fear that trading will
less<strong>on</strong>s unlearned 123<strong>on</strong>ly make it worse. They fear that the scientific fact that air polluti<strong>on</strong>dumps do not respect political borders is being recruited in theservice of ec<strong>on</strong>omic <strong>and</strong> physical exploitati<strong>on</strong>. This is the problem of‘hot spots’.Are you saying this actually happened with US sulphur dioxide trading?That’s a matter of some c<strong>on</strong>troversy. Many factors are involved. Somefactors in some emissi<strong>on</strong>s markets may actually militate against hotspots. For example, it’s often easier to generate cheap credits fromthe worst-polluting plants, meaning that those living around themmay see more improvements than others. 213 Some researchers say thatcommunities of colour have actually disproporti<strong>on</strong>ately benefitedfrom sulphur dioxide trading – except in the US South – althoughthe same researchers add that poor communities have lost out to asmall degree.In geographical terms, though, the effects have clearly been uneven.While sulphur dioxide levels fell in the aggregate during the 1990s,they barely changed in the swath from Columbus, Ohio, to northernWest Virginia. Hot spots have persisted east of Erie, Pennsylvania <strong>and</strong>near Kingst<strong>on</strong> <strong>and</strong> Oswego, New York <strong>and</strong> Oak Ridge, Tennessee,according to the Nati<strong>on</strong>al Atmospheric Depositi<strong>on</strong> Program. Since1995, according to a study by the United States Public Interest ResearchGroup, 300 of the 500 dirtiest plants actually increased sulphurdioxide emissi<strong>on</strong>s. 214 The government’s Envir<strong>on</strong>mental Protecti<strong>on</strong>Agency found that emissi<strong>on</strong>s increased in Texas <strong>and</strong> Alabama, witheffects felt in Florida. 215 In the 1990s, some locati<strong>on</strong>s, a large majorityof which were poor <strong>and</strong> predominantly communities of colour,reported increased emissi<strong>on</strong>s of sulphur dioxide <strong>and</strong> resultant toxicco-pollutants such as particulate matter <strong>and</strong> volatile organic compounds.216 This prompted the Nati<strong>on</strong>al Envir<strong>on</strong>mental Justice AdvisoryCouncil, a government appointed body, to oppose any expansi<strong>on</strong>of polluti<strong>on</strong> trading schemes in the US <strong>and</strong> called <strong>on</strong> the USgovernment to address the envir<strong>on</strong>mental justice impacts of emissi<strong>on</strong>strading. Government officials point out that many other hot spotshave been ‘cooled’ – as they probably would have been under any reducti<strong>on</strong>scheme – but admit that there have been excepti<strong>on</strong>s.Proporti<strong>on</strong>ally, populated areas have benefited less, because buyersof credits are c<strong>on</strong>centrated in more populated areas. New York state,which is downwind of many power producers, believes that it is disadvantagedby sulphur dioxide trading <strong>on</strong> a nati<strong>on</strong>al scale, <strong>and</strong> haspushed for a regi<strong>on</strong>al plan to overcome the dangers of ‘averaging’over a large geographical area. In 2000, New York attached a financialpenalty to the sale of New York sulphur dioxide credits to 14
124 development dialogue september 2006 – carb<strong>on</strong> tradingupwind states believed to c<strong>on</strong>tribute to the state’s acid rain problem.This was ruled unc<strong>on</strong>stituti<strong>on</strong>al by a US district court in 2002, settingoff a high-level legal battle. 217Many critics are c<strong>on</strong>cerned, similarly, that when fossil fuel users buyrights to c<strong>on</strong>tinue polluting their local areas, they are buying the rightto release toxic substances in additi<strong>on</strong> to carb<strong>on</strong> dioxide.All right. But the problem of ‘hot spots’ seems pretty minor if it saves big businessm<strong>on</strong>ey in making short-term polluti<strong>on</strong> cuts.You may think so – provided it isn’t your health or envir<strong>on</strong>ment atstake. But remember that even in the US, airborne particles of sulphurdioxide, together with particles of NO x , cut short the lives ofan estimated 30,000 US residents each year as well as causing acidrain. 218Maybe so, but the programme might still have been ‘effi cient.’ You can’t tellfor sure until you assign an ec<strong>on</strong>omic value to the lives lost or damaged <strong>and</strong> dothe arithmetic.The problem is that for such calculati<strong>on</strong>s to be possible, you couldn’tassign human lives a value so high that it would automatically outweighalmost any ec<strong>on</strong>omic gains made elsewhere.Well, sure. Making a market is like making an omelette – you have to breaka few eggs. You can’t assign an infi nite value to unbroken eggs, otherwise youw<strong>on</strong>’t get your omelette. The eggs have to have a specifi c numerical value, <strong>and</strong>not too high.And suppose the eggs – er, people – disagree with the statistical valuetheir lives have been assigned? Or suppose they refuse to have anysuch value attached to their lives at all? 219They’re not necessarily qualifi ed to discuss it, if they’re not ec<strong>on</strong>omists, are they?Are you suggesting that they d<strong>on</strong>’t know how to value their ownlives?Oops, that doesn’t sound very democratic, does it? Let me rephrase that tomake it sound better.I’m not sure that will do any good. The point is that the new market’sneed for these calculati<strong>on</strong>s to be made leads unavoidably to politicalarguments – like the <strong>on</strong>e we’re having now. There’s nothing ‘neutral’about the project of making emissi<strong>on</strong>s reducti<strong>on</strong>s ‘efficient’ throughtrading schemes.
less<strong>on</strong>s unlearned 125And probably you w<strong>on</strong>’t be surprised to learn that there are still furtherpolitical difficulties with that project.C<strong>on</strong>flicts over ownershipA basic requirement of any trading system is that everybody has toagree who the owners are of the goods to be traded. For a car marketto work, for example, everybody has to agree that it is the car companythat owns the product to be sold – not auto workers, nor communitiesnear sources of raw materials, nor any<strong>on</strong>e else. In emissi<strong>on</strong>smarkets, however, not every<strong>on</strong>e agrees who owns what. Many peopleclaim that countries or firms are using polluti<strong>on</strong> dump space that bel<strong>on</strong>gsto others.The problem was already evident in the US’s sulphur dioxide tradingsystem, which granted polluti<strong>on</strong> allowances <strong>on</strong>ly to the biggestpollutingprivate firms. Some envir<strong>on</strong>mentalists argued that it waselectricity customers, not power companies, who should get the allowances,<strong>and</strong> that companies should have to buy them. ‘It’s the public’sair that’s being used as a waste dump,’ observed attorney DavidD<strong>on</strong>iger of Envir<strong>on</strong>mental Defence in 2002. ‘There’s a good argumentthat you ought to pay to use the dump.’ 220Even deeper <strong>and</strong> more wide-ranging difficulties about ownershipaffl ict the Kyoto Protocol <strong>and</strong> the EU Emissi<strong>on</strong>s Trading Scheme.As ec<strong>on</strong>omist Sim<strong>on</strong>e Bastian<strong>on</strong>i <strong>and</strong> colleagues observe, such programmesrequire an ‘accounting method to create a greenhouse gasinventory which also assigns resp<strong>on</strong>sibility for emissi<strong>on</strong>s’. 221 To put itmore briefly: emissi<strong>on</strong>s markets need to know who it is exactly that’swarming the globe.Sounds like an easy questi<strong>on</strong>.It’s not. It’s a little like trying to work out in the courts who is resp<strong>on</strong>siblefor an industrial accident that takes off a worker’s finger. Is it theco-worker who wasn’t watching? The manufacturer of the machinery?The c<strong>on</strong>tractor who operates it? The pers<strong>on</strong> who invented it 50 yearsago? The owner of the company hiring the c<strong>on</strong>tractor? The owner ofthe factory site? The government safety board? The worker herself?Similarly, who’s resp<strong>on</strong>sible for the burning of fossil fuels in the petroltank of a particular car? The car owner who drives it? Exx<strong>on</strong>, whodrilled the oil? General Motors, who built the car? The politician whodefeated the mass transportati<strong>on</strong> system that would have made the car’spurchase unnecessary? The government of the country within whoseborders the car is driven? Should countries be held resp<strong>on</strong>sible for their
126 development dialogue september 2006 – carb<strong>on</strong> tradingcurrent emissi<strong>on</strong>s or for their historical emissi<strong>on</strong>s as well? 222 Climatology<strong>and</strong> ec<strong>on</strong>omics have no answers to such questi<strong>on</strong>s. Different agentswill be held resp<strong>on</strong>sible in different accounting systems. 223Look at what’s happened to the EU ETS. The EU decided that privatecompanies burning fossil fuels would be c<strong>on</strong>sidered, for the purposesof the scheme, the <strong>on</strong>ly emitters. These are companies like RWE,Cementa, Scottish <strong>Power</strong>, Vattenfall, Ineos Fluor <strong>and</strong> so forth.That sounds reas<strong>on</strong>able enough. What was the alternative?In choosing to give rights to the world carb<strong>on</strong> dump away to corporati<strong>on</strong>s,European governments decided not to give rights to others,including ordinary citizens. In choosing to give rights to corporate‘downstream’ energy users, it chose not to give them to ‘upstream’producers of oil, gas <strong>and</strong> coal.Was that a problem?It created a whole nest of them – ec<strong>on</strong>omic, political <strong>and</strong> technical.First, the questi<strong>on</strong> arose, as in the US, of why assets in what shouldbe a public good are being channelled into private h<strong>and</strong>s. Then therewas the expense involved in distributing rights to thous<strong>and</strong>s or hundredsof thous<strong>and</strong>s of ‘downstream’ energy users rather than a manageableh<strong>and</strong>ful of ‘upstream’ suppliers of fossil fuels. Added to thiswas the questi<strong>on</strong> of arbitrariness.How so?For the sake of c<strong>on</strong>venience, <strong>on</strong>ly big energy users could be included. 224The domestic, transport <strong>and</strong> small-business sectors had to be left out.Even so, there are so many industrial users that the costs of attemptingto m<strong>on</strong>itor <strong>and</strong> administer the scheme are huge. That does createa lot of lucrative work for financial centres like L<strong>on</strong>d<strong>on</strong> <strong>and</strong> Frankfurt– which may have been <strong>on</strong>e of the attracti<strong>on</strong>s of the arrangement. Butthe public has to foot the bill. 225Moreover, if the government finds itself too weak to take away theemissi<strong>on</strong>s rights it has temporarily granted the big industrial participantsin the market, other sectors – transport, individual home owners,government instituti<strong>on</strong>s – will have to bear more of the burden ofmeeting emissi<strong>on</strong>s targets.In additi<strong>on</strong> to being inefficient <strong>and</strong> expensive, the decisi<strong>on</strong> to makeenergy users the owners of emissi<strong>on</strong>s allowances failed to address theglobal warming problem closer to its root. As emphasised earlier inthis special report, the main current threat to climatic stability is the
less<strong>on</strong>s unlearned 127flow of fossil carb<strong>on</strong> out of the ground. It’s both more ec<strong>on</strong>omical<strong>and</strong> more logical to curb this flow at the relatively few points it occursthan to attempt to impose centralised c<strong>on</strong>trol over milli<strong>on</strong>s ofseparate users of coal, oil <strong>and</strong> gas.Maybe so, but by the same token, isn’t it true that putting the point of resp<strong>on</strong>sibilitycloser to where fossil fuel fl ows out of the ground would run against theimmediate interests of infl uential oil <strong>and</strong> coal companies?For sure – unless they were h<strong>and</strong>ed a large number of free rights tothe world’s carb<strong>on</strong> dump.But presumably in that case, they would fi nd themselves under fi re for capturingunacceptably large rents from the customers to whom they would pass <strong>on</strong>their costs. 226I think you’re beginning to see why it’s not a simple questi<strong>on</strong> of experttechnique to decide who the owners of emissi<strong>on</strong>s rights are goingto be. It needs public discussi<strong>on</strong>.It seems like everybody’s going to be in c<strong>on</strong>fl ict with everybody else.C<strong>on</strong>fl ict has already broken out over rights given out by the EU ETS.In a rerun of some of the squabbles that plagued the US sulphur dioxidetrading scheme, for instance, the award of carb<strong>on</strong> credits to variousEU energy <strong>and</strong> chemical corporati<strong>on</strong>s merely for having obeyedWhose Carb<strong>on</strong> Dump Is It?Industrial manufacturers aren’t the <strong>on</strong>lypeople caught up in the new c<strong>on</strong>fl icts overownership of carb<strong>on</strong> dumping space.In New Zeal<strong>and</strong>, plantati<strong>on</strong> owners joinedbattle with the government in 2003 overwho owns the carb<strong>on</strong> in 200,000 hectaresof trees planted after 1989, which are eligibleunder the Kyoto Protocol to countas ‘carb<strong>on</strong> sinks’ that soak up the country’sindustrial emissi<strong>on</strong>s. The owners claimedthe government was trying to steal nzd2.6 billi<strong>on</strong> from them with a stroke of thepen, ‘possibly the largest private propertytheft in New Zeal<strong>and</strong>’s history.’ 233 Theyvowed to ‘take whatever acti<strong>on</strong> is necessary’to ensure just compensati<strong>on</strong> for theirpurloined property. 234In the UK, meanwhile, trouble is brewingbetween firms that sell rights over thecarb<strong>on</strong>-absorbing capacity of trees to thepublic <strong>and</strong> some of the local or state organisati<strong>on</strong>sthat raise the trees. The marketingfirms, it’s alleged, are manoeuvring theforest-planting organisati<strong>on</strong>s into signingc<strong>on</strong>tracts relinquishing these rights for aperiod of 99 years for a pittance. The marketingfirms then sell these rights <strong>on</strong> to thepublic for a huge mark-up, claiming falselythat they can make c<strong>on</strong>sumers’ jet fl ightsor home heating ‘carb<strong>on</strong>-neutral’.
128 development dialogue september 2006 – carb<strong>on</strong> tradinggovernment regulati<strong>on</strong>s or having received government subsidiesprompted protests <strong>and</strong> even legal acti<strong>on</strong>. 227 As metals manufacturersthreatened to stomp out of Germany over having to pay for the EUpolluti<strong>on</strong> allowances German utilities got from their government forfree, 228 the tiny Sax<strong>on</strong> village of Heuersdorf challenged the award offree rights to the energy <strong>and</strong> coal-mining firm Vattenfall, whose operati<strong>on</strong>shave troubled local residents. The <strong>on</strong>ly reas<strong>on</strong> Vattenfall hasbeen able to gain access to this largesse, Heuersdorf claims, is that itwas also the beneficiary of government subsidies for brown coal miningin the 1990s that later made it possible for it to take ‘early acti<strong>on</strong>’<strong>on</strong> carb<strong>on</strong> emissi<strong>on</strong>s. 229Then the European Commissi<strong>on</strong> started making plans to bring aviati<strong>on</strong>into the EU ETS, arguing that state-owned airlines ought to be‘resp<strong>on</strong>sible for emissi<strong>on</strong>s…rather than alternatives such as airports <strong>and</strong>fuel suppliers’. 230 Yet the Commissi<strong>on</strong> was uncomfortably aware thatgiving out emissi<strong>on</strong>s rights to state-owned airlines ‘could fall foul ofstate aid rules’. 231 One banker fretted that the c<strong>on</strong>tinuing debate overthe ownership of emissi<strong>on</strong>s was becoming ‘increasingly sterile’. 232With the Kyoto Protocol, the problems are even more intractable.How so?Early <strong>on</strong>, parties to the UNFCCC <strong>and</strong> their technical advisers singledout nati<strong>on</strong>al territories (what University of Wisc<strong>on</strong>sin historianTh<strong>on</strong>gchai Winichakul calls ‘geo-bodies’) 235 as the relevant emitters,global warming agents <strong>and</strong> owners of polluti<strong>on</strong> permits. Anythingemitted <strong>on</strong> Mexico’s territory, say, would be c<strong>on</strong>sidered to be emitted‘by Mexico’. But this seemingly ‘neutral’ unit of analysis was immediatelyentangled in disputes over resp<strong>on</strong>sibility, history, politics<strong>and</strong> exploitati<strong>on</strong>. People pointed out that some of the dump spaceearmarked for emissi<strong>on</strong>s originating <strong>on</strong> <strong>on</strong>e country’s territory wouldin effect be used by other nati<strong>on</strong>s. One country would wind up usingdump space that should bel<strong>on</strong>g to another.What do you mean?Southern negotiators <strong>and</strong> others argued that ‘inventories should focus<strong>on</strong> the locati<strong>on</strong> of ec<strong>on</strong>omic dem<strong>and</strong>’ for carb<strong>on</strong>-intensive practices‘rather than <strong>on</strong> the site of producti<strong>on</strong>’. 236 Why, for example, shouldMexico be held solely resp<strong>on</strong>sible for emissi<strong>on</strong>s involved in producinggoods for the US?Ec<strong>on</strong>omists asked why a country should be held resp<strong>on</strong>sible for theemissi<strong>on</strong>s of (for example) trucks crossing its territory, if it neither producesnor uses the goods that they carry. In extreme cases a country
less<strong>on</strong>s unlearned 129could even end up being held resp<strong>on</strong>sible for high emissi<strong>on</strong>s used toproduce <strong>and</strong> transport goods n<strong>on</strong>e of which its citizens enjoyed. Yetsingling out final c<strong>on</strong>sumers as the real emitters might not providedirect incentives for cleaner producti<strong>on</strong>. 237At the same time, envir<strong>on</strong>mentalists questi<strong>on</strong>ed whether entitiescalled ‘Russia’, ‘Ukraine’ <strong>and</strong> ‘the UK’ should be credited with post-1990 emissi<strong>on</strong>s reducti<strong>on</strong>s that are in fact due to post-Soviet ec<strong>on</strong>omiccollapse or the aggressive anti-uni<strong>on</strong>ism of Margaret Thatcher, theresulting collapse of the coal industry <strong>and</strong> the rise of less-pollutingnatural gas as a fuel.Indigenous movements, meanwhile, argued that it is they, not nati<strong>on</strong>algovernments, that have reduced emissi<strong>on</strong>s by opposing oil drilling<strong>on</strong> their territories. 238Other activists insisted that col<strong>on</strong>ial history <strong>and</strong> patterns of imposeddevelopment were also relevant to negotiating who the agents wereto be in the new carb<strong>on</strong> emissi<strong>on</strong>s market. For example, oil imperialismshaped Saudi Arabia <strong>and</strong> other Middle Eastern nati<strong>on</strong>s as oildependentsocieties, while col<strong>on</strong>ialism shaped Uruguay as a beef producer.Should today’s Saudis or Uruguayans be held resp<strong>on</strong>sible forcarb<strong>on</strong> dioxide emissi<strong>on</strong>s from gas fl ares or methane emissi<strong>on</strong>s fromcattle?I see. But in the end didn’t every<strong>on</strong>e sweep aside all these arguments <strong>and</strong> agreethat nati<strong>on</strong>-states were resp<strong>on</strong>sible for emissi<strong>on</strong>s within their borders <strong>and</strong> wouldbe the designated owners of emissi<strong>on</strong>s permits?The Kyoto Protocol did try to sweep these arguments under the rug,yes. But they’ve never g<strong>on</strong>e away. In fact, c<strong>on</strong>troversies over who theowners of rights to the earth’s carb<strong>on</strong> dump should be – <strong>and</strong> howmany rights they should have – have <strong>on</strong>ly increased.How’s that?Well, take, for example, the UK comp<strong>on</strong>ent of the EU ETS. As shownin Table 2 (<strong>on</strong> page 89), UK industry, mainly heavy industry, is beinggranted m<strong>on</strong>etisable access to between approximately two <strong>and</strong> a halfto five per cent of what might be called the ‘available’ world carb<strong>on</strong>dump (the figure for the EU corporate sector as a whole comes tobetween 23–45 per cent). UK populati<strong>on</strong>, by c<strong>on</strong>trast, comes to <strong>on</strong>ly<strong>on</strong>e per cent of the world total.The dump space granted to the UK, moreover, does not fall, geographicallyor otherwise, under UK legal jurisdicti<strong>on</strong> as c<strong>on</strong>venti<strong>on</strong>allyunderstood, but is used by all of the earth’s inhabitants. The UK
130 development dialogue september 2006 – carb<strong>on</strong> tradinggovernment has given away to its private corporati<strong>on</strong>s something thatis not its to give.The injustice involved is not abstract. It’s bound to have c<strong>on</strong>crete politicalresults. Southern countries are just as unlikely to sit still whilethe new ‘resource’ of carb<strong>on</strong>-cycling capacity is given away to Northernindustry as Northern countries are unlikely to sit still for proposalsfor a fairer system.Centre for Science<strong>and</strong> Envir<strong>on</strong>mentBut wait a minute. Is it really all that unfair to award the li<strong>on</strong>’s share of emissi<strong>on</strong>srights to big business in the North? After all, Northern countries <strong>and</strong> bigbusiness didn’t know any better when they got into the habit of using so muchof the world’s carb<strong>on</strong> dump following the fi rst decades of the industrial revoluti<strong>on</strong>.Sure, they know now that their acti<strong>on</strong>s are causing global warming. Butthey didn’t know then. You can’t hold them resp<strong>on</strong>sible.Maybe not. But they have benefited from using this capacity, <strong>and</strong> theyc<strong>on</strong>tinue to benefit today, while every<strong>on</strong>e is going to pay the price. 239But aren’t these big fossil users performing a valuable public service? It’s a comm<strong>on</strong>belief am<strong>on</strong>g US citizens, for instance, that their country’s disproporti<strong>on</strong>ateuse of world resources is justifi ed because the country’s ec<strong>on</strong>omy <strong>and</strong> foreignassistance programmes benefi t the whole world. If that’s the case, then perhapsit’s a good thing that the US <strong>and</strong> other industrialised countries be given theli<strong>on</strong>’s share of emissi<strong>on</strong>s rights.This argument echoes the <strong>on</strong>e usually made for making corporati<strong>on</strong>sthe beneficiaries of h<strong>and</strong>outs of property rights: that the public getssomething in return. For example, when railroads were given l<strong>and</strong>grants by the US government to use or sell in the 19th century, it wasexpected that they would provide transportati<strong>on</strong> in the public interest.And when mining companies are given free or low-cost c<strong>on</strong>cessi<strong>on</strong>s, itis expected that society will benefit from the metals made available.
less<strong>on</strong>s unlearned 131But how much has the South benefited from the North’s overuse ofthe global carb<strong>on</strong> dump? Most people would argue the benefits havebeen relatively small <strong>and</strong> uneven, compared to the harm the Southhas absorbed in the past <strong>and</strong> is likely to suffer in the future. As PeterSinger puts it, ‘many of the world’s poorest people, whose shares ofthe atmosphere have been appropriated by the industrialised nati<strong>on</strong>s,are not able to partake in the benefits of [the resulting] increased productivityin the industrialised nati<strong>on</strong>s – they cannot afford to buy itsproducts – <strong>and</strong> if rising sea levels inundate their farml<strong>and</strong>s, or cycl<strong>on</strong>esdestroy their homes, they will be much worse off than theywould otherwise have been’. 240Fixing the market?But maybe the market can be made fairer. The government could allocate emissi<strong>on</strong>srights to itself <strong>and</strong> then aucti<strong>on</strong> them off to the highest bidders.They would still end up in the h<strong>and</strong>s of big polluters.Or fees or profi ts from the sale or lease of emissi<strong>on</strong>s rights could be distributedthrough a trust to ordinary citizens, or communities, or producers of renewableenergy. 241 Or, better, they could be distributed directly to individuals or nati<strong>on</strong>s,eventually <strong>on</strong> a basis of per capita equality. 242 Each Southerner would ultimatelyget the same assets as everybody else, solving the justice problem at a stroke.This is the popular ‘C<strong>on</strong>tracti<strong>on</strong> <strong>and</strong> C<strong>on</strong>vergence’ proposal put forwardby the Global Comm<strong>on</strong>s Institute. Property rights in globalcarb<strong>on</strong>-cycling capacity would be distributed to nati<strong>on</strong>-states <strong>and</strong>their distributi<strong>on</strong> gradually equalised so that, by a certain date, everycountry would hold an amount corresp<strong>on</strong>ding to its populati<strong>on</strong>, or,alternatively, every individual would hold an equal amount.These rights would be traded either by individuals themselves or bythe state apparatuses of the countries in which the individuals lived.At the same time, the global ‘cap’ <strong>on</strong> emissi<strong>on</strong>s would shrink drasticallyto a level deemed sustainable by the internati<strong>on</strong>al community.Today’s large-emitting countries, after being granted the li<strong>on</strong>’sshare of newly-created assets, would thus find their property holdingsdwindling over time, as they were redistributed to the world’s poor<strong>and</strong> the total amount of rights was reduced.Various versi<strong>on</strong>s of C<strong>on</strong>tracti<strong>on</strong> <strong>and</strong> C<strong>on</strong>vergence already have thebacking of most governments in the South <strong>and</strong> many n<strong>on</strong>-governmentorganisati<strong>on</strong>s, prominent public figures <strong>and</strong> political parties inthe North. 243
132 development dialogue september 2006 – carb<strong>on</strong> tradingSounds great!It does, doesn’t it? But the assumpti<strong>on</strong> that equity will be furthered inthe current ec<strong>on</strong>omic <strong>and</strong> political envir<strong>on</strong>ment by commodificati<strong>on</strong><strong>and</strong> systems of private property – <strong>and</strong> that states will be c<strong>on</strong>scientiousguardians of the public welfare – looks risky to many observers withexperience of similar schemes. (See box: ‘Little’ People <strong>and</strong> ‘Big’ Resources.)To what extent would Southern governments come under pressureto use their surplus citizens’ allowances to attract dirty industries? 244Would an equal per capita carb<strong>on</strong> allowance ec<strong>on</strong>omy be any moresuccessful in fostering equity than Nigeria’s oil ec<strong>on</strong>omy, Mali’s cott<strong>on</strong>ec<strong>on</strong>omy or the uranium ec<strong>on</strong>omy of northern Canada or Australia?What scale of reform of local power structures would be necessary toprevent abuses in a system that granted lucrative assets to every localvillager? Whose h<strong>and</strong>s would the polluti<strong>on</strong> rights eventually wind upin? A nominally equal-per-capita scheme that encouraged a state tosubsidise the development of a high-carb<strong>on</strong> industrial structure wouldalso pose new problems for citizens fighting fossil-fuel developmentsin their local areas. C<strong>on</strong>tracti<strong>on</strong> <strong>and</strong> C<strong>on</strong>vergence’s initial grant of adisproporti<strong>on</strong>ate chunk of lucrative assets to the rich, in additi<strong>on</strong>, runsinto the same difficulties as the Kyoto Protocol <strong>and</strong> the EU ETS. Undera C<strong>on</strong>tracti<strong>on</strong> <strong>and</strong> C<strong>on</strong>vergence trading scheme, too, as under everyother carb<strong>on</strong> trading programme, rules aimed at improving integrity<strong>and</strong> preventing fraud would c<strong>on</strong>tinuously be threatened by the emergenceof new <strong>and</strong> more ambitious liberalisati<strong>on</strong> initiatives. 245Maybe we just have to ab<strong>and</strong><strong>on</strong> the idea that greenhouse gas emissi<strong>on</strong>s tradingcan be made fair.Emissi<strong>on</strong>s trading’s most powerful prop<strong>on</strong>ents probably never hadthat idea in the first place. Equality is not what emissi<strong>on</strong>s markets areabout. Even the ‘total product rule’ that R<strong>on</strong>ald Coase relied <strong>on</strong> inhis justificati<strong>on</strong> of polluti<strong>on</strong> markets ‘serves primarily as a mechanismfor redistributing wealth’ from poor to rich, 247 <strong>and</strong> from future generati<strong>on</strong>sto the present. 248You can go further <strong>and</strong> say that <strong>on</strong>e of emissi<strong>on</strong>s trading schemes’ politicalselling points is that they preserve inequality. And many mainstreamenvir<strong>on</strong>mentalist backers of trading schemes are perfectly willingto sacrifice some ‘efficiency’ to make them even more unequal.How can that be? Isn’t the main rais<strong>on</strong> d’etre of trading to cut the costs ofenvir<strong>on</strong>mental acti<strong>on</strong>?
less<strong>on</strong>s unlearned 133‘Little’ People <strong>and</strong> ‘Big’ ResourcesWould giving every<strong>on</strong>e in the world equalrights <strong>on</strong> paper to the use of the earth’scarb<strong>on</strong> dump make an egalitarian marketpossible? Would every<strong>on</strong>e have the power,the resources <strong>and</strong> the informati<strong>on</strong> to benefit?The questi<strong>on</strong> is similar to that ofwhether giving forest peoples paper rightsto the biodiversity in their territories willensure that they benefit from a biodiver sitymarket. Yale University anthropologist <strong>and</strong>forester Michael Dove offers the followingwords of cauti<strong>on</strong>.‘[W]henever a resource at the peripheryacquires value to the centre, the centre assumesc<strong>on</strong>trol of it (e.g., by restricting localexploitati<strong>on</strong>, granting exclusive licenses tocorporate c<strong>on</strong>cessi<strong>on</strong>aires, <strong>and</strong> establishingrestrictive trade associati<strong>on</strong>s). The patternis aptly expressed by a peasant homily fromKalimantan, which states that whenever a‘little’ man chances up<strong>on</strong> a ‘big’ fortune,he finds <strong>on</strong>ly trouble. He is in trouble becausehis political resources are not commensuratewith his new-found ec<strong>on</strong>omicresources. He does not have the power toprotect <strong>and</strong> exploit great wealth <strong>and</strong> so,inevitably, it is taken from him…the implicati<strong>on</strong>[of the proposal to extend a globalsystem of rights to a new commod ity]is that the global system that proposes toextend these rights, <strong>and</strong> the indigenouscommunities that are the intended beneficiaries,are structurally similar membersof the same, integrated system. I suggest,rather, that the global system <strong>and</strong> these indigenouscommunities are structurally dissimilarmembers of a more loosely articulatedsystem… inattenti<strong>on</strong> to this distincti<strong>on</strong>is a functi<strong>on</strong> of a paradoxical tendencyam<strong>on</strong>g scholars <strong>and</strong> planners to insist thatsystems are either all-embracing…or unc<strong>on</strong>nected(e.g., indigenous communities).The c<strong>on</strong>cept of a differentiated system,with relati<strong>on</strong>s obtaining am<strong>on</strong>g dissimilarmembers, is relatively undeveloped inthe internati<strong>on</strong>al science <strong>and</strong> developmentcommunity.’ 246The trade in human organs also suggestsdifficulties with the idea that any equaldistributi<strong>on</strong> of tradeable property rightswill automatically have egalitarian c<strong>on</strong>sequences.No <strong>on</strong>e in the global organ markethas ever been allocated any propertyrights over any<strong>on</strong>e else’s organs. Every<strong>on</strong>ehas an equal right to sell their own organs.Yet it is the poor who wind up selling theirkidneys in today’s organ-trading schemes,not the rich. ‘Free choice’ <strong>on</strong> paper is notthe same as ‘free choice’ in the actuallyexistingmarket.That’s what we often hear from government officials <strong>and</strong> their ec<strong>on</strong>omicadvisers, <strong>and</strong> we’ll c<strong>on</strong>tinue to evaluate that claim as we goal<strong>on</strong>g. But in the meantime, it’s important to note that most realworldtrading advocates are willing to forget about ‘maximising efficiency’if they think that’ll help get big business’s acquiescence inclimate acti<strong>on</strong>.
134 development dialogue september 2006 – carb<strong>on</strong> tradingHow so?Many ec<strong>on</strong>omists who have looked into the matter agree that a polluti<strong>on</strong>trading system will be more efficient – <strong>and</strong> less regressive – if therights it creates are aucti<strong>on</strong>ed, not given away, <strong>and</strong> the revenue usedto make necessary adjustments in the society. 249This is not what real-world trading schemes do. As noted above, USpolluti<strong>on</strong> trading programmes, the Kyoto Protocol <strong>and</strong> the EU Emissi<strong>on</strong>sTrading Scheme all give away polluti<strong>on</strong> rights – <strong>and</strong> give themaway to the worst polluters. So does the Regi<strong>on</strong>al Greenhouse GasInitiative now emerging in the US, 250 which, like Kyoto, operates <strong>on</strong>the ‘polluter earns’ rather than the ‘polluter pays’ principle. This arrangement– known in technical jarg<strong>on</strong> as ‘gr<strong>and</strong>fathering’ – is welcomedby many of the same trading advocates who proclaim themselvesto be primarily c<strong>on</strong>cerned with ‘efficiency’.Such trading advocates go al<strong>on</strong>g with gr<strong>and</strong>fathered trading schemesless because they are ‘efficient’ than because they imagine that buyingoff the rich with formal rights to the open-access good that they havebeen using is necessary to get them to agree to reducti<strong>on</strong>s. 251This, many trading advocates believe, will obviate the need to undertakethe difficult job of supporting <strong>and</strong> building effective popularmovements, public leadership <strong>and</strong> public educati<strong>on</strong> around climatechange that business <strong>and</strong> government will then have to follow. Hencethe often-heard slogan that emissi<strong>on</strong>s trading is more politically ‘realistic’than other opti<strong>on</strong>s: by appealing to the powerful, it will supposedlyachieve the same goal as mobilising ordinary people, <strong>and</strong> morequickly <strong>and</strong> with a lot less effort.Let us listen, for example, to ec<strong>on</strong>omists Robert Hahn <strong>and</strong> RobertStavins:[C]ountries <strong>and</strong> special interest groups will not accept an agreementthat substantially shifts the distributi<strong>on</strong> of wealth or politicalpower. This resistance means that market-based approaches… canfacilitate the formati<strong>on</strong> of coaliti<strong>on</strong>s of support through the gr<strong>and</strong>fatheringof rights.‘Any market-based approach that is implemented to c<strong>on</strong>trol greenhousegases’, Hahn <strong>and</strong> Stavins go <strong>on</strong>,will vary dramatically from the textbook applicati<strong>on</strong>s of thesec<strong>on</strong>cepts. There are many reas<strong>on</strong>s why market-based approacheswill deviate from their ideal; an important <strong>on</strong>e is politics. However,departure of actual instruments from a theoretical ideal is notenough, <strong>on</strong> its own, for rejecti<strong>on</strong> of the approach. 252
less<strong>on</strong>s unlearned 135Or the World Resources Institute:Politically, the issue is not necessarily ec<strong>on</strong>omic efficiency but howany allocati<strong>on</strong> mechanism will affect the specific interests of a particularparticipant or stakeholder. Aucti<strong>on</strong>s that make regulatedsources pay for all allowances are presumably more difficult to implement,due to political resistance. Furthermore, potential newsources that would prefer an aucti<strong>on</strong> may not be sufficiently organised(or even exist) to lobby for it. Free historical allocati<strong>on</strong>s, orgr<strong>and</strong>fathering, became the norm for the [US] Oz<strong>on</strong>e TransportCommissi<strong>on</strong> NO x Budget presumably because of political resistanceto aucti<strong>on</strong>ing. 253Social regressiveness <strong>and</strong> a form of bribery are comm<strong>on</strong>ly built intotrading schemes, both within <strong>and</strong> across nati<strong>on</strong>s.A quick fix?But maybe regressiveness, inequality <strong>and</strong> bribery are necessary evils. After all,surely fi ghting global warming requires working with the ec<strong>on</strong>omic system thatwe have, not solving all the world’s problems. Our children can’t aff ord for usto wait for a regime of global equality, the overthrow of global capitalism or evenjust a more cooperative ec<strong>on</strong>omic system before we move to rein in greenhousegas emissi<strong>on</strong>s. And if that means we have to accept both unfairness <strong>and</strong> relativeineffi ciency, then so be it. Surely to deny this is to play into the h<strong>and</strong>s ofUS President George W. Bush <strong>and</strong> others who are trying to obstruct genuineclimate acti<strong>on</strong>.There are several n<strong>on</strong> sequiturs here that need a quick reply.First, pointing out the obstacles to the ec<strong>on</strong>omic novelty called emissi<strong>on</strong>strading is not the same as calling for a global revoluti<strong>on</strong> againstcapitalism. Up to now, global capitalism – whatever is meant by theterm – has got al<strong>on</strong>g quite well without emissi<strong>on</strong>s trading.The fact that emissi<strong>on</strong>s trading is about ‘creating a new market’, while(say) comm<strong>on</strong>s, c<strong>on</strong>venti<strong>on</strong>al regulati<strong>on</strong>, <strong>and</strong> removal of subsidies arec<strong>on</strong>venti<strong>on</strong>ally classified as ‘outside the market’ doesn’t necessarilymake emissi<strong>on</strong>s trading any more ‘capitalism-friendly’ than, say, c<strong>on</strong>venti<strong>on</strong>alregulati<strong>on</strong> or the redirecti<strong>on</strong> of subsidies. Most observerswould argue that the type of enterprise associated with ‘global capitalism’since the 19th century has actually been dependent for its survival<strong>on</strong> such types of state acti<strong>on</strong>. 254 Some would go even further,urging that no firm boundaries can be drawn between ‘market’ <strong>and</strong>‘n<strong>on</strong>-market’, ‘inside the ec<strong>on</strong>omy’ <strong>and</strong> ‘outside the ec<strong>on</strong>omy’, <strong>and</strong>‘capitalism’ <strong>and</strong> a whole raft of supposedly ‘n<strong>on</strong>capitalistic’ types of
136 development dialogue september 2006 – carb<strong>on</strong> tradingsocial <strong>and</strong> envir<strong>on</strong>mental c<strong>on</strong>trol with pedigrees far older than thatof emissi<strong>on</strong>s trading. 255In short, tackling global warming ‘from within our current ec<strong>on</strong>omicsystem’ – whatever meaning is attached to that phrase – does notentail emissi<strong>on</strong>s trading. Business itself often points out that climatechange can’t be addressed without the sort of l<strong>on</strong>g-term targets <strong>and</strong>directi<strong>on</strong> that can <strong>on</strong>ly be provided by forces comm<strong>on</strong>ly seen as ‘outsidethe market’. No self-respecting big capitalists are likely to imaginethat their survival depends <strong>on</strong> emissi<strong>on</strong>s trading.Sec<strong>on</strong>d, emissi<strong>on</strong>s trading, as what Ruth Greenspan Bell calls the‘most difficult of the ec<strong>on</strong>omic instruments’, is hardly going to be agood choice for any<strong>on</strong>e who wants speedy <strong>and</strong> effective acti<strong>on</strong> acrossthe globe. In the classroom, where all the stage-setting <strong>and</strong> messy political<strong>and</strong> technical work it requires can be sidelined or ignored, it appeareda neat theory. 256 But in the real world, it cannot eliminate theneed for hard decisi<strong>on</strong>s <strong>and</strong> hard political organising. Indeed, it makesthe decisi<strong>on</strong>s <strong>and</strong> the organising even harder. As trading expert DavidDriesen writes, ‘Emissi<strong>on</strong>s trading, rather than providing an antidoteto the problems of complex decisi<strong>on</strong>-making that plague traditi<strong>on</strong>alregulati<strong>on</strong>, provides a layer of additi<strong>on</strong>al complicati<strong>on</strong>s <strong>and</strong> occasi<strong>on</strong>sfor dispute.’ 257 It is emissi<strong>on</strong>s trading itself that is turning out to requirethe impossible task of ‘solving the world’s problems.’The evidence suggests, then, that it’s carb<strong>on</strong> trading advocates, nottrading critics, who are allowing the tail of their political wishes towag the dog of what is practically possible.
less<strong>on</strong>s unlearned 137The special problems ofcarb<strong>on</strong> projectsSo far this chapter has explained why current large-scale attempts atsetting up a market in allowances to emit greenhouse gases d<strong>on</strong>’t c<strong>on</strong>stitutean effective approach to climate change.But – as explained in the last chapter – trading in allowances to emitisn’t the <strong>on</strong>ly kind of carb<strong>on</strong> trading. Commerce in credits generatedby special polluti<strong>on</strong>-saving projects is also growing fast.Remind me. What are these projects? How do they work?From the beginning, private firms, Northern governments <strong>and</strong> theUnited Nati<strong>on</strong>s have been fretting that big fossil fuel users in richcountries w<strong>on</strong>’t be able to afford even the small cuts in fossil fuel userequired by emissi<strong>on</strong>s trading programmes such as that of the KyotoProtocol. As a result, they’ve hunted around for ways of allowing industryto c<strong>on</strong>tinue to burn fossil fuels while still keeping their emissi<strong>on</strong>sunder m<strong>and</strong>ated ‘caps’.The main soluti<strong>on</strong> private industry <strong>and</strong> governments have turned toc<strong>on</strong>sists of special carb<strong>on</strong>-saving or carb<strong>on</strong>-sequestering projects –schemes that capture greenhouse gases, put them out of harm’s way,use fossil fuels more efficiently, <strong>and</strong> so <strong>on</strong>. Instead of cutting off flowsof waste into the overflowing world carb<strong>on</strong> dump, they’ve proposedbuilding ‘extensi<strong>on</strong>s’ of the dump to h<strong>and</strong>le the overflow. Acquiringcertificates of ‘ownership’ of such ‘dump extensi<strong>on</strong>s’ entitles big pollutersto emit more greenhouse gases than they have emissi<strong>on</strong>s allowancesfor.It’s a classic ‘end of pipe’ soluti<strong>on</strong> to polluti<strong>on</strong>. Instead of cutting flowsof a raw material into an industrial process, you fi x the problem afterthe resulting waste is already coming out of the pipe.How do these new projects fi t into the world of trade?The allowances <strong>and</strong> the special credits created by carb<strong>on</strong>-savingprojects are all thrown into a big pot <strong>and</strong> traded <strong>on</strong>e for the other.Everybody is supposed to benefit. Polluters save m<strong>on</strong>ey by not havingto stop polluting, <strong>and</strong> builders of new carb<strong>on</strong> dump make m<strong>on</strong>ey byselling the new dump space they create.What kind of carb<strong>on</strong> dump extensi<strong>on</strong>s are we talking about?
138 development dialogue september 2006 – carb<strong>on</strong> tradingTwo types can be distinguished. The first kind is built <strong>on</strong> using l<strong>and</strong>,forests, soils, water, even parts of the oceans.Some of these new dumps are literally holes in the ground. Oil companiesare eagerly champi<strong>on</strong>ing schemes that would allow fossil fuelusers to capture their carb<strong>on</strong> dioxide, liquefy it, <strong>and</strong> park it in leakygeological formati<strong>on</strong>s such as old oil wells (Figure 5). 258 Other, evenleakier new carb<strong>on</strong> dumps have been proposed for ocean bottoms(Figure 6). 259Figure 5. Storing carb<strong>on</strong> dioxide in geological formati<strong>on</strong>s. (Source: IPCC)Figure 6. Storing carb<strong>on</strong> dioxide <strong>on</strong> ocean bottoms. (Source: IPCC)
less<strong>on</strong>s unlearned 139Still other dump extensi<strong>on</strong>s c<strong>on</strong>sist of new trees planted to absorbcarb<strong>on</strong> dioxide 260 or soils where tilling has been halted to allow carb<strong>on</strong>buildup, or stretches of ocean salted with ir<strong>on</strong> to stimulate plantgrowth.Gas flaring. Companiesmay so<strong>on</strong> be able toget carb<strong>on</strong> credits forusing the gas to generateelectricity instead.And the sec<strong>on</strong>d type of dump extensi<strong>on</strong>?A sec<strong>on</strong>d type involves various emissi<strong>on</strong>s-saving technologies. For example,companies wanting carb<strong>on</strong> credits can help refit factories inKorea or India to capture or destroy hydroflourocarb<strong>on</strong>s such as HFC-23 or other powerful greenhouse gases such as nitrous oxide. Or theycan invest in hydroelectric dams in Guatemala or Brazil that ‘replace’electricity generated by fossil fuels. Or they can set up wind farms togenerate green electricity, or institute efficiency projects that distributeenergy-frugal light bulbs or rearrange traffic signals. Or they can growbiofuel plantati<strong>on</strong>s, which are claimed to provide ‘substitutes’ for fossilfuels. Or they can start up a project to feed supplements to Ug<strong>and</strong>ancows to reduce their methane flatulence. 261 They might even try gettingcredits for cleaning up debris left by the Indian Ocean tsunami. 262Another target for carb<strong>on</strong> finance is projects that take methane from,say, waste dumps in South Africa, coal seams in China, pig farms inChile, 263 or fl aring towers in Nigerian oil fields, <strong>and</strong> use it as a fuel forgenerating electricity. Many such projects release carb<strong>on</strong> dioxide, butare said to be relatively ‘good’ for the climate, since releases of unburnedmethane are even worse for the climate than carb<strong>on</strong> dioxide.But wait a minute. Shouldn’t it just be things like energy effi ciency measuresor solar power – or not building a plant at all – that get carb<strong>on</strong> m<strong>on</strong>ey? Aren’tthose things all less carb<strong>on</strong>-intensive than methane combusti<strong>on</strong>?It doesn’t matter. As l<strong>on</strong>g as a project emits less greenhouse gas than‘business as usual’, it’s in the m<strong>on</strong>ey.But who fi gures out what ‘business as usual’ is?The project prop<strong>on</strong>ent’s private c<strong>on</strong>sultants.Who gives them the power to decide what is business as usual?The UN does. Private businesses do. Government officials do. Individualswho buy carb<strong>on</strong> ‘offset’ credits do.Some of these private c<strong>on</strong>sultants have also served <strong>on</strong> intergovernmentalpanels providing technical advice to the UN <strong>on</strong> what can bed<strong>on</strong>e about climate change <strong>and</strong> the carb<strong>on</strong> accounting methods thatshould be used for carb<strong>on</strong> projects. 264 That further increases their influencewith governments, industry <strong>and</strong> the UN.
140 development dialogue september 2006 – carb<strong>on</strong> tradingIsn’t that a c<strong>on</strong>fl ict of interest?Yes. But no <strong>on</strong>e’s making a fuss. When challenged, UN officials saythat the expert qualificati<strong>on</strong>s of these c<strong>on</strong>sultants, together with theprocess of peer review, exempt them from charges of c<strong>on</strong>fl ict of interest.But what about the public? Why can’t the public have a say over what businessas usual should be c<strong>on</strong>sidered to be?The public doesn’t play much of a part in these discussi<strong>on</strong>s – if theyare informed what’s going <strong>on</strong> at all.How do these c<strong>on</strong>sultants go about their business?They identify the ‘baseline’, or business-as-usual scenario. Then theyverify that the existence of the carb<strong>on</strong> projects is due to the financegenerated by the carb<strong>on</strong> credits they sell. Then they subtract thegreenhouse gas emitted under the project scenario from greenhousegas emitted under the baseline scenario to come up with the emissi<strong>on</strong>s‘saved’ by the project (see box, p. 61). In claiming that variousn<strong>on</strong>-carb<strong>on</strong> or low-carb<strong>on</strong> futures are not possible, they are, in asense, appropriating these futures for their own use.Let me get this straight. Under this kind of trading, the carb<strong>on</strong> accounts of, say,Nigeria, show a debit for carb<strong>on</strong> dioxide released by the gas fl aring that theWestern oil industry c<strong>on</strong>ducts within its borders. At the same time, that sameindustry (or an industrialised country sp<strong>on</strong>soring the technology that capturesthe gas <strong>and</strong> puts it to good use), can get carb<strong>on</strong> credits for whatever the ‘climatic’diff erence is between using that technology <strong>and</strong> releasing unburned methane.That’s correct. Nigeria gets stuck with the resp<strong>on</strong>sibility for the emissi<strong>on</strong>sof a foreign oil company. Foreigners get the credits for some marginal,<strong>and</strong> probably profitable, efforts to clean up around the margins– efforts that are m<strong>and</strong>ated by Nigerian law anyway. 265 It’s a neat wayfor polluters to earn, while making poorer countries pay. It does noverifiable good for the climate, as we’ll see in a moment. And it’s allc<strong>on</strong>cealed under beautifully complicated accounting mathematics.Today, dam companies, forestry firms, oil companies <strong>and</strong> the like areall seeking licenses to sell carb<strong>on</strong> dumping rights <strong>on</strong> the ground thattheir projects result in the emissi<strong>on</strong> of less carb<strong>on</strong> than business-asusual‘alternatives’ identified by experts.So in theory, these carb<strong>on</strong>-‘saving’ projects could license the removal <strong>and</strong> burningof all the remaining fossil fuel still underground.Yes.
less<strong>on</strong>s unlearned 141But doesn’t that reduce the whole idea of trading in carb<strong>on</strong> credits to an absurdity?Because isn’t it true that if all the world’s remaining fossil fuels are exhumed<strong>and</strong> burned, the human race is probably fi nished?Yes. Carried to its logical extreme, trading in credits from ‘offset’projects would result in a world in which all the coal, oil <strong>and</strong> gas hadbeen burned up.That calls up the image of a l<strong>and</strong>scape full of wind farms, solar stati<strong>on</strong>s,<strong>and</strong> the carcasses of biofuel plantati<strong>on</strong>s <strong>and</strong> hydroelectric dams,all baking in an atmosphere hot enough to boil water.Not a very nice picture. But presumably trading in carb<strong>on</strong> credits would neverbe carried that far.No. But no <strong>on</strong>e has ever suggested any ways of stopping it from doingso, either. Or any arguments why credit trading is not incoherent injust the way you’ve suggested.Centre for Science <strong>and</strong>Envir<strong>on</strong>mentSo why are the world’s governments still pursuing this idea?No <strong>on</strong>e is organised enough politically yet to call a halt to it. Meanwhile,the idea has great short-term appeal for business <strong>and</strong> governments.Like ‘pure’ emissi<strong>on</strong>s trading (or cap <strong>and</strong> trade), trading that includescredits is supposed to save m<strong>on</strong>ey by finding ‘envir<strong>on</strong>mentally equivalent’acti<strong>on</strong>s that are in the short run cheaper to undertake. In fact,building or buying new carb<strong>on</strong> dump extensi<strong>on</strong>s is supposed to beeven cheaper than buying some of other countries’ share of the existingdump (assuming any is available). 266In 1999, the World Bank was promising investors in its PrototypeCarb<strong>on</strong> Fund credits at less than usd 5 a t<strong>on</strong>ne – a bargain price thatinfluenced all succeeding price-setting. In 2005, CDM carb<strong>on</strong> creditswere trading at an average of around €6.7 per t<strong>on</strong>ne of carb<strong>on</strong> dioxide,JI credits at around €5.1, 267 two to four times less than EU ETSallowances. Some planners had originally hoped that absorbing carb<strong>on</strong>dioxide by planting trees in poorer countries could be ‘between50 <strong>and</strong> 200 times cheaper’ than reducing it at source. 268 As IPA Energyc<strong>on</strong>sultants have recently noted, permitting Northern installati<strong>on</strong>sto use Certified Emissi<strong>on</strong>s Reducti<strong>on</strong>s or CERs (as CDM creditsare called) ‘effectively c<strong>on</strong>stitutes a sec<strong>on</strong>d allocati<strong>on</strong>, at the CER pricerather than zero cost’. 269But still, off sets encourage creativity in fi nding diff erent ways to deal with climatechange, d<strong>on</strong>’t they? For example, suppose you try to reduce emissi<strong>on</strong>s from jetaircraft by taxing short-haul air tickets so that they’re USD 25 more expensive.
142 development dialogue september 2006 – carb<strong>on</strong> tradingThat might have some impact, but it’s unlikely to deter most well-off people fromfl ying. But if you encourage the same airline passengers to ‘off set’ their fl ightsusing that same USD 25, they can invest in all sorts of diff erent climate acti<strong>on</strong>s <strong>on</strong>the ground. For example, a British Airways scheme off ers schemes to plant treesor subsidise an energy-effi ciency programme in rural India.The problem is that for such offsets to work, carb<strong>on</strong> credits have to beclimatically equivalent to carb<strong>on</strong> allowances. In other words, a carb<strong>on</strong>market that includes credits, like a market that includes <strong>on</strong>ly allowances,needs to ensure that the apples <strong>and</strong> oranges it is trading areclimatically equivalent to each other.Apples <strong>and</strong> orangesExcept that in the case of off sets, the apples <strong>and</strong> oranges are even more diff erentfrom each other than they were with emissi<strong>on</strong>s trading.Exactly. With emissi<strong>on</strong>s trading proper, the apples <strong>and</strong> oranges are,crudely speaking, emissi<strong>on</strong>s that come out of pipes in different locati<strong>on</strong>sthrough different processes <strong>and</strong> c<strong>on</strong>texts. With a market thatalso involves project credits, the apples <strong>and</strong> oranges are far more diverse.The credits derived from various ‘baseline-<strong>and</strong>-credit’ schemesare different both from each other <strong>and</strong> from the emissi<strong>on</strong>s allow ancesassociated with ‘cap <strong>and</strong> trade’ schemes. Destroying the industrialgreenhouse gas HFC-23 is not the same as investing in windmills.Making your chemical plant more efficient is not the same as supplyingefficient light bulbs to Jamaica. Planting trees is not the same asrefraining from flying to the Maldives for a holiday. Yet all of thesethings need to be verified to be ‘climatically equivalent’ for credittrading to work.In fact, the United Nati<strong>on</strong>s <strong>and</strong> other carb<strong>on</strong> trading advocates go sofar as to claim that the carb<strong>on</strong> projects they are promoting are not <strong>on</strong>ly‘equivalent to’, or ‘compensate for’, emissi<strong>on</strong>s reducti<strong>on</strong>s, but actuallyare emissi<strong>on</strong>s reducti<strong>on</strong>s. They assert that planting eucalyptus trees,building hydroelectric dams, burning methane or instituting efficiencyprogrammes are ‘reducing emissi<strong>on</strong>s’ just as much as halting the flow ofcoal into a boiler, even if no emissi<strong>on</strong>s are being reduced.So is there a problem? All these things are in fact climatically equivalent, aren’tthey?No. That can’t be verified.
less<strong>on</strong>s unlearned 143So CDM schemes <strong>and</strong> other carb<strong>on</strong> projects d<strong>on</strong>’t, in fact, ‘off set’ or ‘neutralise’industrial emissi<strong>on</strong>s?No.So they’re not emissi<strong>on</strong>s reducti<strong>on</strong>s after all?No. The putative commodity produced by CDM <strong>and</strong> similar ‘carb<strong>on</strong>-saving’programmes can’t be correctly referred to as ‘emissi<strong>on</strong> reducti<strong>on</strong>s’,‘carb<strong>on</strong>’ or ‘carb<strong>on</strong> dioxide equivalent’, or any similar term.Unlike c<strong>on</strong>venti<strong>on</strong>al dumps receiving industrial waste, mine tailings,or nuclear materials, the purported new carb<strong>on</strong> dumps carved out ofthe biosphere or the future can’t even be verified to be dumps at all.So in fact no <strong>on</strong>e should be allowed to trade CDM or JI credits for allowances.And British Airways should not be claiming that its passengers can ‘neutralise’their fl ights by giving m<strong>on</strong>ey to tree-planters or effi ciency programmes in Indiaor South Africa.That’s right.Well, I’m looking forward to hearing how you justify that claim. Because theUN <strong>and</strong> the IPCC, together with thous<strong>and</strong>s of experts, claim that there areno scientifi c obstacles to trading credits for allowances.The claim, unfortunately, is based more <strong>on</strong> free-market ideology <strong>and</strong>wishful thinking than scientific reflecti<strong>on</strong>. Just as in emissi<strong>on</strong>s trading,the ‘baseline <strong>and</strong> credit’ market’s requirement that so many diversethings be made numerically equivalent has turned out to be itsundoing. The difference is that the problems of trading systems thatinclude project-based credits are even more intractable even than theproblems of allowance trading al<strong>on</strong>e.OK, give me the bad news.Accountants as storytellersLet’s begin with an insoluble quantificati<strong>on</strong> problem that’s comm<strong>on</strong>to all carb<strong>on</strong>-’saving’ projects.As noted above, all such projects calculate carb<strong>on</strong> ‘saved’ by relying<strong>on</strong> experts’ assessments of ‘what would have been the case withoutthe project’. The difficulty is that no expert has either the ability orthe right to determine a single scenario describing ‘what would havehappened without the project’.
144 development dialogue september 2006 – carb<strong>on</strong> tradingFor instance, no expert can calculate what role CDM projects have inforeclosing or promoting structurally different l<strong>on</strong>g-term low-carb<strong>on</strong>futures. All they can do is calculate the role they might have in makingcertain more or less arbitrarily chosen ‘business-as-usual’ pathwaysmarginally more carb<strong>on</strong>-efficient.You’d better explain that in words of <strong>on</strong>e syllable.The credits that a carb<strong>on</strong> project generates are calculated by subtractingthe emissi<strong>on</strong>s of the world that has the project in it from theemissi<strong>on</strong>s of an otherwise-identical possible world that doesn’t. Thislast world is called the ‘baseline’. Industrialised countries or corporati<strong>on</strong>scan then buy credits representing the emissi<strong>on</strong>s that are claimedto have been saved over the ‘baseline’ in lieu of reducing their ownfossil fuel use.Right…To make this work, however, the market needs a single number. Youcan’t very well say that your wind farm or HFC-23 project generates‘either 10 t<strong>on</strong>nes in carb<strong>on</strong> dioxide equivalent credit or 100,000t<strong>on</strong>nes, depending <strong>on</strong> which baseline you choose.’ That would meanchaos. Sellers wouldn’t know how much of their commodity theywere selling. Buyers wouldn’t know how much they were buying. Soyou can choose <strong>on</strong>ly <strong>on</strong>e baseline.OK, I’m with you so far.The problem is that it’s impossible to isolate this single baseline <strong>and</strong>thus fulfil the requirement of a market for a single number. Evenmany trading prop<strong>on</strong>ents acknowledge the ‘impossibility of measuringor even defining savings that are additi<strong>on</strong>al to those that wouldhave occurred in the absence of emissi<strong>on</strong>s credits.’ 270‘Free-rider creditsfrom n<strong>on</strong>-additi<strong>on</strong>alCDM projects threatento undermine theenvir<strong>on</strong>mental integrity ofthe Kyoto Protocol. SomeCDM regimes could leadglobal emissi<strong>on</strong>s to increaseby as much as 600 milli<strong>on</strong>t<strong>on</strong>nes of carb<strong>on</strong> relativeto the Kyoto Protocoltarget, if credits awardedspuriously to projects thatwould have happenedanyway are used in placeof real carb<strong>on</strong> reducti<strong>on</strong>s .... These free riders wouldamount to a multi-billi<strong>on</strong>dollar cross-subsidy toCDM project participantsat the expense of theglobal envir<strong>on</strong>ment.’ 284Steve Bernow et al., 2000What’s the diffi culty?Many without-project scenarios are always possible. The choice ofwhich <strong>on</strong>e is to be used in calculating carb<strong>on</strong> credits is a matter of politicaldecisi<strong>on</strong> rather than ec<strong>on</strong>omic or technical predicti<strong>on</strong>. 271The evidence usually cited to support claims that various schemeswould not have been undertaken without carb<strong>on</strong> investment, moreover,is riddled with irresolvable uncertainties. One study of six proposedcarb<strong>on</strong> plantati<strong>on</strong> projects in Brazil couldn’t come to any moredefinite c<strong>on</strong>clusi<strong>on</strong>s than that ‘at least <strong>on</strong>e <strong>and</strong> possibly five’ of thesix were ‘n<strong>on</strong>-additi<strong>on</strong>al.’ The evidence was ‘completely unreliable’about which project would be profitable or go forward without
less<strong>on</strong>s unlearned 145carb<strong>on</strong> m<strong>on</strong>ey. Depending <strong>on</strong> discount rates, baseline vegetati<strong>on</strong> estimates,carb<strong>on</strong> accounting systems <strong>and</strong> expected price variati<strong>on</strong>s, calculati<strong>on</strong>sof the value of the carb<strong>on</strong> credits to be generated differed byas much as an order of magnitude. 272So measuring carb<strong>on</strong> credits is completely diff erent from measuring emissi<strong>on</strong>s.Yes. While scientists can usually agree about how to read dials, calibrategas detectors, <strong>and</strong> perform the other tasks necessary for directlymeasuring real emissi<strong>on</strong>s (assuming the necessary instrumentati<strong>on</strong> ispresent), no c<strong>on</strong>sensus is attainable anywhere about how to isolate<strong>on</strong>e single hypothetical storyline from am<strong>on</strong>g many possible storylines<strong>and</strong> measure the hypothetical emissi<strong>on</strong>s associated with it.So while some scientific basis exists for markets in emissi<strong>on</strong>s, n<strong>on</strong>eexists for markets in project-based ‘offset’ credits, or markets in whichemissi<strong>on</strong>s allowances <strong>and</strong> project-based credits are interchangeable.So there are likely to be diff erences of opini<strong>on</strong> about how many credits any particularproject generates, or whether it generates any at all.That’s putting it mildly. Try to imagine, for example, what wouldhave happened without a given tree plantati<strong>on</strong> project in Brazil. Supposeyou hire an expert to extrapolate what kind of vegetati<strong>on</strong> wouldgrow <strong>on</strong> the site without the project over the next 100 years. Peopleare going to disagree with your findings. Suppose you hire some<strong>on</strong>eto find out how the project will affect future investment at the companyreceiving the carb<strong>on</strong> credits. People are going to disagree withwhat you c<strong>on</strong>clude. Suppose you hire some<strong>on</strong>e to find out how theabsence of the project would change local carb<strong>on</strong> use over the nextcentury, looking into things like l<strong>and</strong> speculati<strong>on</strong> <strong>and</strong> l<strong>and</strong> prices,l<strong>and</strong> reform, road building, logging, soybean producti<strong>on</strong>, oil palmmarkets, changes in infl ati<strong>on</strong> rates, the profitability of beef producti<strong>on</strong>,alternative investments, prices <strong>and</strong> times for transport, <strong>and</strong> so<strong>on</strong>. 273 People are going to disagree with those findings, too.Experts who back this market have themselves l<strong>on</strong>g admitted that estimatesof hypothetical ‘emissi<strong>on</strong>s reducti<strong>on</strong>s’ for many projects canbe expected to differ by hundreds of percent given <strong>on</strong>ly small changesin initial assumpti<strong>on</strong>s. 274 Michael Schlup of the Gold St<strong>and</strong>ard, an organisati<strong>on</strong>that h<strong>and</strong>s out a special certificate to CDM projects it c<strong>on</strong>sidersof high quality, has claimed that up to 50 per cent of projectsare not really ‘additi<strong>on</strong>al’ but merely relabelled business as usual. CEEBankwatch, in a study of a World Bank Prototype Carb<strong>on</strong> Fund’s JIproject supporting small hydropower plants in the Czech Republic,recently argued that <strong>on</strong>ly six of the 16 installati<strong>on</strong>s involved repre-
146 development dialogue september 2006 – carb<strong>on</strong> tradingsented anything other than business as usual. 275 Strife has also brokenout in the UN <strong>and</strong> in the corporate world. Most CDM carb<strong>on</strong>accounting methodologies proposed to date have been rejected bythe CDM methodological panel for having implausible baselines. 276DuP<strong>on</strong>t has accused its rival Ineos Fluor of overstating emissi<strong>on</strong>s ‘reducti<strong>on</strong>s’from abatement projects (using a methodology that was approvedby the CDM Executive Board) by a factor of three due toinfl ati<strong>on</strong> of baselines. 277 Germany’s Steinbeis Foundati<strong>on</strong> has starteda public campaign protesting CDM Executive Board decisi<strong>on</strong>s <strong>on</strong>permissible baselines for municipal waste projects. 278 Project certifiershave expressed c<strong>on</strong>cern that UN rulebook’s inability to screenout ‘business as usual’ CDM projects makes it hard to calculate carb<strong>on</strong>credits.According to Mark Trexler, a carb<strong>on</strong> businessman with 15 years’ experience,the resoluti<strong>on</strong> of the debate about how to decide whethera project would have happened anyway ‘seems as elusive as ever’.‘There is no technically “correct” answer’, Trexler c<strong>on</strong>cedes. ‘Neverhas so much been said about a topic by so many, without ever agreeing<strong>on</strong> a comm<strong>on</strong> vocabulary, <strong>and</strong> the goals of the c<strong>on</strong>versati<strong>on</strong>.’ 279Speakers at an event arrangedby the Internati<strong>on</strong>al Emissi<strong>on</strong>sTrading Associati<strong>on</strong> (IETA)during internati<strong>on</strong>al climatenegotiati<strong>on</strong>s. IETA is acoaliti<strong>on</strong> of private companiesincluding AES, BarclaysCapital, Chevr<strong>on</strong>Texaco,C<strong>on</strong>ocoPhillips, DuP<strong>on</strong>t,Ecosecurities, Gaz de France,Goldman Sachs, GujaratFluorochemicals, J-<strong>Power</strong>,KPMG, Lafarge, Lahmayer,RWE, Shell, Total, Toyota,TransAlta <strong>and</strong> Vattenfall.This lack of verifi ability would seem to open up a lot of possibilities for corporati<strong>on</strong>sor governments to employ creative accounting in order to claim the maximumnumber of carb<strong>on</strong> credits.You can come up with almost any number you want. Both the incentives<strong>and</strong> the opportunities are huge.As trading expert Michael Grubb <strong>and</strong> colleagues observed years ago,‘every government <strong>and</strong> every company’ 280 wanting carb<strong>on</strong> credits hasan incentive to try to get them for projects that it is already implementingor had planned even before carb<strong>on</strong> markets came al<strong>on</strong>g. Allyou have to do is hire an expert who is willing to make ‘business asusual’ appear as bad as possible. ‘The more c<strong>on</strong>venti<strong>on</strong>al the baseline,the more additi<strong>on</strong>al funds or credits… can be recovered’ from yourcarb<strong>on</strong> project, note Hermann Ott <strong>and</strong> Wolfgang Sachs. 281The result, as <strong>on</strong>e barrister <strong>and</strong> banker, James Camer<strong>on</strong> of <strong>Climate</strong><strong>Change</strong> Capital, notes bluntly, is that many carb<strong>on</strong> project prop<strong>on</strong>ents‘tell their financial backers that the projects are going to makelots of m<strong>on</strong>ey’ at the same time they claim to CDM officials ‘that theywouldn’t be financially viable’ without carb<strong>on</strong> funds. 282In 2003, for example, the Asian Development Bank funded the proposedXiaogushan dam in China, portraying it as the cheapest <strong>and</strong>most ec<strong>on</strong>omically robust alternative for exp<strong>and</strong>ing electricity generati<strong>on</strong>in Gansu province. C<strong>on</strong>structi<strong>on</strong> went ahead without any
less<strong>on</strong>s unlearned 147‘The CDM will be pr<strong>on</strong>eto fraud <strong>and</strong> fl uctuati<strong>on</strong>sbey<strong>on</strong>d c<strong>on</strong>trol of thedeveloper or the CDMboard.’ 293O.P.R. Van Vliet et al.,2003menti<strong>on</strong> being made of the need to secure CDM funding beforeh<strong>and</strong>,<strong>and</strong> was scheduled to be completed in 2006. Yet in a June 2005 applicati<strong>on</strong>for Xiaogushan to be c<strong>on</strong>sidered as a CDM project, the WorldBank claims that without CDM support, the dam ‘would not havebeen able to reach financial closure, mitigate the high project risk,<strong>and</strong> commence the project c<strong>on</strong>structi<strong>on</strong>s’. 283Similarly, CDM credits are being sought for the Bumbuna hydroelectricproject in Sierra Le<strong>on</strong>e <strong>on</strong> the grounds that the project is unviablewithout them, although the project was approved for financingby the World Bank in 2005 as the least-cost project for the country’spower sector. 285 In <strong>on</strong>e Latin American country, c<strong>on</strong>sultants tippexedout the name of a hydroelectric dam from a copy of a nati<strong>on</strong>al developmentplan in an attempt to show that the dam was not alreadyplanned or ‘business as usual’ <strong>and</strong> therefore was deserving of carb<strong>on</strong>finance. 286At an event arranged by the Internati<strong>on</strong>al Emissi<strong>on</strong>s Trading Associati<strong>on</strong>in Milan in 2003, a representative of the Asian DevelopmentBank c<strong>on</strong>fided that his instituti<strong>on</strong>’s first reacti<strong>on</strong> to the CDM was togo through its existing portfolio to see which projects’ funding mightbe topped up with carb<strong>on</strong> finance. No <strong>on</strong>e was under any illusi<strong>on</strong> thatcarb<strong>on</strong> m<strong>on</strong>ey would be used for anything other than what the bankitself acknowledged to be business as usual. (For more examples, seeChapter 4.)In announcing its withdrawal from CDM projects in 2004, HolcimCement went as far as to warn that CDM carb<strong>on</strong>-accounting methodology‘will create other Enr<strong>on</strong>s <strong>and</strong> Arthur Andersens,’ 287 referringto recent accounting sc<strong>and</strong>als at the two firms. A year <strong>and</strong> a half later,even Einar Telnes, a Det Norske Veritas executive representing theforum of private firms that profit from validating <strong>and</strong> verifying carb<strong>on</strong>projects, was publicly fretting that the big differences betweenhow different carb<strong>on</strong> accountants tallied up credits ‘could lead to alack of c<strong>on</strong>fidence in the market as such... . We d<strong>on</strong>’t want an Enr<strong>on</strong>sc<strong>and</strong>al where excess CERs [CDM carb<strong>on</strong> credits] are issued withoutthe actual reducti<strong>on</strong>s taking place... . It is crucial that those verifyinghave the necessary knowledge. Many of them d<strong>on</strong>’t.’ 288A UK Parliamentary Committee was less guarded, lambasting theexperimental UK Emissi<strong>on</strong>s Trading Scheme, which had paid morethan GBP 100 milli<strong>on</strong> to four companies ‘for keeping emissi<strong>on</strong>s downto levels they had already achieved’, as ‘bullshit’, ‘stupid’, a ‘mockery’,<strong>and</strong> an ‘outrageous waste of public m<strong>on</strong>ey’ that undermined governmentemissi<strong>on</strong>s reducti<strong>on</strong> policies. 290
148 development dialogue september 2006 – carb<strong>on</strong> tradingBaseline accounting procedures also set up perverse incentives forcarb<strong>on</strong> project prop<strong>on</strong>ents to emit as much greenhouse gas as possibletoday in order to make projects appear to be saving as much carb<strong>on</strong> aspossible tomorrow. Why not step up polluti<strong>on</strong> or degrade more foreststoday in order to make more carb<strong>on</strong> m<strong>on</strong>ey later? Throughout theSouth, the CDM is creating incentives for emissi<strong>on</strong>s-related envir<strong>on</strong>mentallaws not to be enforced, since the greater the ‘baseline’ emissi<strong>on</strong>s,the greater the payoffs that can be derived from CDM projects.Even sincere unfavourable predicti<strong>on</strong>s about ‘what would happen’without a CDM project may functi<strong>on</strong> as self-fulfilling prophecies. 291With a bit of judicious accounting, a company investing in foreign‘carb<strong>on</strong>-saving’ projects can increase fossil emissi<strong>on</strong>s both at home<strong>and</strong> abroad while claiming to make reducti<strong>on</strong>s in both locati<strong>on</strong>s. 292The calculati<strong>on</strong>al machinery that would be necessary for a market inCDM credits, in other words, is itself undermining predictability <strong>and</strong>the possibility of market calculati<strong>on</strong>.Perhaps underst<strong>and</strong>ably, a few years ago, developers, brokers, Northerngovernment ministers, the World Bank <strong>and</strong> others frustrated bythe sluggish pace of carb<strong>on</strong> project development tried to float the ideathat CDM schemes should not even need to show that they would nothave happened without carb<strong>on</strong> investment. 294 Other experts suggestedthat the questi<strong>on</strong> of ‘what would have happened without a project’should simply be decided arbitrarily, to save trouble. 295 That was asmuch as to admit that the carb<strong>on</strong> credits your project is going to sellcan’t be proved to have anything to do with climate. You might aswell call them ‘schmarb<strong>on</strong> credits.’CDM carb<strong>on</strong>-creditaccounting ‘will create otherENRONs’, according to <strong>on</strong>ecarb<strong>on</strong>-credit buyer, referringto the accounting fraud thatdevastated the energy-tradingfirm. Not surprisingly, perhaps,the disgraced firm was astaunch backer of the KyotoProtocol’s carb<strong>on</strong> tradingsystems. 289Do carb<strong>on</strong> market advocates think that people are really going to pay m<strong>on</strong>ey forthese ‘schmarb<strong>on</strong> credits’ if they can’t be verifi ed not to be a sham?You have to remember that in this market it’s in the interests of bothbuyers <strong>and</strong> sellers to infl ate the number of carb<strong>on</strong> credits a projectgenerates. So there are a lot of incentives <strong>on</strong> all sides to keep quietabout what’s going <strong>on</strong>.As yet, Northern businesses <strong>and</strong> ministries d<strong>on</strong>’t need to worrywhether the market has anything to do with climate or not. Their jobis <strong>on</strong>ly to get hold of cheap credits. And many individual c<strong>on</strong>sumersbuying ‘offset’ credits <strong>on</strong> the voluntary market tend to rely <strong>on</strong> carb<strong>on</strong>traders’ glossy brochures, which are better at salving c<strong>on</strong>sciences thanproviding balanced analysis. There aren’t many checks <strong>and</strong> balancesbuilt into the system. 296In a sense, today’s carb<strong>on</strong> credit market is about appearances <strong>and</strong> publicrelati<strong>on</strong>s. At present, it doesn’t matter whether what the project-
less<strong>on</strong>s unlearned 149based credit market sells is ‘carb<strong>on</strong>’ or ‘schmarb<strong>on</strong>.’ Nor does it matterthat no <strong>on</strong>e knows what schmarb<strong>on</strong> is. In this market, image is assaleable as reality.But if this ‘schmarb<strong>on</strong> market’ isn’t about climate, then what is it about? Aren’tpeople eventually going to want to know what is being bought <strong>and</strong> sold?Very likely. To survive for very l<strong>on</strong>g, the market will ultimately haveto deal in something more c<strong>on</strong>crete whose quality can be verified. Itw<strong>on</strong>’t be enough of a guarantee of product quality that buyers <strong>and</strong> sellersagree to label their commodity ‘carb<strong>on</strong>’ or ‘emissi<strong>on</strong>s reducti<strong>on</strong>s’, ifin fact it’s <strong>on</strong>ly schmarb<strong>on</strong>. To put it another way, so<strong>on</strong>er or later thequality of the image will have to be measured by the reality.George AkerlofAt that point, the project-based credit market begins to run the riskof becoming what ec<strong>on</strong>omist George Akerlof calls a self-destructing‘lem<strong>on</strong>s market’. 298 In such a market, because the quality of goodscan’t be proved, buyers can neither locate, nor create dem<strong>and</strong> for,quality products, if any exist at all. ‘Lem<strong>on</strong>s’ are loaded <strong>on</strong>to themarket, <strong>and</strong> buyers w<strong>on</strong>’t pay the prices dem<strong>and</strong>ed by any sellers ofhigher -quality products. Better projects are penalised <strong>and</strong> bad ‘freeriders’subsidised. Transacti<strong>on</strong> volume <strong>and</strong> quality both decline, furtherlowering prices <strong>and</strong> quality in a cumulative process which ultimatelydestroys the market.Notes Francis Sullivan of HSBC, the H<strong>on</strong>g K<strong>on</strong>g <strong>and</strong> ShanghaiBanking Corporati<strong>on</strong>, ‘there is little incentive for a small company,or even a big business’ to spend a lot of time looking for high-qualitycarb<strong>on</strong> credits ‘when there is a risk of losing credibility <strong>and</strong> wastingm<strong>on</strong>ey’ due to lack of a credible st<strong>and</strong>ard. Sullivan relates that whenHSBC put out a tender for carb<strong>on</strong> credits in the voluntary market,suppliers came forward with credits with a huge price range betweenusd 3–25 per t<strong>on</strong>ne. ‘If there’s an eight-fold difference in price, youcan’t be talking about the same product,’ Sullivan points out. 299Of course, when sellers can’t verify commodity quality any better thanbuyers, <strong>and</strong> know it, the situati<strong>on</strong> is even worse. And it’s worse stillwhen not even buyers are c<strong>on</strong>cerned about verifiable quality, but <strong>on</strong>lyabout fulfilling legal commitments at the cheapest possible price.Yet such are the dem<strong>and</strong>s of the market – <strong>and</strong> the self-defeating determinati<strong>on</strong>to ignore logic in order to ‘keep Kyoto going’ – thatc<strong>on</strong>sultancies, UN bodies <strong>and</strong> technocratic NGOs such as the WorldResources Institute c<strong>on</strong>tinue relentlessly to try to develop techniquesfor isolating unique, quantifiable counterfactual baselines. 301
150 development dialogue september 2006 – carb<strong>on</strong> trading‘Better than the Alternative’Development professi<strong>on</strong>als have often triedto justify failed projects <strong>and</strong> policies byclaiming that at least they were better than‘what would have happened otherwise’.World Bank officials c<strong>on</strong>sistently used thisreas<strong>on</strong>ing to justify their agency’s decadesl<strong>on</strong>gpolitical interventi<strong>on</strong> in Zaire in supportof the dictator Mobutu Sese Seko,who openly stole hundreds of milli<strong>on</strong>s ofdollars from his country. 300Justifying climatically-damaging carb<strong>on</strong>‘offset’ projects using the same reas<strong>on</strong>ing ischild’s play by comparis<strong>on</strong>.Why didn’t the marketeers see this coming? Were the signatories of the KyotoProtocol asleep? And what’s the excuse of the European governments who decidedto accept project-based carb<strong>on</strong> credits in the EU ETS?Those are all good questi<strong>on</strong>s. The impossibility of measuring polluti<strong>on</strong>‘offset’ credits was already plain to see in the US’s earlier polluti<strong>on</strong>trading programmes.Oh, no. You mean this is another case of ‘less<strong>on</strong>s unlearned’?I’m afraid so. In the US, they even had a term for meaningless polluti<strong>on</strong>credits h<strong>and</strong>ed out to industry for acti<strong>on</strong>s that would have happenedanyway. They called them ‘anyway t<strong>on</strong>nes’.Could you give some examples?One instance was the Los Angeles Regi<strong>on</strong>al Clean Air IncentivesMarket (RECLAIM) described above. The South Coast Air QualityManagement District (SCAQMD) allowed factories <strong>and</strong> refineriesto avoid installing polluti<strong>on</strong> c<strong>on</strong>trol equipment if they purchasedcredits generated by licensed car scrappers who destroyed old, highpollutingcars. The idea was that it would be cheaper to reduce overallpolluti<strong>on</strong> by buying up <strong>and</strong> destroying old cars than by forcing stati<strong>on</strong>arysources to make technological changes in their plants. It wasan early example of the ‘offset’ reas<strong>on</strong>ing that’s now so prominent inthe Kyoto Protocol’s carb<strong>on</strong> market.‘In all the excitementover the imminent arrivalof a fully-fl edged carb<strong>on</strong>market, we may be losingsight of <strong>on</strong>e fundamentalquesti<strong>on</strong> – what, exactly,are we trading in?’ 297Envir<strong>on</strong>mental DataServices ReportIn other words, they were claiming that getting rid of cars was just as good forthe air as making factories cut down their polluti<strong>on</strong>?Exactly – <strong>and</strong> that the two could be traded for each other. Unfortunately,car scrappers often generated fraudulent polluti<strong>on</strong> credits bycrushing car bodies without destroying the engines, which they thensold for re-use. More to the point, the polluti<strong>on</strong> credits generated byscrapping cars were based <strong>on</strong> the assumpti<strong>on</strong> that if they were not
less<strong>on</strong>s unlearned 151scrapped, the cars would be driven 4,000–5,000 miles annually for anadditi<strong>on</strong>al three years <strong>and</strong> that their owners would then replace themwith automobiles with ‘average’ emissi<strong>on</strong>s.Yet a SCAQMD audit found that many of the cars were at the endof their useful lives, <strong>and</strong> would have been destroyed through naturalattriti<strong>on</strong>. Some 100,000–200,000 old vehicles are scrapped or ab<strong>and</strong><strong>on</strong>edin the Los Angeles area annually in this way without the interventi<strong>on</strong>of polluti<strong>on</strong> trading programmes. Most of the 23,000 carsthat were destroyed under the polluti<strong>on</strong> trading scheme during itsfirst five years were arguably am<strong>on</strong>g those that would have been destroyedeven without the programme. After all, why sell your old carfor its usd 50 value as scrap metal when you can obtain usd 600 for itthrough a polluti<strong>on</strong> trading scheme? 302Moreover, of the cars that were not at the end of their lives, in additi<strong>on</strong>,many were not regularly driven <strong>and</strong> would not have been driven foranother three years. Inoperable cars were often brought to car scrappingfacilities <strong>and</strong> minor repairs made solely for the purpose of obtainingthe usd 600 payment from the scrapping program. Such cars werenot generating any polluti<strong>on</strong>, but merely collecting dust. N<strong>on</strong>-existentautomobile polluti<strong>on</strong> was transformed, through the market, into realpolluti<strong>on</strong> released from oil tankers or other sources. The end result wasto increase aggregate emissi<strong>on</strong>s across the regi<strong>on</strong>. 303In the ‘bubble’ trading system instituted by the US Envir<strong>on</strong>mentalProtecti<strong>on</strong> Agency, similarly, polluters almost never undertook freshpolluti<strong>on</strong> c<strong>on</strong>trol projects to satisfy regulati<strong>on</strong>s. Instead, they claimedcredits for reducti<strong>on</strong>s that presumably would have occurred withoutthe regulati<strong>on</strong>. For example, polluters often claimed credits for routinebusiness decisi<strong>on</strong>s to slow down producti<strong>on</strong> or shut down facilities. 305In the 1970s, states lured new industry by providing firms with ‘offsets’that the states themselves created – in <strong>on</strong>e case credits for ‘anasphalt substituti<strong>on</strong> process that already was occurring for n<strong>on</strong> -envir<strong>on</strong>mental reas<strong>on</strong>s’. 306 In the 1980s, similarly, Ashl<strong>and</strong> Oil didn’twant to comply with a requirement that it lower emissi<strong>on</strong>s from certainstorage tanks. Instead, it petiti<strong>on</strong>ed to be allowed to reduce theallowable emissi<strong>on</strong> rate from a gasoline truck loading facility from50.7 to 19.0 t<strong>on</strong>nes per year – even though the facility was alreadyemitting <strong>on</strong>ly 4.4 t<strong>on</strong>nes per year. 307 Not surprisingly, such gambitswere heavily criticised by envir<strong>on</strong>mentalists.Nor were such absurdities c<strong>on</strong>fined to the US. The Global Envir<strong>on</strong>mentalFacility, which serves as a financial mechanism for both theUNFCCC <strong>and</strong> the 1992 UN C<strong>on</strong>venti<strong>on</strong> <strong>on</strong> Biological Diversity, early<strong>on</strong> ran into similar accounting problems. The GEF was supposed tofund <strong>on</strong>ly that element of a project that resulted directly in the reducti<strong>on</strong>
152 development dialogue september 2006 – carb<strong>on</strong> tradingCommunities Fight Back in the CourtsIn 2002, two envir<strong>on</strong>mental groups, OurChildren’s Earth <strong>and</strong> Communities for aBetter Envir<strong>on</strong>ment, sued nine Los Angelesorganisati<strong>on</strong>s for purchasing polluti<strong>on</strong>‘offset’ credits, including the city ofBurbank, Southern California Gas <strong>and</strong>United Airlines. The groups pointed outthat the credits had not been approved bythe Envir<strong>on</strong>mental Protecti<strong>on</strong> Agency.The offset credits – awarded for activ itiessuch as replacing st<strong>and</strong>ard buses with vehiclesfuelled by natural gas – had becomeparticularly attractive when pricesfor credits from stati<strong>on</strong>ary sources climbedas high as usd 62 per pound during theCalifornia energy crisis of 2000–01. Priorto the crisis, stati<strong>on</strong>ary source credits hadcost around usd 1 per pound.The NGO plaintiffs argued that allowingsuch credits into the market defeats its fundamentalpurpose. ‘Credits are supposedto become so expensive that it forces somecompanies to put <strong>on</strong> c<strong>on</strong>trols,’ they said.‘We’re just enforcing the programme.’ 304of greenhouse gas emissi<strong>on</strong> <strong>and</strong> so would yield a ‘global envir<strong>on</strong>mentalbenefit’. Under this methodology, a project prop<strong>on</strong>ent had to describewhat would have happened in the Southern host country ‘but for’ theGEF investment. Only then could the GEF provide the funding thatmade the alternative or additi<strong>on</strong>al climate-friendly activity possible.But this approach turned out to be ‘fraught with political <strong>and</strong> methodologicaldifficulties’. For <strong>on</strong>e thing, it ‘excluded the participati<strong>on</strong>of recipient country officials in most cases, because of the lack ofunderst<strong>and</strong>ing of the c<strong>on</strong>cept <strong>and</strong> methodologies’. 308 For another, it‘tempted governments to lower a domestic envir<strong>on</strong>mental baseline tobecome eligible for a larger GEF grant’. The result was that Northerngovernments decided that no <strong>on</strong>e could receive GEF funding just byclaiming their project was better than ‘what would have happenedotherwise’. They had to try to show that it was better than whatshould have happened in the project’s absence. 309But haven’t there been any ‘off set’ success stories?The <strong>on</strong>e polluti<strong>on</strong> trading scheme generally cited by carb<strong>on</strong> tradingadvocates as a success story – the US’s sulphur dioxide trading programme– had the advantage that it excluded project-based ‘offset’credits. 310 What were measured <strong>and</strong> traded were emissi<strong>on</strong>s, not purported‘emissi<strong>on</strong>s reducti<strong>on</strong>s’ derived from projects claimed to be improvements<strong>on</strong> ‘business as usual’.This is in sharp c<strong>on</strong>trast to the Kyoto Protocol (a programme thatis supposed to have been inspired by the sulphur dioxide scheme),which has fully embraced ‘offset’ projects in its trading programme.
less<strong>on</strong>s unlearned 153Sinks, biophysics <strong>and</strong> the unknownSome of the worst trouble that carb<strong>on</strong> market planners have l<strong>and</strong>edthemselves in has come about as a result of credit-generating schemesthat purportedly soak up carb<strong>on</strong> dioxide through tree-planting orother biotic means. There are even more verificati<strong>on</strong> problems withthese ‘carb<strong>on</strong> sink’ projects than with other ‘offsets.’D<strong>on</strong>’t tell me. How could things be any worse?From the beginning, climate technocrats have been under heavy pressureto try to operate a ‘system of credits <strong>and</strong> debits wherein emissi<strong>on</strong>or sequestrati<strong>on</strong> of carb<strong>on</strong> in the biosphere is equated with emissi<strong>on</strong>of carb<strong>on</strong> from fossil fuels’. 311 They’ve been pushed into trying toprove that a world which closes a certain number of coal mines or oilwells will be climatically equivalent to <strong>on</strong>e which keeps them openbut plants more trees, ploughs less soil, fertilises oceans with ir<strong>on</strong>,<strong>and</strong> so forth.So the idea is that if you plant enough trees, you can go <strong>on</strong> mining <strong>and</strong> burningfossil fuels forever.Well, not exactly. Even the biggest fans of tree ‘offset’ projects admitthat there’s not actually much scope for using tree-planting to dealwith the climate crisis.As Chapter 1 noted, the pool of carb<strong>on</strong> stored in living biomass isdwarfed by the pool of remaining fossil carb<strong>on</strong> awaiting exploitati<strong>on</strong>.Under the most favourable assumpti<strong>on</strong>s, using trees even to try to‘compensate’ for current emissi<strong>on</strong>s would require protecting impossiblec<strong>on</strong>tinent-sized plantati<strong>on</strong>s rigorously for decades. 312 Trying tocounteract a single year’s emissi<strong>on</strong>s in the UK would necessitate coveringDev<strong>on</strong> <strong>and</strong> Cornwall with trees. 313 Doing the same for a singleyear’s global emissi<strong>on</strong>s would mean, at a minimum, setting up <strong>and</strong>protecting industrial plantati<strong>on</strong>s <strong>on</strong> all ‘available’ l<strong>and</strong> in Brazil forthe next 40 to 50 years. 314 Attempting to absorb the carb<strong>on</strong> dioxidereleased by the burning of the fossil fuels still in the ground wouldrequire additi<strong>on</strong>al planets full of trees. As a distinguished group ofscientists writing in Science c<strong>on</strong>cluded:Prospects of retrieving anthropogenic CO 2 from the atmosphereby enhancing natural sinks are small… There is no natural ‘saviour’waiting to assimilate all the anthropogenically-producedCO 2 in the coming century. 315A similar point applies to projects producing biofuels to replace petroleum.Gigantic plantati<strong>on</strong>s would be required just to replace a tiny
154 development dialogue september 2006 – carb<strong>on</strong> tradingfracti<strong>on</strong> of the fossil fuels used for transport. It is estimated, for instance,that even if the entire US maize crop were used for ethanol,it would replace <strong>on</strong>ly about 20 per cent of domestic petrol c<strong>on</strong>sumpti<strong>on</strong>.316 To power 10 per cent of the US’s cars with home-grownmaize-based ethanol, according to the Organisati<strong>on</strong> for Ec<strong>on</strong>omicCo- operati<strong>on</strong> <strong>and</strong> Development, would require almost <strong>on</strong>e-third ofUS farml<strong>and</strong>. 317 A study sp<strong>on</strong>sored by the European Envir<strong>on</strong>mentAgency <strong>and</strong> the German Envir<strong>on</strong>ment Ministry doesn’t see it as desirableto plan for more than 10 per cent of the EU’s transport fueldem<strong>and</strong> to be met by biofuels. 318 Biofuels can make up no more than5 per cent of petrol or diesel c<strong>on</strong>sumpti<strong>on</strong> in the US <strong>and</strong> the EuropeanUni<strong>on</strong> without causing envir<strong>on</strong>mental damage, according to areport from Bank Sarasin. 319What’s more, there is no guarantee that the huge takeover of l<strong>and</strong>would slow in any way the exploitati<strong>on</strong> of the fossil fuels still remainingunderground. Such so-called ‘renewable’ fuels are not, in fact, goingto be renewable if today’s industrial, transport <strong>and</strong> military structuresremain locked in place. As columnist George M<strong>on</strong>biot explains,‘every year we use four centuries’ worth of plants <strong>and</strong> animals’ in theform of coal, oil <strong>and</strong> gas. ‘The idea that we can simply replace thisfossil legacy – <strong>and</strong> the extraordinary power densities it gives us – withambient energy is the stuff of science ficti<strong>on</strong>. There is simply no substitutefor cutting back.’ 320 Julia Olmsted of the L<strong>and</strong> Institute in theUS c<strong>on</strong>curs: ‘Pushing biofuels at the expense of energy c<strong>on</strong>servati<strong>on</strong>today will <strong>on</strong>ly make our problems more severe, <strong>and</strong> their soluti<strong>on</strong>smore painful, tomorrow.’ 321But it can’t be verified anyway to what extent a tree plantati<strong>on</strong> orother biotic project ‘compensates’ for fossil fuel use.Why can’t it?The problem – as described in Chapter 1 – is that above-ground bioticcarb<strong>on</strong> <strong>and</strong> below-ground fossil carb<strong>on</strong> are c<strong>on</strong>nected to the atmospherein different ways. Geologically, socially, politically, biologically<strong>and</strong> climatically, fossil carb<strong>on</strong> can’t be equated with biotic carb<strong>on</strong>.These differences are so great that they make n<strong>on</strong>sense out of the carb<strong>on</strong>market’s claim that tree plantati<strong>on</strong>s or similar schemes ‘sequester’carb<strong>on</strong> <strong>on</strong> the earth’s surface in a way that is quantifiably comparableto the way coal <strong>and</strong> oil ‘sequester’ carb<strong>on</strong> underground. ‘Sequestering’,after all, means separating, <strong>and</strong> there are many degrees of separati<strong>on</strong>.The carb<strong>on</strong> in a cigarette, in the fluid in a lighter, in grass ora tree trunk, in furniture or paper, in the top seven inches of soil, incoal deposits a kilometre underground, in carb<strong>on</strong>ate rock dozens of
less<strong>on</strong>s unlearned 155kilometres beneath the surface – all are separated from the atmosphere,but in different ways, for different average time periods, <strong>and</strong>with different risks of the carb<strong>on</strong> being released unexpectedly intothe atmosphere. While fossil carb<strong>on</strong> flows into the biosphere/atmospheresystem are pretty much irreversible over n<strong>on</strong>-geological timeperiods, those from the atmosphere into the biosphere are easily reversible<strong>and</strong> not so easily c<strong>on</strong>trolled. A t<strong>on</strong>ne of carb<strong>on</strong> in wood is notgoing to be ‘sequestered’ from the atmosphere as safely, or as l<strong>on</strong>g, asa t<strong>on</strong>ne of carb<strong>on</strong> in an unmined underground coal deposit.You mean that a tree plantati<strong>on</strong> might burn.Or it might be made into paper that will wind up in l<strong>and</strong>fill <strong>and</strong>degenerate into greenhouse gas, or be made into furniture with alifespan of <strong>on</strong>ly 50 years. Or it might be cut <strong>and</strong> left <strong>on</strong> the ground torot by angry local villagers.But surely carb<strong>on</strong> traders know this.Of course. They acknowledge that <strong>on</strong>e t<strong>on</strong>ne of carb<strong>on</strong> in a treeis climatically not the same as <strong>on</strong>e t<strong>on</strong>ne of carb<strong>on</strong> in a deep coaldeposit. But they hope that fossil carb<strong>on</strong> <strong>and</strong> biotic carb<strong>on</strong> can bemade comparable by taking the amount of carb<strong>on</strong> in wood or soil<strong>and</strong> multi plying it by some fudge factor that takes into account its impermanence<strong>and</strong> the complexities of carb<strong>on</strong> circulati<strong>on</strong> in the abovegroundcarb<strong>on</strong> pool.So, say, fi ve t<strong>on</strong>nes of carb<strong>on</strong> to be sequestered in trees by a carb<strong>on</strong> project establishedtoday would be assumed to be ‘climatically equivalent’ to <strong>on</strong>e t<strong>on</strong>neof carb<strong>on</strong> left in coal deep underground.Something like that. There are all sorts of schemes for applying discountingformulas or ‘risk-spreading’ factors to sequestrati<strong>on</strong> creditsbased <strong>on</strong> how l<strong>on</strong>g trees survive. There are all sorts of proposals formaking sequestrati<strong>on</strong> credits temporary or available <strong>on</strong>ly for rental,insuring trees against fire, <strong>and</strong> so forth. Means have also been suggestedfor identifying <strong>and</strong> quantifying precisely how much carb<strong>on</strong>‘leaks’ from various kinds of biotic projects (through fires, soil erosi<strong>on</strong>,fossil emissi<strong>on</strong>s from transport required for the project, evicti<strong>on</strong>sleading to forest encroachment elsewhere, etc.). 322N<strong>on</strong>e of these methods work, however.Why not? What’s the problem?You might remember that Chapter 1 introduced Frank Knight’sdistincti<strong>on</strong> between risk – a situati<strong>on</strong> in which the probabilities of
156 development dialogue september 2006 – carb<strong>on</strong> tradingevery thing that can go wr<strong>on</strong>g actually going wr<strong>on</strong>g are well-known– <strong>and</strong> uncertainty – in which they aren’t.The trouble with ‘carb<strong>on</strong> sink’ projects that attempt to commensuratebiotic with fossil carb<strong>on</strong> is that, to do so, they have to c<strong>on</strong>fuseuncertainty with risk – <strong>and</strong> try to c<strong>on</strong>vert the <strong>on</strong>e into the other.But that’s not all. These projects also c<strong>on</strong>fuse risk with ignorance– a situati<strong>on</strong> in which not even all the things that can go wr<strong>on</strong>gare known. And, like other carb<strong>on</strong>-saving projects, they c<strong>on</strong>fuse riskwith indeterminacy, which applies in situati<strong>on</strong>s in which comparis<strong>on</strong>with counterfactual scenarios makes the calculati<strong>on</strong> of probabilitiesinappropriate.Hang <strong>on</strong> a minute. Let’s start at the beginning. What do you mean when yousay carb<strong>on</strong> sink projects c<strong>on</strong>fuse risk <strong>and</strong> uncertainty?In order to derive the single number the market requires, carb<strong>on</strong> sinkaccountants have to look at all the things that might result in carb<strong>on</strong>being released from trees into the atmosphere <strong>and</strong> calculate theirprobability. But they can’t do this.Why not?Straightforward inadequacy of data is <strong>on</strong>e obstacle. To get an idea ofthe size of the problem, c<strong>on</strong>sider <strong>on</strong>e detailed study d<strong>on</strong>e by the respectedInternati<strong>on</strong>al Institute for Applied Systems Analysis (IIASA).According to the study, mean net Russian carb<strong>on</strong> balance in 1990(including flows into <strong>and</strong> out of the biosphere) can be pinned down<strong>on</strong>ly to the range of minus 155 to plus 1209 milli<strong>on</strong> t<strong>on</strong>nes per year.That swamps probable changes in total Russian carb<strong>on</strong> flux balancebetween 1990 <strong>and</strong> 2010, which are expected to be <strong>on</strong>ly 142 to 371milli<strong>on</strong> t<strong>on</strong>nes (Figure 7). 323The IIASA c<strong>on</strong>cludes that knowledge of carb<strong>on</strong> flows am<strong>on</strong>g the atmosphere,biosphere <strong>and</strong> lithosphere is inadequate ‘to form the basisfor…any viable trading scheme.’ That makes the Kyoto Protocol‘completely unverifiable’ <strong>and</strong> a ‘cheat’s charter’. 324 Climatologist R. A.Hought<strong>on</strong>, similarly, has suggested carb<strong>on</strong> errors ‘as large as 500 percent in the forest inventories of northern mid-latitudes’. 325
less<strong>on</strong>s unlearned 157Figure 7. Posssible Range of Carb<strong>on</strong> Fluxes in RussiaSource: IIASABy the same token, estimates of carb<strong>on</strong> sequestrati<strong>on</strong> rates in China’sforests have recently been found to differ by up to 89 per cent 326 <strong>and</strong>in a pine forest in The Netherl<strong>and</strong>s by 46 per cent, 327 depending <strong>on</strong>the method used. In 2006, in additi<strong>on</strong>, it was revealed that pine plantati<strong>on</strong>sin the southern US were resp<strong>on</strong>sible for large increases in carb<strong>on</strong>dioxide emissi<strong>on</strong>s, since they were replacing hardwood or indigenouspine forests. 328 World methane sources have meanwhile beenfound to be uncertain by ‘20 to 150 per cent.’ 329 In 2001, the UK’sRoyal Society cited an ‘urgent need’ to reduce uncertainties beforel<strong>and</strong> carb<strong>on</strong> sinks are used. 330Similarly, although some of the mechanisms that will affect the abilityof trees to sequester <strong>and</strong> store carb<strong>on</strong> as the world warms up areknown, the probability that any particular wooded regi<strong>on</strong> will maintainany given carb<strong>on</strong> balance over the next 50 or even 10 years can’tbe calculated. 331With regard to many such uncertainties, it’s possible, to borrow thewords of ec<strong>on</strong>omist Douglass North, to ‘acquire more knowledge <strong>and</strong>therefore c<strong>on</strong>vert uncertainty into risk’. When it comes to ignorance,however, ‘<strong>on</strong>e not <strong>on</strong>ly does not have a probability distributi<strong>on</strong> ofoutcomes, but (using a Keynesian definiti<strong>on</strong>) <strong>on</strong>e may not even knowwhat the possible outcomes are, much less have a probability distributi<strong>on</strong>of them’. 332For example?For example, the past decade of research has provided c<strong>on</strong>tinual surprisesabout how carb<strong>on</strong> in the biosphere affects climate, <strong>and</strong> viceversa, <strong>and</strong> how n<strong>on</strong>linear <strong>and</strong> unpredictable relati<strong>on</strong>s can be betweenthe two:
158 development dialogue september 2006 – carb<strong>on</strong> trading• Since the turn of the century, evidence has been emerging thatpossible climatic ‘tipping events’ such as the rapid release of greenhousegases from permafrost, peat, ocean floors or dried-out tropicalor boreal forests could be as unpredictable in their timing asin their impacts. 333 Meanwhile an enormous ‘missing sink’ in thebiosphere has yet to be definitively located. 334• In 2000 scientists were startled to learn that the heat absorbed bydark-coloured tree plantati<strong>on</strong>s in Northern regi<strong>on</strong>s might cancelout their ability to absorb carb<strong>on</strong> dioxide. 335 A review article inScience warned that unanticipated ‘feedback effects between carb<strong>on</strong><strong>and</strong> other biogeochemical <strong>and</strong> climatological processes willlead to weakened sink strength in the foreseeable future.’ 336 Thepossibility was mooted that that lengthening of dry seas<strong>on</strong>s couldabruptly result in catastrophic releases of carb<strong>on</strong> through fires inAmaz<strong>on</strong>, pushing temperatures up 6–8 ºC in 100 years. 337• In 2002, scientists warned that soils’ or forests’ ability to functi<strong>on</strong>as sinks under different c<strong>on</strong>diti<strong>on</strong>s is n<strong>on</strong>linear <strong>and</strong> ‘limited.’ 338• In 2004, experiments called into questi<strong>on</strong> the effectiveness of increasingthe oceans’ uptake of carb<strong>on</strong> by seeding them with ir<strong>on</strong>,dem<strong>on</strong>strating that the organic carb<strong>on</strong> increased by the techniqueis not transferred efficiently below the permanent thermocline. 339Global warming was shown to intensify insect infestati<strong>on</strong>s thatcan damage the carb<strong>on</strong>-storing ability of forests. 340• In 2005, new research suggested that carb<strong>on</strong> releases from soils ina warming world may ‘be even str<strong>on</strong>ger than predicted by globalmodels.’ 341 It was then revealed that since 1978 there had been hugesurprise carb<strong>on</strong> releases from warmed soils in the UK. 342 New researchshowed that in many circumstances ‘creating carb<strong>on</strong> offsetcredits in agricultural soils is not cost effective because reducedtillage practices store little or no carb<strong>on</strong>.’ 343 Reduced-tillage soilcarb<strong>on</strong> sequestrati<strong>on</strong> was found to result in unexpected releases ofnitrous oxide, a powerful greenhouse gas. 344• Also in 2005, an ensemble of general circulati<strong>on</strong> models assuminga doubling of levels of atmospheric CO 2 <strong>and</strong> a selecti<strong>on</strong> of c<strong>on</strong>diti<strong>on</strong>sc<strong>on</strong>sidered plausible by experts showed that the range of possiblewarming (<strong>and</strong> thus effects <strong>on</strong> carb<strong>on</strong>-storing ecosystems) wasfar greater than expected (from less than 2 to more than 11.5 degreesCelsius). 345 Unexpected carb<strong>on</strong> dioxide releases from biologicalmatter in Amaz<strong>on</strong>ian rivers were traced for the first time. 346‘It’s a working principleof the Head Bureau thatthe very possibility oferror must be ruled outof account. This groundprinciple is justifi ed by thec<strong>on</strong>summate organisati<strong>on</strong>of the whole authority,<strong>and</strong> it is necessary if themaximum speed is tobe attained…Is there aC<strong>on</strong>trol Authority? Thereare <strong>on</strong>ly c<strong>on</strong>trol authorities.Frankly it isn’t theirfuncti<strong>on</strong> to hunt out errorsin the vulgar sense, forerrors d<strong>on</strong>’t happen, <strong>and</strong>even when <strong>on</strong>ce in a whilean error does happen, asin your case, who can sayfi nally that it’s an error?’‘The Superintendent’in Franz Kafka,The Castle, 1926
less<strong>on</strong>s unlearned 159• In early 2006, climate researchers were stunned when new researchrevealed terrestrial plants emit methane, a greenhouse gas,under normal growing c<strong>on</strong>diti<strong>on</strong>s through mechanisms that are asyet mysterious. 347There’s no reas<strong>on</strong> to expect such surprises are over. And any of themcould play havoc with the possibility of doing the accounting that amarket in credits from sinks projects would require.Even worse news for the carb<strong>on</strong> market is the fact that setting up ameasurable equivalence am<strong>on</strong>g emissi<strong>on</strong>s <strong>and</strong> biological sequestrati<strong>on</strong>would require quantificati<strong>on</strong> of the effects of social acti<strong>on</strong>s <strong>and</strong> instituti<strong>on</strong>sthat mediate carb<strong>on</strong> flows. Carb<strong>on</strong> transferred from undergroundto the atmosphere enters not <strong>on</strong>ly the biosphere but also social<strong>and</strong> cultural spheres. Physical acti<strong>on</strong>s (for instance, planting biomassfor power plants) bring about social effects (for example, resistanceam<strong>on</strong>g local farmers, diminished interest in energy efficiency am<strong>on</strong>ginvestors or c<strong>on</strong>sumers, loss of local power or knowledge), which inturn bring about further physical effects (for instance, migrati<strong>on</strong> tocities, increased use of fossil fuels) with carb<strong>on</strong> or climatic implicati<strong>on</strong>s.Calculating how much carb<strong>on</strong> a new tree plantati<strong>on</strong> actually‘offsets’ would require not <strong>on</strong>ly looking at soils <strong>and</strong> adjacent plots <strong>and</strong>streams, but also estimating how much the plantati<strong>on</strong> has delayedthe adopti<strong>on</strong> of a technologically different energy-generati<strong>on</strong> path <strong>on</strong>the part of carb<strong>on</strong> credit buyers, observing the ‘carb<strong>on</strong> behaviour’ offarmers evicted from the plantati<strong>on</strong> site <strong>and</strong> their descendents for unspecifiableperiods of between 42 <strong>and</strong> 150 years (estimates of the atmosphericlifetime of carb<strong>on</strong> dioxide emissi<strong>on</strong>s vary), 348 <strong>and</strong> so forth.No basis exists in either physical or social science for deriving numbersfor the effects <strong>on</strong> carb<strong>on</strong> stocks <strong>and</strong> flows of such social acti<strong>on</strong>s. 349‘Risk’ models <strong>and</strong> what Douglass North calls the ‘static theory’ oforthodox ec<strong>on</strong>omics are simply unhelpful in these circumstances ‘ofc<strong>on</strong>tinuous change in many dimensi<strong>on</strong>s,’ including ‘change in the socialstructure <strong>and</strong> behaviour of human beings’. 350Reality <strong>and</strong> fantasyWhat eff ect have c<strong>on</strong>cerns about the credibility of these carb<strong>on</strong>-saving projectshad?Carb<strong>on</strong> sink projects like plantati<strong>on</strong>s had a rough ride from the beginning.A majority of envir<strong>on</strong>mentalists <strong>and</strong> NGOs have opposed themstr<strong>on</strong>gly in a stream of declarati<strong>on</strong>s <strong>and</strong> positi<strong>on</strong> papers, 358 <strong>and</strong> somegovernments have also been intermittently sceptical. The Verificati<strong>on</strong>Research, Training <strong>and</strong> Informati<strong>on</strong> Centre stated unequivocally in2000 that forestry <strong>and</strong> l<strong>and</strong> use ‘must not be used to meet emissi<strong>on</strong>s
160 development dialogue september 2006 – carb<strong>on</strong> tradingCarb<strong>on</strong> Off sets <strong>and</strong> the Ghost of Frank KnightFrank H. Knight(1885–1972), a Universityof Chicagoec<strong>on</strong>omist recognisedas <strong>on</strong>e of thedeepest thinkers in20 th century US socialscience, is famousfor his distincti<strong>on</strong> betweenrisk <strong>and</strong> uncertainty.351 Although hecould never have anticipated all the ways itcould be applied, Knight’s 1921 distincti<strong>on</strong>helps explain why it’s c<strong>on</strong>fused to put anyfaith in a market for emissi<strong>on</strong>s credits generatedby carb<strong>on</strong>-saving projects.Risk, in Knight’s sense, refers to situati<strong>on</strong>sin which the probability of somethinggoing wr<strong>on</strong>g is well-known. An exampleis the fl ip of a coin. There is a 50–50chance of its being either heads or tails. Ifyou gamble <strong>on</strong> heads, you risk losing yourm<strong>on</strong>ey if it turns out to be tails. But youknow exactly what the odds are.Uncertainty is different. Here, you know allthe things that can go wr<strong>on</strong>g, but can’t calculatethe probability of a harmful result.For example, scientists know that the useof antibiotics in animal feed induces resistanceto antibiotics in humans, but can’tbe sure what the probabilities are that anyparticular antibiotic will become uselessover the next 10 years.Still worse, as Knight’s successors suchas Poul Harremoës <strong>and</strong> colleagues havepointed out, 352 are situati<strong>on</strong>s of ignorance.Here you d<strong>on</strong>’t even know all the thingsthat might go wr<strong>on</strong>g, much less the probabilityof their causing harm. For example,before 1974, no <strong>on</strong>e knew that CFCs couldcause oz<strong>on</strong>e layer damage. Obviously, thisignorance would have invalidated any attempt,at the time, to calculate the probabilityof oz<strong>on</strong>e depleti<strong>on</strong>. 353 Here, as withuncertainty, talk of ‘margins of error’ is inappropriate.In situati<strong>on</strong>s of indeterminacy, finally, theprobability of a result cannot be calculatedbecause it is not a matter of predicti<strong>on</strong>, butof decisi<strong>on</strong>. For example, it might be ‘implausible’for subsidies for fossil fuel extracti<strong>on</strong>to be removed within five years, butyou can’t assign a numerical probability tothis result, because whether it happens ornot depends <strong>on</strong> politics. In fact, trying toassign a probability to this outcome can itselfaffect the likelihood of the outcome.In such c<strong>on</strong>texts, the exercise of predicti<strong>on</strong>can undermine itself.Problems posed by risk, uncertainty, ignorance<strong>and</strong> indeterminacy each call for differentkinds of precauti<strong>on</strong>. Risk fits easilyinto ec<strong>on</strong>omic thinking, because it can bemeasured easily. Uncertainty, ignorance<strong>and</strong> indeterminacy, however, call for amore precauti<strong>on</strong>ary <strong>and</strong> flexible, <strong>and</strong> lessnumerical, approach. 354Take the carb<strong>on</strong> credits to be generatedby tree plantati<strong>on</strong>s. If these credits werethreatened by nothing more than risk, calculatingtechniques associated with insuranceor discounting would be enough tocreate a viable commodity. You could insurecarb<strong>on</strong> credits from a plantati<strong>on</strong> just asyou take out fire insurance for a building.If you knew the margin of error associatedwith a carb<strong>on</strong> calculati<strong>on</strong>, you could playit safe by applying a discount factor.
less<strong>on</strong>s unlearned 161But such credits are subject not <strong>on</strong>ly torisk, but to uncertainty, ignorance, <strong>and</strong> indeterminacyas well. For example:• How l<strong>on</strong>g will plantati<strong>on</strong>s last beforethey release the carb<strong>on</strong> they have storedinto the atmosphere again, through beingburned down or cut down to makepaper or lumber, which themselves ultimatelydecay? This is not simply a risk,in Knight’s sense, but involves uncertainties<strong>and</strong> ignorance that can’t be capturedin numbers. For example, it is stillnot known what precise effects differentdegrees of global warming will have <strong>on</strong>the cycling of carb<strong>on</strong> between differentkinds of trees <strong>and</strong> the atmosphere.• To what extent will plantati<strong>on</strong>s affectthe carb<strong>on</strong> producti<strong>on</strong> associated withneighbouring ecosystems, communities,<strong>and</strong> trade patterns? Again, uncertainty<strong>and</strong> ignorance, not just risk, st<strong>and</strong> in theway of answers.• How many credits should be subtractedfrom the total generated by plantati<strong>on</strong>sto account for the activities that they displacethat are more beneficial for the atmospherein the l<strong>on</strong>g term, for example,investment in energy efficiency or ecologicalfarming? No single number canbe given in answer to this questi<strong>on</strong>, since‘it is inherently impossible to verify whatwould have happened in the absence ofthe project’. 355 That is, the answer is indeterminate.Uncertainty, ignorance <strong>and</strong> indeterminacyare three reas<strong>on</strong>s why it’s not ever goingto be possible to trade trees for smoke. Bymixing up ‘the analytically distinct c<strong>on</strong>cepts’356 of risk, uncertainty, ignorance <strong>and</strong>indeterminacy, schemes such as the CleanDevelopment Mechanism <strong>and</strong> Joint Implementati<strong>on</strong>have blundered into whatKnight would have called a ‘fatal ambiguity’.357 In this case, the fatality is the veryclimate commodity that carb<strong>on</strong> creditmarkets hoped to deal in.reducti<strong>on</strong>s commitments’ since changes to carb<strong>on</strong> stocks will ‘rarelybe verifiable.’ 359 In the end, despite industrialized countries’ efforts,credits from forest c<strong>on</strong>servati<strong>on</strong> projects were not allowed into KyotoProtocol markets 360 <strong>and</strong> carb<strong>on</strong> sink project credits barred from use inthe EU ETS, though they remained prominent in the Protocol.However, the fundamental impossibilities of carb<strong>on</strong>-sink creditshaven’t ever been faced squarely by business, UN specialists, or mostgovernments.For example, during its deliberati<strong>on</strong>s <strong>on</strong> l<strong>and</strong> use, an IntergovernmentalPanel <strong>on</strong> <strong>Climate</strong> <strong>Change</strong> committee 361 stubbornly professedhigh c<strong>on</strong>fidence in certain global estimates of biotic carb<strong>on</strong> fluxesdespite its being pointed out that estimates of net global terrestrialcarb<strong>on</strong> uptake had a factor-of-five error bar (200 milli<strong>on</strong> t<strong>on</strong>nesgive or take a billi<strong>on</strong> t<strong>on</strong>nes). Similarly, because acknowledging thehuge error bars surrounding estimates of tropical deforestati<strong>on</strong> would
162 development dialogue september 2006 – carb<strong>on</strong> tradinghave undermined the possibility of generating CDM credits through‘avoided deforestati<strong>on</strong>’, the existence of the bars was referred to <strong>on</strong>lyin a footnote. When delegates discovered that the IPCC panel hadchanged already-approved estimates regarding sequestrati<strong>on</strong> by factorsof up to 10 times in a way that made biotic carb<strong>on</strong> sequestrati<strong>on</strong>seem more plausible, panel chair Robert T. Wats<strong>on</strong> offered the excuseof a ‘simple typing mistake’. Throughout, IPCC scientists have beencareful to avoid putting themselves in a positi<strong>on</strong> in which they mightbe forced to assess carefully the threat various risks <strong>and</strong> uncertaintiespose to the Kyoto market’s accounting system. 362 The carb<strong>on</strong>-tradingtail was wagging the scientific dog.The wagging has c<strong>on</strong>tinued. Recently, several European governments,desperate for cheap credits, have let slip that they plan to tryto allow carb<strong>on</strong> sink credits back into the EU ETS. In additi<strong>on</strong>, carb<strong>on</strong>sink credits c<strong>on</strong>tinue to be popular in the voluntary market. Andthere has recently also been a renewed push to include forest c<strong>on</strong>servati<strong>on</strong>projects in the CDM. 363‘The Kyoto Protocolto the UN FrameworkC<strong>on</strong>venti<strong>on</strong> <strong>on</strong> <strong>Climate</strong><strong>Change</strong> may be themost important ec<strong>on</strong>omicagreement penned in the20th century.’Aar<strong>on</strong> Cosbey,Royal Institute ofInternati<strong>on</strong>al Affairs,L<strong>on</strong>d<strong>on</strong>But maybe these governments <strong>and</strong> their expert advisers just d<strong>on</strong>’t underst<strong>and</strong>the issues.It’s unlikely that’s the entire explanati<strong>on</strong>. 364 Trading advocates such asMichael Grubb are very clear that it is ‘impossible’ to measure or definethe climatic difference between with- <strong>and</strong> without-project scenarios.It’s just that they later backtrack to the positi<strong>on</strong> that it’s merely‘difficult’. 365 In this same way, another expert admitted that carb<strong>on</strong>savings ‘cannot be measured’ <strong>on</strong>ly later to slip into the claim that ‘accurate’or ‘inaccurate’ measurements can be made. 366Baselines that are at first admitted to be ‘inherently impossible to verify’are often then treated as merely imprecise, with error bars of, say,‘45 per cent in either directi<strong>on</strong>’ that can be ‘managed’ by ‘putting inplace safeguards <strong>and</strong> taking a c<strong>on</strong>servative approach’. 367 In 2003, carb<strong>on</strong>project prop<strong>on</strong>ents were forced to admit that some projects thathad been CDM c<strong>and</strong>idates – <strong>and</strong> rejected for being business as usual– were indeed going forward without carb<strong>on</strong> m<strong>on</strong>ey. The resp<strong>on</strong>sefrom some trading prop<strong>on</strong>ents was that even if such projects were notbusiness as usual ‘at the time of applicati<strong>on</strong>,’ perhaps they became solater – or that perhaps it was <strong>on</strong>ly initial CDM interest that enabledthem to find the finance that allowed them to proceed.Similarly, many carb<strong>on</strong> c<strong>on</strong>sultants at first denied the need to quantifysocially-mediated carb<strong>on</strong> effects of CDM projects, or protestedthat it was ‘not their job’ to do so. 368 Others tried to float the ideathat (for example) the indirect <strong>and</strong> l<strong>on</strong>g-range effects of establishing
less<strong>on</strong>s unlearned 163subtropical carb<strong>on</strong> plantati<strong>on</strong>s <strong>on</strong> timberl<strong>and</strong> management in temperateregi<strong>on</strong>s could be satisfactorily quantified years in advance. 369 TheIPCC’s panel <strong>on</strong> l<strong>and</strong> use <strong>on</strong>ce tied itself in knots trying to figureout how carb<strong>on</strong> credits might be given out for good c<strong>on</strong>servati<strong>on</strong>istpolicies. Eventually the panel decided that since ‘quantifying theimpact of policies themselves is unlikely to be feasible’, measurementattempts should c<strong>on</strong>fine themselves to the apparently easier task offinding out how much carb<strong>on</strong> is taken up in specific projects. This, ofcourse, l<strong>and</strong>ed them back in trouble, since the emissi<strong>on</strong>s baseline ofany given project will vary under different policies.But surely reality must be catching up with these fantasies of quantifying theunquantifi able?Yes, but it’s taking a while. Because the job of measuring the climaticbenefits of carb<strong>on</strong>-saving projects is permanently impossible, themore seriously experts try to carry it out, the more complicated <strong>and</strong>fanciful – <strong>and</strong> hard to untangle – their techniques get. 370 Like roguetrader Nick Lees<strong>on</strong> trying to cover his tracks at Barings Bank, carb<strong>on</strong>c<strong>on</strong>sultants pile complexity <strong>on</strong> complexity in an ultimately fruitlessattempt to evade the inevitable reck<strong>on</strong>ing. That, of course, jacks upthe ‘transacti<strong>on</strong> costs’ of doing the projects. 371Sequestering Carb<strong>on</strong> or Fiddling Data?In 2005, a template document for BioCarb<strong>on</strong>Fundproject developers to use to estimatesequestrati<strong>on</strong> rates was posted <strong>on</strong>the World Bank’s carb<strong>on</strong> finance website.Examples were helpfully provided to illustratehow to fill in certain fields.In the field ‘c<strong>on</strong>tact (preferably email)’ appearedthe sample entry‘fred@data_fiddling_Inc.jail.com’.Small projects lose outThe escalati<strong>on</strong> of transacti<strong>on</strong> costs is <strong>on</strong>e reas<strong>on</strong> that communityfriendlyrenewable-energy carb<strong>on</strong> projects that generate few creditslose out. Particularly threatened are CDM projects attempting tocompensate for less than 50,000 t<strong>on</strong>nes of CO 2 -equivalent emissi<strong>on</strong>sper year. 372 Transacti<strong>on</strong> costs for some prospective micro-schemeswould run to a prohibitive several hundred Euros per t<strong>on</strong>ne of CO 2equivalent, at a time when the average price of CDM credits is runningat less than €7.
164 development dialogue september 2006 – carb<strong>on</strong> tradingAs a result of this <strong>and</strong> other factors, the CDM is dominated by big,n<strong>on</strong>-renewable projects that generate a lot of cheap credits but arenot leading to structural change – in particular a h<strong>and</strong>ful of schemesto capture <strong>and</strong> destroy greenhouse gases called HFC-23 <strong>and</strong> N 2 O.HFC-23 (a by-product from the manufacture of HCFC-22 <strong>and</strong> asubstance used in air c<strong>on</strong>diti<strong>on</strong>ers <strong>and</strong> refrigerators) is an extremelypotent greenhouse gas estimated to be 11,700 times as climaticallydamaging as carb<strong>on</strong> dioxide. N 2 O, another very harmful greenhousegas, is emitted during the industrial producti<strong>on</strong> of adipic acid, a rawmaterial for nyl<strong>on</strong>.Capturing <strong>and</strong> destroying the two gases is relatively c<strong>on</strong>venient <strong>and</strong>easy. You do it all in <strong>on</strong>e place – the factories where the gases are generated.The technique is uncomplicated, politically speaking – you justbolt extra bits of machinery <strong>on</strong>to an existing plant. And, because theseHFC-23 <strong>and</strong> N2O are so potent climatically, the dividends are huge.The Clean DevelopmentMechanism (CDM) ‘isnot encouraging companiesto devote funds torenewable energy sources…to the extent…hoped.’Wall Street Journal,11 August 2005Could you give an example?The Gujarat HFC-23 project in India, set up to supply credits to Japan,will prevent the emissi<strong>on</strong> of <strong>on</strong>ly 289 t<strong>on</strong>nes of HFC-23 annually. Yetbecause HFC-23 is such a potent greenhouse gas, this single quick fixwill yield a whopping 3 milli<strong>on</strong> carb<strong>on</strong> credits per year, more th<strong>and</strong>ouble the yield of all 20 CDM renewable energy projects registeredwith the CDM by May 2006. As of the same date, a single HFC-23 decompositi<strong>on</strong> project, the Sh<strong>and</strong><strong>on</strong>g D<strong>on</strong>gyue scheme in China,represented 19 per cent of all the credits generated under CDM. Ac<strong>on</strong>sortium of Japanese, Italian <strong>and</strong> Chinese partners is meanwhileinvestigating a project spread across 12 HCFC-22 plants in Chinathat would yield 60 milli<strong>on</strong> credits a year from 2008. Just seven of the265 projects registered by August 2006 accounted for nearly three -quarters of all CDM credits. All were gas capture projects. 373 Renewableenergy projects make up <strong>on</strong>ly 2 per cent of CDM credits (seeFigure 8). The current proporti<strong>on</strong> of world market investment in renewableenergy or energy efficiency due to the CDM – also a mere 2per cent – can <strong>on</strong>ly shrink.Even so, the cost <strong>and</strong> inc<strong>on</strong>venience of having to come up with carb<strong>on</strong>accounting documents irritates business, Northern governments,<strong>and</strong> agencies such as the World Bank, who want as many cheap creditsto be flowing into the market as fast as possible so that fossil fuels canc<strong>on</strong>tinue to be burned at their accustomed pace. In 2005, for example,the World Bank pushed for the CDM Executive Board to be sidelined,claiming it was being too meticulous about reviewing methodologiesat a time when thous<strong>and</strong>s of projects had to be approvedin a hurry. As a result, the pressure is <strong>on</strong> technocrats <strong>and</strong> c<strong>on</strong>sultants
less<strong>on</strong>s unlearned 165Figure 8. Share of Total Registered CDM Credits Generated by Project Type, May 2006Data analysis by Adam Ma’anit, Carb<strong>on</strong> Trade Watchcapture 72%biomass 21%renewables 2%dams 3%efficiency 2%While ‘there were highhopes that the CDMwould usher in climatefriendlyforeign directinvestment…this remainslargely to be seen.’ 375R. A. Alburo Guarin,Development Bank of thePhilippinesto simplify or streamline carb<strong>on</strong> accounting procedures as much aspossible – for example, to come up with st<strong>and</strong>ardised techniques forvalidating projects en masse to save <strong>on</strong> costs. 374Organisati<strong>on</strong>s attempting to develop higher-quality CDM projectsare frustrated for different reas<strong>on</strong>s. Emily Tyler of the South Africanbasedorganisati<strong>on</strong> SouthSouthNorth c<strong>on</strong>cludes that ‘the CDM actuallyadds little value (indeed, it adds costs) to the very sorts of projectsit was designed to encourage’. Tyler claims that what with its creditprices, c<strong>on</strong>tract terms, <strong>and</strong> transacti<strong>on</strong> costs, the CDM adds ‘no financialvalue’ to ‘the project types which most closely fit the CDM’savowed objectives’. She suggests that good-quality projects will beable to break even <strong>on</strong>ly by bypassing the bureaucracy required forquality c<strong>on</strong>trol at the CDM, seeking extra d<strong>on</strong>or funding, <strong>and</strong> sellingcredits <strong>on</strong> the higher-priced voluntary market to offset emissi<strong>on</strong>sfrom corporate travel, c<strong>on</strong>venti<strong>on</strong>s, pers<strong>on</strong>al lifestyle <strong>and</strong> so forth. 376The catch is that the simpler, faster <strong>and</strong> more st<strong>and</strong>ardised carb<strong>on</strong> accountingprocedures get, the less possible it is to justify the claim thatthe projects have anything to do with climate, <strong>and</strong> the more ‘freerider’credits are created for companies seeking subsidies for theirexisting operati<strong>on</strong>s. 377 It’s an irresolvable dilemma – <strong>and</strong> <strong>on</strong>e which,<strong>on</strong>ce again, was already familiar from the US, where attempts to reducethe risk of ‘paper credits . . . increased transacti<strong>on</strong> costs to a pointwhere many trades were discouraged’. 378
166 development dialogue september 2006 – carb<strong>on</strong> tradingA side issue?OK, I can see that off sets d<strong>on</strong>’t work. But surely off set credits are <strong>on</strong>ly a minorpart of carb<strong>on</strong> trading – so minor that we can perhaps just ignore them?It’s not so easy. Some countries have c<strong>on</strong>templated using carb<strong>on</strong> creditsbought from abroad to cover as much as half their (already minimal)emissi<strong>on</strong>s reducti<strong>on</strong> obligati<strong>on</strong>s under the Kyoto Protocol. Countriessuch as Japan, Canada, Spain, The Netherl<strong>and</strong>s, the UK, France, Sweden<strong>and</strong> Italy are expected to be am<strong>on</strong>g the biggest buyers.In October 2005, <strong>on</strong>e L<strong>on</strong>d<strong>on</strong> financial c<strong>on</strong>sultant went so far asto proclaim that the EU carb<strong>on</strong> market was ‘betting the house <strong>on</strong>CDM/JI credits.’ So keen is Japan <strong>on</strong> gaining access to foreign carb<strong>on</strong>credits, meanwhile, that it is giving Japanese companies 50 percent of start-up investment costs for CDM projects, as well as 50 percent of validati<strong>on</strong> <strong>and</strong> legal documentati<strong>on</strong> costs, together with othersubsidies for feasibility studies <strong>and</strong> design documents. A World Bankofficial has claimed that Northern countries as a whole will need tofind between 750 <strong>and</strong> 2,200 CDM projects in the next few years, or<strong>on</strong> the order of 1.4 billi<strong>on</strong> t<strong>on</strong>nes of credits. Only 265 projects hadbeen officially registered by August 2006, accounting for <strong>on</strong>ly about84 milli<strong>on</strong> credits, <strong>and</strong> Northern governments <strong>and</strong> corporati<strong>on</strong>s alikeare desperately pushing for more to be produced.The fact that offset credits form a large part of the carb<strong>on</strong> market’svolume makes them central to carb<strong>on</strong> trading’s overall problems.Carb<strong>on</strong> credits c<strong>on</strong>taminate any trading system they are used in byadding another layer of unverifiability to the hybrid commodity beingtrafficked.‘It is widely recognisedthat…[the end-of-pipedevelopments that sofar c<strong>on</strong>stitute the bulkof CDM projects] haveno direct developmentbenefi ts.’Holm Olsen, UnitedNati<strong>on</strong>s Envir<strong>on</strong>mentProgrammeAll right, maybe credits from carb<strong>on</strong> projects are important in the market. Butat least you have to admit that carb<strong>on</strong> sink projects, which surely have the mosttechnical problems of all, are <strong>on</strong>ly a trivial part of the market. After all, theyc<strong>on</strong>stitute less than 10 per cent of the credits from CDM projects. So perhapswe can aff ord to be relaxed about the fact that they aren’t doing any verifi ablegood for the climate.Carb<strong>on</strong> sinks credits may be a small part of the market. But, as can beseen in the case studies of the next chapter, they have a disproporti<strong>on</strong>ateeffect <strong>on</strong> l<strong>and</strong> <strong>and</strong> people’s use of it. Remember how manytrees <strong>and</strong> how much territory is needed in order supposedly to ‘offset’a minimal amount of emissi<strong>on</strong>s. With sinks, it doesn’t take manycredits to damage people’s lives.Which perhaps makes this a good time to turn to the topic of the particularproperty rights c<strong>on</strong>fl icts associated with carb<strong>on</strong> saving projects.
less<strong>on</strong>s unlearned 167Ownership againI thought we already talked about this.No, our previous discussi<strong>on</strong> was about the difficulties created bythe need of emissi<strong>on</strong>s trading to create <strong>and</strong> distribute property rights.Carb<strong>on</strong> - saving projects such as those created under the Clean DevelopmentMechanism raise property rights problems of their own. Asthe next chapter will document, the new carb<strong>on</strong> dumps that largepolluters need usually have to appropriate some<strong>on</strong>e else’s l<strong>and</strong>, some<strong>on</strong>eelse’s water, or some<strong>on</strong>e else’s future. C<strong>on</strong>fl icts over ownershipare inevitable.Some of the easiest examples are carb<strong>on</strong> projects that involve treeplanting.Jayant Sathaye of the US’s Lawrence Berkeley Nati<strong>on</strong>al Laboratory<strong>on</strong>ce observed breezily that anxieties about the rich cleansing theiremissi<strong>on</strong>s by taking over the poor’s l<strong>and</strong> for forestry projects couldbe relieved simply by ‘ensuring that the title to the l<strong>and</strong> is separatedfrom the title to carb<strong>on</strong>.’ 379 The reality is not so simple. First, mostplantati<strong>on</strong>s that are c<strong>and</strong>idates for carb<strong>on</strong> finance are already in theh<strong>and</strong>s of powerful corporati<strong>on</strong>s or state bureaucracies. Many of thesecorporati<strong>on</strong>s or bureaucracies are already embroiled in c<strong>on</strong>fl ict withlocal people over their takeover of local l<strong>and</strong> <strong>and</strong> water. In such circumstancescarb<strong>on</strong> finance is likely to be viewed merely as anothersubsidy for an exploitative status quo. Sec<strong>on</strong>d, l<strong>and</strong> whose tree <strong>and</strong>soil carb<strong>on</strong> has been signed over to a utility is going to be less able toprovide livelihood goods to local people. 380Carb<strong>on</strong> is not some unexploited ‘extra’ product that is simply lyingaround unused, waiting to be plucked <strong>and</strong> sold to fossil fuel users,with no other social effects. Its presence is intimately bound up withother uses of the l<strong>and</strong>. Since, under the CDM, the l<strong>and</strong> in questi<strong>on</strong>lies in the South, carb<strong>on</strong> plantati<strong>on</strong> projects are likely to magnify existingNorth-South inequalities.The case of bioenergy plantati<strong>on</strong>s presents an interesting case study.Bioenergy schemes are increasingly attracting carb<strong>on</strong> finance (includingover 100 projects registered with the CDM by May 2006).Insofar as they are expected to replace a substantial percentage of theoil or coal used in today’s industry <strong>and</strong> transport systems, however,they foreshadow a future in which vast tracts of l<strong>and</strong> in the South areturned over to producing biofuel for export.That raises the questi<strong>on</strong> of whether such plantati<strong>on</strong>s would be anymore successful for the countries that establish them than traditi<strong>on</strong>alagricultural export m<strong>on</strong>ocultures, given familiar problems of
168 development dialogue september 2006 – carb<strong>on</strong> tradingoverproducti<strong>on</strong>, declining terms of trade, failure to diversify the producti<strong>on</strong>base, l<strong>and</strong> degradati<strong>on</strong> <strong>and</strong> so <strong>on</strong>.Biofuel plantati<strong>on</strong>s also raise the questi<strong>on</strong> of ownership in a broader<strong>and</strong> more far-reaching sense. Industrially-produced agricultural commoditiessuch as sugar, soya, rubber, bananas, maize, coffee, cott<strong>on</strong>,pulpwood <strong>and</strong> palm oil have already, in a sense, dispossessed milli<strong>on</strong>sin the global South. Why should biofuels be any different?I thought I was supposed to be the <strong>on</strong>e asking the questi<strong>on</strong>s.Examples like biofuels also remind us that carb<strong>on</strong> projects not <strong>on</strong>lytake over l<strong>and</strong> <strong>and</strong> water, but also stake a claim <strong>on</strong> the future. Theydivert not <strong>on</strong>ly present but also future resources to licensing <strong>and</strong> prol<strong>on</strong>gingfossil-fuel use.Plantati<strong>on</strong> ofoilseeds forbiofuel.How does that work?The UK’s Carb<strong>on</strong> Neutral Company (CNC) presents <strong>on</strong>e clearly documentedexample. CNC sells carb<strong>on</strong> credits <strong>on</strong> the unofficial, ‘voluntary’market to c<strong>on</strong>sumers, claiming thereby that it can make their activities‘carb<strong>on</strong>-neutral’. In return for a small amount of extra fundingto woodl<strong>and</strong> owners or forestry managers for tree plantings that aretaking place already, CNC assumes ownership of the associated carb<strong>on</strong>rights, which are then sold <strong>on</strong> to customers at a huge mark-up.According to <strong>on</strong>e 2001 c<strong>on</strong>tract, a forestry enterprise established <strong>on</strong>public l<strong>and</strong> in North Yorkshire in the UK agreed to ‘allocate <strong>and</strong> assign’to CNC (then called Future Forests) <strong>and</strong> not ‘to any<strong>on</strong>e else’ the‘greenhouse gas absorpti<strong>on</strong> capacity of the tree biomass <strong>on</strong> the l<strong>and</strong>
less<strong>on</strong>s unlearned 169identified in the plan for 99 years from the date you countersign thisletter.’ While the agreement specified that CNC did not thereby acquireownership of ‘individual trees’, it did ‘entitle’ CNC to ‘individualseparable enforceable…carb<strong>on</strong> sequestrati<strong>on</strong> rights in the l<strong>and</strong>.’The l<strong>and</strong> could not be sold during that 99-year period unless thebuyer also agreed ‘to observe the terms of this agreement’:…this agreement shall be treated as a burden <strong>on</strong> the l<strong>and</strong> <strong>and</strong> willaccordingly be binding (so far as legally possible) <strong>on</strong> your successorsin title to the l<strong>and</strong>. 381In 2002, meanwhile, the Western Australian government introduceda Carb<strong>on</strong> Rights Bill governing biological carb<strong>on</strong> sequestrati<strong>on</strong> as a‘first step’ toward setting up a carb<strong>on</strong> trading regime. The bill defineda ‘carb<strong>on</strong> right’ as separate from other rights in l<strong>and</strong> <strong>and</strong> specified thatit ‘can be owned by a pers<strong>on</strong> unrelated to the owner of the l<strong>and</strong>’. 382But what do the British voluntary off set market <strong>and</strong> domestic Australian tradingarrangements have to do with the internati<strong>on</strong>al Kyoto off set market?They work by the same principles – <strong>and</strong> appropriate people’s l<strong>and</strong> <strong>and</strong>futures in similar ways. And they can provoke some of the same reacti<strong>on</strong>s.Local people in Minas Gerais, Brazil, for example, explicitly opposethe way a plantati<strong>on</strong> charcoal project helps obliterate possible futuresthey wish to build:The argument that producing pig ir<strong>on</strong> from charcoal is less bad thanproducing it from coal is a sinister strategy… . What we really need areinvestments in clean energies that at the same time c<strong>on</strong>tribute to thecultural, social <strong>and</strong> ec<strong>on</strong>omic well-being of local populati<strong>on</strong>s… . 383Indigenous Peoples’ organisati<strong>on</strong>s were am<strong>on</strong>g the first to spot thel<strong>and</strong> grabs <strong>and</strong> mortgaging of the future involved in Kyoto’s carb<strong>on</strong>sink projects. The Indigenous Peoples’ Statement made at the NinthC<strong>on</strong>ference of the Parties to the UNFCCC in Milan in December2003 noted that:Sinks projects do not c<strong>on</strong>tribute to climate change mitigati<strong>on</strong> <strong>and</strong>sustainable development. The modalities <strong>and</strong> procedures for afforestati<strong>on</strong><strong>and</strong> reforestati<strong>on</strong> project activities under the CDM d<strong>on</strong>ot respect <strong>and</strong> guarantee our right to l<strong>and</strong>s, territories, <strong>and</strong> selfdeterminati<strong>on</strong>.384In May 2006, representatives of all of Ecuador’s indigenous nati<strong>on</strong>alities,meeting at Puyo in the Ecuadorian Amaz<strong>on</strong> with other indigenousgroups <strong>and</strong> nati<strong>on</strong>al <strong>and</strong> internati<strong>on</strong>al NGOs, declared:
170 development dialogue september 2006 – carb<strong>on</strong> tradingWe reject the use of the Kyoto Protocol’s so-called Clean DevelopmentMechanism in projects affecting the communities, suchas hydroelectric dams, m<strong>on</strong>oculture tree plantati<strong>on</strong>s <strong>and</strong> others.We reject the signing of further c<strong>on</strong>tracts in our communities forthe sale of envir<strong>on</strong>mental services with nati<strong>on</strong>al or internati<strong>on</strong>alNGOs, municipalities or individuals. We exhort CONAIE <strong>and</strong>CONFENIAE [c<strong>on</strong>federati<strong>on</strong>s of indigenous peoples in Ecuador]to submit the corresp<strong>on</strong>ding complaints to the courts [<strong>and</strong>] to havepunitive measures taken against the notaries, c<strong>on</strong>tract promoters<strong>and</strong> NGOs that participate in these activities.We’ve been talking about who owns the l<strong>and</strong> <strong>and</strong> water used by carb<strong>on</strong> projects.But who owns the carb<strong>on</strong> credits produced by these projects?It’s not always clear. As late as 2004, Baker <strong>and</strong> McKenzie, an internati<strong>on</strong>allaw firm specialising in carb<strong>on</strong> trading, was still asking, ‘Whois entitled to legal ownership of emissi<strong>on</strong>s reducti<strong>on</strong>s?’Could legal title to emissi<strong>on</strong> reducti<strong>on</strong>s [sic] which are being tradedbe challenged by another party to the project (i.e., the lessor of thel<strong>and</strong>, the government, another shareholder in the project) or limitedby c<strong>on</strong>cessi<strong>on</strong> arrangements?... What if foreign involvement ina project is limited to the purchase of credits – would this c<strong>on</strong>stitutea transfer of ‘property rights’ to the foreign investor? 385Only in 2005 did the Chinese government, to take <strong>on</strong>e example, clarifywhat percentage of the benefits from the sale of carb<strong>on</strong> credits it wouldtake <strong>and</strong> how much it would leave to implementing enterprises.Not surprisingly, businesses interested in buying carb<strong>on</strong> credits areobsessed with property rights. While EU emissi<strong>on</strong>s allowances are‘real property’, noted <strong>on</strong>e Dutch banker recently, CDM credits ‘d<strong>on</strong>’thave such a solid status yet’. As internati<strong>on</strong>al commercial lawyers gearup for disputes over title, <strong>on</strong>e European carb<strong>on</strong> fund manager washeard to remark in October 2005 that ‘there are just not enough guarantees. . . I’m not going to spend my life in the court of Belo Horiz<strong>on</strong>teto get my credits. We’re placing bets here. CDM credits willalways be discounted.’What’s the problem? People who invest in carb<strong>on</strong> projects should own the carb<strong>on</strong>savings. And everybody else should just accept this.People who have arguably ‘invested’ for generati<strong>on</strong>s in l<strong>and</strong> <strong>and</strong> othergoods used for carb<strong>on</strong> projects yet do not own, <strong>and</strong> cannot sell,the credits they produce, are likely to take a different view. Indigenouspeoples, for instance, may have preserved forests <strong>and</strong> soils for
less<strong>on</strong>s unlearned 171cen turies, yet are likely to have no share in the carb<strong>on</strong> profits that aformal l<strong>and</strong>owner can reap.Similarly, indigenous communities, envir<strong>on</strong>mental groups, policymakers<strong>and</strong> even nati<strong>on</strong>al governments have ‘invested’ in, <strong>and</strong> c<strong>on</strong>tinueto invest in, innumerable carb<strong>on</strong>-saving activities such as preventingoil extracti<strong>on</strong> or maintaining energy-efficient activities intheir territories. As Hermann Ott <strong>and</strong> Wolfgang Sachs point out, ‘acountry which, for reas<strong>on</strong>s of equity, promotes biodiversity habitats,resource-light producti<strong>on</strong>, livelihood agriculture or the instituti<strong>on</strong> ofcommunity rights, may already avoid a great deal of emissi<strong>on</strong>s,’ 386 yetmay not own, or be able to sell, carb<strong>on</strong> credits for doing so. DouglasKorsah-Brown of Friends of the Earth Ghana <strong>on</strong>ce argued al<strong>on</strong>g similarlines that while Southern countries have effectively ‘loaned theirecological space to developed countries’, they ‘have received no creditfor avoiding emissi<strong>on</strong>s to date’ <strong>and</strong> ‘should be rewarded for not havingadopted dirty technology in the first place’. 387Well, but you can’t just give credits to somebody for not doing something.The Kyoto Protocol does it all the time. All CDM credits are generatedby not doing something. Remember that every project has to showthat it does not do ‘what would have happened without the project.’Some even have ‘avoidance’ in their name.Look, for example, at the Lages Methane Avoidance Project in Brazil,which was registered by the CDM board in April 2006. This projectgenerates credits by not l<strong>and</strong>filling wood waste <strong>and</strong> burning it instead.Or, to take another example at r<strong>and</strong>om: Japan gets carb<strong>on</strong> creditsfrom the Graneros Plant Fuel Switching Project in Chile, registeredin July 2005, because the plant does not use a certain amount of coalor oil, having switched to gas instead.If Japan gets credits for industries that do not use coal, <strong>and</strong> a Braziliancompany gets credits for not leaving wood to decay, then Costa Ricashould get credits for having prevented US companies such as HarkenOil from exploiting oil <strong>on</strong> its territory. 388 Indigenous communitiesshould get credits for having w<strong>on</strong> the revocati<strong>on</strong> of fossil fuel c<strong>on</strong>cessi<strong>on</strong>sin their territories. 389In fact, why stop there? Nepal should put in an applicati<strong>on</strong> to theCDM to get credits for not building a superhighway system. Camero<strong>on</strong>should get credits for not undertaking a space programme. Anybodyin a Southern or Eastern European country should be able to generatecredits for choosing to ride a bicycle instead of investing in a car. 390
172 development dialogue september 2006 – carb<strong>on</strong> tradingStop being silly. Nepal was never going to build a superhighway system.Camero<strong>on</strong> was never going to invest in a space programme. And presumablyCosta Rica would have stopped Harken Oil from drilling for reas<strong>on</strong>s otherthan the promise of carb<strong>on</strong> credits. How could you possibly verify <strong>and</strong> measurethe carb<strong>on</strong> credits from such projects?As dem<strong>on</strong>strated above, the CDM already cannot verify how manycredits its projects generate, <strong>and</strong> for just the same reas<strong>on</strong>: it can’t provethat its projects are not business as usual. In accounting terms, thereshould be no difference between them <strong>and</strong> these other speculativeprojects. The silliness is all <strong>on</strong> the side of the CDM <strong>and</strong> other carb<strong>on</strong>offsetprogrammes themselves. To cite these hypothetical examples is<strong>on</strong>ly to throw that silliness into sharper relief.In fact, in the case of indigenous communities <strong>and</strong> the Costa Ricangovernment preventing oil exploitati<strong>on</strong>, measurement is arguably agood deal easier than in the average CDM project, involving <strong>on</strong>lyquantificati<strong>on</strong> of the unexploited oil deposits.What qualifies you to be a carb<strong>on</strong> credit owner, in sum, is not thatyou are saving carb<strong>on</strong>. It is, rather, that you have the m<strong>on</strong>ey to investin various piecemeal technical fixes in specific industries <strong>and</strong> to hirec<strong>on</strong>sultants to calculate <strong>and</strong> ‘verify’ carb<strong>on</strong> credits, crunch numbers,fill in forms, m<strong>on</strong>itor projects <strong>and</strong> so <strong>on</strong>. Carb<strong>on</strong> credits go to wellfinanced,high-polluting operati<strong>on</strong>s capable of hiring professi<strong>on</strong>alvalidators of counterfactual scenarios. They do not go to n<strong>on</strong>-professi<strong>on</strong>alactors in already low-emitting c<strong>on</strong>texts or social movementsactively working to reduce use of fossil fuels. (See box, p. 61.)Few rural communities in Northeast Thail<strong>and</strong> or the Peruvian Amaz<strong>on</strong>,for example, are going to be able to afford the services of the expensiveprivate carb<strong>on</strong> c<strong>on</strong>sultants designated by the United Nati<strong>on</strong>s– such as Norway’s Det Norske Veritas, Germany’s TUV, Britain’sSGS or Japan’s JQA – to document, ‘validate’ <strong>and</strong> ‘verify’ their community-friendlyenergy schemes, even if the UN encouraged suchprojects. 391 In the distributi<strong>on</strong> of property rights over carb<strong>on</strong> savings,there’s a clear bias in favour of wealthy corporati<strong>on</strong>s <strong>and</strong> governments<strong>and</strong> against communities, the poor, n<strong>on</strong>-professi<strong>on</strong>als <strong>and</strong> certainethnic groups.It hardly needs to be added that this prejudice – which often deservesthe title of ‘structural racism’ – badly serves the cause of climatic stability.It reinforces a system in which, ir<strong>on</strong>ically, the main entitiesrecognised as being capable of making ‘emissi<strong>on</strong>s reducti<strong>on</strong>s’ are thecorporati<strong>on</strong>s most committed to a fossil-fuel-burning future, suchas Shell or Tokyo <strong>Power</strong>, while indigenous communities, envir<strong>on</strong>mentalmovements <strong>and</strong> ordinary people acting more c<strong>on</strong>structively
less<strong>on</strong>s unlearned 173Who Owns Forest Carb<strong>on</strong>?The United Nati<strong>on</strong>s has never been ableto work out a c<strong>on</strong>vincing way of decidingwho owns the carb<strong>on</strong>-recycling capacityof forests – <strong>and</strong> therefore who should beable to cash in <strong>on</strong> it in a carb<strong>on</strong> market.Early in the Kyoto Protocol negotiati<strong>on</strong>s,the EU <strong>and</strong> some Southern countries wereeager to prevent industrialised countriesfrom using regrowth of their forests as anexcuse for not reducing industrial emissi<strong>on</strong>s.They dem<strong>and</strong>ed that marketable bioticcarb<strong>on</strong> assets be limited to those resultingfrom ‘direct human-induced’ carb<strong>on</strong>uptake, <strong>and</strong> not include ‘natural fluxes’.Awkwardly, this opened up the entireterrestrial biosphere to carb<strong>on</strong> propertyclaims. Every part of the globe has beenaffected by human activity over millennia,from Australia’s fire-moulded l<strong>and</strong>scape toNorth America’s forest mosaic. 393Not even the Intergovernmental Panel <strong>on</strong><strong>Climate</strong> <strong>Change</strong> has been able to factorout ‘direct human-induced’ effects from‘indirect human-induced <strong>and</strong> natural effects’such as those due to enhanced CO 2c<strong>on</strong>centrati<strong>on</strong>s <strong>and</strong> nitrogen depositi<strong>on</strong>.‘The phrase “human-induced”’, it admits,‘has no scientific meaning’. 394 Hence it’sbeen hard to identify which biotic carb<strong>on</strong>dumps should be regarded as bel<strong>on</strong>ging tohuman beings at all.The IPCC’s suggested way out – to define‘directly human-induced’ activities arbitrarilyas those resulting from the decisi<strong>on</strong>sof c<strong>on</strong>temporary ‘l<strong>and</strong> managers’, including,most obviously, professi<strong>on</strong>al ‘afforesters<strong>and</strong> reforesters’ – tends to exclude historicalactors who often have better claimsto c<strong>on</strong>serving carb<strong>on</strong>.As <strong>on</strong>e of Tuvalu’s negotiatiors <strong>on</strong>ce pointedout, a government or company that hiresan aeroplane to scatter a few particles offertiliser over its l<strong>and</strong>-holdings could gainthe right to claim credit for the carb<strong>on</strong> inthe forests below, while indigenous <strong>and</strong>settler peoples who had a h<strong>and</strong> in the earliershaping of such ecosystems – or farmerswho happen to look after l<strong>and</strong>s classifiedby experts as ‘unmanaged’ – might get nocredit at all. 395 That would make propertyownership pretty much entirely dependent<strong>on</strong> professi<strong>on</strong>al <strong>and</strong> ec<strong>on</strong>omic status,together with technical measurement capability.to tackle climate change are tacitly excluded, their creativity unrecognised,<strong>and</strong> their claims suppressed. As Janica Lane <strong>and</strong> colleaguesobserve, ‘Most climate change aid goes to current or future pollutersin developing nati<strong>on</strong>s, while people c<strong>on</strong>ducting relatively climatefriendlypractices are ignored.’ 392In other words, carb<strong>on</strong> off set trading is treating the worst climate off enders asclimate heroes, while failing to support many of those who are addressing theproblem at its roots.
174 development dialogue september 2006 – carb<strong>on</strong> tradingExactly. And a final injury of carb<strong>on</strong> offset trading is that, by licensingmore polluti<strong>on</strong> in already-polluted areas, it reinforces a pattern ofinequality worldwide.How does that happen?Some of the biggest buyers of carb<strong>on</strong> credits are industries that badlypollute their local communities – utilities, oil refineries, chemicalfirms, pulp <strong>and</strong> paper companies <strong>and</strong> the like. In fact, throughoutthe world, polluting industries <strong>and</strong> poor communities suffering discriminati<strong>on</strong>of various kinds tend to be found together, for reas<strong>on</strong>sincluding weak polluti<strong>on</strong> z<strong>on</strong>ing restricti<strong>on</strong>s <strong>and</strong> low real estate costs.Cheap carb<strong>on</strong> offsets help allow these industries to go <strong>on</strong> damagingtheir local envir<strong>on</strong>ments.But the credits they buy are carb<strong>on</strong> dioxide credits. Carb<strong>on</strong> dioxide is not atoxic pollutant in itself.No, but, as menti<strong>on</strong>ed earlier, the same processes that produce carb<strong>on</strong>dioxide also produce a lot of co-pollutants that are toxic. By helpingindustries to go <strong>on</strong> producing carb<strong>on</strong> dioxide, cheap carb<strong>on</strong> creditsalso allow them to go <strong>on</strong> producing a range of toxic substances.Worse, a polluting industrial installati<strong>on</strong> often gets a new lease <strong>on</strong>life by buying cheap carb<strong>on</strong> credits from a project that damages thelives <strong>and</strong> livelihoods of local people elsewhere. In this way, the tradein carb<strong>on</strong> credits can use the oppressi<strong>on</strong> of local people whose l<strong>and</strong>is being used for industrial plantati<strong>on</strong>s in Brazil, say, to prol<strong>on</strong>g theoppressi<strong>on</strong> of other local communities in the vicinity of oil refineriesor power plants in Europe. Communities that should be uniting intheir battles for a transiti<strong>on</strong> away from the hydrocarb<strong>on</strong> ec<strong>on</strong>omy arebeing pitted against each other by the trading system that pretends tooffer a soluti<strong>on</strong>. In the future, it may even happen that an indigenouscommunity fighting an oil company’s exploitati<strong>on</strong> of its territory willfind itself at odds with another indigenous community down theriver providing carb<strong>on</strong> sink credits to the same company.Once again, the experience of offset markets in the US should haveprovided some less<strong>on</strong>s for the carb<strong>on</strong> trade. In Los Angeles County,for example, minorities are more than twice as likely as Caucasians tobe living in a census tract located within a <strong>on</strong>e-mile radius of at least<strong>on</strong>e large-capacity toxic site, 396 <strong>and</strong> a majority of facilities emittingtoxic pollutants are in ‘Hispanic-dominated’ census tracts. 397 The LosAngeles RECLAIM offset trading programme described above reinforcedthis pattern.
less<strong>on</strong>s unlearned 175How?The polluti<strong>on</strong> prevented by RECLAIM’s programme of destroying decrepitcars would have been spread over a wide four-county regi<strong>on</strong>. Butthe industries that bought the resulting ‘offsets’ are densely clusteredin <strong>on</strong>ly a few communities, or ‘hot spots’. So the car ‘offset’ schemeeffectively c<strong>on</strong>centrated more polluti<strong>on</strong> in communities surroundingstati<strong>on</strong>ary sources, particularly those associated with the four oil companieswho were the biggest buyers of the offset credits generated byscrapping cars: Unocal, Chevr<strong>on</strong>, Ultramar <strong>and</strong> GATX.All these companies used their ‘offsets’ to avoid installing polluti<strong>on</strong>c<strong>on</strong>trol equipment that captures toxic gases <strong>and</strong> vapours released duringoil tanker loading at their marine terminals, including benzene,which can cause leukaemia, anaemia, respiratory tract irritati<strong>on</strong>, dermatitis,pulm<strong>on</strong>ary oedema, <strong>and</strong> haemorrhaging. 398 The surroundingcommunities were overwhelmingly Latino, three of them populatedbetween 75 to 90 per cent by people of colour (compared to a figureof 36 per cent for the entire South Coast Air Basin). 399Much of the historical polluti<strong>on</strong> burden of these underprivileged communitieswas thus maintained through a programme advertised as ‘c<strong>on</strong>trolling’polluti<strong>on</strong>. 400 In a trade of like for unlike, the c<strong>on</strong>tinued releaseof highly toxic chemicals into certain communities was exchanged forsmall area-wide reducti<strong>on</strong>s in much less toxic chemicals.Nor is this case unique. A trading programme in the San Francisco area‘unfairly gave up toxic emissi<strong>on</strong>s reducti<strong>on</strong>s from a petroleum refineryin a community of colour facing high cancer risk, in exchange forcredits from reducti<strong>on</strong>s in auto use throughout the Bay Area’. 401How offsets block changeIf trading in carb<strong>on</strong> credits worsens the problem of hot spots, it alsoadds to the forces blocking the technological <strong>and</strong> social innovati<strong>on</strong>needed to address climate change. Again, this is a pattern evidentfrom ‘offset’ projects in earlier US polluti<strong>on</strong> trading schemes that isbeing repeated in today’s carb<strong>on</strong>-‘saving’ projects – including theKyoto Protocol’s CDM.What’s the US experience, then?One example is, again, the RECLAIM polluti<strong>on</strong> market set up in LosAngeles. 402 Beginning in 1997, the local air quality management authorityoffered to award marketable credits to businesses or individualswho repaired emissi<strong>on</strong>s-related comp<strong>on</strong>ents in high-emitting vehicles,bought clean buses or other vehicles, electrified truck stops <strong>and</strong> tour bus
176 development dialogue september 2006 – carb<strong>on</strong> tradingstops to prevent engine idling, bought battery-operated lawn mowers<strong>and</strong> so <strong>on</strong>. Whether or not these ‘offset’ technologies are themselves regardedas innovative, they were used to relieve pressures <strong>on</strong> large emittersto make other, more substantial technological changes.Similarly, as also menti<strong>on</strong>ed above, ‘offsets’ used in the US Envir<strong>on</strong>mentalProtecti<strong>on</strong> Agency’s ‘bubble’ programmes removed big polluters’incentives to innovate to c<strong>on</strong>trol their own emissi<strong>on</strong>s, usuallythrough use of credits generated by an already-existing technology.Firms also claimed credits for shutting down emissi<strong>on</strong>s sources or forproducti<strong>on</strong> slowdowns, even when such acti<strong>on</strong>s were undertaken forbusiness reas<strong>on</strong>s. Writing of such ‘paper credits,’ envir<strong>on</strong>mental lawyerDavid D<strong>on</strong>iger wrote in 1986 that ‘in practice…there has been farmore innovati<strong>on</strong> in shell games <strong>and</strong> sharp accounting practices thanin polluti<strong>on</strong> c<strong>on</strong>trol technology’. 403In a similar way, the Kyoto Protocol’s credit-generating mechanisms– JI <strong>and</strong> CDM – are designed in a way that allows industries in thewealthiest countries to avoid or delay innovati<strong>on</strong> in their own technologicalsystems as l<strong>on</strong>g as they fund the installati<strong>on</strong> of off-the-shelftechnology in Southern or Eastern European countries.These mechanisms have been a particular failure in promoting renewableenergy, in which innovati<strong>on</strong> is especially desirable. Olderindustrial plants whose emissi<strong>on</strong>s are supposedly ‘compensated for’ bycarb<strong>on</strong> credits bought from abroad will more easily undercut newer,more efficient technology, reducing incentives for change. And in additi<strong>on</strong>to failing to promote innovati<strong>on</strong> in the North, they also fail topromote innovati<strong>on</strong> in the South.Why?There are several reas<strong>on</strong>s.First, the more a Southern country makes it a matter of policy topromote renewable energy or climate-friendly technology generally,the harder it is for it to attract CDM projects. The more serious it isabout weaning its technological structure off fossil fuels, the harder itbecomes to prove that good projects would not have happened withoutthe CDM. 405The CDM, in other words, gives governments perverse incentives forchoosing the short-term benefit of CDM revenues aimed at plucking‘low-hanging fruit’ over the l<strong>on</strong>g-term benefits of envir<strong>on</strong>mental policypromoting climate-friendly technological change. For ex ample,high-level government bureaucrats in South Africa’s Department ofMines <strong>and</strong> Energy have admitted that they have faced pressure from
less<strong>on</strong>s unlearned 177Innovati<strong>on</strong>, the Atmosphere <strong>and</strong> Ec<strong>on</strong>omicsBecause it allows the North to delayurgently-needed social <strong>and</strong> technologicalchange, every block of carb<strong>on</strong> credits fromthe South has a l<strong>on</strong>g-term climatic cost.Carb<strong>on</strong> accountants need to quantify such‘opportunity costs’ when adding up theeffects <strong>on</strong> the atmosphere of each carb<strong>on</strong>project. Logically speaking, that’s a prerequisitefor accurately calculating howmany carb<strong>on</strong> credits a project should beallowed to sell.However, no CDM project validators orverifiers ever make such calculati<strong>on</strong>s. No<strong>on</strong>e has any idea how to figure out howmuch carb<strong>on</strong> a project will ‘lose’ by deprivinga company in the North of an immediateincentive to innovate. Nor is it possiblethey ever will, although in the l<strong>on</strong>g termthe amount could be enormous.This failure of the carb<strong>on</strong> ‘offset’ market is<strong>on</strong>ly <strong>on</strong>e example of the many paradoxeswhich result when c<strong>on</strong>venti<strong>on</strong>al ec<strong>on</strong>omicthinking is uncritically applied to issuessuch as climate change mitigati<strong>on</strong>. As legalscholar Robin Paul Malloy explains, efficiencyanalysis ‘is incapable of adequatelyaddressing creativity because creativity isindeterminate.’ 404the private sector not to make renewable energy targets too stringent,for fear future CDM projects will not be able to prove they are betterthan what would have happened otherwise. 406Pressures for holding off <strong>on</strong> innovati<strong>on</strong> are increased by the fact thatcredit buyers <strong>and</strong> c<strong>on</strong>sultant validators seeking future c<strong>on</strong>tracts haveincentives to postulate, <strong>and</strong> try to bring about, business-as-usual scenarioswhich are the highest-emitting possible, in order to make theprojects that they back appear to be saving as much carb<strong>on</strong> as possible.Sec<strong>on</strong>d, some proposed CDM projects claim carb<strong>on</strong> credits simply forobeying the envir<strong>on</strong>mental laws of the host country. One example is aproposed project to divert the natural gas now being flared into the skyby Chevr<strong>on</strong>, Shell <strong>and</strong> other corporati<strong>on</strong>s in Nigeria to a productiveuse. Flaring is already prohibited in Nigeria, <strong>and</strong> the companies havebeen paying a penalty for n<strong>on</strong>-compliance. 408 Indeed, the NigerianHigh Court recently affirmed that flaring is illegal <strong>and</strong> unc<strong>on</strong>stituti<strong>on</strong>al.409 Another example is South African regulati<strong>on</strong>s that methane emissi<strong>on</strong>sfrom l<strong>and</strong>fills be captured <strong>on</strong>ce they reach a certain level. 410Prop<strong>on</strong>ents of carb<strong>on</strong> projects often claim that they help ensure thatenvir<strong>on</strong>mental laws are obeyed. However, the prospect of carb<strong>on</strong> financegives both host countries <strong>and</strong> project prop<strong>on</strong>ents incentives forensuring that those laws – including those that create incentives forstructural change <strong>and</strong> innovati<strong>on</strong> to lower emissi<strong>on</strong>s – are normally
178 development dialogue september 2006 – carb<strong>on</strong> tradingnot enforced. The climatic ‘balance sheet’ for such projects wouldthus, logically speaking, have to be debited for the climate effectsof the associated damage d<strong>on</strong>e to the rule of law in the host country.In additi<strong>on</strong> to undermining important incentives for structuralchange <strong>and</strong> innovati<strong>on</strong>, this type of proposed CDM accounting raisesquesti<strong>on</strong>s about the commitment of the internati<strong>on</strong>al community involvedin CDM projects, including the World Bank <strong>and</strong> Northerngovernments, to what the Bank calls ‘good governance’.Third, <strong>and</strong> perhaps most important, the cheapest <strong>and</strong> most secure carb<strong>on</strong>credits that the CDM has to offer – <strong>and</strong> thus the <strong>on</strong>es most indem<strong>and</strong> by industrialised countries – will be those, like the HFC-23<strong>and</strong> N x O projects menti<strong>on</strong>ed above, that do the least to help develop astructure of renewable energy <strong>and</strong> transport in Southern countries. 411While such projects (assuming they would not have been implementedanyway) do carry envir<strong>on</strong>mental benefits, they are essentially <strong>on</strong>lyend-of-pipe add-<strong>on</strong>s to single, existing plants; could have easily beencarried out through traditi<strong>on</strong>al regulati<strong>on</strong>; <strong>and</strong> d<strong>on</strong>’t help bring aboutstructural change in critical climate-related sectors such as energyor transport through research <strong>and</strong> development, technology sharing,training <strong>and</strong> so <strong>on</strong>.As the US lead <strong>and</strong> sulphur dioxide programmes dem<strong>on</strong>strate, becausethis type of market-oriented project ‘focuses solely <strong>on</strong> reducinga single pollutant by an exact date <strong>and</strong> a precise amount at least cost,techniques <strong>and</strong> practices that deliver multiple benefits – e.g., newways of energy c<strong>on</strong>versi<strong>on</strong>, as well as c<strong>on</strong>servati<strong>on</strong>, <strong>and</strong> renewableforms of energy – are frozen out of the market’. 412As a 2004 overview of the CDM by the Organisati<strong>on</strong> for Ec<strong>on</strong>omic Cooperati<strong>on</strong><strong>and</strong> Development, a b<strong>and</strong> of 30 industrialised countries, noted:[A] large <strong>and</strong> rapidly growing porti<strong>on</strong> of the CDM project portfoliohas few direct envir<strong>on</strong>mental, ec<strong>on</strong>omic or social effectsother than greenhouse gas mitigati<strong>on</strong>, <strong>and</strong> produces few outputsother than emissi<strong>on</strong>s credits. These project types generally involvean incremental investment to an already-existing system in orderto reduce emissi<strong>on</strong>s of a waste stream of GHG (e.g. F-gases orCH 4 ) without increasing other outputs of the system. 413Coal-bed methane schemes are another example of business-friendlyprojects that do have envir<strong>on</strong>mental benefits, but d<strong>on</strong>’t promoteclimate stability when part of a trading scheme. Gas capture projectsin oil fields similarly c<strong>on</strong>tribute little toward the innovati<strong>on</strong>s neededfor a transiti<strong>on</strong> away from fossil fuels, yet also yield c<strong>on</strong>veniently largechunks of cheap carb<strong>on</strong> credits.Many nati<strong>on</strong>al-levelCDM authorities ‘do notcare about additi<strong>on</strong>ality ofCDM projects…There isa real risk of a backlashagainst the CDM if itssustainability performancedoes not improve.’ 407Axel Michaelowa(CDM MethodologyPanel) <strong>and</strong> KatharinaMichaelowa, HamburgInstitute for Internati<strong>on</strong>alEc<strong>on</strong>omics
less<strong>on</strong>s unlearned 179I d<strong>on</strong>’t agree with your criticism of projects that capture gas from coal mines<strong>and</strong> oil wells <strong>and</strong> then burn it off to generate electricity. Surely these are efficiency measures that need to be undertaken at every such installati<strong>on</strong>. Whyare you against them?No <strong>on</strong>e’s against preventing this kind of waste. C<strong>on</strong>sidered <strong>on</strong> theirown, such projects are needed <strong>and</strong> should have been d<strong>on</strong>e from thestart. The difficulty comes when they become tradable for increasedfossil fuel use elsewhere. As part of a trading system, they become notjust much-needed efficiency schemes but also licenses for acceleratedcarb<strong>on</strong>-dioxide release.We’ve been talking about what, from an envir<strong>on</strong>mental point of view, are admittedlyrather dodgy schemes. But aren’t there at least some renewable energyprojects in the CDM?There are a fair number, but they were never going to generatemany credits. Often small capital- or labour-intensive greenfielddevelopments that provide low rates of return, 414 are less able to shoulderthe burden of the documentati<strong>on</strong>, validati<strong>on</strong>, <strong>on</strong>going m<strong>on</strong>itoring<strong>and</strong> verificati<strong>on</strong> of emissi<strong>on</strong>s reducti<strong>on</strong>s required of CDM projects.An additi<strong>on</strong>al h<strong>and</strong>icap for renewable energy projects, which haveto pay more of their costs upfr<strong>on</strong>t than many other projects, is thecommodity transacti<strong>on</strong> model overwhelmingly followed by CDM<strong>and</strong> JI projects, in which credits are bought as they are delivered overa 10- or 21-year crediting period. 415HFC-23 <strong>and</strong> N 2 O projects had a head start in getting their methodologiesapproved, too, <strong>and</strong> are likely to maintain their advantageover renewable energy projects for which carb<strong>on</strong> accounting is morecumbersome <strong>and</strong> tests of whether a project ‘would have happenedwithout carb<strong>on</strong> credits’ are especially difficult to apply. 416 Significantly,n<strong>on</strong>e of the nine renewable energy projects being developedunder the Dutch-funded CERUPT carb<strong>on</strong>-trading programme in2004 was able to dem<strong>on</strong>strate that it ‘would not have happened otherwise.’417 Similarly, the large renewable-energy Darajat III geothermalproject in Ind<strong>on</strong>esia <strong>and</strong> the Zafarana wind farm in Egypt havefailed to get their baseline methodologies accepted by the CDM duein part to their inability to dem<strong>on</strong>strate that they are ‘additi<strong>on</strong>al’.Investment by Japan – whose Bank for Internati<strong>on</strong>al Cooperati<strong>on</strong>provided a soft loan to Zafarana in breach of CDM rules against usingoverseas development aid m<strong>on</strong>ey – has accordingly shifted more <strong>and</strong>more toward l<strong>and</strong>fill gas <strong>and</strong> gas capture projects.In short, no market system that prioritises price per unit of carb<strong>on</strong>credits will be of much good to renewable energy, as the World
180 development dialogue september 2006 – carb<strong>on</strong> tradingBank, am<strong>on</strong>g others, recognised early <strong>on</strong>. Only m<strong>on</strong>ths after the2001 Marrakech Accords laid down the rule book for the CDM,the c<strong>on</strong>sultancy Ecofys had already c<strong>on</strong>cluded that there would be<strong>on</strong>ly a ‘limited role for renewable energy projects under… KyotoMechanisms dominated by least-cost approaches’. 418 More recently,the World Bank explicitly called attenti<strong>on</strong> to the ‘the n<strong>on</strong>-ec<strong>on</strong>omic’nature of the renewable projects in the CDM portfolio, noting thatthe current proporti<strong>on</strong> of renewable energy projects is bound to diminishin the ‘mature CDM market’. 419Am<strong>on</strong>g registered CDM project types, <strong>on</strong>ly energy efficiency schemeshave produced fewer credits (less than 1 milli<strong>on</strong> t<strong>on</strong>nes of CO 2equivalent) than renewables. Calculati<strong>on</strong>s by the World Wide Fundfor Nature (WWF) show that the amount of financing expected tobe mobilised by the CDM for renewable energy is a fracti<strong>on</strong> not <strong>on</strong>lyof existing investment <strong>and</strong> Overseas Development Assistance (ODA)flows, but also of Global Envir<strong>on</strong>ment Facility (GEF) financing forrenewable energy. WWF estimates that the CDM will account for lessthan 0.5 per cent of the annual renewable energy market in Southerncountries if current trends c<strong>on</strong>tinue. 420When investors do put m<strong>on</strong>ey into renewable energy schemes, theyare treating them mainly as green decorati<strong>on</strong>s for portfolios dominatedby c<strong>on</strong>venti<strong>on</strong>al energy rather than as sober market investments.The Finnish government, for example, submitted four micro-hydroprojects in H<strong>on</strong>duras to the CDM, yet their credit generati<strong>on</strong> is sosmall – <strong>on</strong>e project is claiming to generate <strong>on</strong>ly 9,000 t<strong>on</strong>nes of CO 2credits over 10 years – that it is difficult to see how credit sales couldeven cover transacti<strong>on</strong> costs. 421 Similarly, the minimum price tagfor certifying a CDM project in South Africa – estimated at around40,000 r<strong>and</strong>/usd 6,300 – puts carb<strong>on</strong> finance out of reach of mostsmall-scale renewable energy project developers. 422Centre for Science <strong>and</strong>Envir<strong>on</strong>mentBut d<strong>on</strong>’t the Southern governments hosting CDM projects want them to beof more l<strong>on</strong>g-term value to their peoples?Some might like it to be that way, but that’s not how the market works.If host countries started trying to enforce ‘sustainable development’criteria, transacti<strong>on</strong> costs would go up <strong>and</strong> their projects would beless likely to attract investment. Unsurprisingly, CDM host countrieshaven’t been very insistent <strong>on</strong> promoting renewable energy or other‘high-quality’ CDM projects capable of driving innovati<strong>on</strong> <strong>and</strong>strategic change.In sum, CDM is not a renewable energy promoti<strong>on</strong> instrument ora ‘sustainable development’ fund. It identifies <strong>and</strong> funds low-cost
less<strong>on</strong>s unlearned 181carb<strong>on</strong> credits rather than investments that drive strategic change inenergy <strong>and</strong> transport.Still, it must be better than nothing.‘A mechanism designed to promote climate protecti<strong>on</strong>,’ as CDM expertBen Pears<strong>on</strong> puts it, ‘should be reducing the number of coal <strong>and</strong>oil projects, not providing them with a new revenue stream <strong>and</strong> divertingfinancing from renewable projects.’ The technology the CDMpromotes merely embroiders an overwhelmingly fossil-oriented approachto energy <strong>and</strong> transport. Nearly every instituti<strong>on</strong> that investsin the CDM market is investing far more in the fossil fuel market.It’s useful to return <strong>on</strong>ce again to the example of the World Bank. Manycorporate investors in the Prototype Carb<strong>on</strong> Fund (PCF) – the Bank’sflagship carb<strong>on</strong> fund – are in fact receiving far greater amounts of Bankfinancing for fossil fuel projects that produce emissi<strong>on</strong>s (Table 4).Table 4Corporati<strong>on</strong>PCF c<strong>on</strong>tributi<strong>on</strong> for CDM <strong>and</strong>JI projects 1999–2004 423(USD milli<strong>on</strong>)Received from WB forfossil fuel projects1992–2002(USD milli<strong>on</strong>) 424Mitsui 17 481 1,807.5BP 5 938.8Mitsubishi 5 403.6Deutsche Bank 5 165.6Gaz de France 5 138.9RWE 5 138.9Statoil 5 242.3Total 46 3,834.6The involvement of BP <strong>and</strong> Statoil in the PCF is particularly notablegiven the <strong>on</strong>going financial support by the Bank’s Internati<strong>on</strong>alFinance Corporati<strong>on</strong> (IFC) for their efforts to open up the massiveAzerbaijan oil fields for c<strong>on</strong>sumpti<strong>on</strong> in Western Europe <strong>and</strong> the US.In October 2003, BP <strong>and</strong> Statoil were part of a group of corporati<strong>on</strong>swho received usd 120 milli<strong>on</strong> from the IFC for development ofthe Azeri-Chirag-Guneshli oil fields in Azerbaijan. Greenhouse gasemissi<strong>on</strong>s from the oil produced by this project will be over 2,000milli<strong>on</strong> t<strong>on</strong>nes carb<strong>on</strong> dioxide over 20 years. In November 2003, theIFC approved another usd 125 milli<strong>on</strong> for the Baku-Ceyhan pipelinebetween Azerbaijan <strong>and</strong> Turkey, whose investment c<strong>on</strong>sortium isagain led by BP. An estimated three billi<strong>on</strong> t<strong>on</strong>nes of carb<strong>on</strong> dioxidewill be released to the atmosphere through the burning of the oil thatwill be transported by the pipeline.
182 development dialogue september 2006 – carb<strong>on</strong> tradingSimilarly, just five m<strong>on</strong>ths after the PCF was launched in 2000, the Bankapproved over usd 551 milli<strong>on</strong> 427 in financing for the Chad-Camero<strong>on</strong>oil pipeline. The financing package for the pipeline came to about threetimes the capitalisati<strong>on</strong> of the PCF, <strong>and</strong> the expected lifetime emissi<strong>on</strong>sof approximately 446 milli<strong>on</strong> t<strong>on</strong>nes of carb<strong>on</strong> dioxide 428 generated bythe pipeline’s oil amount to roughly three times the 142 milli<strong>on</strong> t<strong>on</strong>nesthat will allegedly be ‘saved’ by PCF projects in total. 429Significantly, PCF investors get carb<strong>on</strong> credits from PCF projects, butno debits for their Bank-supported projects involving fossil fuel extracti<strong>on</strong>or use.Finally, technology ‘transfer’, CDM-style, has been implicated intechnology displacement – in particular, displacement of superior lowcarb<strong>on</strong>technologies (see Chapter 4, ‘India – A taste of the future’). Itis not as if, through the CDM, the North is somehow bringing technologyto technology-free places. Promoti<strong>on</strong>al brochures may showshiny, seemingly benign technologies being peacefully ‘transferred’,but the technologies being disrupted in the process are typically lessvisible. ‘Technology transfer’ often also centralises political c<strong>on</strong>trol.‘Technology transfer’ is a highly ideological phrase denoting a highlypolitical process. When used with the CDM, it tends to st<strong>and</strong> for apattern of fossil fuel-oriented corporate incursi<strong>on</strong> that can excludetypes of informal technology exchange between communities thatare often more climate-friendly.In general, the CDM is impeding c<strong>on</strong>structive acti<strong>on</strong> not <strong>on</strong>ly in theNorth (where it allows government <strong>and</strong> industry to avoid investmentin l<strong>on</strong>g-term change), but also in the South (where, by <strong>and</strong> large, itchannels resources into n<strong>on</strong>-renewable projects that sustain the fossilfuel ec<strong>on</strong>omy).‘If the CDM c<strong>on</strong>tinues tooperate within the currentpolicy perversity in whichthe Kyoto Protocol <strong>and</strong>CDM exist al<strong>on</strong>gsidemassive North-Southfi nancial fl ows to fossilfuels, then it will fail.’ 426Ben Pears<strong>on</strong>,CDM WatchBut if we can’t fi x the damage the CDM has <strong>on</strong> the North’s transiti<strong>on</strong> to apost-fossil era, maybe we can still fi x the CDM in a way that helps the Southtoward more renewable sources of energy. What we need are st<strong>and</strong>ards that willtell buyers which CDM carb<strong>on</strong> credits come from resp<strong>on</strong>sible, renewable energy<strong>and</strong> energy effi ciency projects that really do something for the climate <strong>and</strong> forpeople. Buyers could well stampede to buy these premium credits. Finally themarket would start working for a liveable climate instead of against it.Somebody’s already thought of that idea. It’s called the Gold St<strong>and</strong>ard,<strong>and</strong> was developed by World Wide Fund for Nature <strong>and</strong> otherNGOs in collaborati<strong>on</strong> with governments, corporati<strong>on</strong>s <strong>and</strong> expertsaround the world.The Gold St<strong>and</strong>ard attempts to ensure that carb<strong>on</strong> credits are ‘genuine,’‘credible,’ <strong>and</strong> provide ‘real emissi<strong>on</strong>s reducti<strong>on</strong>s’ <strong>and</strong> ‘real
less<strong>on</strong>s unlearned 183Segments of theBaku-Ceyhanpipeline awaitassembly.increases in sustainable energy investment’. 430 It claims to be able todo this by ‘exceed[ing] the envir<strong>on</strong>mental st<strong>and</strong>ards dem<strong>and</strong>ed by themarket regulator <strong>and</strong> governments’, which it admits are unsatisfactory.Forestry <strong>and</strong> fossil fuel projects are excluded <strong>and</strong> projects musttry to ‘prove’ <strong>on</strong>ce again that they are not ‘business as usual’ <strong>and</strong> thatthey have ‘sustainable development’ benefits.Of course, Gold St<strong>and</strong>ard credits cost more. But, it’s argued, theyhelp buyers avoid dodgy products.Sounds perfect. Has the idea worked?No. Why should it? It can’t change the market fundamentals. Theunderlying dilemma remains: the harder you try to make your offsetproject have a positive l<strong>on</strong>g-term impact <strong>on</strong> climate, the more it willprice itself out of the market. You can’t have it both ways – good,
184 development dialogue september 2006 – carb<strong>on</strong> tradingsmall projects <strong>and</strong> cheap credits. A few buyers may be interested ingood Gold St<strong>and</strong>ard projects as window dressing, but they can neverbecome the main stock in trade at the CDM. But if the Gold St<strong>and</strong>ardtries to accommodate business’ wishes too closely, it risks a credibilityalready in questi<strong>on</strong>.Thus <strong>on</strong>e comm<strong>on</strong> business complaint against the Gold St<strong>and</strong>ard isthat it is too ‘rigorous’ to supply a steady stream of cheap credits.By the same token, ‘good’ Gold St<strong>and</strong>ard projects – such as the Kuyasascheme in South Africa – can’t survive in the market <strong>and</strong> haveto be propped up with large subsidies (see Chapter 4, ‘South Africa– Carb<strong>on</strong> credits from the cities’). Gold St<strong>and</strong>ard credits make up aninsignificant fracti<strong>on</strong> of the total CDM trade, <strong>and</strong> there are few expectati<strong>on</strong>sthis will change in the future.The CDM is ‘notworking.’Gold St<strong>and</strong>ardstaff memberSo there’s no way around it. The carb<strong>on</strong> ‘off set’ market is actually frustrating envir<strong>on</strong>mentallysuperior outcomes by pointing investment in the wr<strong>on</strong>g directi<strong>on</strong>.That’s about the size of it. As with emissi<strong>on</strong>s trading, the focus <strong>on</strong>short-term ‘efficiency’ without fostering radical innovati<strong>on</strong> <strong>and</strong> localsensitivity is leading, paradoxically, to ineffectiveness. 431Why wasn’t this foreseen?A lot of it was. Even a carb<strong>on</strong> trading prop<strong>on</strong>ent, Michael Grubb,admitted early <strong>on</strong> that the CDM had the potential to turn into a ‘sinkfor the intellectual as well as some of the physical resources of the developingworld, <strong>and</strong> a distracti<strong>on</strong> from the fundamental goals of sustainabledevelopment’. 432But such warnings were not heeded. It was simply assumed that fixescould be c<strong>on</strong>cocted that would make carb<strong>on</strong> trading compatible withc<strong>on</strong>structive climate acti<strong>on</strong>. Once again, free-market ideology – <strong>and</strong>the hope that the fundamental c<strong>on</strong>tradicti<strong>on</strong>s of the Kyoto Protocolwould simply go away if they were ignored – have occupied the spacethat should have been taken up by a careful weighing of the evidence<strong>and</strong> an investigati<strong>on</strong> of the existing instituti<strong>on</strong>s, infrastructure, <strong>and</strong>traditi<strong>on</strong>s of different countries <strong>and</strong> regi<strong>on</strong>s. Many officials <strong>and</strong> envir<strong>on</strong>mentalists– including many NGOs – have been looking for ‘positivesoluti<strong>on</strong>s’ in the wr<strong>on</strong>g place. In the words of Ruth GreenspanBell, they have prescribed the cure before examining the patient. 433 Alot of time has been wasted.Still, suppose I’m a renewable energy developer with a str<strong>on</strong>g interest in workingclosely with small communities. Frankly, why should I care? This market,wacky as it is, is already here, <strong>and</strong> maybe I can get some m<strong>on</strong>ey out of it for my
less<strong>on</strong>s unlearned 185pet schemes, even if its overall tendency is destructive. After all, there aren’t allthat many opportunities to get funding for renewable energy around, <strong>and</strong> I’vegot to take them where I can fi nd them.If you still think this market is going to provide support for the painstakingwork you do, good luck. As <strong>on</strong>e Dutch banker involved in thecarb<strong>on</strong> credit market put it recently, ‘[F]ew in the market can dealwith communities.’ Ec<strong>on</strong>omic carb<strong>on</strong> projects are not going to be theecologically- or socially-beneficial <strong>on</strong>es.The problem is not just that <strong>on</strong>ly 2 per cent of CDM m<strong>on</strong>ey is goinginto renewable energy. It is also, as Ben Pears<strong>on</strong> stresses, thatthe CDM is diverting finance that should be going into renewableenergy into easier projects that merely prop up an outdated, fossilfuel- dependent industrial structure. As a renewable energy developer,you st<strong>and</strong> to lose from the CDM in the l<strong>on</strong>g term.All right, let me adopt an even more cynical attitude. Suppose I’m not a resp<strong>on</strong>siblerenewable energy developer but rather a Southern government. Surely theCDM will be useful to me <strong>and</strong> my ministries as a source of new investment in mycountry. The investment may not do any good for global warming, <strong>and</strong> it may beec<strong>on</strong>omically <strong>and</strong> socially useless. 434 But it might, if I’m lucky, at least provide afew new capital fl ows to development projects – <strong>and</strong> my business sector.It’s hard to argue this point. But notice that we’ve now left the climatedebate behind entirely, by admitting that the CDM has nothing to dowith tackling global warming. The fact that the c<strong>on</strong>versati<strong>on</strong> has collapsedinto a general discussi<strong>on</strong> of internati<strong>on</strong>al investment <strong>and</strong> developmentshows to what extent the instituti<strong>on</strong>s c<strong>on</strong>cerned have takenover <strong>and</strong> diverted the climate debate. And that should give us pause.Even if CDM projects are c<strong>on</strong>sidered merely as ‘foreign direct investmentthrough c<strong>on</strong>structi<strong>on</strong>’ with no climatic benefits, they still holdthe same sort of risks as any other foreign direct investment. As YinShao Lo<strong>on</strong>g <strong>and</strong> Ben Pears<strong>on</strong> point out, these include ‘shift of capitalownership from domestic to foreign <strong>and</strong> high transfers of surplusaway from host countries’. 435If carb<strong>on</strong> credit investors are mostly interested in high-volume industrial projects,or those with low transacti<strong>on</strong> costs, doesn’t that mean they’re going towind up discriminating against smaller, poorer Southern countries anyway,<strong>and</strong> favouring <strong>on</strong>ly a few, well-prepared <strong>on</strong>es?
186 development dialogue september 2006 – carb<strong>on</strong> tradingYes. The World Bank has admitted that most Southern countries can deliver<strong>on</strong>ly small projects. The risks <strong>and</strong> high per-credit transacti<strong>on</strong> costsinvolved in delivering carb<strong>on</strong> from these projects makes it unlikely thatsmaller, poorer countries will be able to attract much carb<strong>on</strong> finance.Indeed, the Bank’s resp<strong>on</strong>se to the problem – setting up a specialpurposeCommunity Development Carb<strong>on</strong> Fund that pays higher thanmarket prices for small projects in Southern countries – is an implicitadmissi<strong>on</strong> that ‘the market’ will not work in the hoped-for way in theSouth, <strong>and</strong> that a carb<strong>on</strong> market that revolves around private capital<strong>and</strong> low-cost carb<strong>on</strong> credits will bypass the smallest countries.As of August 2006, just four countries – China, Brazil, Korea <strong>and</strong>India – were hosting over 61 per cent of the 265 CDM projects registeredby that date, <strong>and</strong> producing an overwhelming 86 per cent of theassociated CDM credits (see Figures 9 <strong>and</strong> 10).Figure 9. Expected Average Annual CDM Credits from already registered projects, August 2006Source: UNFCCCMalaysia 1%Chile 2% Other 5 %Argentina 2%Mexico 5%India 12%China 44%Republic of Korea 13%Brazil 16%Figure 10. Number of Already-Registered CDM Projects by Country, August 2006Source: UNFCCCOthers 18%Republic of Korea 2%Argentina 2%Malaysia 3%India 31%H<strong>on</strong>duras 3%Chile 5%Brazil 22%China 7%Mexico 7%
less<strong>on</strong>s unlearned 187Where’s the enforcement?One of the most important less<strong>on</strong>s of US polluti<strong>on</strong> markets is thattrading requires not <strong>on</strong>ly a credible system of measuring emissi<strong>on</strong>sbut also a system of strict enforcement of the rules under a single governmentaljurisdicti<strong>on</strong>. 436As argued above, these c<strong>on</strong>diti<strong>on</strong>s are not present under either theKyoto Protocol or the EU ETS. Measurement is inadequate or impossible.M<strong>on</strong>itoring is insufficient or impossible. Penalties wouldhave to be made far more serious than they are today. And without aworld government, signatories to treaties such as the Kyoto Protocolmay simply renege <strong>on</strong> their agreements if they find that meeting theirtargets are inc<strong>on</strong>venient.Both Los Angeles’s RECLAIM <strong>and</strong> the US sulphur dioxide programmewere instituted under single governmental jurisdicti<strong>on</strong>s that were ableto impose tough <strong>and</strong> enforceable penalties. 437 The Kyoto Protocol, byc<strong>on</strong>trast, is an internati<strong>on</strong>al agreement that will be easy for any countryto disobey, or withdraw from, if its polluti<strong>on</strong> allowances prove insufficient.Former Canadian Finance Minister John Manley recently reassuredCanadians that they should not worry about internati<strong>on</strong>al penaltiesif the country falls short of its Kyoto targets, because the treaty is‘not binding’. Countries that do stay in the agreement but overshoottheir targets in 2012 are required to find <strong>on</strong>ly an extra 0.3 permits overthe next five years <strong>on</strong> top of each permit they ‘owe’.The EU ETS may appear to have more enforcement power at its disposalthan Kyoto does. However, it’s revealing that it dares to impose<strong>on</strong>ly a paltry penalty of €40 per t<strong>on</strong>ne of carb<strong>on</strong> dioxide <strong>on</strong> thosewho use more than their entitlements, compared to an April 2006carb<strong>on</strong> price that had reached €30 per t<strong>on</strong>ne. This effectively caps thecarb<strong>on</strong> price at a level not much higher than it started out at – a leveleverybody agrees is not going to provide an incentive for structuralchange. Even then, Germany proposed halving the penalty in 2006. 438By c<strong>on</strong>trast, the US sulphur dioxide programme imposed a penalty20 times the permit price.But will it really come to the point that countries simply default <strong>on</strong> their Kyototargets?Well, it’s already clear that many industrialised countries w<strong>on</strong>’tachieve their targets – even if they take advantage of what ec<strong>on</strong>omistCornelius van Kooten calls the ‘smoke <strong>and</strong> mirrors’ of purchasesof ‘hot air’ from Russia <strong>and</strong> the Ukraine, ‘carb<strong>on</strong> offset credits for
188 development dialogue september 2006 – carb<strong>on</strong> tradingbusiness-as-usual forest management’, ‘temporary carb<strong>on</strong> sinks’ <strong>and</strong>bogus emissi<strong>on</strong> ‘reducti<strong>on</strong>s arising from a “fortunate” choice of baseyear.’ 439 Carb<strong>on</strong> trading hasn’t made the bullet of emissi<strong>on</strong>s reducti<strong>on</strong>smuch easier to bite than it was to begin with.Each Kyoto signatory knows, moreover, that both it <strong>and</strong> its fellowsignatories have str<strong>on</strong>g short-term ec<strong>on</strong>omic incentives to look theother way when firms exceed their emissi<strong>on</strong>s targets. That makesdefault even more tempting. 440 Many observers have doubts whetherKyoto-like agreements can survive after 2012 anyway.As polluti<strong>on</strong> trading expert Ruth Greenspan Bell observes, it is‘highly unlikely that anything approximating the rigour of the US[sulphur dioxide] trading system can be devised to c<strong>on</strong>trol climatechange worldwide’ in the future even if measurement of emissi<strong>on</strong>swere possible, since countries tend to see internati<strong>on</strong>al oversight asa ‘threat to their sovereignty’. 441 They are likely to withdraw from atreaty whose c<strong>on</strong>diti<strong>on</strong>s are too <strong>on</strong>erous, or simply accept the penaltiesimposed by a lax agreement.Not that the US itself is exactly a model for ‘rigour’ in this respect.No. As ec<strong>on</strong>omist William D. Nordhaus notes, ‘the accounting sc<strong>and</strong>alsof the last decade have not been limited to dollar sc<strong>and</strong>als,’ but‘have also spilled over into emissi<strong>on</strong>s markets.’ 442 Greenspan Bell herselfhas documented the case of PSEG Fossil LLC, the biggest playerin New Jersey’s emissi<strong>on</strong>s trading system, which apparently had notinstalled necessary polluti<strong>on</strong> c<strong>on</strong>trols or obtained proper permits:The US Justice Department discovered this <strong>and</strong> brought an enforcementacti<strong>on</strong>, which was resolved in the form of a c<strong>on</strong>sent decree.PSEG, without admitting any wr<strong>on</strong>gdoing, agreed to stopselling its credits to other firms <strong>and</strong> to stay out of the trading system.When PSEG was forced to withdraw, its sheer size <strong>and</strong> statusas <strong>on</strong>e of the largest “suppliers” of credits in New Jersey broughtthat state’s system close to collapse. 443It makes you w<strong>on</strong>der what kind of fraud lies ahead for the world carb<strong>on</strong> market.Yes. ‘Such cheating,’ Nordhaus c<strong>on</strong>cludes, ‘will probably be p<strong>and</strong>emicin an emissi<strong>on</strong>s trading system that involves large sums of m<strong>on</strong>ey.’ Heobserves that whereas in a tax system, the government has an incentiveto try to ensure taxes are paid, in an emissi<strong>on</strong>s trading system, bothbuyers <strong>and</strong> sellers can afford to be indifferent to whether reducti<strong>on</strong>shave actually been made. Tax evasi<strong>on</strong> in the US is <strong>on</strong> the order of 10 or20 percent of taxes due. Given the incentives <strong>and</strong> the lack of adequatemeans of quantificati<strong>on</strong>, it is hard to put an upper limit <strong>on</strong> the extent
less<strong>on</strong>s unlearned 189of cheating possible in a global emissi<strong>on</strong>s trading system. As GreenspanBell remarks, ‘keeping companies h<strong>on</strong>est is hard enough in a robustlegal <strong>and</strong> regulatory envir<strong>on</strong>ment, as Enr<strong>on</strong>’s sham energy trades <strong>and</strong>WorldCom’s balance-sheet fraud amply dem<strong>on</strong>strated. In a weak legalsystem, the potential for emissi<strong>on</strong>s trading fraud is enormous.’ 444The lack of an adequate measurement system for either carb<strong>on</strong> emissi<strong>on</strong>sor so-called ‘emissi<strong>on</strong>s reducti<strong>on</strong>s’ <strong>on</strong>ly adds to that potential,making cheating not <strong>on</strong>ly easy but almost irresistible.What about the legal systems of various countries? How will they resp<strong>on</strong>dwhen US-style polluti<strong>on</strong> trading systems are pushed <strong>on</strong> them?Greenspan Bell emphasises that many Southern countries will be unableto ‘manage or enforce complex intangible property rights c<strong>on</strong>cerninggoods such as polluted air escaping from a factory’ or provideenough incentives for businesses to run polluti<strong>on</strong> c<strong>on</strong>trol equipmenteven if it is installed. Internati<strong>on</strong>al st<strong>and</strong>ards governing CDM projectsCarb<strong>on</strong> Trading’s Unc<strong>on</strong>scious Cultural Assumpti<strong>on</strong>sThe theory behind carb<strong>on</strong> trading is thatfactories, power plants, <strong>and</strong> any<strong>on</strong>e elsethat generates carb<strong>on</strong> dioxide will be eager<strong>and</strong> capable partners in deals to buy <strong>and</strong>sell emissi<strong>on</strong>s. Nothing seems more obviousto many middle-class Westerners.But the theory rests <strong>on</strong> several faulty assumpti<strong>on</strong>s.The first is that all industryeverywhere wants to save <strong>on</strong> the costs ofobeying envir<strong>on</strong>mental laws. But wherepolluti<strong>on</strong> laws are little more than paper,industry knows it need not worry muchabout these costs. Plants that aren’t beingforced to comply with requirements maynot see the point in elaborate trading regimes.A sec<strong>on</strong>d assumpti<strong>on</strong> is equally intuitivefor many Westerners, but equally wr<strong>on</strong>g:that the opportunity to trade will reveala natural instinct to make a profit <strong>and</strong> todo so in the most efficient way possible.In much of the world, efficiency <strong>and</strong> profitare sec<strong>on</strong>dary to producti<strong>on</strong> or employmentgoals, or the need to maintain valuabletraditi<strong>on</strong>s, <strong>and</strong> supposedly ‘uncompetitive’companies are kept afloat throughgovernment support.A third weak assumpti<strong>on</strong> behind carb<strong>on</strong>trading is that even if plants aroundthe world are not themselves motivated toembrace clean technologies, they will acceptthem if they are offered free throughthe Kyoto Protocol’s flexible mechanisms.Maybe so, but what incentives do theyhave to keep the equipment <strong>on</strong> <strong>and</strong> pay itsrunning costs? That doesn’t happen anywherewithout disinterested enforcement.In short, carb<strong>on</strong> trading rests <strong>on</strong> unexaminedcultural assumpti<strong>on</strong>s many of whichare unrealistic in most of the world.Source: Ruth Greenspan Bell, ‘The KyotoPlacebo’, Issues in Science <strong>and</strong> Technology,Winter 2006.
190 development dialogue september 2006 – carb<strong>on</strong> tradingare even less likely to be obeyed (see Chapter 4) – particularly sincecarb<strong>on</strong> accountants’ inability to verify that such projects ‘compensate’for any given quantity of industrial carb<strong>on</strong> dioxide emissi<strong>on</strong>s is not aproblem that can be fixed by improvements in technique.‘Survey the world’, Greenspan Bell says, ‘<strong>and</strong> few countries c<strong>and</strong>em<strong>on</strong>strate dependable legal systems <strong>and</strong> an independent judiciaryready to st<strong>and</strong> behind c<strong>on</strong>tracts such as envir<strong>on</strong>mental trading agreements’.445 Pursuing violators is going to be hard when <strong>on</strong>e party toa transacti<strong>on</strong> is a state-owned enterprise that is ‘clearly more powerfulthan the regulatory body that supposedly supervises it, or whenthe ultimate beneficiary of the sale of emissi<strong>on</strong> credits is the party inpower. When the scale of the regulatory effort is global, no worldcourt exists to litigate the trustworthiness of the polluti<strong>on</strong> reducti<strong>on</strong>sthat become emissi<strong>on</strong> credits.’ 446Many countries also have legal traditi<strong>on</strong>s <strong>and</strong> c<strong>on</strong>cepti<strong>on</strong>s of the relati<strong>on</strong>shipbetween government <strong>and</strong> industry which are a far cry fromthose of the US.Narrowing the discussi<strong>on</strong>All right, I admit carb<strong>on</strong> trading may not have much potential for helping us toaddress climate change directly. But it’s valuable at least in that it encouragesthe public in Northern countries to discuss <strong>and</strong> educate itself about the globalwarming issue.How does it do that?Well, look at business. When carb<strong>on</strong> has a price, business has to pay attenti<strong>on</strong>.For the fi rst time, the climate crisis speaks to corporati<strong>on</strong>s in a languagethey can underst<strong>and</strong>. As a result, the business world begins buzzing with c<strong>on</strong>cern<strong>and</strong> ideas for acti<strong>on</strong>. And that’s bound to have a positive l<strong>on</strong>g-term eff ect<strong>on</strong> climate. If <strong>on</strong>ly it were possible to calculate that into the m<strong>on</strong>etary value ofcarb<strong>on</strong> credits!Let’s look at these claims carefully. First, do carb<strong>on</strong> prices direct business’sattenti<strong>on</strong> <strong>and</strong> ingenuity toward the climate crisis – or away fromit? As documented above, the European market for carb<strong>on</strong> so far hasn’tpushed corporati<strong>on</strong>s into creative l<strong>on</strong>g-term undertakings to do somethingabout global warming. Instead, it has taught them how to lobbyfor more emissi<strong>on</strong>s permits, find ways of passing <strong>on</strong> costs to customers,game the system, locate cheap carb<strong>on</strong> credits abroad, present a green
less<strong>on</strong>s unlearned 191face to the public, keep gas as an opti<strong>on</strong>, <strong>and</strong> make marginal efficiencyimprovements. Resp<strong>on</strong>ding to carb<strong>on</strong> prices is <strong>on</strong>e thing; taking practicall<strong>on</strong>g-term acti<strong>on</strong> <strong>on</strong> climate change quite another.The truth is that carb<strong>on</strong> prices are a pretty inferior way of educatingcorporati<strong>on</strong>s about climate change <strong>and</strong> its importance for theirwork. Insurance companies are already learning fast through othermeans – including Hurricane Katrina’s devastati<strong>on</strong> of New Orleans– that global warming threatens their business. <strong>Power</strong> utilities, technologydevelopers <strong>and</strong> retailers are already asking governments forl<strong>on</strong>ger-term signals than those that are provided by a market. Thereare more credible ways of entering into a dialogue about climate withcorporati<strong>on</strong>s than by appealing to a new commodity system whosefl imsy basis they are <strong>on</strong>ly too well aware of. As University of L<strong>on</strong>d<strong>on</strong>geographer John Adams notes in a similar c<strong>on</strong>text, ‘[T]reasuries <strong>and</strong>big business are better equipped than most to notice when some<strong>on</strong>e isspeaking n<strong>on</strong>sense in their own language.’ 447Maybe so, but how about the case of individual c<strong>on</strong>sumers?You mean people buying carb<strong>on</strong> credits in the ‘voluntary market’ tomake up for the carb<strong>on</strong> dioxide emitted during their jet fl ights or internati<strong>on</strong>alc<strong>on</strong>ferences?Yes. Admittedly, these carb<strong>on</strong> credits – the <strong>on</strong>es you buy from fi rms like theCarb<strong>on</strong> Neutral Company, <strong>Climate</strong> Care, Atmosfair, Natsource, Terrapass,DrivingGreen, Drive Neutral, carb<strong>on</strong>fund.org, My<strong>Climate</strong>, AtmosClear <strong>Climate</strong>Club, Carb<strong>on</strong>fund.org or <strong>Climate</strong> Friendly – d<strong>on</strong>’t really make your jetfl ight or home or daily driving verifi ably ‘carb<strong>on</strong>-neutral’ or ‘zero carb<strong>on</strong>’. Butwhen you buy these ‘off sets,’ at least you have to calculate how much carb<strong>on</strong>you emit in your daily life. That can’t help but improve your awareness of thecauses of climate change.Take a simple example. An executive trainer from Reading, UK named CharlotteRobs<strong>on</strong> recently learned for the fi rst time from the Carb<strong>on</strong> Neutral Company’scarb<strong>on</strong> calculator that her pers<strong>on</strong>al carb<strong>on</strong> ‘footprint’ was 24 t<strong>on</strong>nes ofcarb<strong>on</strong> dioxide per year. ‘I am ast<strong>on</strong>ished I have been such a m<strong>on</strong>ster,’ Robs<strong>on</strong>wrote in the L<strong>on</strong>d<strong>on</strong> Daily Telegraph. 448 Isn’t it great that people like her arediscovering the real impacts of their acti<strong>on</strong>s?It’s not clear what is really being discovered here. Is the cause of climatechange really that individuals like Charlotte Robs<strong>on</strong> are ‘m<strong>on</strong>sters’? IsCharlotte Robs<strong>on</strong> pers<strong>on</strong>ally resp<strong>on</strong>sible for the historical lock-in ofheavy fossil fuel use in industrialised societies? Does she choose for theUK government to use her tax m<strong>on</strong>ey to subsidise oil extracti<strong>on</strong> <strong>and</strong>road <strong>and</strong> airport c<strong>on</strong>structi<strong>on</strong> rather than renewable energy? Did she
192 development dialogue september 2006 – carb<strong>on</strong> tradinghave a say in the invasi<strong>on</strong>s of Iraq in 1991 <strong>and</strong> 2003? Somehow it’s hardto imagine Charlotte Robs<strong>on</strong> being as bad a pers<strong>on</strong> as she says.The deeper difficulty is that if you blame yourself as an individual forclimate change, then you’re likely to think that, by the same token,you can also discharge all your resp<strong>on</strong>sibility for solving the problemsimply by making a few different pers<strong>on</strong>al lifestyle choices. If youblame ‘c<strong>on</strong>sumers’ for global warming, then you’ll probably thinkthat the soluti<strong>on</strong> lies in reforming their individual c<strong>on</strong>sciousnesses<strong>and</strong> purchasing habits.Now that you menti<strong>on</strong> it, Charlotte Robs<strong>on</strong> did report being pleasantly surprisedto learn from the Carb<strong>on</strong> Neutral Company that all she had to do to‘neutralise’ the eff ect of her carb<strong>on</strong>-emitting ways was to make out a cheque tothe fi rm for around GBP 156 a year for planting trees <strong>and</strong> building n<strong>on</strong>-CO 2emitting energy-generati<strong>on</strong> plants. ‘A cost of GBP 156 is nothing,’ she exulted.‘Think of the m<strong>on</strong>ey you spend <strong>on</strong> lipstick <strong>and</strong> magazines.’Exactly. Thanks to the Carb<strong>on</strong> Neutral Company, Robs<strong>on</strong> was ableto feel that she had g<strong>on</strong>e from ‘m<strong>on</strong>ster’ to makeover in a heartbeat. 449The questi<strong>on</strong> is to what extent this sort of cathartic individual dramahelps move society toward underst<strong>and</strong>ing the urgency of change inthe policies that feed global warming. Does it help any<strong>on</strong>e underst<strong>and</strong>that most remaining fossil fuels are going to have to be left inthe ground? Or that choosing a better br<strong>and</strong> of c<strong>on</strong>sumer productmay have limitati<strong>on</strong>s as a strategy for dealing with climate change? Itwould seem that it does just the opposite.Well, but surely customers of the Carb<strong>on</strong> Neutral Company <strong>and</strong> similar fi rms,<strong>on</strong>ce they’re sensitised to the issue, will go <strong>on</strong> to try to reduce their use of fossilfuels as well as try to ‘off set’ them. As companies selling ‘voluntary’ carb<strong>on</strong>credits to the public often point out, they’re bound to begin thinking more abouthow they might save carb<strong>on</strong> in their daily lives.For example, after calculating her individual carb<strong>on</strong> emissi<strong>on</strong>s, Charlotte Robs<strong>on</strong>decided to try to minimise business travel: ‘If a client wants two programmesin Singapore, they have to be at the same time, so we d<strong>on</strong>’t stack upCO 2 by fl ying in twice’. Surely there’s nothing wr<strong>on</strong>g with that!The problem is that the misleading term ‘carb<strong>on</strong> neutral’ c<strong>on</strong>veys acompletely different message: that any emissi<strong>on</strong>s that people happento be pers<strong>on</strong>ally unable or unwilling to reduce can be compensatedfor by buying carb<strong>on</strong> credits instead, since buying credits is climatically‘just the same’ as reducing fossil fuel use.You can use carb<strong>on</strong> credits, the Carb<strong>on</strong> Neutral company says, forthose areas in which your emissi<strong>on</strong>s are ‘unavoidable’. 450 But what
less<strong>on</strong>s unlearned 193are those areas? What are the criteria for being ‘unavoidable’? Whodecides what is ‘unavoidable’? What it is about the way society is organisedthat makes these emissi<strong>on</strong>s ‘unavoidable’? How might theyultimately be made ‘avoidable’ through political acti<strong>on</strong> <strong>and</strong> planning?The answers to all these questi<strong>on</strong>s are left mysterious. Indeed, thequesti<strong>on</strong>s themselves go unasked.What’s left is a feeling of pers<strong>on</strong>al guilt <strong>and</strong> resignati<strong>on</strong>, not a senseof history, politics or ec<strong>on</strong>omics. In additi<strong>on</strong> to propagating the falsehoodthat carb<strong>on</strong> credits can ‘neutralise’ emissi<strong>on</strong>s, such corporati<strong>on</strong>sc<strong>on</strong>vey a message that nothing can be d<strong>on</strong>e about what they call ‘unavoidable’emissi<strong>on</strong>s. That’s disempowering, to say the least.But maybe the awareness that comes with buying carb<strong>on</strong> credits from fi rms likethe Carb<strong>on</strong> Neutral Company will someday lead customers to other, more engagedkinds of thinking <strong>and</strong> acti<strong>on</strong> <strong>on</strong> global warming.Maybe, but it’s difficult to see how. The main message such firms providetoday is that individual c<strong>on</strong>sumers can relieve their guilt throughpurchases. It’s a classic instance of helping to shape dem<strong>and</strong> for a newproduct while simultaneously offering to supply that dem<strong>and</strong>.This commercial recasting of climate politics as a narrative of individualguilt <strong>and</strong> redempti<strong>on</strong> tends to pois<strong>on</strong> public discussi<strong>on</strong>, notpromote it. It makes criticism of, say, air travel or car-centred societiesseem like a moral critique of the ‘rich <strong>and</strong> privileged’ for being‘self-indulgent’ <strong>and</strong> a call for government to ‘punish’ them. That<strong>on</strong>ly provokes defensive reacti<strong>on</strong>s against calls for l<strong>on</strong>g-term socialacti<strong>on</strong>. 451In reality, the climate crisis doesn’t require people to feel guilty. Whatit requires is for them to be aware of the deeper roots of the problem,<strong>and</strong> to join with others in political acti<strong>on</strong>. It requires not buying <strong>and</strong>selling ‘offset’ credits, but social resp<strong>on</strong>sibility.All right, but what about the public discussi<strong>on</strong> encouraged by offi cial emissi<strong>on</strong>strading programmes? Emissi<strong>on</strong>s trading helps the public decide how much theywant to invest in acti<strong>on</strong> <strong>on</strong> climate change, by enabling it to focus <strong>on</strong> how strictthe emissi<strong>on</strong>s ‘cap’ should be, rather than arcane questi<strong>on</strong>s about what technologiesindustry should be required to adopt to meet that goal, which are best leftto industry itself. Emissi<strong>on</strong>s trading opens up an intelligent, democratic debateabout questi<strong>on</strong>s about overall goals, such as ‘How important is a healthy envir<strong>on</strong>mentanyway? When should we stop pouring m<strong>on</strong>ey into the envir<strong>on</strong>mentin order to make room for more spending <strong>on</strong> educati<strong>on</strong>, health or foreign aid?’That’s not what happened in the US. When promulgating the sulphurdioxide trading programme, as Georgetown University law profes-
194 development dialogue september 2006 – carb<strong>on</strong> tradingsor Lisa Heinzerling points out, the US C<strong>on</strong>gress didn’t debate howmuch emissi<strong>on</strong>s should be cut or how badly sulphur dioxide was affectingforests, streams <strong>and</strong> lakes. Instead, C<strong>on</strong>gress merely acceptedthe emissi<strong>on</strong>s cut originally proposed to it <strong>and</strong> occupied itself withdividing up the rights to pollute that it was giving away in a waythat would best satisfy influential business interests. Al<strong>on</strong>g the way ith<strong>and</strong>ed out special favours to, am<strong>on</strong>g others, the high-sulphur coalindustry, a powerful lobby group, by providing extra incentives touse scrubbers – thus c<strong>on</strong>tradicting the claim of trading enthusiaststhat the scheme would give polluters the freedom to choose means ofc<strong>on</strong>trolling their polluti<strong>on</strong>. As Robert Glicksman <strong>and</strong> Christopher H.Schroeder note, legislators seemed to see ‘little distincti<strong>on</strong> betweenthe Clean Air Act <strong>and</strong> a fight over which defence installati<strong>on</strong> to close,or an appropriati<strong>on</strong> for public works project. The pork tastes as good,from whichever barrel it comes.’ 452 Alternatives to giving rights awayfree to high-polluting corporati<strong>on</strong>s were also little discussed, thoughif they had been, the c<strong>on</strong>troversy could have been intense.As noted above, discussi<strong>on</strong> of social goals has also taken a back seat tohorse-trading during the implementati<strong>on</strong> of the EU Emissi<strong>on</strong>s TradingSystem. And the market in CDM <strong>and</strong> JI credits is likewise unfriendlyto democratic discussi<strong>on</strong> of social goals, including emissi<strong>on</strong>s cuts.Unfriendly in what ways?Well, for <strong>on</strong>e thing, any<strong>on</strong>e wanting to comment <strong>on</strong> planning documentsfor CDM projects (for example) has to learn English, find acomputer, log <strong>on</strong>to a website, register, <strong>and</strong> then navigate hundreds ofpages of technical jarg<strong>on</strong>, usually under a tight deadline. CDM commentforms provide no spaces for discussing the reliability of the implementingcompanies or the indeterminacy <strong>and</strong> scientific ig norancethat st<strong>and</strong> in the way of the projects’ being verifiably climatically effective.Nor are there spaces for questi<strong>on</strong>ing the ubiquitous assumpti<strong>on</strong>that such projects produce ‘emissi<strong>on</strong>s reducti<strong>on</strong>s’. 453 As <strong>on</strong>e Indiansocial activist remarked <strong>on</strong> being c<strong>on</strong>fr<strong>on</strong>ted with an officialUN form for submitting comments <strong>on</strong> a CDM project, ‘the form forpublic input is so full of technicalities there seems to be no space forgeneral comments’. 454By their sheer bulk <strong>and</strong> repetitiveness, such documents entrench a‘mainstream’ discussi<strong>on</strong> about climate change that sidelines thinkingabout how to halt the flow of fossil fuels out of the ground <strong>and</strong> limitsthe political choices a society can make to small, incremental variati<strong>on</strong>s<strong>on</strong> business as usual. As Adil Najam <strong>and</strong> colleagues c<strong>on</strong>cludedin 2003, ‘There is a danger that Kyoto has now become so much of amechanism for managing global carb<strong>on</strong> trade that emissi<strong>on</strong> cuts for
less<strong>on</strong>s unlearned 195atmospheric carb<strong>on</strong> stabilisati<strong>on</strong> could be neglected, or at least delayed.’455But surely the Kyoto Protocol has focussed public attenti<strong>on</strong> <strong>on</strong> overall emissi<strong>on</strong>stargets. That’s what Kyoto means for most people – a set of targets – even ifeverybody agrees they’re inadequate.That’s true. But Kyoto’s success in making emissi<strong>on</strong>s reducti<strong>on</strong> targetsa matter for political debate isn’t due to the market that the treaty setsup. Emissi<strong>on</strong>s targets were going to be a public issue whether or notcarb<strong>on</strong> trading was involved.I’m still a bit c<strong>on</strong>fused by this discussi<strong>on</strong>. Politicians <strong>and</strong> ec<strong>on</strong>omics professorsare always telling us that markets reduce centralised decisi<strong>on</strong>-making <strong>and</strong>bureaucracy, <strong>and</strong> allow people to think <strong>and</strong> act for themselves. Are you sayingthat isn’t always true?The charitable resp<strong>on</strong>se would be that politicians’ press c<strong>on</strong>ferences<strong>and</strong> ec<strong>on</strong>omics classrooms are perhaps not the best places to learnabout these issues.After 60 years, Karl Polanyi’s perspective is still the more balanced<strong>on</strong>e: that trading schemes are ‘opened <strong>and</strong> kept open by an enormousincrease in c<strong>on</strong>tinuous, centrally-organised <strong>and</strong> c<strong>on</strong>trolled interventi<strong>on</strong>ism’.The Kyoto Protocol’s market has set up <strong>on</strong>e of the most centralised,opaque, complicated <strong>and</strong> jarg<strong>on</strong>-ridden internati<strong>on</strong>al processesever seen, while the EU ETS is perhaps the most complex, impenetrablepiece of envir<strong>on</strong>mental legislati<strong>on</strong> Europe has ever known.True, the Kyoto market does not dictate to anybody the technologiesthey must adopt to reduce emissi<strong>on</strong>s. And it has opened up all sortsof discussi<strong>on</strong>s about the means by which countries might meet theirminimal emissi<strong>on</strong>s reducti<strong>on</strong>s obligati<strong>on</strong>s. But at the same time, it hascreated large bureaucracies remote from ordinary people at both global<strong>and</strong> nati<strong>on</strong>al levels in order to try to create a market commodity– to inventory emissi<strong>on</strong>s; divide up emissi<strong>on</strong>s rights; register trades;protect property rights; approve, validate <strong>and</strong> verify projects; establishexchanges; enforce compliance; ensure reporting <strong>and</strong> so <strong>on</strong>.Not even the US’s sulphur dioxide scheme actually decentralises decisi<strong>on</strong>-makingto firms. Since power generati<strong>on</strong> is highly regulated, itmerely pushes certain decisi<strong>on</strong>s back <strong>on</strong>to state public utility commissi<strong>on</strong>s.At no point was the price of polluti<strong>on</strong> rights ever determinedby anything describable as a ‘market’ separable from ‘government’.Are you saying that the carb<strong>on</strong> market isn’t, after all, increasing transparency<strong>and</strong> giving ordinary people more choices?
196 development dialogue september 2006 – carb<strong>on</strong> tradingWell, look around you. Few members of the general public have anyinkling of what is going <strong>on</strong> in the bureaucracies that govern either theUN’s or the EU’s climate market, or what evasi<strong>on</strong>s, abuses <strong>and</strong> c<strong>on</strong>flicts are afoot. Few are even aware how far the attempt to set up a giantglobal carb<strong>on</strong> market has g<strong>on</strong>e. Few, too, can make sense of the swarmof acr<strong>on</strong>yms <strong>and</strong> technical terms Kyoto has spawned <strong>and</strong> c<strong>on</strong>tinues tospawn, including AAUs, CERs, ERUs, DNAs, DOEs, NAPs, PDDs,AIEs, SBIs, COPs, MOPs, SBSTAs, LULUCF, additi<strong>on</strong>ality, modelrules, meth panels, supplementarity, leakage, <strong>and</strong> so <strong>on</strong>. Not even manyjournalists covering climate know what’s going <strong>on</strong>.No w<strong>on</strong>der I haven’t heard about all this stuff before.Yes. That’s not to say that there hasn’t been a lot of debate about theshortcomings of polluti<strong>on</strong> trading. But it rages largely am<strong>on</strong>g affectedcommunities <strong>and</strong> an expert elite with its own interests. The publicat large, whether in the US or worldwide, has tended to be fooled bythe complexity of trading systems into believing that they are reducingpolluti<strong>on</strong> more than they are. On the whole, public debate has notbeen enhanced, but rather blocked, by the schemes. And, as will bedetailed in the coming chapter, the carb<strong>on</strong> market has not exp<strong>and</strong>ed,but rather c<strong>on</strong>tracted, ordinary people’s choices, in case after case.Nor is the discussi<strong>on</strong> helped when NGO trading prop<strong>on</strong>ents insistthat emissi<strong>on</strong>s markets have nothing to do with assets <strong>and</strong> property.‘The Kyoto Protocol <strong>and</strong> the EU ETS do NOT create propertyrights,’ <strong>on</strong>e large Washingt<strong>on</strong> envir<strong>on</strong>mental NGO staff memberproclaimed indignantly in late 2005. ‘The EU ETS created the “allowance”specifically to make clear that is c<strong>on</strong>stitutes a discrete permitunder a regulati<strong>on</strong>, not a property right.’ 456 Kyoto units are merely‘unitised <strong>and</strong> divisible embodiments of promises,’ insists another envir<strong>on</strong>mentalist.457 To warn the public that assets are being given awayto the rich, fumes still another, is ‘ideological claptrap’.Such dismissive views block intelligent public debate about what kindof property rights emissi<strong>on</strong>s trading schemes involve; whether thoserights are defensible; how they might be distributed or transferred<strong>and</strong> to whom <strong>and</strong> for whose benefit; <strong>and</strong> so <strong>on</strong>. Such a debate is crucial.Whose atmosphere is it, <strong>and</strong> whose earth? This is a questi<strong>on</strong> foreverybody, not just for government ministries, lobbyists, experts <strong>and</strong>large envir<strong>on</strong>mental NGOs.Indeed, <strong>on</strong>e of the reas<strong>on</strong>s the EU ETS has run into such difficultiesis that there has been no open debate <strong>on</strong> allocati<strong>on</strong> of allowances.No newspaper or televisi<strong>on</strong> programme appears to have covered the‘choices involved in setting up the system during the period in which
less<strong>on</strong>s unlearned 197it would have been possible for the plans to have been changed.’ 458Even the brief debate <strong>on</strong> the system in the European Parliament <strong>on</strong>10 October 2002 was unreported in any major British broadsheet orfinancial newspaper. Nor did many Members of the European Parliamentunderst<strong>and</strong> the ramificati<strong>on</strong>s of the scheme, since the officialsummary they had been given did not discuss who owned the rightsthat the permits represented, but <strong>on</strong>ly which industrial sectors wouldbe covered, how many allowances should be given out free, <strong>and</strong> soforth. The last thing that is needed is more such suppressi<strong>on</strong> of debate.459But are c<strong>on</strong>venti<strong>on</strong>al regulati<strong>on</strong> or taxes any more transparent to public scrutinyor c<strong>on</strong>ducive to public discussi<strong>on</strong>?In many ways, they are. As law professor <strong>and</strong> emissi<strong>on</strong>s trading expertDavid Driesen remarks,With a little work, citizens can underst<strong>and</strong> whether an Envir<strong>on</strong>mentalProtecti<strong>on</strong> Agency or state regulati<strong>on</strong> will force a factoryin their neighbourhood to meet emissi<strong>on</strong> limitati<strong>on</strong>s, includingtechnology-based limitati<strong>on</strong>s, that similar factories meet elsewhere,or that can be met with known technology. Underst<strong>and</strong>ingthe myriad potential games that can be accomplished throughemissi<strong>on</strong>s trading requires expertise that very few possess.The fact that emissi<strong>on</strong>s trading, unlike more c<strong>on</strong>venti<strong>on</strong>al forms ofregulati<strong>on</strong>, allows each factory to ‘emit at a different level from itspeers’, makes public scrutiny <strong>and</strong> comparis<strong>on</strong> even harder. Keepingtrack of trades in the ‘invisible, intangible commodity’ that c<strong>on</strong>sistsof ‘the right to emit a given amount of CO 2 ’ is going to be difficultfor ordinary people even in a country like the US. Imagine the problemsfor nati<strong>on</strong>s with different underst<strong>and</strong>ings of property rights <strong>and</strong>property law, whether in Europe or the South. 460Maybe what you say is true. But isn’t too much public discussi<strong>on</strong> sometimesdangerous, too? For example, by exposing problems with carb<strong>on</strong> trading, you’reexposing problems with the Kyoto Protocol. And isn’t that, again, just playinginto the h<strong>and</strong>s of George W. Bush <strong>and</strong> other obstructi<strong>on</strong>ists?No. It’s precisely to insist <strong>on</strong> the respect for evidence that Bush lacks,by seeking answers to global warming that work while trying to avoidthose that d<strong>on</strong>’t. The ‘trading fix’ for global warming currently promotedby many governments <strong>and</strong> mainstream NGOs, in fact, is similarin many ways to the ‘technological fix’ that Bush is seeking. Both fixesfail because they pretend to be able to avoid the unavoidable: politics.
198 development dialogue september 2006 – carb<strong>on</strong> tradingSumming up –Market ideology vs. climate acti<strong>on</strong>Many people of str<strong>on</strong>g envir<strong>on</strong>mentalist c<strong>on</strong>victi<strong>on</strong>s <strong>and</strong> democraticspirit genuinely believe that if the earth’s carb<strong>on</strong>-cycling capacity isto be respected <strong>and</strong> preserved, it is inevitable that it be treated as acommodity. ‘Given the logic of capitalism’, says Peter Barnes, <strong>on</strong>ethoughtful US envir<strong>on</strong>mentalist <strong>and</strong> egalitarian, treating carb<strong>on</strong>cyclingcapacity as a ‘scarce resource’ <strong>and</strong> an ‘asset’ to be marketed ‘isthe best way to save it’.Not, Barnes hastens to add, that the ‘sky has no value other than itsexchange value… . If anything we know can be called sacred, the skyis such a thing… . It has incalculable intrinsic value.’ Yet, at the sametime, he argues:[W]e need to communicate with markets because markets determinehow resources are used. All our preachings <strong>and</strong> serm<strong>on</strong>s willbe for naught if we d<strong>on</strong>’t inscribe them <strong>on</strong> tablets that markets canunderst<strong>and</strong>… [The market] is a great system for managing scarcity…If you ask a market to determine price of a thing some<strong>on</strong>eowns, it will do so quickly <strong>and</strong> efficiently. Transacti<strong>on</strong>s will thenfollow… [The price] is not the equivalent of the intrinsic value,nor an editorial comment <strong>on</strong> it. It’s merely a proxy, a useful numericalsubstitute. And it’s a much better proxy than the <strong>on</strong>e marketscurrently use – namely, zero… . To achieve the ends of ChiefSeattle, we must use the means of Dow Chemical. The world hascome to that, <strong>and</strong> it’s sad. But… selling the sky is not an end initself. It’s a means for achieving a higher end – the preservati<strong>on</strong> ofour planet. 461This chapter has provided c<strong>on</strong>crete materials to help show that thisappealing argument – which today is encountered in politics, in internati<strong>on</strong>aldevelopment, in the UN, in think tanks, in the academy<strong>and</strong> in envir<strong>on</strong>mentalist circles – is both invalid <strong>and</strong> unsound. Thatis, it has helped show both that its c<strong>on</strong>clusi<strong>on</strong> does not follow from itspremises, <strong>and</strong> that the premises themselves are mistaken.The argument is invalid because even if the premise that the ‘logic ofcapitalism’ necessitates or encourages polluti<strong>on</strong> markets were true,it would not follow that carb<strong>on</strong> trading is a sensible regime for addressingglobal warming. By the same token, while it is true thatsome ‘markets’ do partly determine how some resources are used insome circumstances, <strong>and</strong> that having a ‘zero price’ does result in the
less<strong>on</strong>s unlearned 199inadequate valuati<strong>on</strong> of some resources in certain limited c<strong>on</strong>texts, itdoesn’t follow that a trading system of the type currently being set upis capable of improving the ‘scarcity management’ of the earth’s carb<strong>on</strong>dump in a way that could foster a liveable climate.Price is not a ‘useful numerical substitute’, in any c<strong>on</strong>text, either forthe ‘intrinsic value’ of carb<strong>on</strong>-cycling capacity (whatever that mightbe) or its survival value. To suggest that it could be reveals fundamentalmisunderst<strong>and</strong>ings of climate, scientific as well as social, ec<strong>on</strong>omic<strong>and</strong> political. The purported carb<strong>on</strong> commodity is different from establishedcommodities such as wheat or silver. For governments totake it up<strong>on</strong> themselves to make it an ec<strong>on</strong>omically scarce good isnot encouraging, but rather hampering, practices that could increasethe chances of a liveable climate in the future. The price assigned bycarb<strong>on</strong> markets in the course of ‘managing’ that scarcity, accordingly,<strong>and</strong> the resulting incentives <strong>and</strong> ‘transacti<strong>on</strong>s’, are moving the worldaway from that goal rather than toward it. This is particularly so inview of the facts that the market ‘management’ of this scarcity involvesproviding extensive property rights to corporati<strong>on</strong>s, is biasedmainly toward short-term cost reducti<strong>on</strong>s for industry, <strong>and</strong> involves acommodity that is an incoherent amalgam c<strong>on</strong>sisting both of ‘emissi<strong>on</strong>s’<strong>and</strong> of credits generated by carb<strong>on</strong> projects.The argument is also unsound in that its premises are false. In truth,‘markets’ do not, in most circumstances around the world, ‘determinehow resources are used,’ in any sense in which markets can be distinguishedfrom, or do not depend <strong>on</strong>, comm<strong>on</strong>s regimes, state agencies<strong>and</strong> other social organisati<strong>on</strong>s that d<strong>on</strong>’t revolve around the pricemechanism. To put this another way, it is empirically false that no marketprice entails less resp<strong>on</strong>sible stewardship than a positive price. Onlyif, per impossibile, commodificati<strong>on</strong> somehow became all-pervasive, <strong>and</strong>the price mechanism the sole <strong>and</strong> all-powerful coordinating mechanismfor all transacti<strong>on</strong>s involving l<strong>and</strong>, water, life <strong>and</strong> so forth, couldthis asserti<strong>on</strong> even become possible to evaluate. Carb<strong>on</strong> trading, in additi<strong>on</strong>,is no more c<strong>on</strong>genial to anything that might be called the ‘logicof capitalism’ than a multitude of other types of regulati<strong>on</strong>, taxati<strong>on</strong>,planning <strong>and</strong> stewardship that private corporati<strong>on</strong>s themselves have alwaysdepended <strong>on</strong> – <strong>and</strong> in this case, given the increasingly obviousc<strong>on</strong>tradicti<strong>on</strong>s of carb<strong>on</strong> trading, may wind up preferring.As in so many areas of c<strong>on</strong>temporary social life, a vague ideology ofmarket effectiveness <strong>and</strong> market inevitability is c<strong>on</strong>cealing a regressive,c<strong>on</strong>fused, c<strong>on</strong>tested <strong>and</strong> envir<strong>on</strong>mentally dangerous political<strong>and</strong> technical project. The ideology <strong>and</strong> the project both badly needto be opened to wider public criticism.
200 development dialogue september 2006 – carb<strong>on</strong> trading1 Ruth Greenspan Bell, ‘Market Failure’,Envir<strong>on</strong>mental Forum, March/April 2006, pp. 28–33,http://www.weathervane.rff.org/, p. 28.2 Whether trading is an efficient way of reaching agoal depends <strong>on</strong> what the goal is, <strong>and</strong> how society<strong>and</strong> technology are organised in any particular timeor place. Trading in l<strong>and</strong> would not have been anefficient way of maximising returns to scale fromgrazing during the era of open-field agriculture inEurope (Carl Dahlman, The Open Field System <strong>and</strong>Bey<strong>on</strong>d: A Property Rights Analysis of an Ec<strong>on</strong>omicInstituti<strong>on</strong>, Cambridge University Press, Cambridge,1980, pp. 115–21). Trading in agricultural seed varietiesis not the most efficient way of making the greatestdiversity available to the most people over the l<strong>on</strong>gterm. Trading in b<strong>and</strong>width is not an efficient way ofensuring the free exchange of informati<strong>on</strong> over radio.Trading in human rights would not be an efficient wayof maximising respect for human rights, nor tradingin medical malpractice an efficient way of ensuringthe best health care. Privatised electricity, water <strong>and</strong>medicine typically result in higher prices for smallc<strong>on</strong>sumers. Raising the price of energy can be a lessefficient way of reducing energy use than regulatingcertain kinds of investment (Gar Lipow, No HairShirts: M<strong>on</strong>ey <strong>and</strong> Politics in the Fight against GlobalWarming, draft manuscript).3 Larry Lohmann, ‘Pulp, Paper <strong>and</strong> <strong>Power</strong>: Howan Industry Reshapes Its Social Envir<strong>on</strong>ment’,1995, http://www.thecornerhouse.org.uk/item.shtml?x=52196.4 Nicholas Stern, ‘What is the Ec<strong>on</strong>omics of <strong>Climate</strong><strong>Change</strong>?’, Stern Review <strong>on</strong> the Ec<strong>on</strong>omics of<strong>Climate</strong> <strong>Change</strong>, 31 January 2006, L<strong>on</strong>d<strong>on</strong>. Seealso Anne Hamblet<strong>on</strong>, ‘An Annotated Glossary ofComm<strong>on</strong>ly-Used <strong>Climate</strong> <strong>Change</strong> Terms’, The Centrefor Sustainable Development in the Americas,http://www.csdanet.org/glossary.html; Nathan E.Hultman <strong>and</strong> Daniel M. Kammen, ‘Equitable RevenueDistributi<strong>on</strong> under an Internati<strong>on</strong>al Emissi<strong>on</strong>s TradingRegime’, Political Ec<strong>on</strong>omy Research Institute,University of Massachusetts at Amherst, Centrefor Science <strong>and</strong> the Envir<strong>on</strong>ment, Internati<strong>on</strong>alC<strong>on</strong>ference <strong>on</strong> Natural Assets, Tagtaytay City, thePhilippines, 3 January 2003.5 Gerald Torres, ‘Who Owns the Sky?’, PaceEnvir<strong>on</strong>mental Law Review 19, 2001, pp. 515-574.6 Richard L. S<strong>and</strong>or et al., ‘An Overview of aFree-Market Approach to <strong>Climate</strong> <strong>Change</strong> <strong>and</strong>C<strong>on</strong>servati<strong>on</strong>’, in I. R. Swingl<strong>and</strong>, ed., CapturingCarb<strong>on</strong> <strong>and</strong> C<strong>on</strong>serving Biodiversity: The MarketApproach, Earthscan, L<strong>on</strong>d<strong>on</strong>, 2002, p. 56.7 Carb<strong>on</strong> Market Europe, 24 June 2005, http://www.pointcarb<strong>on</strong>.com.8 UNFCCC, ‘Principles, nature <strong>and</strong> scope of themechanisms pursuant to Articles 6, 12 <strong>and</strong> 17 of theKyoto Protocol’, Decisi<strong>on</strong> 15/CP.7, http://unfccc.int/documentati<strong>on</strong>/decisi<strong>on</strong>s.9 US Envir<strong>on</strong>mental Protecti<strong>on</strong> Agency, Clean Air ActAmendments, 1990, Secti<strong>on</strong> 403 (f), Title IV, http://www.epa.gov/air/caa/title4.html.10 ‘S. 139, the <strong>Climate</strong> Stewardship Act’, Sec. 331, http://democrats.senate.gov/~dpc/pubs/108-1-379.html.11 Carol M. Rose, ‘The Several Futures of Property:Of Cyberspace <strong>and</strong> Folk tales, Emissi<strong>on</strong> Trades <strong>and</strong>Ecosystems’, Minnesota Law Review 83, 1998, p. 129.12 Jeanne M. Dennis, ‘Smoke for Sale: Paradoxes <strong>and</strong>Problems of the Emissi<strong>on</strong>s Trading Program of theClean Air Amendments of 1990’, UCLA Law Review40, 1993, pp. 1101–1125.13 Ibid., p. 1118.14 The Kyoto Protocol differs sharply from mostsystems of tradable fishing or hunting quotas, inwhich the total number of quotas given out issupposed to represent <strong>on</strong>ly a small part of theavailable stock, or a ‘sustainable yield’. Under Kyoto,the total number of emissi<strong>on</strong>s quotas given out isseveral times the ‘available’ stock or resource. Ofcourse, the number of these permits is supposed tobe reduced over time.15 Karl Polanyi, The Great Transformati<strong>on</strong>, Beac<strong>on</strong>Press, Bost<strong>on</strong>, 2002 [1944].16 Elinor Ostrom, Governing the Comm<strong>on</strong>s: TheEvoluti<strong>on</strong> of Instituti<strong>on</strong>s for Collective Acti<strong>on</strong>,Cambridge University Press, Cambridge, 1990.17 C. B. Macphers<strong>on</strong>, ed., Property: Mainstream <strong>and</strong><str<strong>on</strong>g>Critical</str<strong>on</strong>g> Positi<strong>on</strong>s, University of Tor<strong>on</strong>to Press,Tor<strong>on</strong>to, 1978.18 Ibid.19 As Daniel H. Cole remarks in Polluti<strong>on</strong> <strong>and</strong> Property:Comparing Ownership Instituti<strong>on</strong>s for Envir<strong>on</strong>mentalProtecti<strong>on</strong>, Cambridge University Press, Cambridge,2002, a utility can’t stop the government fromc<strong>on</strong>fiscating the allowances it is given, but ‘it certainlycan exclude all others from interfering with it’ (p. 54).20 Quoted in J. P. Morgan, client report, Global UtilitiesPartner, L<strong>on</strong>d<strong>on</strong>, 10 November 2003, p. 38. TheBoard says that participating companies should‘account for allocati<strong>on</strong>s of emissi<strong>on</strong> allowances orrights to emit as intangible assets’ whose ‘fair value’should be ‘determined by the appropriate marketprices at the time of allocati<strong>on</strong>’.21 W. Fichtner et al., ‘The impact of private investors’transacti<strong>on</strong> costs <strong>on</strong> the cost effectiveness ofproject-based Kyoto mechanisms’, <strong>Climate</strong> Policy 3,3, pp. 249–59, p. 257.22 Friends of the Comm<strong>on</strong>s, The State of the Comm<strong>on</strong>s2003–04, http://www.friendsofthecomm<strong>on</strong>s.org.
less<strong>on</strong>s unlearned 20123 Timothy Mitchell, Rule of Experts: Egypt,Technopolitics, Modernity, University of CaliforniaPress, Berkeley, 2000, pp. 59–74.24 Ibid., p. 73.25 Ibid.26 Ibid., pp. 84–93.27 Ibid., p. 71.28 Rebecca Le<strong>on</strong>ard <strong>and</strong> Kingkorn Narintarakul naAyutthaya, ‘Taking L<strong>and</strong> from the Poor, Giving L<strong>and</strong>to the Rich’, Watershed [Bangkok], Nov. 2002 – Feb.2003, pp. 14–25.29 David Harvey, The New Imperialism, OxfordUniversity Press, Oxford, 2003, p. 158.30 Michael Dove, ‘Centre, Periphery <strong>and</strong> Biodiversity:A Paradox of Governance <strong>and</strong> a DevelopmentalChallenge’, in Stephen B. Brush <strong>and</strong> DoreenStabinsky, Valuing Local Knowledge: IndigenousPeople <strong>and</strong> Intellectual Property Rights, Isl<strong>and</strong>Press, Washingt<strong>on</strong>, DC, 1996, pp. 41–67.31 Richard B. Stewart, ‘Privprop, Regprop, <strong>and</strong> Bey<strong>on</strong>d’,Harvard Journal of Law <strong>and</strong> Public Policy 13, 1990,p. 91; see also James E. Krier, ‘Marketable Polluti<strong>on</strong>Allowances’, University of Toledo Law Review 25,1994, p. 449.32 Dennis, op. cit. supra note 12, p. 1118.33 Frank C<strong>on</strong>very, ‘Emissi<strong>on</strong>s Trading <strong>and</strong> Envir<strong>on</strong>mentalPolicy in Europe’, paper presented at pre-summitc<strong>on</strong>ference <strong>on</strong> Knowledge <strong>and</strong> Learning for aSustainable Society, Göteborg University, Sweden,12–14 June 2001, http://www.ucd.ie/envinst/envstud/CATEP%20Webpage/publicati<strong>on</strong>s/goteborg.pdf.34 David Victor, The Collapse of the Kyoto Protocol<strong>and</strong> the Struggle to Slow Global Warming, Princet<strong>on</strong>University Press, Princet<strong>on</strong>, 2001, pp. 14–17.35 ‘Rent-Seeking’, Wikipedia Free Encyclopaedia,http://en.wikipedia.org/wiki/Rent-seeking.36 Ibid.37 Financial Times, 9 May 2006.38 Peter Cramt<strong>on</strong> <strong>and</strong> Suzi Kerr, ‘Tradeable Carb<strong>on</strong>Permit Aucti<strong>on</strong>s: How <strong>and</strong> Why to Aucti<strong>on</strong> notGr<strong>and</strong>father’, Energy Policy 30, 4, 2002, pp. 333–345, p. 343.39 Mitchell, op. cit. supra note 23.40 M. E. Levine <strong>and</strong> J. L. Forrence, ‘RegulatoryCapture, Public Interest, <strong>and</strong> the Public Agenda:Toward a Synthesis’, Journal of Law, Ec<strong>on</strong>omics<strong>and</strong> Organizati<strong>on</strong> 6, 1990, pp. 167–198; Ralph Nader,Cutting Corporate Welfare, Seven Stories Press,New York, 2001; Dexter Whitfield, Public Services orCorporate Welfare: Rethinking the Nati<strong>on</strong> State inthe Global Ec<strong>on</strong>omy, Pluto Press, L<strong>on</strong>d<strong>on</strong>, 2001.41 A. Danny Ellerman, ‘Obstacles to CO 2 Trading:A Familiar Problem’, MIT Joint Program <strong>on</strong> theScience <strong>and</strong> Policy of Global <strong>Change</strong>, No. 42,Cambridge, MA, November 1998. See also Ellermanet al., Markets for Clean Air: The US Acid RainProgram, Cambridge, 2000.42 See, e.g., Marcus Colchester <strong>and</strong> Larry Lohmann,eds, The Struggle for L<strong>and</strong> <strong>and</strong> the Fate of theForests, Zed Books, L<strong>on</strong>d<strong>on</strong>, 1993.43 George C. Coggins <strong>and</strong> Margaret Lindeberg-Johns<strong>on</strong>, ‘The Law of Public Rangel<strong>and</strong> ManagementII: The Comm<strong>on</strong>s <strong>and</strong> the Taylor Act’, Envir<strong>on</strong>mentalLaw 1, 1982, p. 41, cited in Dennis, op. cit. supra note12, p. 1123.44 Ibid., p. 101.45 Dennis, op. cit. supra note 12, p. 1125.46 David M. Driesen, ‘What’s Property Got to Do withIt?’ (review of Cole, op. cit. supra note 19), EcologyLaw Quarterly 30, 2003, p. 1016.47 Dennis, op. cit. supra note 12, p. 1122.48 Statement of Senator Symms, C<strong>on</strong>gress<strong>on</strong>al Record,27 October 1990.49 US Envir<strong>on</strong>mental Protecti<strong>on</strong> Agency, Clean Air ActAmendments, 1990, Secti<strong>on</strong> 403 (f), Title IV, http://www.epa.gov/air/caa/title4.html.50 Dennis, op. cit. supra note 12, p. 1120.51 Ibid., p. 1121.52 Cole, op. cit. supra note 19, p. 55.53 A. Denny Ellerman et al., Markets for Clean Air: TheUS Acid Rain Program, Cambridge, 2001, p. 32, note 2.54 Ibid.55 Lisa Heinzerling, ‘Selling Polluti<strong>on</strong>, ForcingDemocracy’, Stanford Envir<strong>on</strong>mental Law Journal 14,2, May 1995, p. 676.56 Dallas Burtraw, ‘Emissi<strong>on</strong>s Trading <strong>and</strong> AllowanceDistributi<strong>on</strong>’, Sec<strong>on</strong>d Generati<strong>on</strong> Issues CommitteeNewsletter 3, 2, American Bar Associati<strong>on</strong>, 2003.57 Ibid.58 Cole, op. cit. supra note 19; ‘Industrials ChallengeKentucky <strong>Power</strong>’s Decisi<strong>on</strong> to Retain its AllowanceEarnings’, Industrial Energy Bulletin, 23 January1998.59 Heinzerling, op. cit. supra note 55, p. 333.60 ‘EPA Says Pollutants Cut in Half Since 1970; SulphurDioxide Emissi<strong>on</strong>s Increased in 2003’, Envir<strong>on</strong>mentReporter 35, 38, 24 September 2004. In someemissi<strong>on</strong>s trading programmes, companies may‘bank’ unused emissi<strong>on</strong>s allowances that result fromearly reducti<strong>on</strong>s for use in later years.
202 development dialogue september 2006 – carb<strong>on</strong> trading61 Curtis A. Moore, ‘Marketing Failure: TheExperience with Air Polluti<strong>on</strong> Trading in the UnitedStates’, Health <strong>and</strong> Clean Air, 2003, http://www.health<strong>and</strong>cleanair.org/emissi<strong>on</strong>s/marketing_failure.pdf or www.acidrain.org/AN2-04.htm.62 Ibid., p. 9; David M. Driesen, ‘Is Emissi<strong>on</strong>s Tradingan Ec<strong>on</strong>omic Incentive Program? Replacing theComm<strong>and</strong> <strong>and</strong> C<strong>on</strong>trol/Ec<strong>on</strong>omic IncentiveDichotomy’, Washingt<strong>on</strong> <strong>and</strong> Lee Law Review 55, 1998.63 Ibid.64 United Nati<strong>on</strong>s Framework C<strong>on</strong>venti<strong>on</strong> <strong>on</strong> <strong>Climate</strong><strong>Change</strong> (UNFCCC), document FCCC/SB/1999/8,149 f.65 Douglas Russell, ‘Design <strong>and</strong> Legal C<strong>on</strong>siderati<strong>on</strong>sfor North American Emissi<strong>on</strong>s Trading’, June 2002,Working Paper for the Commissi<strong>on</strong> for Envir<strong>on</strong>mentalCooperati<strong>on</strong> of North America, M<strong>on</strong>treal; C.Philibert <strong>and</strong> J. Reinaud, ‘Emissi<strong>on</strong>s Trading: TakingStock <strong>and</strong> Looking Forward’, OECD, Paris, 2004,http://www.oecd.org/dataoecd/58/59/32140134.pdf,note that allowances granted to corporati<strong>on</strong>s ‘canbe assimilated to a lump-sum subsidy’ (p. 22). Seealso Aar<strong>on</strong> Cosbey, ‘The Kyoto Protocol <strong>and</strong> theWTO’, Royal Institute for Internati<strong>on</strong>al Affairs <strong>and</strong>Internati<strong>on</strong>al Institute for Sustainable Development,L<strong>on</strong>d<strong>on</strong>, 1999; <strong>and</strong> Tom Brewer, ‘The Trade <strong>and</strong><strong>Climate</strong> Regimes: Compatibilities <strong>and</strong> C<strong>on</strong>flicts inWTO-Kyoto Relati<strong>on</strong>ships’, Policy Brief, McD<strong>on</strong>oughSchool of Business, Georgetown University,Washingt<strong>on</strong> DC, 2002.66 UNFCCC, ‘Principles, Nature <strong>and</strong> Scope of theMechanisms Pursuant to Articles 6, 12 <strong>and</strong> 17 of theKyoto Protocol’, Preamble Paragraph 5, Decisi<strong>on</strong>15./CP.7; <strong>and</strong> Draft Decisi<strong>on</strong> -/CMP.1 (mechanisms).67 Financial Times, 29 May 2005; Helmut Schreiber,World Bank Europe <strong>and</strong> Central Asia Department,‘World Bank Carb<strong>on</strong> Finance: Experience, Strategy<strong>and</strong> New Products: Opportunities <strong>and</strong> Challengesunder the Kyoto Protocol for Russia’, Moscow, 22December 2004; Richard Rosenzweig et al., ‘TheEmerging Internati<strong>on</strong>al Greenhouse Gas Market’,March 2002, Pew Centre for <strong>Climate</strong> <strong>Change</strong>,Washingt<strong>on</strong>.68 United States Department of Energy, ‘EnergyInformati<strong>on</strong> Administrati<strong>on</strong>, Analysis of S.139, the<strong>Climate</strong> Stewardship Act of 2003: Highlights <strong>and</strong>Summary’, Washingt<strong>on</strong>, p. 6.69 Cole, op. cit supra note 19, p. 86.70 Steve Rayner, Testim<strong>on</strong>y to House of Comm<strong>on</strong>sEnvir<strong>on</strong>mental Audit Committee, in House ofComm<strong>on</strong>s Envir<strong>on</strong>mental Audit Committee, TheInternati<strong>on</strong>al Challenge of <strong>Climate</strong> <strong>Change</strong>: UKLeadership in the G8 <strong>and</strong> EU. Fourth Report of Sessi<strong>on</strong>2004–5, The Stati<strong>on</strong>ery Office, L<strong>on</strong>d<strong>on</strong>, 2005, p. Ev141.71 Fi<strong>on</strong>a Harvey <strong>and</strong> Raphael Minder, ‘Permit GlutUndermines EU Carb<strong>on</strong> Scheme’, Financial Times,15 May 2006.72 Per Lek<strong>and</strong>er, ‘Guest Comment’, Carb<strong>on</strong> MarketEurope, 12 May 2006, p. 3.73 Fred Pearce, ‘A Most Precious Commodity’, NewScientist 2481, 8 January 2005, p. 6.74 Energy Risk, 8 July 2004.75 Fred Pearce, ‘A Most Precious Commodity’, NewScientist 2481, 8 January 2005, p. 6.76 ‘Is it All Over for Phase One?’, Carb<strong>on</strong> MarketEurope, 5 May 2006.77 ‘Commissi<strong>on</strong> Reassures <strong>on</strong> Carb<strong>on</strong> Price Crash’,Envir<strong>on</strong>mental Finance News, 4 May 2006.78 Carb<strong>on</strong> Market Europe, 12 May 2006.79 ‘EU ETS Hits German Firms Too Hard – Report’,Point Carb<strong>on</strong>, 1 June 2006.80 ‘[F]or renewables, it is a pretty thin slice [ofincentives] from emissi<strong>on</strong>s trading, the rest comesfrom other incentives’ (James Camer<strong>on</strong>, <strong>Climate</strong><strong>Change</strong> Capital, Evidence given before House ofLords Select Committee <strong>on</strong> the European Uni<strong>on</strong>,‘Towards a Sustainable EU Policy <strong>on</strong> <strong>Climate</strong><strong>Change</strong>’, 24 March 2004, p. 34).81 Garth Edwards, presentati<strong>on</strong> at Internati<strong>on</strong>alEmissi<strong>on</strong>s Trading Associati<strong>on</strong>, Fifth AnnualWorkshop <strong>on</strong> Greenhouse Gas Emissi<strong>on</strong>s Trading,Paris, 27–28 September 2005.82 IPA Energy C<strong>on</strong>sulting, ‘Implicati<strong>on</strong>s of the EUEmissi<strong>on</strong>s Trading Scheme for the UK <strong>Power</strong>Generati<strong>on</strong> Sector’, report to the UK Department ofTrade <strong>and</strong> Industry, 11 November 2005.83 James Camer<strong>on</strong>, Testim<strong>on</strong>y to House of Comm<strong>on</strong>sEnvir<strong>on</strong>mental Audit Committee, in House ofComm<strong>on</strong>s Envir<strong>on</strong>mental Audit Committee, TheInternati<strong>on</strong>al Challenge of <strong>Climate</strong> <strong>Change</strong>: UKLeadership in the G8 <strong>and</strong> EU. Fourth Report ofSessi<strong>on</strong> 2004–5, The Stati<strong>on</strong>ery Office, L<strong>on</strong>d<strong>on</strong>,2005, p. Ev130.84 Rayner, op. cit. supra note 70.85 Open Europe, ‘The High Price of Hot Air: Why theEU Emissi<strong>on</strong>s Trading Scheme is an Envir<strong>on</strong>mental<strong>and</strong> Ec<strong>on</strong>omic Failure’, Executive Summary, L<strong>on</strong>d<strong>on</strong>,2006, http://www.openeurope.org.uk/research/ets.pdf, p. 3.86 ‘RWE Makes CO 2 Windfall Profits of €1.8 billi<strong>on</strong>,Users Claim’, Point Carb<strong>on</strong>, 26 October 2005.The industry has struck back by saying that lack ofcompetiti<strong>on</strong> in electricity markets makes the EUETS ‘absurd’ (Point Carb<strong>on</strong>, 3 February 2006).87 Point Carb<strong>on</strong>, 29 September 2005.
less<strong>on</strong>s unlearned 20388 Frantisek Bouc, ‘Pecina: Emissi<strong>on</strong>s Trading isN<strong>on</strong>sense’, Prague Post, 15 March 2006.89 Per Lyk<strong>and</strong>er, ‘Guest Comment’, Carb<strong>on</strong> MarketEurope, 12 May 2006, p. 3.90 Carb<strong>on</strong> Market News, 3 February 2006.91 ‘Fortum Bags USD 25 Milli<strong>on</strong> from Selling CO 2Allowances’, Carb<strong>on</strong> Market News, 3 February 2006.92 Wendy Frew, ‘Dirty <strong>Power</strong> Plants Making Milli<strong>on</strong>sout of Green Scheme, Sydney Morning Herald, 14September 2005.93 A. Denny Ellerman et al., Emissi<strong>on</strong>s Trading in theUS: Experience, Less<strong>on</strong>s <strong>and</strong> C<strong>on</strong>siderati<strong>on</strong>s forGreenhouse Gases, Pew Centre <strong>on</strong> Global <strong>Climate</strong><strong>Change</strong>, Washingt<strong>on</strong>, 2003, p. 21.94 Nathan J. Glasgow, ‘The New Business <strong>Climate</strong>:Achieving Lower Carb<strong>on</strong> Emissi<strong>on</strong>s <strong>and</strong> BetterBusiness Performance’, Rocky Mountain Institute,Aspen, CO.95 IPA Energy C<strong>on</strong>sulting, op. cit. supra note 82, p. 2.96 Ibid., p. 19.97 FEASTA <strong>and</strong> New Ec<strong>on</strong>omics Foundati<strong>on</strong>, ‘TheGreat Emissi<strong>on</strong>s Give-Away’, March 2006, http://www.feasta.org/documents/energy/emissi<strong>on</strong>s2006.pdf, p. 3.98 Bruno v<strong>and</strong>erBorght, ‘Making Performance Count’,Carb<strong>on</strong> Finance 2, 1 2004/05, p. 11.99 ‘Dutch Plants Delay Cuts in Hope of EU ETSParticipati<strong>on</strong>’, Point Carb<strong>on</strong>, 5 July 2005.100 Point Carb<strong>on</strong>, 15 February 2005.101 Citigroup Smith Barney, ‘Utilities: The Impactof Carb<strong>on</strong> Trading <strong>on</strong> the European Sector’, 10October 2003; Envir<strong>on</strong>mental Data Services, ENDSReport 341, June 2003; 346, November 2003.102 ENDS Report, 352, May 2004.103 Fi<strong>on</strong>a Harvey, ‘Emissi<strong>on</strong>s Scheme Receives SevereBlow’, Financial Times, 12 May 2006.104 Carol Rose, ‘Romans, Roads <strong>and</strong> Romantic Creators:Traditi<strong>on</strong>s of Public Property in the Informati<strong>on</strong>Age’, Law <strong>and</strong> C<strong>on</strong>temporary Problems 66, 89,Winter/Spring 2003.105 Cole, op. cit. supra note 19, p. 75.106 Ibid., p. 73.107 David M. Driesen, ‘Markets are Not Magic’, TheEnvir<strong>on</strong>mental Forum, November/December 2003,pp. 18–27, p. 22.108 Cole, op. cit. supra note 19, p. 75.109 Driesen, op. cit. supra note 62, p. 311.110 Philibert <strong>and</strong> Reinaud, op. cit. supra note 65, p. 18.111 Michael T. Mal<strong>on</strong>ey <strong>and</strong> Bruce Y<strong>and</strong>le, ‘Estimati<strong>on</strong>of the Cost of Air Polluti<strong>on</strong> C<strong>on</strong>trol Regulati<strong>on</strong>’,Journal of Envir<strong>on</strong>mental Ec<strong>on</strong>omic <strong>and</strong>Management 11, 1984, p. 244, cited by Cole, op. cit.supra note 19, p. 71.112 Amory B. Lovins et al., Winning the Oil Endgame,Rocky Mountain Institute, Snowmass, CO, 2004,http://www.rmi.org/images/other/WtOE/WtOEg_72dpi.pdf, p. 175. Ruth Greenspan Bell observesthat the claim that ‘market instruments’ such asemissi<strong>on</strong>s trading ‘have lower instituti<strong>on</strong>al <strong>and</strong>human resource requirements’ than c<strong>on</strong>venti<strong>on</strong>alregulati<strong>on</strong> ‘is totally at odds with empirical evidencefrom the US’. See Greenspan Bell, ‘ChoosingEnvir<strong>on</strong>mental Policy Instruments in the RealWorld’, Organisati<strong>on</strong> for Ec<strong>on</strong>omic Cooperati<strong>on</strong><strong>and</strong> Development, Global Forum <strong>on</strong> SustainableDevelopment, OECD, Paris, 11 March 2003, p. 11.113 Cole, op. cit. supra note 19, p. 70.114 Quoted in Cole, op. cit.115 Greenspan Bell, op. cit. supra note 1, p. 31116 S<strong>on</strong>ja Peters<strong>on</strong>, ‘M<strong>on</strong>itoring, Accounting <strong>and</strong>Enforcement in Emissi<strong>on</strong>s Trading Regimes’, paperpresented at a c<strong>on</strong>ference <strong>on</strong> ‘C<strong>on</strong>certed Acti<strong>on</strong><strong>on</strong> Tradeable Emissi<strong>on</strong>s Permits Country Forum’,OECD Headquarters, Paris, 17–18 March 2003,CCNM/GF/SD/ENV(2003)5/FINAL, Paris, p. 7.117 Quoted in Cole, op. cit. supra note 19, p. 82.118 Cole, op. cit., p. 84.119 Michael Obersteiner et al., ‘Quantifying a FullyVerifiable Kyoto’, World Resource Review 14, 2002,p. 542.120 Suvi M<strong>on</strong>ni, ‘Uncertainties in the FinnishGreenhouse Gas Emissi<strong>on</strong>s Inventory’,Envir<strong>on</strong>mental Science <strong>and</strong> Policy 7, 2004, pp. 87–98.121 Intergovernmental Panel <strong>on</strong> <strong>Climate</strong> <strong>Change</strong>,Guidelines for Nati<strong>on</strong>al Greenhouse Gas Inventories.Reporting Instructi<strong>on</strong>s. Surprisingly, in the face ofthese figures, the UN has assumed that existingscience <strong>and</strong> technology is adequate for measuringadherence to the Kyoto Protocol’s small reducti<strong>on</strong>targets. See Tim Denne, ‘Aggregate versus Gas byGas Models of Greenhouse Gas Emissi<strong>on</strong>s Trading’,Centre for Clean Air Policy Scoping Paper No. 6,June 1999, p. 2. Uncertainties associated with bioticemissi<strong>on</strong>s are likely to become progressively moredifficult to estimate due to the n<strong>on</strong>-linear resp<strong>on</strong>se ofplant life to global warming. In July <strong>and</strong> August 2003,500 milli<strong>on</strong> t<strong>on</strong>nes of carb<strong>on</strong> is likely to have escapedfrom Western Europe’s forests <strong>and</strong> fields during adrought – twice the amount released in the regi<strong>on</strong>from fossil fuel burning. In 2005, c<strong>on</strong>trary to st<strong>and</strong>ardbaseline assumpti<strong>on</strong>s, Europe’s ecosystems areexpected to be net releasers, not net absorbers, of
204 development dialogue september 2006 – carb<strong>on</strong> tradingcarb<strong>on</strong>. See Fred Pearce, ‘Drought Bumps up GlobalThermostat’, New Scientist, 6 August 2005, p. 16.122 R. Birdsey, ‘Data Gaps for M<strong>on</strong>itoring Forest Carb<strong>on</strong>in the United States: An Inventory Perspective’,Envir<strong>on</strong>mental Management 33 (Supplement 1),2004, pp. 1–8.123 Richard Toshiyuki Drury et al., ‘Polluti<strong>on</strong> Trading<strong>and</strong> Envir<strong>on</strong>mental Injustice: Los Angeles’Failed Experiment in Air Quality Policy’, DukeEnvir<strong>on</strong>mental Law <strong>and</strong> Policy Forum 45, 1999.124 Ibid.125 ‘AQMD Issues Violati<strong>on</strong> for Alleged False Reports inRECLAIM’, Air Quality Management Divisi<strong>on</strong> News, 2August 2002, http://www.aqmd.gov/news1/acenov.htm.126 ‘Agency Slashes Check M<strong>on</strong>itoring of IndustrialEmissi<strong>on</strong>s’, ENDS Report 360, January 2005. Seealso Fred Pearce, ‘Kyoto’s Promises are Nothing butHot Air’, New Scientist 2557, 24 June 2006, p. 10. Seealso Fred Pearce, ‘Kyoto’s Promises are Norhing butHot Air’, New Scientist, 2557, 24 June 2006, p. 10.127 California Envir<strong>on</strong>mental Protecti<strong>on</strong> Agency,‘Frequently Asked Questi<strong>on</strong>s: <strong>Climate</strong> Acti<strong>on</strong> TeamDraft Report’, Sacramento, 8 December 2005.128 ‘BP’s Credibility Gap over Carb<strong>on</strong> Emissi<strong>on</strong>s’, ENDSReport 326, March 2002, p. 3. See also Partnership for<strong>Climate</strong> Acti<strong>on</strong>, ‘Comm<strong>on</strong> Elements am<strong>on</strong>g AdvancedGreenhouse Gas Management Programmes’,Envir<strong>on</strong>mental Defence, New York, 2002.129 Ruth Greenspan Bell, ‘The Kyoto Placebo’, Issues inScience <strong>and</strong> Technology, Winter 2006.130 Ruth Greenspan Bell, op. cit. supra note 1, p. 22.131 ‘Point’ sources of CO2 are c<strong>on</strong>fined to electricitygenerators <strong>and</strong> some industrial processes, whichare relatively few compared to the great numberof ‘diffuse’ sources in the commercial, residential,transport <strong>and</strong> forestry sectors. Methane emissi<strong>on</strong>s– from gas distributi<strong>on</strong>, coal mining, livestock <strong>and</strong>manure, l<strong>and</strong>fill dumps <strong>and</strong> wastewater treatment– are similarly widely spread across the l<strong>and</strong>scape.N 2 O is emitted partly from a few easily-identifiablepoint sources associated with certain industrialprocesses, but again mainly from the diffusedtransport <strong>and</strong> agricultural sectors. PFC emissi<strong>on</strong>sare c<strong>on</strong>fined mainly to aluminium manufacture,but HFC <strong>and</strong> SF 6 emissi<strong>on</strong>s from refrigerators <strong>and</strong>electrical equipment are again diffused, althoughmore easily c<strong>on</strong>trolled than carb<strong>on</strong> dioxide ormethane emissi<strong>on</strong>s in that they are associated withparticular manufactures.132 Quoted in Ross Gelbspan, ‘History at Risk: TheCrisis of the Global <strong>Climate</strong>’, The Heat is Online,1999, http://www.heatis<strong>on</strong>line.org/htmloverview.cfm.133 Lisa Jacobs<strong>on</strong> <strong>and</strong> Allis<strong>on</strong> Schumacher, ‘Emissi<strong>on</strong>sTrading: Issues <strong>and</strong> Opti<strong>on</strong>s for Domestic <strong>and</strong>Internati<strong>on</strong>al Markets’, Business Council forSustainable Energy, Washingt<strong>on</strong>, 2000, http://www.bcse.org, p. 8. See also Ross Gelbspan, ‘Toward aGlobal Energy Transiti<strong>on</strong>’, Foreign Policy in Focus,January 2004, http://www.fpif.org/pdf/petropol/ch5.pdf.134 Quoted in Michael Shellenberger <strong>and</strong> TedNordhaus, ‘The Death of Envir<strong>on</strong>mentalism: GlobalWarming Politics in a Post-Envir<strong>on</strong>mental World’,2004, p. 15, available at http://thebreakthrough.org/images/Death_of_Envir<strong>on</strong>mentalism.pdf.135 John Pickrell, ‘Soil May Spoil UK’s <strong>Climate</strong> Efforts’,New Scientist, 7 September 2005.136 Andrew Keeler, ‘Designing a Carb<strong>on</strong> Dioxide TradingSystem: The Advantages of Upstream Regulati<strong>on</strong>’,<strong>Climate</strong> Policy Center, Washingt<strong>on</strong>, DC, 2002, http://www.cpc-inc.org; Peters<strong>on</strong>, op. cit. supra note 116.137 Cole, op. cit. supra note 19, p. 84.138 Ellerman et al., op. cit. supra note 93, p.15.139 Heinzerling, op. cit. supra note 55, notes 94–95. Seealso A. Denny Ellerman, ‘Ex Post Evaluati<strong>on</strong> of TradablePermits: The US SO 2 Cap-<strong>and</strong>-Trade Programme’,Massachusetts Institute of Technology, 2003,http://web.mit.edu/ceepr/www/2003-003.pdf, p. 32;Matthew L. Wald, ‘Acid-Rain Polluti<strong>on</strong> Credits Are NotEnticing Utilities’, New York Times, 5 June 1995.140 Curtis Carls<strong>on</strong> et al., ‘Sulfur Dioxide C<strong>on</strong>trol byElectric Utilities: What Are the Gains from Trade?’,Journal of Political Ec<strong>on</strong>omy 108, 6, December2000, pp. 1292–1326.141 Curtis A. Moore, ‘The 1990 Clean Air ActAmendments: Failing the acid test’, Envir<strong>on</strong>mentalLaw Reporter News <strong>and</strong> Analysis 34, 2004.142 Dallas Burtraw et al., ‘Ec<strong>on</strong>omics of Polluti<strong>on</strong>Trading for SO2 <strong>and</strong> NOx’ Resources for the FutureDiscussi<strong>on</strong> Paper 5-05, Resources for the Future,Washingt<strong>on</strong>, 2005.143 Moore, op. cit. supra note 61.144 Hern<strong>and</strong>o de Soto, The Mystery of Capital:Why Capitalism Triumphs in the West <strong>and</strong> FailsEverywhere Else, Black Swan, L<strong>on</strong>d<strong>on</strong>, 2000.145 Paul Hawken, Amory Lovins <strong>and</strong> L. Hunter Lovins,Natural Capitalism: Creating the Next IndustrialRevoluti<strong>on</strong>, Little, Brown <strong>and</strong>Company/Back Bay, Bost<strong>on</strong>, 2000, p. 117.146 The EU advertises its ETS as ‘an open schemepromoting global innovati<strong>on</strong> to combat climatechange’ in the title of <strong>on</strong>e of its pamphlets – withoutoffering any argument for the claim or evenmenti<strong>on</strong>ing the word ‘innovati<strong>on</strong>’ in the text. See ‘EUEmissi<strong>on</strong>s Trading’, European Commissi<strong>on</strong>, Brussels,2005, http://europa.eu.int.
less<strong>on</strong>s unlearned 205147 Adam B. Jaffe et al., ‘Envir<strong>on</strong>mental Policy <strong>and</strong>Technological <strong>Change</strong>’, Envir<strong>on</strong>mental <strong>and</strong> ResourceEc<strong>on</strong>omics 22, 2002, pp. 41–51, p. 51; Richard B.Stewart, ‘C<strong>on</strong>trolling Envir<strong>on</strong>mental Risks throughEc<strong>on</strong>omic Incentives’ (1988), Columbia Journalof Envir<strong>on</strong>mental Law 13, 1988, p. 160. Under theEU ETS, companies are not formally allowed tobank leftover allowances from <strong>on</strong>e phase of theprogramme to the next. However, they can achievethe same effect through what traders call ‘tradingthe spread’: selling, say, their 2007 allowances whilebuying 2008 allowances. See ‘Backwardati<strong>on</strong> Allows<strong>and</strong> Incentivises EUA Banking into Phase Two’,Point Carb<strong>on</strong>, 23 September 2005, http://www.pointcarb<strong>on</strong>.com.148 See, e.g., Jeff Romm, Cool Companies, Isl<strong>and</strong> Press,Washingt<strong>on</strong>, 1999; F. Krause, ‘The Cost of MitigatingCarb<strong>on</strong> Emissi<strong>on</strong>s: A Review of Methods <strong>and</strong>Findings from European Studies’, Energy Policy24, 10/11, pp. 899–915; Ernst v<strong>on</strong> Weizsacker <strong>and</strong>Amory B. Lovins, Factor Four: Doubling Wealth,Halving Resource Use, Earthscan, L<strong>on</strong>d<strong>on</strong>, 1997. TheUS Department of Energy has found that the UScould cut its predicted energy c<strong>on</strong>sumpti<strong>on</strong> by 20per cent by 2020 <strong>and</strong> its carb<strong>on</strong> dioxide emissi<strong>on</strong>sby a third, bringing them close to 1990 levels,all the while saving USD 124 billi<strong>on</strong> <strong>on</strong> its energybill (US Department of Energy, Office of EnergyEfficiency <strong>and</strong> Renewable Energy, ‘Scenarios for aClean Energy Future’, Washingt<strong>on</strong>, 2000. See alsoP. Raeburn, ‘It’s Perfect Weather to Fight GlobalWarming’, Business Week, 11 December 2000, p.36). According to energy expert Amory Lovins, theUS is failing to make many reducti<strong>on</strong>s in carb<strong>on</strong>emissi<strong>on</strong>s not because they would be expensivebut because of capital misallocati<strong>on</strong>, organisati<strong>on</strong>al<strong>and</strong> regulatory failures, lack of informati<strong>on</strong>, perverseincentives, <strong>and</strong> so <strong>on</strong>. See ‘<strong>Climate</strong> Protecti<strong>on</strong> forFun <strong>and</strong> Profit’, Rocky Mountain Institute Newsletter,13, 3, Fall/Winter 1997, p. 3 <strong>and</strong> Amory B. Lovins,‘More Profit with Less Carb<strong>on</strong>’, Scientific American,September 2005, pp. 74–82.149 Working Group III c<strong>on</strong>tributi<strong>on</strong> to Third AssessmentReport, IPCC, Cambridge University Press,Cambridge, 2001.150 Henrik Hasselknippe <strong>and</strong> Kjetil Reine, eds., Carb<strong>on</strong>2006: Towards a Truly Global Market, Point Carb<strong>on</strong>,Copenhagen, 2006, http://www.pointcarb<strong>on</strong>.com/wimages/Carb<strong>on</strong>_2006_final_print.pdf.151 David A. Malueg, ‘Emissi<strong>on</strong>s Credit Trading <strong>and</strong>the Incentive to Adopt New Polluti<strong>on</strong> AbatementTechnology’, Journal of Envir<strong>on</strong>mental Ec<strong>on</strong>omics<strong>and</strong> Management 16, 1987, p. 52; A. Denny Ellermanet al., op. cit. supra note 93, p. 14. .152 Ibid.153 Margaret Taylor et al., ‘Regulati<strong>on</strong> as the Mother ofInventi<strong>on</strong>: The Case of SO 2 C<strong>on</strong>trol’, Law <strong>and</strong> Policy27, 2005, pp. 348–78, p. 372.154 Ruth Greenspan Bell, ‘What to Do about <strong>Climate</strong><strong>Change</strong>’, Foreign Affairs 85, 3, June 2006, availableat http://www.weathervane.rff.org/soluti<strong>on</strong>s_<strong>and</strong>_acti<strong>on</strong>s/Internati<strong>on</strong>al/What_to_Do_About_<strong>Climate</strong>_<strong>Change</strong>.cfm.155 Greenspan Bell, op. cit. supra note 1, pp. 28, 30.156 ‘Statement of G8 <strong>Climate</strong> <strong>Change</strong> Roundtable’,World Ec<strong>on</strong>omic Forum <strong>and</strong> Her Majesty’sGovernment, UK, L<strong>on</strong>d<strong>on</strong>, 9 June 2005. Even theoil corporati<strong>on</strong> Shell admits that carb<strong>on</strong> efficiencymeasures are more likely when market soluti<strong>on</strong>ssuch as emissi<strong>on</strong>s trading are limited, globalisati<strong>on</strong>has been restricted in favour of nati<strong>on</strong>al laws <strong>and</strong>st<strong>and</strong>ards, <strong>and</strong> cross-border ec<strong>on</strong>omic integrati<strong>on</strong>is limited. Under a regime of greater cross-borderintegrati<strong>on</strong>, regulatory harm<strong>on</strong>isati<strong>on</strong> <strong>and</strong> voluntarycodes, it c<strong>on</strong>cludes, there may be higher ec<strong>on</strong>omicgrowth, but an ‘absence of security-driveninvestment in indigenous renewable energy sources’(Royal Dutch Shell, ‘The Shell Global Scenarios to2025. The Future Business Envir<strong>on</strong>ment: Trends,Trade-Offs <strong>and</strong> Choices’, 2005, www.ukerc.ac.uk/comp<strong>on</strong>ent/opti<strong>on</strong>,com_docman/task,doc_download/gid,346/). It was for such reas<strong>on</strong>s that the lowemissi<strong>on</strong>svehicle program enacted by several USstates to stimulate innovati<strong>on</strong> <strong>and</strong> secure emissi<strong>on</strong>sreducti<strong>on</strong>s didn’t require merely that emissi<strong>on</strong>sst<strong>and</strong>ards be met. That goal could have beenachieved merely by tweaking existing technologythrough, for instance, introducing very efficientcatalysts. Rather, the program recognised that someec<strong>on</strong>omically-’unjustified’ zero-emissi<strong>on</strong>s vehicleshad to be introduced as well, in order to jumpstartmore serious technological change. The mostefficient short-term soluti<strong>on</strong>, it was understood,would not necessarily deliver envir<strong>on</strong>mentallysuperiortechnological innovati<strong>on</strong> (David M. Driesen,‘Does Emissi<strong>on</strong>s Trading Encourage Innovati<strong>on</strong>?’,Envir<strong>on</strong>mental Law Reporter News <strong>and</strong> Analysis 33,2003, p. 10094).157 Margaret Taylor et al., op. cit. supra note 153; DavidPopp, ‘Polluti<strong>on</strong> C<strong>on</strong>trol Innovati<strong>on</strong>s <strong>and</strong> the CleanAir Act of 1990’, Journal of Policy Analysis <strong>and</strong>Management 93, 2003, p. 390.158 David M. Driesen, Syracuse University School ofLaw, pers<strong>on</strong>al communicati<strong>on</strong>, 2005. But see alsoCurtis A. Moore, op. cit. supra note 61, p. 11, whostates that the market did have a role, but writesdryly that the ‘innovati<strong>on</strong>’ it stimulated was ‘in newrailroad tracks, <strong>on</strong>- <strong>and</strong> off-loading systems <strong>and</strong>other ways of bringing lower-sulphur coal from thePowder River Basin to market’.
206 development dialogue september 2006 – carb<strong>on</strong> trading159 Taylor et al., op. cit. supra note 153, p. 23.160 N. Madu (ed.), H<strong>and</strong>book of Envir<strong>on</strong>mentallyC<strong>on</strong>scious Manufacturing, Kluwer AcademicPublishers, Bost<strong>on</strong>, 2001, pp. 32–33.161 David Driesen, The Ec<strong>on</strong>omic Dynamics ofEnvir<strong>on</strong>mental Law, MIT Press, Cambridge, 2003,pp. 79–80.162 Ellerman et al., op. cit. supra note 93, p. 14.163 Once the trading scheme got under way, manyinstallati<strong>on</strong>s managed to cut emissi<strong>on</strong>s withouttrading at all. Most of those who did trade traded<strong>on</strong>ly within their own firm. Inter-firm trading came to<strong>on</strong>ly two per cent of total emissi<strong>on</strong>s (Moore, op. cit.supra note 61, p. 26).164 Moore, op. cit. supra note 61, pp. 7–8.165 Curtis A. Moore, ‘RECLAIM: Southern California’sFailed Experiment with Air Polluti<strong>on</strong> Trading’, Health<strong>and</strong> Clean Air, 2003, www.health<strong>and</strong>cleanair.org/emissi<strong>on</strong>s/reclaim.pdf, p. 24.166 Richard A. Liroff, Reforming Air Polluti<strong>on</strong> Regulati<strong>on</strong>:The Toil <strong>and</strong> Trouble of EPA’s Bubble, C<strong>on</strong>servati<strong>on</strong>Foundati<strong>on</strong>, Washingt<strong>on</strong>, 1986, p. 100.167 ‘BP’s Credibility Gap over Carb<strong>on</strong> Emissi<strong>on</strong>s’,ENDS Report 326, March 2002, p. 4. In 2001, justthe <strong>on</strong>e-year growth increment in emissi<strong>on</strong>s fromthe products BP sold by itself amounted to doublethe greenhouse gas emissi<strong>on</strong>s from the company’sown operati<strong>on</strong>s. BP’s oil <strong>and</strong> gas producti<strong>on</strong> has<strong>on</strong>ly increased since 1990 (‘BP – Annual data– reported basis’, http://www.investis.com/bp_acc_ia/ar/htdocs/reports/report_17.html). BP estimatedthat its products emitted nearly 1.3 billi<strong>on</strong> t<strong>on</strong>nes ofgreenhouse gases, equivalent to 5 per cent of thetotal 24 billi<strong>on</strong> t<strong>on</strong>nes emitted each year from fossilfuel c<strong>on</strong>sumpti<strong>on</strong>.168 Shaun Harley, ‘Outback to the Future’, Shield (BPMagazine) 1, 2000, p. 38.169 ‘BP’s Credibility Gap over Carb<strong>on</strong> Emissi<strong>on</strong>s’, ENDSReport 326, March 2002, p. 4.170 David Driesen, ‘Trading <strong>and</strong> Its Limits’, Penn StateEnvir<strong>on</strong>mental Law Review, forthcoming 2006.171 Ibid., pp. 83–4.172 Gar Lipow, op. cit. supra note 2.173 Gregory C. Unruh, ‘Underst<strong>and</strong>ing Carb<strong>on</strong> Lock-In’,Energy Policy 28, 2000, pp. 817–30.174 Ibid., p. 820.175 Estimates of military <strong>and</strong> foreign aid costsassociated with ensuring the flow of oil to majorc<strong>on</strong>sumer countries from the Arabian Gulf varydramatically. One study in 1990, when Saudi Arabianoil was selling at around USD 15 a barrel, arguedthat another USD 60 should be added to yield thereal cost to the US. More recently, the director ofthe Earth Institute at Columbia University reck<strong>on</strong>edthat the ‘dollar costs of US military operati<strong>on</strong>s in theMiddle East attributable to policing the energy flowsare tens of billi<strong>on</strong>s a year, if not 100 billi<strong>on</strong> or more.This amounts to a hidden subsidy to oil use of USD10 or more per barrel exported from the regi<strong>on</strong>’.See Toby Shelley, Oil, Zed Books, L<strong>on</strong>d<strong>on</strong>, 2005,pp. 162–3. For universities, see PLATFORM et al.,Degrees of Capture, PLATFORM, L<strong>on</strong>d<strong>on</strong>, 2003.176 J. Pershing <strong>and</strong> J. Mackenzie, ‘Removing Subsidies:Levelling the Playing Field for Renewable EnergyTechnologies’, lecture presented to the Internati<strong>on</strong>alC<strong>on</strong>ference for Renewable Energies, B<strong>on</strong>n, June2004. Subsidies, of course, are difficult to quantify,as they may involve not <strong>on</strong>ly direct financialtransfers but also trade restricti<strong>on</strong>s, regulatoryinstruments, preferential tax treatment, police <strong>and</strong>military budgets, legal changes, company bailouts<strong>and</strong> publicly-funded research <strong>and</strong> development.177 See also Amory Lovins, ‘Soft Energy Paths’, ForeignAffairs, 1973; Ivan Illich, Energy <strong>and</strong> Equity, Penguin,L<strong>on</strong>d<strong>on</strong>, 1971; Ricardo Carrere <strong>and</strong> Larry Lohmann,Pulping the South: Industrial Tree Plantati<strong>on</strong>s in theWorld Paper Ec<strong>on</strong>omy, Zed Books, L<strong>on</strong>d<strong>on</strong>, 1996. Ifa broader range of political issues is not addressed,fuel efficiency will not cause fossil fuel use todecline. It may simply lead to incentives to warmmore rooms or buy bigger cars.178 Lipow, op. cit. supra note 2.179 In its first years, FedEx lost m<strong>on</strong>ey building theinfrastructure necessary to implement reliableovernight mail delivery. Once it had put thenecessary infrastructure in pace, however, it beganto profit by offering the service. Venture capitalistsfinanced Jeff Bezos’s ‘inefficient’ Amaz<strong>on</strong>.comfor years in the hope that the company wouldeventually turn a profit, even though it lost hundredsof milli<strong>on</strong>s of dollars to start with. By c<strong>on</strong>trast,venture capital for envir<strong>on</strong>mental technologiesin the US has dropped in recent years at a timewhen emissi<strong>on</strong>s trading has gained unprecedentedprominence. See Driesen, op. cit. supra note 161, pp.93–97.180 Israel M. Kirzner, Discovery <strong>and</strong> the CapitalistProcess, University of Chicago Press, Chicago, 1985,p. 157.181 Tim Denne, ‘Aggregate versus Gas by Gas Modelsof Greenhouse Gas Emissi<strong>on</strong>s Trading’, Centre forClean Air Policy Scoping Paper No. 6, 1999, p. 19.182 Philip Verleger, the Institute for Internati<strong>on</strong>alEc<strong>on</strong>omics, quoted in George M<strong>on</strong>biot, ‘CryingSheep’, The Guardian, 27 September 2005.
less<strong>on</strong>s unlearned 207183 Lipow, op. cit. supra note 2. See also DermotGately <strong>and</strong> Hillard G. Huntingt<strong>on</strong>, ‘The AsymmetricEffects of <strong>Change</strong>s in Price <strong>and</strong> Income <strong>on</strong> Energy<strong>and</strong> Oil Dem<strong>and</strong>’, Ec<strong>on</strong>omic Research Reports,New York University, 2001, http://www.ec<strong>on</strong>.nyu.edu/cvstarr/working/2001/RR01-01.PDF <strong>and</strong> JerryTaylor <strong>and</strong> Peter Van Doren, ‘Evaluating the Casefor Renewable Energy: Is Government SupportWarranted?’, Policy Analysis 422, Cato Institute, 10January 2002.184 Corporati<strong>on</strong>s, for their part, often rati<strong>on</strong>ally preferinvesting in technologies that increase their powerover labour over those that improve productivityper unit of energy (Michael Perelman, ClassWarfare in the Informati<strong>on</strong> Age, Palgrave Macmillan,New York, 2000).185 Henrik Hasselknippe <strong>and</strong> Kjetil Reine, op. cit. supranote 150.186 ‘Emissi<strong>on</strong> trading “no good without targets”’,Envir<strong>on</strong>ment Daily 1739, 4 October 2004.187 William Nordhaus, ‘Life after Kyoto: AlternativeMechanisms to C<strong>on</strong>trol Global Warming Policies’,Yale University, 2005, http://www.fpif.org/fpiftxt/3167.188 Ellerman et al., op cit. supra note 93; Moore, op. cit.supra note 61.189 Vincent de Rivaz, ‘Short Term Strategies Can DistortEmissi<strong>on</strong>s Progress’, Financial Times, 28 July 2005,p. 19. See also Fi<strong>on</strong>a Harvey, ‘Market Begins toInfluence Behaviour of Generators’, Financial Times,10 October 2005; <strong>and</strong> Jean Eaglesham, ‘BusinessAttacks Government’s Short Term Target <strong>on</strong> GlobalWarming’, Financial Times, 6 October 2005, p. 2).190 Robert L. Hirsch et al., ‘Peaking of WorldOil Producti<strong>on</strong>: Impacts, Mitigati<strong>on</strong> <strong>and</strong> RiskManagement’, February 2005, www.hilltoplancers.org/stories/hirsch0502.pdf.191 Moore, op. cit. supra note 61, p. 23.192 For example, the Competitive Enterprise Institutestates that the costs of complying with the KyotoProtocol al<strong>on</strong>e would cost the US USD 300 billi<strong>on</strong>per year, losing 28 per cent of GDP over 10 years(cited in Vijay V. Vaitheeswaran, <strong>Power</strong> to thePeople, Earthscan, L<strong>on</strong>d<strong>on</strong>, 2005). Energy expertAmory Lovins claims, by c<strong>on</strong>trast, that reducti<strong>on</strong>sin carb<strong>on</strong> emissi<strong>on</strong>s would save USD 300 billi<strong>on</strong>annually given better capital allocati<strong>on</strong> <strong>and</strong>correcti<strong>on</strong> of organisati<strong>on</strong>al <strong>and</strong> regulatory failures,lack of informati<strong>on</strong>, perverse incentives, <strong>and</strong> so <strong>on</strong>(‘<strong>Climate</strong> Protecti<strong>on</strong> for Fun <strong>and</strong> Profit’, note 168).The US Department of Energy also predicts billi<strong>on</strong>sof dollars in savings (‘Scenarios for a Clean EnergyFuture’, supra note 148). Differences in assumpti<strong>on</strong>seven am<strong>on</strong>g c<strong>on</strong>venti<strong>on</strong>al ec<strong>on</strong>omic models can‘easily lead to cost estimates that differ by a factorof ten or more’, notes Stanford ec<strong>on</strong>omist JohnWeyant. ‘If you ask the broader questi<strong>on</strong> of howmuch tackling climate change will cost over thiscentury’, c<strong>on</strong>cludes Vaitheeswaran, ‘the h<strong>on</strong>estanswer must be that we simply do not know’.193 Jack Cogen, presentati<strong>on</strong> at the side event arrangedby the Internati<strong>on</strong>al Emissi<strong>on</strong>s Trading Associati<strong>on</strong><strong>and</strong> the World Bank at the C<strong>on</strong>ference of theParties to the UNFCCC, M<strong>on</strong>treal, 5 December2005.194 Lipow, op. cit supra note 2.195 Driesen, op. cit. supra note 161, p. 24.196 Michael E. Porter <strong>and</strong> Claas Van der Linde,‘Toward a New C<strong>on</strong>cepti<strong>on</strong> of the Envir<strong>on</strong>ment-Competitiveness Relati<strong>on</strong>ship’, Journal of Ec<strong>on</strong>omicPerspectives 9, 1995, p. 97.197 Driesen, op. cit. supra note 161, p. 86.198 Ibid., p. 68.199 Commissi<strong>on</strong> <strong>on</strong> Sustainable Development, Reportof the Secretary General, UN Doc.E/CN.17/2001/PC/20, 2000, p. 4; Driesen, op. cit. supra note 156.200 Wolfgang Sachs et al., The Jo’Burg Memo, HeinrichBöll Foundati<strong>on</strong>, Berlin, 2002, p. 38.201 See, for example, Barbara White, ‘Coase <strong>and</strong> theCourts: Ec<strong>on</strong>omics for the Comm<strong>on</strong> Man’, Iowa LawReview 72, 1987, pp. 577–635; Larry Lohmann, ‘Making<strong>and</strong> Marketing Carb<strong>on</strong> Dumps: Commodificati<strong>on</strong>,Calculati<strong>on</strong> <strong>and</strong> Counterfactuals in <strong>Climate</strong><strong>Change</strong> Mitigati<strong>on</strong>’, Science as Culture 14, 3, pp.1–33; Nick Johnst<strong>on</strong>e, ‘Efficient <strong>and</strong> Effective Use ofTradable Permits in Combinati<strong>on</strong> with Other PolicyInstruments’, OECD, Paris, 2003, http://www.oecd.org/dataoecd/11/55/2957650.pdf.202 Pat Mo<strong>on</strong>ey, What Next? Trendlines <strong>and</strong> Alternativesfor Civil Society over the Next 30 Years, DagHammarskjöld Foundati<strong>on</strong>, 2006, http://www.dhf.uu.se; Ken Neals<strong>on</strong> <strong>and</strong> J. Craig Venter, ‘Summary’of Workshop <strong>on</strong> The Role of Biotechnology inMitigating Greenhouse Gas C<strong>on</strong>centrati<strong>on</strong>s, 23 June2001, US Department of Energy, Office of Biological<strong>and</strong> Envir<strong>on</strong>mental Research; Alun Anders<strong>on</strong>, ‘CraigVenter’, Prospect, April 2006.203 Greenspan Bell, op. cit. supra note 1, p. 21.204 Michael McCarthy <strong>and</strong> Michael Harris<strong>on</strong>, ‘Carb<strong>on</strong>trading will not cut airline emissi<strong>on</strong>s, says BA’,Independent, 30 June 2006.205 ‘BP’s Credibility Gap over Carb<strong>on</strong> Emissi<strong>on</strong>s’, ENDSReport 326, March 2002, p. 4.206 Paul McGarr, ‘Capitalism <strong>and</strong> <strong>Climate</strong> <strong>Change</strong>’,Internati<strong>on</strong>al Socialism 107, 2005, http://www.isj.org.uk/index.php4?id=119&issue=107.
208 development dialogue september 2006 – carb<strong>on</strong> trading207 These figures are taken from the US’s Carb<strong>on</strong>Dioxide Informati<strong>on</strong> Centre.208 Pers<strong>on</strong>al communicati<strong>on</strong>.209 Polanyi, op. cit. supra note 15.210 ‘Robbed of the protective covering of culturalinstituti<strong>on</strong>s, human beings would perish from theeffects of social exposure; they would die as thevictims of acute social dislocati<strong>on</strong> ... Nature wouldbe reduced to its elements, neighbourhoods <strong>and</strong>l<strong>and</strong>scapes defiled, rivers polluted, ... the powerto produce food <strong>and</strong> raw materials destroyed.... Aself-adjusting market ... could not exist for any lengthof time without annihilating the human <strong>and</strong> naturalsubstance of society; it would have physicallydestroyed man <strong>and</strong> transformed his surroundingsinto a wilderness’ (Polanyi, op. cit., p. 3).211 The gr<strong>and</strong>father of emissi<strong>on</strong>s trading, R<strong>on</strong>ald Coase,himself pointed this out: ‘The rights of a l<strong>and</strong>ownerare not unlimited. It is not even always possiblefor him to remove the l<strong>and</strong> to another place, forinstance, by quarrying it. And although it may bepossible for him to exclude some people fromusing ‘his’ l<strong>and</strong>, this may not be true of others. Forexample, some people may have the right to crossthe l<strong>and</strong>. Furthermore, it may or may not be possibleto erect certain types of building or to grow certaincrops or to use particular drainage systems <strong>on</strong> thel<strong>and</strong>. This does not come about simply because ofgovernmental regulati<strong>on</strong>. It would be equally trueunder the comm<strong>on</strong> law. In fact, it would be trueunder any system of law. A system in which therights of individuals were unlimited would be <strong>on</strong>e inwhich there were no rights to acquire’ (Coase, TheFirm, the Market <strong>and</strong> the Law, University of ChicagoPress, Chicago, 1988, p. 155).212 Daniel Altman, ‘Just How Far Can Trading ofEmissi<strong>on</strong>s Be Extended?’, New York Times, 31 May2002.213 Torres, op. cit. supra note 5, p. 227. In additi<strong>on</strong>,under c<strong>on</strong>venti<strong>on</strong>al regulati<strong>on</strong>, richer communitiespay a smaller proporti<strong>on</strong> of their wealth for overallpolluti<strong>on</strong> cuts than poorer <strong>on</strong>es do.214 Altman, op. cit. supra note 212.215 Moore, op. cit. supra note 61.216 Haywood Turrentine, Chair, Nati<strong>on</strong>al Envir<strong>on</strong>mentalJustice Advisory Committee, Letter to CarolBrowner, Administrator, U.S. Envir<strong>on</strong>mentalProtecti<strong>on</strong> Agency, 11 March 1998.217 David Biello, ‘Emissi<strong>on</strong>s Trading under Attack’,Envir<strong>on</strong>mental Finance, May 2002.218 Ibid.219 Larry Lohmann, ‘Whose Voice is Speaking? HowCost-Benefit Analysis Synthesizes New “Publics”’,Corner House Briefing Paper No. 7, 1998, http://www.thecornerhouse.org.uk.220 Altman, op. cit. supra note 212. Lifting regulati<strong>on</strong> ofutilities’ profit margins makes the transfer of wealthto corporati<strong>on</strong>s in the form of emissi<strong>on</strong>s allowancesstill more blatant.221 Sim<strong>on</strong>e Bastian<strong>on</strong>i et al., ‘The Problem of AssigningResp<strong>on</strong>sibility for Greenhouse Gas Emissi<strong>on</strong>s’,Ecological Ec<strong>on</strong>omics 49, 3, 2004, pp. 253–57, p. 254.222 See, e.g., Michael J. G. Den Elzen et al.,‘Differentiating Future Commitments <strong>on</strong> the Basisof Countries’ Relative Historical Resp<strong>on</strong>sibilityfor <strong>Climate</strong> <strong>Change</strong>: Uncertainties in the“Brazilian Proposal” in the C<strong>on</strong>text of a PolicyImplementati<strong>on</strong>’, Climatic <strong>Change</strong> 71, pp. 277–301,2005.223 Larry Lohmann, ‘Democracy or Carbocracy?Intellectual Corrupti<strong>on</strong> <strong>and</strong> the Future of the<strong>Climate</strong> Debate’, Corner House Briefing Paper No.24, 2001, http://www.thecornerhouse.org.uk/.224 Keeler, op. cit. supra note 136.225 FEASTA <strong>and</strong> New Ec<strong>on</strong>omics Foundati<strong>on</strong>, op. cit.supra note 97, p. 3; John FitzGerald, ‘An ExpensiveWay to Combat Global Warming: Reform Neededin the EU Emissi<strong>on</strong>s Trading Regime’, ESRIQuarterly Ec<strong>on</strong>omic Commentary, April 2004; UBSInvestment Research, ‘European Emissi<strong>on</strong>s TradingScheme’, L<strong>on</strong>d<strong>on</strong>, 2004, www.unepfi.org/fileadmin/documents/materiality1/emissi<strong>on</strong>s_trading_eu_ubs_2004.pdf.226 Peters<strong>on</strong>, op. cit. supra note 116; Lisa Jacobs<strong>on</strong><strong>and</strong> Allis<strong>on</strong> Schumacher, ‘Emissi<strong>on</strong>s Trading: Issues<strong>and</strong> Opti<strong>on</strong>s for Domestic <strong>and</strong> Internati<strong>on</strong>alMarkets’, Business Council for Sustainable Energy,Washingt<strong>on</strong>, 2000.227 Point Carb<strong>on</strong>, 16 November 2004.228 IPA Energy, op. cit. supra note 82.229 Point Carb<strong>on</strong>, 16 November 2004.230 ENDS Report 369, October 2005, p. 47.231 Ibid.232 ‘HSBC: Testing the Waters for Carb<strong>on</strong> Neutrality’,ENDS Report 369, October 2005, p. 25.233 Nati<strong>on</strong>al Business Review (New Zeal<strong>and</strong>), 30December 2003.234 Ibid.235 Th<strong>on</strong>gchai Winichakul, Siam Mapped: The Historyof the Geo-Body of a Nati<strong>on</strong>, University of HawaiiPress, H<strong>on</strong>olulu, 1994.236 Michael Grubb et al., The Kyoto Protocol: A Guide<strong>and</strong> Assessment, Royal Institute for Internati<strong>on</strong>alAffairs, L<strong>on</strong>d<strong>on</strong>, 1999, p. 98.
less<strong>on</strong>s unlearned 209237 Bastian<strong>on</strong>i et al., op. cit. supra note 221, p. 254.238 Oilwatch, ‘Positi<strong>on</strong> Paper: Fossil Fuels <strong>and</strong> <strong>Climate</strong><strong>Change</strong>’, The Hague, November 2000.239 Peter Singer, One World: The Ethics ofGlobalizati<strong>on</strong>, Yale University Press, New Haven,2002.240 Ibid.241 Torres, op. cit. supra note 5, p. 578.242 Fred Pearce, ‘Calling the Tune, New Scientist, 7 July2001, pp. 47–9; Anil Agarwal et al., Green Politics:Global Envir<strong>on</strong>mental Negotiati<strong>on</strong>s, Centre forScience <strong>and</strong> the Envir<strong>on</strong>ment, New Delhi, 1999;Centre for Science <strong>and</strong> Envir<strong>on</strong>ment, ‘Definiti<strong>on</strong>s ofEqual Entitlements’, CSE Dossier Factsheet 5, NewDelhi. http://www.cseindia.org/programme/geg/cdm_guide.htm.243 See http://www.gci.org.uk for a list.244 Already, carb<strong>on</strong> costs associated with internati<strong>on</strong>alemissi<strong>on</strong>s trading schemes are encouraging someenergy-intensive industries to think about relocatingproducti<strong>on</strong> abroad, <strong>and</strong> the same would likelyhappen if foreign countries had a surfeit of carb<strong>on</strong>permits to offer (Philibert et al., op. cit. supra note65, p. 22). Martin Pecina, chairman of the CzechRepublic’s Anti-M<strong>on</strong>opoly Office, noted in February2006, for example, that the EU ETS is likely toinduce Mittal Steel, which has plants in the CzechRepublic, merely to increase output in Kazakhstan,bey<strong>on</strong>d the reach of the EU ETS. ‘At the same time,it would reduce producti<strong>on</strong> in the Czech Republic,<strong>and</strong> would even profit from the sale of the unusedcarb<strong>on</strong> credits,’ Pecina noted, claiming that the EUETS fails to protect the envir<strong>on</strong>ment <strong>and</strong> should beabolished (Bouc, op. cit. supra note 88).245 As <strong>on</strong>e trade expert puts it, ‘if a specific subsidycauses adverse effects to competing entities inforeign countries, then it can be acti<strong>on</strong>able inthe World Trade Organisati<strong>on</strong>.’ S. Charnovitz,‘Bey<strong>on</strong>d Kyoto: Advancing the Internati<strong>on</strong>alEffort Against <strong>Climate</strong> <strong>Change</strong>’ in Pew Centre<strong>on</strong> Global <strong>Climate</strong> <strong>Change</strong>, Trade <strong>and</strong> <strong>Climate</strong>:Potential C<strong>on</strong>flicts <strong>and</strong> Synergies, Washingt<strong>on</strong>, DC,2003, http://www.pewclimate.org/docUploads/Bey<strong>on</strong>d%20Kyoto%2Epdf, pp. 141–170. In the US,for instance, the Clean Air Act restricted importsof low st<strong>and</strong>ard reformulated gasoline in 1999, butthe WTO forced the US Envir<strong>on</strong>mental Protecti<strong>on</strong>Agency to rewrite the rules to comply with theWTO rules. Similarly, a recent NAFTA disputewith the US forced the Canadian government torepeal its ban of MMT, a substance manufacturedby US-based Ethyl Corporati<strong>on</strong> (<strong>and</strong> which hadbeen banned in the US), <strong>and</strong> to pay compensati<strong>on</strong>to the company for profit losses.Heidi Bachram etal., The Sky is Not the Limit: The Emerging Marketin Greenhouse Gases, Transnati<strong>on</strong>al Institute,Amsterdam, 2003 http://www.carb<strong>on</strong>tradewatch.org.246 Dove, op. cit. supra note 30, pp. 45–47, 49.247 White, op. cit. supra note 201.248 Douglas Kysar, ‘Law, Envir<strong>on</strong>ment <strong>and</strong> Visi<strong>on</strong>’,Northwestern University Law Review 97, 2003, pp.675–729, pp. 690–1.249 Cramt<strong>on</strong> <strong>and</strong> Kerr, op. cit. supra note 38; UnitedStates C<strong>on</strong>gressi<strong>on</strong>al Budget Office, Who Gains<strong>and</strong> Who Pays under Carb<strong>on</strong>-Allowance Trading?,Washingt<strong>on</strong>, 2000; Dallas Burtraw et al., ‘The Effect<strong>on</strong> Asset Values of the Allocati<strong>on</strong> of Carb<strong>on</strong> DioxideEmissi<strong>on</strong> Allowances’, Resources for the Future,Washingt<strong>on</strong>, 2002; Nathan Hultman et al., ‘EquitableCarb<strong>on</strong> Revenue Distributi<strong>on</strong> under an Internati<strong>on</strong>alEmissi<strong>on</strong>s Trading Regime’, Political Ec<strong>on</strong>omyResearch Institute, Amherst, 2002; J. Jensen <strong>and</strong> T.Rasmussen, ‘Allocati<strong>on</strong> of CO 2 Emissi<strong>on</strong>s Permits: AGeneral Equilibrium Analysis of Policy Instruments’,Ministry of Business <strong>and</strong> Industry, Copenhagen,1998; L. Lane, ‘Allowance Allocati<strong>on</strong> under a Carb<strong>on</strong>Cap-<strong>and</strong>-Trade Policy’, <strong>Climate</strong> Policy Centre,Washingt<strong>on</strong>, 2003; Ian Parry, ‘Are Emissi<strong>on</strong>s PermitsRegressive?’, Resources for the Future, Washingt<strong>on</strong>,2003; J. Pezzey, ‘Emissi<strong>on</strong>s Taxes <strong>and</strong> TradeablePermits: A Comparis<strong>on</strong> of Views <strong>on</strong> L<strong>on</strong>g-RunEfficiency’, Envir<strong>on</strong>mental <strong>and</strong> Resource Ec<strong>on</strong>omics26, 2003, pp. 329–343.250 Peter Barnes, ‘The Regi<strong>on</strong>al Greenhouse GasInitiative’, 2006, http://<strong>on</strong>thecomm<strong>on</strong>s.org/node/789.251 Cramt<strong>on</strong> <strong>and</strong> Kerr, op. cit. supra note 38.252 Robert Hahn <strong>and</strong> Robert Stavins, ‘Trading inGreenhouse Permits: A <str<strong>on</strong>g>Critical</str<strong>on</strong>g> Examinati<strong>on</strong> ofDesign <strong>and</strong> Implementati<strong>on</strong> Issues’, in H. Lee, ed.,Shaping Nati<strong>on</strong>al Resp<strong>on</strong>ses to <strong>Climate</strong> <strong>Change</strong>,Isl<strong>and</strong> Press, Washingt<strong>on</strong>, 1995, p. 203.253 Andrew Aulisi et al., Greenhouse Gas Emissi<strong>on</strong>sTrading in US States: Observati<strong>on</strong>s <strong>and</strong> Less<strong>on</strong>s fromthe OTC NO x Budget Program, World ResourcesInstitute, Washingt<strong>on</strong>, 2005, p. 19.254 Polanyi, op. cit. supra note 15; Harvey, op. cit. supranote 29.255 Mitchell, op. cit. supra note 23.256 The importance of the aesthetic appeal ofsuch approaches has been highlighted by thedistinguished University of Iowa ec<strong>on</strong>omist DeirdreN. McCloskey: ‘When ec<strong>on</strong>omists are asked whyalmost all of them believe in free trade, they will saythat it is a “theoretical” argument that persuadesthem. Further inquiry will reveal that it is in fact apretty diagram that persuades them.’
210 development dialogue september 2006 – carb<strong>on</strong> trading257 Driesen, op. cit. supra note 93, p. 94.258 Robert H. Socolow, ‘Can We Bury Global Warming?’,Scientific American, July 2005, pp. 45–55; Bert Metzet al., eds., Carb<strong>on</strong> Dioxide Capture <strong>and</strong> Storage:Summary for Policymakers <strong>and</strong> Technical Summary,Intergovernmental Panel <strong>on</strong> <strong>Climate</strong> <strong>Change</strong>, 2005.For problems with this geosequestrati<strong>on</strong> ‘soluti<strong>on</strong>’,see, e.g., ‘Carb<strong>on</strong> Dioxide’s Great UndergroundEscape in Doubt’, New Scientist 2560, 18 July 2006,p. 19; ‘Plan to Bury CO 2 under North Sea’, theGuardian, 5 September 2003 <strong>and</strong> German AdvisoryCouncil <strong>on</strong> Global <strong>Change</strong>, The Future Oceans:Warming Up, Rising High, Turning Sour, Summaryfor Policy Makers, Berlin, 2006, which notes that‘storing CO2 in geological formati<strong>on</strong>s under thesea floor can <strong>on</strong>ly be an “emergency” soluti<strong>on</strong> for atransiti<strong>on</strong>al period’ (p. 5).259 Metz, op. cit., pp. 34–36. The German AdvisoryCouncil <strong>on</strong> Global <strong>Change</strong>, op. cit., c<strong>on</strong>cludes flatlythat ‘introducing CO2 into seawater should beprohibited, because the risk of ecological damagecannot be assessed <strong>and</strong> the retenti<strong>on</strong> period in theoceans is too short’ (p. 5).260 Freeman J. Dys<strong>on</strong>, ‘Can We C<strong>on</strong>trol Carb<strong>on</strong> Dioxidein the Atmosphere?’, Energy, 2, 1977, pp. 287–291.261 <strong>Climate</strong> Neutral Network, Business <strong>and</strong> theEnvir<strong>on</strong>ment, XI, 5, May 2000, http://www.climateneutral.com/pages/press_bus_env.html.262 Deepak Maw<strong>and</strong>ia, ‘Leveraging CDM to MobilizeDisaster Relief Funding: It Could Make GoodBusiness Sense’, Kolkata, 2005.263 ‘Chile’s Agrosuper Sells Credits from Pig Waste toUtilities’, Bloomberg News, 20 September 2004.264 Lohmann, op. cit. supra note 223.265 ‘No Carb<strong>on</strong> Credit for the West African GasPipeline’, http://www.eracti<strong>on</strong>.org/modules.php?name=ERA_News&file=article&sid=33; ‘GroupsSlam Nigeria’s Submissi<strong>on</strong> of Gas Flare Reducti<strong>on</strong>sfor Carb<strong>on</strong> Credits’, http://www.carb<strong>on</strong>tradewatch.org/news/nigeria.html; ‘Judge Orders Shell NigeriaMD <strong>and</strong> Petroleum Minister to Appear in Court’,http://www.climatelaw.org/media/Nigeria.shell.april06.266 Warwick J. McKibben <strong>and</strong> Peter J. Wilcoxen, ‘TheRole of Ec<strong>on</strong>omics in <strong>Climate</strong> <strong>Change</strong> Policy’,Journal of Ec<strong>on</strong>omic Perspectives 16, 2, 2002, pp.107–29, p. 126.267 Hasselknippe <strong>and</strong> Reine, op. cit. supra note 150, p. 22.268 Ver<strong>on</strong>ica Vidal, La Aplicaci<strong>on</strong> de Politicas sobreCambio Climatico en el Sector Forestal del Ecuador,Memoria de Investigación Doctorado en GestiónAmbiental y Ec<strong>on</strong>omía Ecológica, Aut<strong>on</strong>omousUniversity of Barcel<strong>on</strong>a, October 1999.269 IPA Energy, op. cit. supra note 82, p. 3.270 Grubb, op. cit. supra note 236, p. 138. World Bankofficials, accounting firms, financial analysts <strong>and</strong>many businesses have all admitted, publicly orprivately, that no ways exist to dem<strong>on</strong>strate thatcarb<strong>on</strong> finance is what made a project possible. Inthe words of PriceWaterhouseCoopers, ‘financialadditi<strong>on</strong>ality cannot really be checked by a validator’.Holcim Cement believes that the ‘incentive providedby carb<strong>on</strong> credits, especially at their current price. . . cannot possibly prove decisive in investmentdecisi<strong>on</strong>s’. A New South Wales governmentspokesman attempting to defend a state greenhousegas trading scheme accused of providing coalburningpower plants with huge windfalls recentlyflatly admitted that ‘it is not possible to distinguishbetween producti<strong>on</strong> or investment decisi<strong>on</strong>s madeas a result of the scheme <strong>and</strong> those that would havebeen made anyway’ ( Wendy Frew, ‘Dirty <strong>Power</strong>Plants Making Milli<strong>on</strong>s out of Green Scheme’, SydneyMorning Herald, 14 September 2005). Other tradingexperts as well have c<strong>on</strong>fessed that counterfactualwithout-project scenarios ‘cannot be measured’(Carolyn Fischer, ‘Project-Based Mechanisms forEmissi<strong>on</strong>s Reducti<strong>on</strong>s: Balancing Trade-Offs withBaselines’ Energy Policy 33, 2005, p. 1807). Therecan be no single ‘right’ account of ‘what wouldhave happened without a project’ (Erik Haites <strong>and</strong>Farhana Yamin, ‘The Clean Development Mechanism:Proposals for Its Operati<strong>on</strong> <strong>and</strong> Governance’, GlobalEnvir<strong>on</strong>mental <strong>Change</strong> 10, 2000, pp. 27–43).271 To assume otherwise is, in the words of <strong>on</strong>e analyst,to reduce ‘social c<strong>on</strong>diti<strong>on</strong>alities…that do not easilylend themselves to predicti<strong>on</strong>…(inter alia, socioec<strong>on</strong>omicdevelopment, demographic trends, futurel<strong>and</strong> use practices, internati<strong>on</strong>al policy making)…totechnical <strong>and</strong> methodological uncertainties’ or mereimprecisi<strong>on</strong> or data gaps. Eva Lovbr<strong>and</strong>, ‘BridgingPolitical Expectati<strong>on</strong>s <strong>and</strong> Scientific Limitati<strong>on</strong>sin <strong>Climate</strong> Risk Management – On the UncertainEffects of Internati<strong>on</strong>al Carb<strong>on</strong> Sink Policies’,Climatic <strong>Change</strong> 67, 2–3, 2004, p. 451.272 O. P. R. Van Vliet et al., ‘Forestry Projects under theClean Development Mechanism’, Climatic <strong>Change</strong>61, 2003, p. 154.273 P. M. Fearnside, ‘Forests <strong>and</strong> Global WarmingMitigati<strong>on</strong> in Brazil: Opportunities in the BrazilianForest Sector for Resp<strong>on</strong>ses to Global Warmingunder the “Clean Development Mechanism”’,Biomass <strong>and</strong> Bioenergy 16, 1999, pp. 171–189.274 Michael Lazarus, ‘The CDM Quantificati<strong>on</strong>Challenge: Time for a More St<strong>and</strong>ardised Approach’,presentati<strong>on</strong> at World Resources Institute/ WorldBusiness Council <strong>on</strong> Sustainable Development sideevent at the Ninth C<strong>on</strong>ference of the Parties to theUNFCCC, Milan, 10 December 2003.
less<strong>on</strong>s unlearned 211275 CEE Bankwatch, ‘An Analysis of Additi<strong>on</strong>ality. ThePCF’s JI Project in the Czech Republic: SixteenSmall Hydropower Plants’, Prague, September 2005.276 Many private ‘offset’ schemes including thoseassociated with firms such as the Carb<strong>on</strong> NeutralCompany <strong>and</strong> the Chicago <strong>Climate</strong> Exchange, whichdo not have to pass such checks, are also likelyto have implausible counterfactual baselines, butinformati<strong>on</strong> is difficult to obtain due to commercialc<strong>on</strong>fidentiality. For informati<strong>on</strong> <strong>on</strong> the Carb<strong>on</strong>Neutral Company (formerly Future Forests), seewww.sinkswatch.org.277 ENDS Report 354, July 2004, p. 6.278 See http://www.emissi<strong>on</strong>s.de/index.htm.279 Mark C. Trexler, ‘A Statistically Driven Approach toOffset-Based GHG Additi<strong>on</strong>ality Determinati<strong>on</strong>s:What Can We Learn?’, Sustainable Development<strong>and</strong> Policy Journal, forthcoming.280 Grubb, op. cit. supra note 236, p. 229.281 Hermann Ott <strong>and</strong> Wolfgang Sachs, ‘Ethical Aspectsof Emissi<strong>on</strong>s Trading’, Wuppertal Papers No. 110,Wuppertal Institut für Klima, Umwelt, Energie,Wuppertal, May 2000.282 Financial Times, 16 February 2005.283 Internati<strong>on</strong>al Rivers Network, ‘Comments Submittedto the Japan C<strong>on</strong>sulting Institute (JCI) CleanDevelopment Mechanism (CDM) Centre regardingXiaogushan Large Hydroelectric Project (XHP)’,August 21, 2005, http://www.irn.org/programs/greenhouse/index.php?id=050823xiaogushan.html.284 Steve Bernow et al., ‘Free-Riders <strong>and</strong> the CleanDevelopment Mechanism’, World Wildlife Fund,Gl<strong>and</strong>, Switzerl<strong>and</strong>, 2000, p. 17.285 Clean Development Mechanism, Project DesignDocument for Bumbuna Hydroelectric Project,n.d., http://cdm.unfccc.int/UserManagement/FileStorage/FS_756041443.286 Pers<strong>on</strong>al communicati<strong>on</strong>, c<strong>on</strong>fidential.287 Bruno v<strong>and</strong>erBorght, ‘Assessment of Present CDMMethodologies’, presentati<strong>on</strong> at World BusinessCouncil <strong>on</strong> Sustainable Development side eventat the Tenth C<strong>on</strong>ference of the Parties to theUNFCCC, Buenos Aires, 10 December 2004.288 ‘Executive Board Warns against Unlevel CDMPlaying Field’, Point Carb<strong>on</strong>, 16 May 2006.289 Paul J. Georgia, ‘Enr<strong>on</strong> Sought Global WarmingRegulati<strong>on</strong>, Not Free Markets’ Roanoke Times, 3February 2002.290 ENDS Report 352, May 2004, pp. 34–35.291 For example, European, South Asian <strong>and</strong> SoutheastAsian forest history is full of examples of destructivestate or commercial projects legitimised by the claimthat without them, the so-called ‘tragedy of thecomm<strong>on</strong>s’ would result in despoliati<strong>on</strong> as growingswarms of individualistic farmers loot a l<strong>and</strong>scapeunprotected by private property rights. Onceprojects legitimised in this way go into operati<strong>on</strong>, theyoften undermine comm<strong>on</strong>s regimes which functi<strong>on</strong>in ways which prevent such looting. As a result,the projects end up encouraging the destructive,no-holds-barred local behaviour they claim tohave opposed. The attempt of baseline-<strong>and</strong>-creditaccounting to determine ‘business as usual’ scenariosparadoxically transforms the scenarios into movingtargets, making h<strong>on</strong>est carb<strong>on</strong> accounting impossible,with negative results for climate.292 Lazarus, op. cit. supra note 274.293 Van Vliet et al., op. cit. supra note 272, p. 154.294 Ben Pears<strong>on</strong>, The World Bank <strong>and</strong> the Carb<strong>on</strong>Market: Rhetoric <strong>and</strong> Reality, Clean DevelopmentWatch, Sydney, 2005, p. 22, http://www.cdmwatch.org. See also Clean Development Watch <strong>and</strong> ThirdWorld Network, The CDM: Reducing GHG Emissi<strong>on</strong>sor Business as Usual?, CDM Watch, Sydney, 2003,http://www.cdmwatch.org. See also Camer<strong>on</strong>, op.cit. supra note 83; Financial Times, 16 February 2005295 Haites <strong>and</strong> Yamin, op. cit. supra note 270; Trexler, op.cit. supra note 279.296 The voluntary market is subject to even lessregulatory scrutiny than the ‘official’ Kyoto Protocol<strong>and</strong> EU ETS markets. Credits from some projectsmay well be quietly sold more than <strong>on</strong>ce. A traderwho asked not to be named has noted that several‘offset’ projects have been advertised <strong>on</strong> carb<strong>on</strong>retailers’ websites for years <strong>and</strong> should have soldall their credits l<strong>on</strong>g ago, including a well-knownbiomass project in India. Sales of such credits arenot recorded in any registry <strong>and</strong> there is no way forcustomers to check whether the credits have beensold more than <strong>on</strong>ce. The trader also claimed thatsome projects financed by governments for otherreas<strong>on</strong>s have subsequently sold carb<strong>on</strong> credits <strong>on</strong>the voluntary market through private retailers.297 Editorial, ENDS Report 354, July 2004.298 George Akerlof, ‘The Market for “Lem<strong>on</strong>s”:Qualitative Uncertainty <strong>and</strong> the Market Mechanism’,Quarterly Journal of Ec<strong>on</strong>omics 84, 3, pp. 488–500;Michael Obersteiner et al., ‘Avoiding a Lem<strong>on</strong>sMarket by Including Uncertainty in the KyotoProtocol: Same Mechanism – Improved Rules’, IIASAInterim Report IR-00-043, Internati<strong>on</strong>al Institute forApplied Systems Analysis, Laxenburg, Austria, 2000.299 Quoted in Keith Allott, ‘Testing the Waters forCarb<strong>on</strong> Neutrality’, ENDS Report 369, October2005, pp. 24–26.
212 development dialogue september 2006 – carb<strong>on</strong> trading300 Michelle Wr<strong>on</strong>g, In the Footsteps of Mr Kurtz, FourthEstate, L<strong>on</strong>d<strong>on</strong>, 2001, pp. 189–209.301 See, for example, World Business Council forSustainable Development <strong>and</strong> World ResourcesInstitute ‘Greenhouse Gas Protocol’, http://www.ghgprotocol.org.302 Drury et al., op. cit. supra note 123.303 Ibid.304 Biello, op. cit. supra note 217.305 Driesen, op. cit. supra note 62, pp. 314–5.306 Liroff, op.cit. supra note 166, pp. 16, 117.307 Ibid., pp. 83–6.308 Jacob Werksman, ‘The Clean DevelopmentMechanism: Unwrapping the “Kyoto Surprise”’,Review of European Community <strong>and</strong> Internati<strong>on</strong>alEnvir<strong>on</strong>mental Law 7, 2, 1998, pp. 149-150.309 Op. cit., p. 155.310 Ellerman et al., op. cit. supra note 53, p. 318.311 Lovbr<strong>and</strong>, op. cit. supra note 271, p. 452. See alsoGregg Marl<strong>and</strong> et al., ‘The Climatic Impacts of L<strong>and</strong>Surface <strong>Change</strong> <strong>and</strong> Carb<strong>on</strong> Management, <strong>and</strong> theImplicati<strong>on</strong>s for <strong>Climate</strong>-<strong>Change</strong> Mitigati<strong>on</strong> Policy’,<strong>Climate</strong> Policy 3, 2, 2003, pp.149–57, p. 150.312 W. Booth, ‘Johnny Appleseed <strong>and</strong> the Greenhouse:Replanting Forests of Mitigate Global Warming’,Science 242, 4875, October 1988, p. 197; B. W.Walsh, ‘World Forests’, American Forests 95, 11/12,November 1989, p. 28; Roger Sedjo <strong>and</strong> A. M.Solom<strong>on</strong>, ‘<strong>Climate</strong> <strong>and</strong> Forests’, in N. J. Rosenberget al., eds., Greenhouse Warming: Abatement <strong>and</strong>Adaptati<strong>on</strong>, Resources for the Future, Washingt<strong>on</strong>,1989.313 Mike Mas<strong>on</strong>, <strong>Climate</strong> Care, quoted in ENDS Report,March 2000.314 Van Vliet et al., op. cit. supra note 272, p. 154. Eventhe Kyoto Protocol, with its minimal emissi<strong>on</strong>sreducti<strong>on</strong> requirements, sancti<strong>on</strong>s the idea of givingthe industrialised countries of the North access toa whopping 10 milli<strong>on</strong> hectares every year for useas a carb<strong>on</strong> dumping ground (Jutta Kill, Sinkswatch,pers<strong>on</strong>al communicati<strong>on</strong>, 2001).315 P. Falkowski et al., ‘The Global Carb<strong>on</strong> Cycle:A Test of Our Knowledge of Earth as a System’,Science 290, 13 October 2000, pp. 291–96. See alsoIan Noble et al., ‘Sinks <strong>and</strong> the Kyoto Protocol’,<strong>Climate</strong> Policy 1, 2001, pp. 5–25 <strong>and</strong> R. A. Hought<strong>on</strong>,‘Counting Terrestrial Sources <strong>and</strong> Sinks of Carb<strong>on</strong>’,Climatic <strong>Change</strong> 48, 2001, p. 526: ‘the net annualflux of carb<strong>on</strong> between terrestrial ecosystems <strong>and</strong>the atmosphere is small, between 0 <strong>and</strong> 1.4 PgC peryear, <strong>and</strong> thus (arguably) not worth measuring orcounting for the Kyoto Protocol’. While uptake ofcarb<strong>on</strong> by the biosphere may have increased overthe 1990s, Falkowski et al. cauti<strong>on</strong> that ‘sink strengthwill almost certainly weaken’ as time goes <strong>on</strong> (p.293). See also Robert Socolow, ‘The Century L<strong>on</strong>gChallenge of Fossil-Carb<strong>on</strong> Sequestrati<strong>on</strong>’, paperprepared for the Sec<strong>on</strong>d Annual Envir<strong>on</strong>mentalPolicy Forum, ‘<strong>Climate</strong> <strong>Change</strong> – What Next?’,Aspen 13–16 Sept. 2001.316 ‘Agribusiness Giants Hold Different Philosophies:ADM Pursuing Biofuels, While Cargill Makes Foodits Priority’, Associated Press, 22 May 2006.317 James Mackintosh, ‘Elusive Cornucopia: Why it willbe Hard to Reap the Benefit of Biofuel’, FinancialTimes, 21 June 2006.318 Uwe R. Fritsche, ‘Sustainable Biomass Energy:Results for Europe, <strong>and</strong> Global Issues’, Oko-Institut,Darmstadt, May 2006.319 Fi<strong>on</strong>a Harvey, ‘Biofuels “Can Harm theEnvir<strong>on</strong>ment”’, Financial Times, 25 July 2006.320 George M<strong>on</strong>biot, ‘Worse then Fossil Fuel’, TheGuardian, 6 December 2005.321 See http://www.counterpunch.org/olmstead07032006.html.322 Lohmann, op. cit. supra note 223.323 Sten Nilss<strong>on</strong> et al., Full Carb<strong>on</strong> Account for Russia,IIASA Interim Report IR-00-021, Internati<strong>on</strong>alInstitute for Applied Systems Analysis, Laxenburg,Austria, 2000, http://www.iiasa.ac.at.324 Sten Nilss<strong>on</strong>, ‘Editorial’, Opti<strong>on</strong>s, Internati<strong>on</strong>alInstitute for Applied Systems Analysis, Laxenburg,Austria, Autumn 2000, p. 1. Data are improving, butstill remain useless for the purposes of a carb<strong>on</strong>market. See Quirin Schiermaier, ‘That SinkingFeeling’, Nature 435, 9 June 2005, pp. 732–33.325 Hought<strong>on</strong>, op. cit. supra note 315.326 Y. Pan et al., ‘New Estimates of Carb<strong>on</strong> Storage<strong>and</strong> Sequestrati<strong>on</strong> in China’s Forests: Effects ofAge-Class <strong>and</strong> Method <strong>on</strong> Inventory-Based Carb<strong>on</strong>Estimati<strong>on</strong>’, Climatic <strong>Change</strong> 67, 2–3, 2004, pp.211–236.327 M. J. Schelhaas et al., ‘Closing the Carb<strong>on</strong> Budgetof a Scots Pine Forest in The Netherl<strong>and</strong>s’, Climatic<strong>Change</strong> 67, 2–3, 2004, pp. 309–328.328 ‘Pine Plantati<strong>on</strong>s May Be One Culprit in IncreasingCarb<strong>on</strong> Dioxide Levels’, NASA Earth Observatory,24 July 2006.329 Victor, op. cit. supra note 34.330 D. Read et al., The Role of L<strong>and</strong> Carb<strong>on</strong> Sinks inMitigating Global <strong>Climate</strong> <strong>Change</strong>, The RoyalSociety, L<strong>on</strong>d<strong>on</strong>, 2001.331 Fred Pearce, ‘Drought Bumps Up Global
less<strong>on</strong>s unlearned 213Thermostat’, New Scientist, 6 August 2005, p. 16.332 Douglass C. North, ‘Dealing with a N<strong>on</strong>-ErgodicWorld: Instituti<strong>on</strong>al Ec<strong>on</strong>omics, Property Rights,<strong>and</strong> the Global Envir<strong>on</strong>ment’, Duke Envir<strong>on</strong>mentalLaw <strong>and</strong> Policy Forum 10, 1, 1999. See also PaulHarremoës et al., The Precauti<strong>on</strong>ary Principle in the20 th Century: Late Less<strong>on</strong>s from Early Warnings,Earthscan, L<strong>on</strong>d<strong>on</strong>, 2002.333 J. G. Canadell et al., ‘Quantifying, Underst<strong>and</strong>ing<strong>and</strong> Managing the Carb<strong>on</strong> Cycle in the NextDecades’, Climatic <strong>Change</strong>, 67, 2–3, 2004, pp. 147–160; Ian Sample, ‘Warming hits “tipping point”’, TheGuardian, 11 August 2005.334 Canadell et al., op. cit. This ‘missing terrestrial sink’amounts to 1.0–3.6 billi<strong>on</strong> t<strong>on</strong>nes of carb<strong>on</strong> a year, orabout half as much as annual fossil fuel emissi<strong>on</strong>s.Sink strength is ‘highly variable’ from year to year, withthe projected ‘future dynamics’ of the carb<strong>on</strong> cyclevarying enormously from model to model, especiallyin view of ecosystem resp<strong>on</strong>ses to warming.335 R. A. Betts, ‘Offset of the Potential Carb<strong>on</strong> Sinkfrom Boreal Forestati<strong>on</strong> by Decreases in SurfaceAlbedo’, Nature 408, 9 November 2000, pp. 187–90.336 Falkowski et al., op. cit. supra note 315.337 Betts, op. cit. supra note 335; Canadell et al., op. cit.supra note 333.338 R. A. Gill et al., ‘N<strong>on</strong>linear Grassl<strong>and</strong> Resp<strong>on</strong>ses toPast <strong>and</strong> Future Atmospheric CO 2 ’, Nature 417, 16May 2002, pp. 279–283.339 P. W. Boyd et al., ‘The Decline <strong>and</strong> Fate of an Ir<strong>on</strong>-Induced Subarctic Phytoplankt<strong>on</strong> Boom’, Nature428, 1 April 2004, pp. 549–553.340 ‘A C<strong>on</strong>sequence of <strong>Climate</strong> <strong>Change</strong>: InsectInfestati<strong>on</strong>s Destroying Canada’s Forests’, BiocapCanada Foundati<strong>on</strong>, Kingst<strong>on</strong>, Ontario, September2004, http://www.biocap.ca.341 W. Knorr et al., ‘L<strong>on</strong>g-Term Sensitivity of Soil Carb<strong>on</strong>Turnover to Warming’, Nature 433, 20 January 2005.342 Pickrell, op. cit. supra note 135.343 J. Manley et al., ‘Creating Carb<strong>on</strong> Offsets inAgriculture through No-Till Cultivati<strong>on</strong>: a Meta-Analysis of Costs <strong>and</strong> Carb<strong>on</strong> Benefits’, Climatic<strong>Change</strong> 68, 1–2, 2005, p. 41.344 Changsheng Li et al., ‘Carb<strong>on</strong> Sequestrati<strong>on</strong> in ArableSoils is Likely to Increase Nitrous Oxide Emissi<strong>on</strong>s,Offsetting Reducti<strong>on</strong>s in <strong>Climate</strong> Radiative Forcing’,Climatic <strong>Change</strong> 72, 2005, pp. 321–338.345 D. A. Stainforth et al., ‘Uncertainty in Predicti<strong>on</strong>sof the <strong>Climate</strong> Resp<strong>on</strong>se to Rising Levels ofGreenhouse Gases’, Nature 433, 27 January 2005,pp. 403–07.346 E. Mayorga et al., ‘Young Organic Matter as a Sourceof Carb<strong>on</strong> Dioxide Outgassing from Amaz<strong>on</strong>ianRivers’, Nature 436, 2005, pp. 538–41.347 David C. Lowe, ‘A Green Source of Surprise’, Nature439, 12 January 2006, pp. 148–49; Frank Keppleret al., ‘Methane Emissi<strong>on</strong>s from Terrestrial Plantsunder Aerobic C<strong>on</strong>diti<strong>on</strong>s’, Nature 439, 12 January2006, pp. 187–191.348 Gregg Marl<strong>and</strong> et al., ‘Accounting for SequesteredCarb<strong>on</strong>: The Questi<strong>on</strong> of Permanence’,Envir<strong>on</strong>mental Science <strong>and</strong> Policy 4, 2001, pp. 259–268; Michael Dutschke, ‘Fracti<strong>on</strong>s of Permanence– Squaring the Cycle of Sink Carb<strong>on</strong> Accounting’,Mitigati<strong>on</strong> <strong>and</strong> Adaptati<strong>on</strong> Strategies for Global<strong>Change</strong> 7, 2002, pp. 381–402.349 Lohmann, op. cit. supra note 223, pp. 40–41.350 North, op. cit. supra note 332.351 Frank H. Knight, Risk, Uncertainty <strong>and</strong> Profit,Hought<strong>on</strong> Mifflin, Bost<strong>on</strong>, 1921. Knight’s distincti<strong>on</strong> isbetween ideal types <strong>and</strong> need not be treated as asharp binary oppositi<strong>on</strong>.352 Harremoës, op. cit. supra note 332.353 Ibid., p. 217.354 Ibid. As ec<strong>on</strong>omist Douglass North puts it,’ec<strong>on</strong>omists, from Kenneth Arrow to RobertLucas, have asserted that <strong>on</strong>e cannot theorise inthe face of pure uncertainty … almost all of the[envir<strong>on</strong>mental] issues that we are c<strong>on</strong>cerned with …are uncertainty issues.…’ (North, op. cit. supra note332).355 ENDS Report 328, May 2002.356 Harremoës, op. cit. supra note 332, p. 216.357 Knight, op. cit. supra note 351, Part III, Chapter VI.358 See, for instance, World Rainforest Movement,‘Mount Tamalpais Declarati<strong>on</strong>’, 2000, http://www.wrm.org.uy/statements/Tamalpais.html;Equity Watch archives, Centre for Science <strong>and</strong>Envir<strong>on</strong>ment, Delhi, http://www.cseindia.org/campaign/ew/archives.htm.359 Claire Tenner, ‘Verificati<strong>on</strong> of the Kyoto Protocol: AFundamental Requirement’, VERTIC Briefing Paper00/6, October 2000. As early as 1998, the GermanAdvisory Council <strong>on</strong> Global <strong>Change</strong> had warnedthat the ‘complex n<strong>on</strong>linear dynamics’ of terrestrialecosystems set them apart from ‘energy-relatedprocesses’ <strong>and</strong> cauti<strong>on</strong>ed against counting growth offorests as ‘emissi<strong>on</strong>s reducti<strong>on</strong>s.’360 UNFCCC, document FCCC/CP/2001/13.Add.1.361 Robert T. Wats<strong>on</strong> et al., eds., L<strong>and</strong> Use, L<strong>and</strong> Use<strong>Change</strong> <strong>and</strong> Forestry, Cambridge University Press,Cambridge, 2000.
214 development dialogue september 2006 – carb<strong>on</strong> trading362 Cathleen Fogel, ‘Biotic Carb<strong>on</strong> Sequestrati<strong>on</strong> <strong>and</strong>the Kyoto Protocol: The C<strong>on</strong>structi<strong>on</strong> of GlobalKnowledge by the Intergovernmental Panel <strong>on</strong><strong>Climate</strong> <strong>Change</strong>’, Internati<strong>on</strong>al Envir<strong>on</strong>mentalAgreements 5, 2005, pp. 191–210.363 Peter Popham, ‘Pay up to Save the Rainforests’,The Independent, 28 November 2005, http://news.independent.co.uk/envir<strong>on</strong>ment/article329977.ece.364 See Lohmann, op. cit. supra note 223 for discussi<strong>on</strong>of c<strong>on</strong>flict of interest, Northern bias, physicalscience bias <strong>and</strong> instituti<strong>on</strong>al factors.365 Ibid.366 Fischer, op. cit. supra note 270, p. 1821.367 ENDS Report 328, May 2002.368 Lohmann, op. cit. supra note 223.369 Roger Sedjo <strong>and</strong> Brent Sohngen, ‘ForestrySequestrati<strong>on</strong> of CO 2 <strong>and</strong> Markets for Timber’,Resources for the Future, Washingt<strong>on</strong>, September2000; R. Valentini, et al., ‘Accounting for Carb<strong>on</strong>Sinks in the Biosphere – European Perspective’,CarboEurope, European Director General Desk,Brussels, 2000.370 For examples, see http://cdm.unfccc.int/Projects.371 ‘[T]he need for administrative revisi<strong>on</strong> <strong>and</strong> approvalof counterfactual emissi<strong>on</strong>s baselines increasestransacti<strong>on</strong> costs enormously’ (Ellerman, op. cit.supra note 53). See also Axel Michaelowa et al.,‘Transacti<strong>on</strong> Costs of the Kyoto Mechanisms’,<strong>Climate</strong> Policy 3, 2, 2003, pp. 261–78; AxelMichaelowa <strong>and</strong> Frank Jotzo, ‘Transacti<strong>on</strong> Costs,Instituti<strong>on</strong>al Rigidities <strong>and</strong> the Size of the CleanDevelopment Mechanism’, Energy Policy 33,4, pp. 511–23; W. Fichtner et al., ‘The Impact ofPrivate Investors’ Transacti<strong>on</strong> Costs <strong>on</strong> the CostEffectiveness of Project-Based Kyoto Mechanisms’,<strong>Climate</strong> Policy 3, 3, 2003, pp. 249–59.372 Michaelowa et al., ‘Transacti<strong>on</strong> Costs of the KyotoMechanisms’, op. cit. supra.373 Data analysis by Adam Ma’anit, Carb<strong>on</strong> TradeWatch, May 2006.374 See, for instance, Fischer, op. cit. supra note 270.375 Quoted in Michael Schlup, ‘The Gold St<strong>and</strong>ard,Linking the CDM to Development <strong>and</strong> PovertyReducti<strong>on</strong>’, presentati<strong>on</strong> at c<strong>on</strong>ference <strong>on</strong> <strong>Climate</strong>or Development, Hamburg Institute of Internati<strong>on</strong>alEc<strong>on</strong>omics, 28–29 October 2005.376 Emily Tyler, ‘CDM for Small, Sustainable Projects:Where is the Value Added?’, EcosystemMarketplace, Katoomba Group, 7 February 2006,http://www.ecosystemmarketplace.com.377 Bernow et al., op. cit. supra note 284.378 Philibert <strong>and</strong> Reinaud, op. cit. supra note 65, p. 11.379 J. A. Sathaye, ‘Carb<strong>on</strong> Cycle: Project Opportunities<strong>and</strong> Challenges’, n.d.380 Carrere <strong>and</strong> Lohmann, op. cit. supra note 177.381 Future Forests, Carb<strong>on</strong> Sequestrati<strong>on</strong> Agreement,Coatham Wood, 26 September 2001.382 Andrew G. Thomps<strong>on</strong> <strong>and</strong> Jolanta Olszewska,‘Australia: Carb<strong>on</strong> Rights’, Oil, Gas <strong>and</strong> Energy LawIntelligence 1, 1, Oct 2003.383 FASE et al., ‘Open Letter to Executives <strong>and</strong>Investors in the PCF’, 23 May 2003, available athttp://www.sinkswatch.org. See Chapter 4, ‘Brazil:H<strong>and</strong>outs for Repressi<strong>on</strong> as Usual’.384 Available at http://www.klimabuendnis.org/.385 Martijn Wilder, ‘Internati<strong>on</strong>al <strong>Climate</strong> Law: RecentDevelopments <strong>and</strong> Key Issues’, in Robert Dornau,ed., Greenhouse Gas Market 2004: Ready for Take-Off, Internati<strong>on</strong>al Emissi<strong>on</strong>s Trading Associati<strong>on</strong>,Geneva, 2004, p. 4.386 Ott <strong>and</strong> Sachs, op. cit. supra note 281.387 Lohmann, op. cit. supra note 223.388 See Mark Engler <strong>and</strong> Nadia Martinez, ‘True Goldof Our Future’, New Internati<strong>on</strong>alist 361, October2003.389 Oilwatch, op. cit. supra note 238.390 A similar criticism applies to the Kyoto Protocol’semissi<strong>on</strong>s trading mechanism. Russia gets carb<strong>on</strong>allowances for ec<strong>on</strong>omic stagnati<strong>on</strong> after 1990 (butnot, say, C<strong>on</strong>go).391 The bill for a CDM Project Design Document comesto €15,000 if the methodology involved has alreadybeen approved by the CDM Board, €45,000 if ithas not. Hiring a Designated Operati<strong>on</strong>al Entity to‘validate’ a project requires €7,000–15,000, <strong>and</strong> to‘verify’ it at a succeeding stage still more. There arealso costs c<strong>on</strong>nected with clearing a project with theDesignated Nati<strong>on</strong>al Authority <strong>and</strong> getting approvalfrom the CDM Executive Board. See http://www.cseindia.org/programme/geg/cdm_guide.htm.392 Janica Lane et al., ‘Equity in <strong>Climate</strong> <strong>Change</strong>’,Tiempo 55, April 2005, p. 13.393 Stephen J. Pyne, World Fire: The Culture of Fire <strong>on</strong>Earth, University of Washingt<strong>on</strong> Press, Seattle, 1993;Lovbr<strong>and</strong>, op. cit. supra note 271, p. 453.394 Wats<strong>on</strong> et al., op. cit. supra note 361, pp. 79–80;Hought<strong>on</strong>, op. cit. supra note 315.395 Ian Fry, ‘Report <strong>on</strong> The Hague Negotiati<strong>on</strong>s’, ForestCover (Global Forest Coaliti<strong>on</strong> newsletter) 2, 2001.396 Drury et al., op. cit. supra note 123.397 Ibid.
less<strong>on</strong>s unlearned 215398 Ibid. See also Shipra Bansal <strong>and</strong> Scott Kuhn, ‘Stoppingan Unfair Trade: Envir<strong>on</strong>mental Justice, Polluti<strong>on</strong>Trading, <strong>and</strong> Cumulative Impacts in Los Angeles’,Envir<strong>on</strong>mental Law News, Spring 1998, pp. 16–18.399 Drury et al., op. cit. supra note 123.400 Ibid. It is disputed whether RECLAIM madepolluti<strong>on</strong> ‘hot spots’ worse or not. Installati<strong>on</strong>sbuying RECLAIM credits were situated incommunities that had significantly higherpopulati<strong>on</strong>s of minorities <strong>and</strong> impoverished peoplewithin a half-mile radius than the Los Angeles-wideaverage. So, however, did installati<strong>on</strong>s selling credits.See Jacob Hawkins et al., ‘An Evaluati<strong>on</strong> of theLA Regi<strong>on</strong>al Clean Air Incentives Market’, SantaBarbara School of Envir<strong>on</strong>mental Sciences <strong>and</strong>Management, 2001.401 Driesen, op. cit. supra note 107.402 Drury et al., supra note 123; Moore, op. cit. supranote 61.403 David D. D<strong>on</strong>iger, ‘Point ... And Counterpoint’,Envir<strong>on</strong>mental Forum 4, 29, 1986, p. 34.404 Robin Paul Malloy, Law <strong>and</strong> Market Ec<strong>on</strong>omy,Cambridge University Press, Cambridge, 2000, p. 3.405 Marte Nordseth, ‘CDM EB takes measures against“perverse incentives”’, CDM M<strong>on</strong>itor, 27 October2004. Because some CDM host countries haverefrained from implementing climate-friendlypolicies so that CDM projects can still generatecarb<strong>on</strong> credits, the CDM Executive Board decidedin 2004 to require that policies introduced afterthe 1997 Kyoto Protocol that have led to increasedgreenhouse gas emissi<strong>on</strong>s not be included in projectbaselines. Yet if incentives for more emissi<strong>on</strong>s existin practice, they ‘should be taken into account inthe baseline’. The Board also decided that policiesaimed at reducing greenhouse gas emissi<strong>on</strong>simplemented after the adopti<strong>on</strong> of the MarrakeshAccords in 2001 should be disregarded in thebaseline. In other words, project developers canclaim credits <strong>on</strong> a baseline that pretends that suchclimate-progressive policies do not exist.406 See Chapter 4, ‘South Africa – Carb<strong>on</strong> Credits fromthe Cities’.407 Axel <strong>and</strong> Katharina Michaelowa, ‘SustainableDevelopment: The Forgotten Aspect of the CDM?’,Joint Implementati<strong>on</strong> Quarterly 11, 4, December2005, p. 8.408 See Envir<strong>on</strong>mental Rights Acti<strong>on</strong>, ‘No Carb<strong>on</strong>Credits for the West African Gas Pipeline’, BeninCity, Nigeria, 2004, http://www.eracti<strong>on</strong>.org/modules.php?name=ERA_News&file=article&sid=33.409 ‘Court Orders Nigerian Gas Flaring to Stop’, E-LawAdvocate, Winter 2006, http://www.elaw.org/news/advocate/default.asp?issue=2006-1.410 See Chapter 4, ‘South Africa: Carb<strong>on</strong> Credits fromthe Cities’.411 Ben Pears<strong>on</strong>, then of CDM Watch, was the firstanalyst to document <strong>and</strong> explain this crucial pointin a series of thorough <strong>and</strong> clear papers. See www.cdmwatch.org.412 Moore, op. cit. supra note 61.413 Jane Ellis et al., ‘Taking Stock of Progress under theCDM’, OECD, Paris, 2004, http://www.oecd.org/dataoecd/58/58/32141417.pdf.414 The comparatively small credit volume yielded bysuch projects is due partly to the fact that they aredesigned to ‘reduce’ carb<strong>on</strong> dioxide rather than, say,methane, which is 21 times more potent as a climateforcinggas, or some HCFCs, which are 11,000 timesmore potent.415 World Bank, State <strong>and</strong> Trends of the Carb<strong>on</strong> Market2004, Washingt<strong>on</strong>, DC, http;//www.carb<strong>on</strong>finance.org.416 Ben Pears<strong>on</strong>, ‘Market Failure: Why the CleanDevelopment Mechanism W<strong>on</strong>’t Promote CleanDevelopment’, CDM Watch, Sydney, 2004, p. 2.417 For submissi<strong>on</strong>s <strong>on</strong> Suzl<strong>on</strong>, see http://www.cdmwatch.org.418 Ecofys, ‘Opportunities for Renewables under theKyoto Mechanisms’, Ecofys, The Netherl<strong>and</strong>s, 2002,http://www.ecofys.com.419 Ben Pears<strong>on</strong>, The World Bank <strong>and</strong> the Carb<strong>on</strong>Market: Rhetoric <strong>and</strong> Reality, Clean DevelopmentMechanism Watch, Sydney, 2005, p. 3.420 Ibid.421 Ibid., p. 6.422 See Chapter 4, ‘South Africa – Carb<strong>on</strong> credits fromthe cities’.423 This was the operati<strong>on</strong>al period of the PCF duringwhich the funds were placed. This table is thanks toBen Pears<strong>on</strong>.424 Figures taken from ‘Transnati<strong>on</strong>al CorporateBeneficiaries of World Bank Group Fossil FuelProjects, 1992 – August 2002’, Sustainable Energy<strong>and</strong> Envir<strong>on</strong>ment Network, Washingt<strong>on</strong>, 2002,http://www.seen.org.425 Some of Mitsui’s c<strong>on</strong>tributi<strong>on</strong>s went toward theBiocarb<strong>on</strong> Fund, another World Bank-managedenterprise.426 Ben Pears<strong>on</strong>, ‘Market Failure: Why the CleanDevelopment Mechanism W<strong>on</strong>’t Promote CleanDevelopment’, CDM Watch, Sydney, 2004, http://www.cdmwatch.org.427 World Bank, Striking a Better Balance: ExtractiveIndustries Review, Washingt<strong>on</strong>, 2004.
216 development dialogue september 2006 – carb<strong>on</strong> trading428 ‘The World Bank’s Investments in <strong>Climate</strong>-ChangingFossil fuels’, Envir<strong>on</strong>mental Media Services, 16October 2003, http://www.ems.org.429 Based <strong>on</strong> figures provided in the PCF’s 2004 AnnualReport, World Bank, Washingt<strong>on</strong> (http://www.carb<strong>on</strong>finance.org). Because some of the PCF’sprojects would have happened without the PCF,<strong>and</strong> thus cannot represent real reducti<strong>on</strong>s, the word‘allegedly’ is necessary here.430 Gold St<strong>and</strong>ard brochure, n. d.431 Driesen, op. cit. supra note 161, pp. 158, 164.432 Grubb, op. cit. supra note 236, p. 246.433 Ruth Greenspan Bell, ‘The Kyoto Placebo’, Issues inScience <strong>and</strong> Technology, Winter 2006, p. 22.434 Clean Development Watch <strong>and</strong> Third WorldNetwork, The CDM: Reducing GHG Emissi<strong>on</strong>s orBusiness as Usual?, CDM Watch, Sydney, 2003.435 Ibid.436 Philibert <strong>and</strong> Reineaud, op. cit. supra note 65.437 Ibid.438 The cost of compliance for a Chinese sulphurdioxide trading programme was often greater thanthe maximum allowed penalty for n<strong>on</strong>-compliance.See Greenspan Bell, op. cit. supra note 129, p. 19.439 G. Cornelius van Kooten, ‘Smoke <strong>and</strong> Mirrors: TheKyoto Protocol <strong>and</strong> Bey<strong>on</strong>d’, unpublished paper,2003, p. 24. See also G. Cornelius van Kooten,<strong>Climate</strong> <strong>Change</strong> Ec<strong>on</strong>omics: Why Internati<strong>on</strong>alAccords Fail, Edward Elgar, L<strong>on</strong>d<strong>on</strong>, 2004.440 McKibben <strong>and</strong> Wilcoxen, op. cit. supra note 266,p. 126.441 Greenspan Bell, op. cit. supra note 112.442 William Nordhaus, ‘Life after Kyoto: AlternativeMechanisms to C<strong>on</strong>trol Global Warming Policies’,Yale University, 2005, http://www.fpif.org/fpiftxt/3167.443 ‘<strong>Climate</strong> <strong>Change</strong> M<strong>on</strong>itoring: Internati<strong>on</strong>alGreenhouse Gas Emissi<strong>on</strong>s Trading’, http://www.emissierechten.nl/climate_change__m<strong>on</strong>itoring_inter.htm .444 Greenspan Bell, op. cit. supra note 433.445 Ibid.446 Ibid.447 John Adams, ‘Cost-Benefit Analysis: Part of theProblem, Not the Soluti<strong>on</strong>’, paper delivered atGreen College, Oxford, 1995, p. 18. See also JohnO’Neill, ‘Managing without Prices: The M<strong>on</strong>etaryValuati<strong>on</strong> of Biodiversity’, Ambio 26, 8, 1997, p. 550.448 ‘Charlotte’s “Carb<strong>on</strong> Footprint”’, Daily Telegraph, 5March 2006.449 Bill Leverett, ‘Can’t See the Good for the Trees’,Envir<strong>on</strong>ment <strong>and</strong> Sustainable Technology, June2006, pp. 16-17, likens carb<strong>on</strong> offsets to themedieval trade in ‘indulgences’, vouchers thatwiped out a specified amount of sin. ‘Aggressive<strong>and</strong> unscrupulous selling of indulgences, <strong>and</strong> therealisati<strong>on</strong> <strong>on</strong> the part of buyers that they didn’treally do all they were supposed to do, was <strong>on</strong>e ofthe factors leading to the Protest Reformati<strong>on</strong>.’450 See http://www.carb<strong>on</strong>neutral.com.451 For an example, see Anatole Kaletsky, ‘Workers ofthe World Unite! We Have Nothing to Lose but ourAirline Tickets!’, L<strong>on</strong>d<strong>on</strong> Times, 9 March 2006, p. 21.452 Quoted in Heinzerling, op. cit. supra note 55, p. 312.453 See forms available at http://cdm.unfccc.int/Projects/Validati<strong>on</strong>.454 Soumitra Ghosh, pers<strong>on</strong>al communicati<strong>on</strong>, May2006.455 Adil Najam et al., ‘<strong>Climate</strong> Negotiati<strong>on</strong>s bey<strong>on</strong>dKyoto: Developing Countries’ C<strong>on</strong>cerns <strong>and</strong>Interests’, <strong>Climate</strong> Policy 3, 2003, 221–231, p. 226.456 Rob Bradley, World Resources Institute, Washingt<strong>on</strong>,DC.457 Jacob Werksman, ‘Greenhouse Gas Emissi<strong>on</strong>sTrading <strong>and</strong> the WTO’, Review of EuropeanCommunity <strong>and</strong> Internati<strong>on</strong>al Envir<strong>on</strong>mental Law 8,3, 1999, pp. 251–264.458 FEASTA <strong>and</strong> New Ec<strong>on</strong>omics Foundati<strong>on</strong>, op. cit.supra note 97, p. 4.459 Ibid. See also <strong>Climate</strong> Acti<strong>on</strong> Network Europe,‘Analysis of Nati<strong>on</strong>al Allocati<strong>on</strong> Plans’, Brussels,2005, pp. 45-46 for the narrower complaint thatNGOs in particular have not participated fully informulating Nati<strong>on</strong>al Allocati<strong>on</strong> Plans.460 Greenspan Bell, op. cit. supra note 129.461 Peter Barnes, Who Owns the Sky? Our Comm<strong>on</strong>Assets <strong>and</strong> the Future of Capitalism, Isl<strong>and</strong> Press,Washingt<strong>on</strong>, 2001.
Chapter 4Offsets – The fossil ec<strong>on</strong>omy’snew arena of c<strong>on</strong>flictIn which it is shown how projects designed to ‘compensate’ for c<strong>on</strong>tinued fossilfuel use are helping to dispossess ordinary people of their l<strong>and</strong>, water, air– <strong>and</strong> futures.Introducti<strong>on</strong>Again <strong>and</strong> again, this special report has returned to the difficult truththat there is <strong>on</strong>ly <strong>on</strong>e way of addressing the climate crisis: to keepmost remaining coal, oil <strong>and</strong> gas in the ground.To find a democratic way of doing so quickly seems a tall order in aworld whose industrial societies are ever more dependent <strong>on</strong> fossil energy.As has been detailed in previous chapters, political <strong>and</strong> businessleaders, experts <strong>and</strong> even many NGOs, while increasingly alarmed,even despairing, about climate change, have so far shown few signs offacing up to the end of the fossil era.But, as this report has also stressed, there is at least <strong>on</strong>e group – <strong>and</strong> avery large <strong>on</strong>e – for whom the idea of leaving coal, oil <strong>and</strong> gas in theground is not necessarily a revoluti<strong>on</strong>ary c<strong>on</strong>cept. These are peoplewhose lives, livelihoods <strong>and</strong> l<strong>and</strong> have already been damaged or devastatedby fossil fuel explorati<strong>on</strong>, extracti<strong>on</strong>, refining, transport, use<strong>and</strong> all the instituti<strong>on</strong>s that surround them.For this group, the struggle to stabilise climate – to stop the world’sabove-ground carb<strong>on</strong> dump from overflowing – is likely to look like<strong>on</strong>ly <strong>on</strong>e chapter in a much l<strong>on</strong>ger <strong>and</strong> broader history. When indigenouspeoples who have lost their l<strong>and</strong>s through oil drilling meetothers whose Arctic hunting grounds are falling victim to climatechange, when communities battling the c<strong>on</strong>structi<strong>on</strong> of gas pipelinesthat would pass over their comm<strong>on</strong> l<strong>and</strong>s encounter fenceline communitieswhose children’s health is ruined by air polluti<strong>on</strong> from refineriesor power plants, when opp<strong>on</strong>ents of airport expansi<strong>on</strong> meetimpoverished city dwellers who have lost their neighbourhoods toa hurricane strengthened by warming subtropical waters, awarenesscannot but grow that, despite their differences, all such communitiesare facing a comm<strong>on</strong> struggle.
220 development dialogue september 2006 – carb<strong>on</strong> tradingAnd now a new group is <strong>on</strong> stage: communities facing the new‘carb<strong>on</strong> - saving’ projects that generate the credits bought <strong>and</strong> sold inthe carb<strong>on</strong> market. Such projects – tree plantati<strong>on</strong>s, industrial gas destructi<strong>on</strong>projects, <strong>and</strong> many others – not <strong>on</strong>ly help perpetuate the oldproblems of coal, oil <strong>and</strong> gas; they often bring new problems as well.In order to generate carb<strong>on</strong> credits from trees or energy crops, plantati<strong>on</strong>companies have to maintain their hold <strong>on</strong> l<strong>and</strong> that ordinarypeople may need for other purposes. In order to generate carb<strong>on</strong>credits from burning the methane bubbling out of l<strong>and</strong>fill sites, authoritieshave to fight to keep them open. In order to keep track ofthe carb<strong>on</strong> their agroforestry schemes generate, rural developmentorganisati<strong>on</strong>s have to divert resources from their traditi<strong>on</strong>al work. Inorder to get carb<strong>on</strong> credits for halting fl aring, oil companies have togo <strong>on</strong> drilling <strong>and</strong> polluting.And all the while, new strip mines c<strong>on</strong>tinue to be opened, oil c<strong>on</strong>tinuesto be spilled, <strong>and</strong> chemical pollutants c<strong>on</strong>tinue to waft overpower-generating plants. Every Clean Development Mechanism orJoint Implementati<strong>on</strong> project set up under the Kyoto Protocol, or‘carb<strong>on</strong> offset’ scheme launched by a private firm, helps perpetuatethe fatal flow of fossil carb<strong>on</strong> out of the ground <strong>and</strong> into the air just assurely as any drill bit or transc<strong>on</strong>tinental pipeline.The fossil fuel ec<strong>on</strong>omy’s new fr<strong>on</strong>tier, in short, has become a newbattlefield. Added to classic local c<strong>on</strong>fl icts over extracti<strong>on</strong>, polluti<strong>on</strong>,‘Middle East nati<strong>on</strong>scall oil the “blood of theearth”. No resource ismore critical to [US]industry, security, <strong>and</strong>freedom… Let’s openup the Arctic Nati<strong>on</strong>alWildlife Refuge todrilling…pump out ofthe Strategic PetroleumReserve… clear theway for explorati<strong>on</strong> <strong>on</strong>the Outer C<strong>on</strong>tinentalShelf… Tell SaudiArabia, Kuwait, <strong>and</strong> thesheikdoms of the Gulfthat if they do not begin topump enough oil to cut theprice to USD 20 a barrelby fall, they can lookelsewhere the next timewar clouds descend overthe Gulf.’Patrick Buchanan,US presidential c<strong>and</strong>idate,2000
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 221‘Oil, the blood of theearth, has become, in timeof war, the blood of victory.’Henry Berenger,adviser to French PrimeMinister Clemenceau, 1918Oil is the blood of theearth, <strong>and</strong> should not betaken away. We cannot dothat.’Berito Kubaruwa, U’wa,Colombian Amaz<strong>on</strong>, 1998‘No blood for oil.’Antiwar slogan,1990, 2002<strong>and</strong> labour abuse are now, increasingly, local c<strong>on</strong>fl icts over ‘carb<strong>on</strong>offsets’ – the projects that license <strong>and</strong> excuse the extracti<strong>on</strong>, the polluti<strong>on</strong><strong>and</strong> the abuse.At first glance, these new c<strong>on</strong>fl icts may seem to be <strong>on</strong>ly indirectlyc<strong>on</strong>nected to fossil fuels. People fighting industrial tree plantati<strong>on</strong>sin Brazil, for example, may never catch a whiff of the hydrocarb<strong>on</strong>swhose release in Scotl<strong>and</strong> the plantati<strong>on</strong>s are supposed to justify <strong>and</strong>excuse. But the struggle of the exploited community in Brazil <strong>and</strong> thepolluted community in Scotl<strong>and</strong> are, in a sense, <strong>on</strong>e. In discoveringthe other’s struggle, each, in a sense, rediscovers its own. The KyotoProtocol <strong>and</strong> other carb<strong>on</strong> market schemes springing up around theworld, in globalising the defence of fossil fuels in a new way, are alsoglobalising c<strong>on</strong>fl icts <strong>and</strong> movements over fossil fuels in a new way.In the past, the deeper meanings of dependence <strong>on</strong> fossil fuel could beunderstood by coming to grips with the experience of oil wars, pollutedfarml<strong>and</strong>, lung disease, militarisati<strong>on</strong>, strip mines, disappearingforests <strong>and</strong> degraded ice caps. But this is no l<strong>on</strong>ger enough. Today,any<strong>on</strong>e who wants to underst<strong>and</strong> what fossil fuel dependencemeans also has to look closely at the ‘carb<strong>on</strong> offset’ <strong>and</strong> ‘carb<strong>on</strong> saving’projects now being set up around the globe, under the auspicesof the Kyoto Protocol’s ‘flexible mechanisms’, the World Bank <strong>and</strong>innumerable c<strong>on</strong>sultancies <strong>and</strong> other private firms; to ask questi<strong>on</strong>sabout them; <strong>and</strong> to listen to the voices of those who are affected.Looking at tensi<strong>on</strong>s <strong>and</strong> c<strong>on</strong>fl icts in Guatemala, Ecuador, Ug<strong>and</strong>a,Costa Rica, India, Sri Lanka, Thail<strong>and</strong>, South Africa <strong>and</strong> Brazil, thischapter brings together a few of these questi<strong>on</strong>s <strong>and</strong> voices. It attemptsto introduce these struggles in the <strong>on</strong>ly way they can be introduced:through studying what actually happens <strong>on</strong> the ground.The topic is difficult. As the last chapter has tried to indicate, themarket in credits generated by ‘carb<strong>on</strong>-saving’ involves some of themost arcane <strong>and</strong> c<strong>on</strong>voluted technical, legal <strong>and</strong> intellectual exercisesever devised in the service of perpetuating inequality <strong>and</strong> envir<strong>on</strong>mentalfolly.But as elsewhere in this special report, a questi<strong>on</strong>-<strong>and</strong>-answer formatmay help bring the issues surrounding the new carb<strong>on</strong> marketcloser to open public debate. And as with previous chapters, it’s hopedthat questi<strong>on</strong>s will c<strong>on</strong>tinue to be raised even after the last page isturned.
222 development dialogue september 2006 – carb<strong>on</strong> tradingThe beginnings –A story from GuatemalaMexicoGuatemalaBelizeH<strong>on</strong>durasEl SalvadorThe beginnings of the ‘carb<strong>on</strong>offset’ idea can be traced back atleast as far as 1977, when the physicistFreeman Dys<strong>on</strong> specu latedthat large-scale planting of treesor swamp plants could be a cheapmeans of soaking up excess carb<strong>on</strong>dioxide in the atmosphere. 1But it wasn’t until 1989 that thefirst forestry project funded explicitlyto offset greenhouse gasemissi<strong>on</strong>s was set up. 2Applied Energy Service, Inc. (AES), a United States-based independentpower producer, had been looking for a cost-effective techniquefor reducing carb<strong>on</strong> dioxide emissi<strong>on</strong>s at a new 183-megawatt coalfiredpower plant in C<strong>on</strong>necticut in order to make the plant moreacceptable to state regulators. On the recommendati<strong>on</strong> of the Washingt<strong>on</strong>-basedWorld Resources Institute (WRI), AES decided to tryto ‘mitigate’ the plant’s carb<strong>on</strong> emissi<strong>on</strong>s by offering usd 2 milli<strong>on</strong> tofinance 10 years’ worth of ‘l<strong>and</strong>-use activities <strong>and</strong> multiple-use forestryprojects’ in Guatemala.The activities would be undertaken by the organisati<strong>on</strong> CARE withthe help of USAID <strong>and</strong> the Guatemalan Directorate General of Forests.3 CARE had been working in agroforestry since 1974 in theWestern Highl<strong>and</strong>s – <strong>on</strong>e of the country’s few remaining highl<strong>and</strong>areas with existing forest <strong>and</strong> the potential to offset significant quantitiesof carb<strong>on</strong> – <strong>and</strong> it was hoped that the AES m<strong>on</strong>ey could leverageadditi<strong>on</strong>al funds from other sources (debt-for-nature swaps) as well asvolunteer services from groups such as the US Peace Corps.Some 40,000 smallholder farmers would plant 50 milli<strong>on</strong> pine <strong>and</strong> eucalyptustrees in the course of establishing 12,000 hectares of communitywoodlots, 60,000 hectares of agroforestry <strong>and</strong> 2,880 kilometres oflive fences. Some 2,000 hectares of vulnerable slopes in local watershedswould be protected <strong>and</strong> training provided for forest fire brigades toreduce the threat of fire <strong>and</strong> potential CO 2 release. During its first 10years, the project would also train local communities so that its activitieswould become self-sustaining. In all, AES finance would make possiblethe sequestrati<strong>on</strong> of 15.5 to 16.3 milli<strong>on</strong> t<strong>on</strong>nes of carb<strong>on</strong> in Guatemala
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 223– more than enough, it was claimed, to cover the 14.1 milli<strong>on</strong> t<strong>on</strong>nesthe C<strong>on</strong>necticut plant would emit over its 40-year lifetime. 4Did it work?No. In 1999, an external evaluati<strong>on</strong> of the AES-CARE projectshowed that, even by its own carb<strong>on</strong>-accounting st<strong>and</strong>ards, it wasfalling far short of the 1 milli<strong>on</strong> t<strong>on</strong>nes of carb<strong>on</strong> it was supposed tohave ‘offset’ to date. 5Three scenes from theWestern Highl<strong>and</strong>s.What happened?The project was built around the assumpti<strong>on</strong> that using the area forcarb<strong>on</strong> producti<strong>on</strong> would be compatible with improving local qualityof life through increasing agricultural productivity, watershed protecti<strong>on</strong>,<strong>and</strong> improved fuelwood access. But the designers didn’t sufficientlygrasp what the project would mean for farmers in their localpolitical c<strong>on</strong>text.First, many of the mainly indigenous subsistence farmers in theproject area in the Western Highl<strong>and</strong>s had been pushed to the edgeof the agri cultural fr<strong>on</strong>tier as l<strong>and</strong> in the fertile lowl<strong>and</strong>s became c<strong>on</strong>centratedin the agribusiness sector. The Western Highl<strong>and</strong>s encompassthe country’s poorest communities <strong>and</strong> most envir<strong>on</strong>mentallydegraded areas. More than 90 per cent of rural households live in absolutepoverty, 6 <strong>and</strong> with populati<strong>on</strong> densities exceeding 100 peopleper square kilometre <strong>and</strong> a deforestati<strong>on</strong> rate of 90,000 hectares peryear, erosi<strong>on</strong> <strong>and</strong> l<strong>and</strong> degradati<strong>on</strong> have led to an intensificati<strong>on</strong> ofrural l<strong>and</strong> use even as poverty rates increase. The average family inthe Western Highl<strong>and</strong>s has access to less than <strong>on</strong>e hectare of l<strong>and</strong> forfarming.Yet at the same time, l<strong>and</strong> with official forest status was often declaredoff-limits to c<strong>on</strong>tinued agricultural use under Guatemala’s 1996 forestlaw. The government was trying to re-locate c<strong>on</strong>trol over communalforests into the h<strong>and</strong>s of municipal authorities, <strong>and</strong> the law criminalisedsubsistence activities such as fuelwood gathering.Well, wasn’t that a good thing? It helped protect the carb<strong>on</strong> stored in the trees.What it did first <strong>and</strong> foremost was to take access to the trees out of theh<strong>and</strong>s of ordinary people. One result was that c<strong>on</strong>fl ict grew betweenmunicipal <strong>and</strong> village authorities <strong>and</strong> individual l<strong>and</strong>owners. Anotherwas that reforestati<strong>on</strong> looked less attractive. Who wants to plant treesif by doing so you deprive yourself of daily necessities? A third resultwas increasing distrust of government forest offices, some of whichwere partly funded by the CARE/AES Agroforestry Project. Not a
224 development dialogue september 2006 – carb<strong>on</strong> tradinggood outcome, whether your objective was people’s welfare or l<strong>on</strong>gtermcarb<strong>on</strong> savings.Then, too, in the early years of the project, the tree species promotedwere often inappropriate for the climate <strong>and</strong> for degraded l<strong>and</strong> areas.Damage by animals <strong>and</strong> sabotage of replanted areas also limited theexpansi<strong>on</strong> of reforested areas.But what about agroforestry systems, which allow farmers to make use of thecarb<strong>on</strong>-sequestering areas?Agroforestry systems are indeed more attractive to local farmers, asthey serve multiple purposes (grazing, fodder <strong>and</strong> fuelwood provisi<strong>on</strong>,<strong>and</strong> subsistence or cash-crop comp<strong>on</strong>ents). But they typicallytake three to five years to become productive. That also makes thema difficult opti<strong>on</strong> for families with limited l<strong>and</strong>.So it was hard to rec<strong>on</strong>cile local people’s needs with the goal of carb<strong>on</strong> producti<strong>on</strong>.In more ways than <strong>on</strong>e. Another problem was CARE’s need to channelmore <strong>and</strong> more of its limited pers<strong>on</strong>nel <strong>and</strong> finance into m<strong>on</strong>itoring<strong>and</strong> measuring carb<strong>on</strong> instead of trying to improve people’slives.In the past, CARE had had a respectable record of promoting sustainableagriculture <strong>and</strong> agroforestry, <strong>and</strong> even some success in protectingwater sources through reforestati<strong>on</strong>, although less so in theWestern Highl<strong>and</strong>s. The organisati<strong>on</strong> had a great deal of experiencein training local community extensi<strong>on</strong> agents, providing seeds <strong>and</strong>tree nursery supplies, <strong>and</strong> training local people in soil c<strong>on</strong>servati<strong>on</strong>,fodder producti<strong>on</strong> <strong>and</strong> watershed management. CARE extensi<strong>on</strong>agents also provided advice <strong>and</strong> materials for improving grazing areas<strong>and</strong> soil recuperati<strong>on</strong>, services that local project participants c<strong>on</strong>tinueto evaluate positively.The new carb<strong>on</strong> focus for its work, however, meant that finance <strong>and</strong>staff time began gravitating away from agroforestry towards reforestati<strong>on</strong>,<strong>and</strong> away from farm extensi<strong>on</strong> work towards unfamiliar work inmodelling <strong>and</strong> m<strong>on</strong>itoring carb<strong>on</strong> emissi<strong>on</strong>s benefits.Couldn’t the staff do both things at <strong>on</strong>ce?It’s not so easy. Carb<strong>on</strong> accounting is specialised, complicated work.The market needs hard carb<strong>on</strong> numbers. You can’t just look at a coupleof trees <strong>and</strong> say that they will have soaked up the carb<strong>on</strong> equivalentof <strong>on</strong>e 1000-kilometre airline fl ight by 2020. You have to look atgrowth rates, soil changes, interacti<strong>on</strong> with local communities, howVillagers in CARE’starget area.
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 225The research <strong>on</strong>Guatemala <strong>on</strong> whichthis secti<strong>on</strong> draws wascarried out by Dr HannahK. Wittman of Sim<strong>on</strong>Fraser University. Itwas c<strong>on</strong>ducted in thec<strong>on</strong>text of a participatoryevaluati<strong>on</strong> (that includedcommunity mapping<strong>and</strong> a household-levelquesti<strong>on</strong>naire) of CARE’sagroforestry extensi<strong>on</strong>programme, operatingin two villages in themunicipalities of San JoséOjetenam <strong>and</strong> Ixchiguánin the state of San Marcosin the GuatemalanHighl<strong>and</strong>s.much greenhouse gas the l<strong>and</strong>scape would have released compared towhat would have happened without the project. In fact, if you lookcarefully enough, as Chapter 3 has argued, you find you can’t do thecalculati<strong>on</strong>s at all. 7The complexity (or impossibility) of this new job played real havocwith CARE’s original missi<strong>on</strong>. CARE was used to training <strong>and</strong> agriculturalextensi<strong>on</strong>, not carb<strong>on</strong> m<strong>on</strong>itoring. In 1999, the organisati<strong>on</strong>still didn’t have a methodology in place for measuring <strong>and</strong> m<strong>on</strong>itoringcarb<strong>on</strong> in agroforestry plots <strong>and</strong> forests.An external evaluati<strong>on</strong> c<strong>on</strong>ducted in 1999 by Winrock Internati<strong>on</strong>allaid down the law: the project’s certified carb<strong>on</strong> producti<strong>on</strong> had tobe improved to make it ‘more acceptable as a CDM-type of project’. 8A l<strong>and</strong>-use mapping system using a Geographic Informati<strong>on</strong> Systemhad to be developed together with remote sensing technologies thatcould track project changes. ‘Proxy areas’ had to be identified to serveas a ‘without-project’ baseline, <strong>and</strong> a carb<strong>on</strong>-m<strong>on</strong>itoring programmefor all project activities for which carb<strong>on</strong> credits would be claimedhad to be set up.In short, the Winrock evaluators, mindful of the requirements of thecarb<strong>on</strong> market, reversed CARE’s own emphasis <strong>on</strong> livelihood overcarb<strong>on</strong> sequestrati<strong>on</strong>. By 2000, CARE officials were openly discussingthe possible need to redirect resources formerly channelled toextensi<strong>on</strong> activities to pay outside c<strong>on</strong>sultants to develop carb<strong>on</strong> accountingmethodologies.But surely most of CARE’s agricultural extensi<strong>on</strong> work went <strong>on</strong> as before?Not necessarily. The new carb<strong>on</strong> rules were an incentive to CAREto shift its reforestati<strong>on</strong> focus to larger farmers, who had more resourcesavailable to undertake reforestati<strong>on</strong> projects <strong>and</strong> were thusbetter equipped to help CARE comply with its carb<strong>on</strong> sequestrati<strong>on</strong>commitments.The new carb<strong>on</strong> focus of CARE’s work also made its objectives <strong>and</strong>premises harder to share with farmers. Even as of 2000-01, farmerswere not being told what the project was about, nor how their reforestati<strong>on</strong><strong>and</strong> fire brigade efforts c<strong>on</strong>tributed to carb<strong>on</strong> mitigati<strong>on</strong>, norwhat the impacts <strong>on</strong> them of a changing climate might be. Nor werethey even directly paid for their reforestati<strong>on</strong> activities. That, of course,made it impossible to discuss with them their role in, or rewards for,offsetting Northern carb<strong>on</strong> emissi<strong>on</strong>s, or to ask them how their ownknowledge might improve carb<strong>on</strong> sequestrati<strong>on</strong> design or disseminati<strong>on</strong>.‘Participatory’ carb<strong>on</strong> sequestrati<strong>on</strong> it was not.
226 development dialogue september 2006 – carb<strong>on</strong> tradingFrom the Netherl<strong>and</strong>s to the Andes –A tale from EcuadorThe Dutch FACE Foundati<strong>on</strong>,Colombiaor ‘Forest Absorbing Carb<strong>on</strong>Dioxide Emissi<strong>on</strong>s’, was establishedin 1990 by the Boardof Management of the DutchEcuadorElectricity Generating Companies.The original idea wasto establish 150,000 hectaresof tree plantati<strong>on</strong>s to compensatefor the emissi<strong>on</strong>s from aPerunew 600-megawatt coal-firedelectricity generati<strong>on</strong> plant tobe built in The Netherl<strong>and</strong>s.‘For reas<strong>on</strong>s of l<strong>and</strong> availability<strong>and</strong> cost-effectiveness’, FACE explained, ‘greater emphasis has beenplaced <strong>on</strong> collaborati<strong>on</strong> with developing countries <strong>and</strong> countries intransiti<strong>on</strong>’. 9Since 2000, the FACE Foundati<strong>on</strong> has been producing <strong>and</strong> sellingcarb<strong>on</strong> credits from tree plantati<strong>on</strong>s as an independent, n<strong>on</strong>-profitorganisati<strong>on</strong>. It trades the credits through two Dutch companies:Business for <strong>Climate</strong> (set up by FACE in 2002 jointly with TriodosBank <strong>and</strong> Kegado BV) <strong>and</strong> Triodos <strong>Climate</strong> Clearing House.The FACE Foundati<strong>on</strong> has five projects worldwide: in Malaysia, theNetherl<strong>and</strong>s, the Czech Republic, Ecuador <strong>and</strong> Ug<strong>and</strong>a. The FACEProgramme for Forestati<strong>on</strong> in Ecuador S.A., or PROFAFOR, currentlythe largest, was set up in 1993. PROFAFOR has not been approvedas a UN Clean Development Mechanism (CDM) project. Butit does see itself as ‘potentially CDM-compliant’ – as sequesteringcarb<strong>on</strong> over <strong>and</strong> above what would have been the case otherwise, asproviding social, ec<strong>on</strong>omic <strong>and</strong> envir<strong>on</strong>mental benefits, <strong>and</strong> so <strong>on</strong>.PROFAFOR originally thought to plant 75,000 hectares of trees, butlater revised this goal downward to 25,000 ha. So far c<strong>on</strong>tracts havebeen signed for the plantati<strong>on</strong> of 24,000 ha, <strong>and</strong> 22,000 ha have actuallybeen planted. Initially, PROFAFOR activities were focused <strong>on</strong>the Andean regi<strong>on</strong>, or Sierra, <strong>and</strong> 8,000 ha have been planted underc<strong>on</strong>tract with 39 indigenous mountain communities. However, since2000, c<strong>on</strong>tracts have also been signed in Ecuador’s coastal regi<strong>on</strong>. 10
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 227Paramo soils.Well, planting trees is bound to be a good thing for everybody involved, isn’t it?It’s not so simple. The Sierra sites used by PROFAFOR are located ina biome known by the col<strong>on</strong>ial Spanish term paramo – which denoteshigh altitude plains or barren plateaus without woodl<strong>and</strong>s. This z<strong>on</strong>ewas never forested, although it does support some trees. The dominantvegetati<strong>on</strong> is Andean grasses from the genuses Festuca, Stipa,Calamagrostis <strong>and</strong> Deyeuxia.The dark, volcanic paramo soils have a complex particulate structurethat, in the cold, moist climate of the Sierra, enables them to retaina great deal of water <strong>and</strong> organic matter. The soils have a far greatercapacity to hold water than the vegetati<strong>on</strong> covering them, althougha layer of plants is important to keep moisture in the soils duringdry seas<strong>on</strong>s. In the humid but not high-rainfall Sierra envir<strong>on</strong>ment,paramo soils are believed to be the main water reservoirs for the localinhabitants.Although indigenous agriculture has been practised for hundreds ofyears up to 3,500 metres (the Sacred Valley of Cuzco, a centre ofindigenous agriculture, lies at around 3,000 metres), the ecologicalbalance of the paramo above 3,200 metres is very fragile. If the plantcover is removed even temporarily, evaporati<strong>on</strong> from the surface increases<strong>and</strong> organic matter in the soil begins to decompose, resultingin reduced capacity to hold water. Once dry, the soils cannot recovertheir original structure <strong>and</strong> organic c<strong>on</strong>tent, even when they get wetagain.The m<strong>on</strong>oculture tree plantati<strong>on</strong>s PROFAFOR sets up to fix carb<strong>on</strong>are a bizarre <strong>and</strong> damaging innovati<strong>on</strong> in this envir<strong>on</strong>ment. The speciesused are exotics comm<strong>on</strong>ly used in industrial plantati<strong>on</strong>s elsewhere.Some 90 per cent are pine, either Pinus radiata (particularly inthe provinces of Carchi <strong>and</strong> Chimborazo) or, to a lesser extent, Pinuspatula (mainly planted in Cañar <strong>and</strong> Loja). Eucalyptus <strong>and</strong> cypressspecies make up another 4 per cent.But what’s wr<strong>on</strong>g with pine trees? PROFAFOR says that experiments withpine in diff erent places get diff erent results <strong>and</strong> that ‘it cannot be categoricallystated that pine is noxious for paramo soils.’PROFAFOR’s n<strong>on</strong>-indigenous pines dry out <strong>and</strong> crack the soils, not<strong>on</strong>ly because they disturb the existing vegetative cover, but also becausethey use a great deal of water. Organic matter <strong>and</strong> biologicalactivity decline, uncompensated for by the fall of pine needles. Soilstend to be transformed from water retainers to water repellents, <strong>and</strong>surrounding flora <strong>and</strong> fauna are deprived of food <strong>and</strong> habitat. 11
228 development dialogue september 2006 – carb<strong>on</strong> tradingThe threat is not <strong>on</strong>ly to local hydrology, but also, ir<strong>on</strong>ically, to localcarb<strong>on</strong> storage capacity. Subject to less extreme variati<strong>on</strong>s in temperature<strong>and</strong> humidity than the drier Southern Andean z<strong>on</strong>e known bythe indigenous term puna, the paramo stores in its thick layers of soilvast amounts of carb<strong>on</strong> – perhaps 1,700 t<strong>on</strong>nes per hectare in the caseof Carchi province, more than a tropical forest – but <strong>on</strong>ly as l<strong>on</strong>g asthe soils are not exposed to the air <strong>and</strong> to increased erosi<strong>on</strong> throughplanting operati<strong>on</strong>s <strong>and</strong> firebreaks.Under the PROFAFOR project,villagers are obliged to c<strong>on</strong>structfirebreaks in which the paj<strong>on</strong>algrasses protecting the soil of theparamo are uprooted in a stripbordering the plantati<strong>on</strong>, leavingthe soil exposed.In additi<strong>on</strong>, the carb<strong>on</strong> in the trees is at risk from fire. In the communityof SigSig in Azuay province, fires have already killed or stuntedthe growth of many pines. And fires are likely to recur c<strong>on</strong>tinuously,given a fire-pr<strong>on</strong>e natural flora, traditi<strong>on</strong>al burning practicesused to encourage fodder regrowth, str<strong>on</strong>g winds, firebreaks that aretoo few <strong>and</strong> too narrow, <strong>and</strong> the lack of permanent wardens or firefightingequipment. The yellowish needles appearing <strong>on</strong> numerouslocal st<strong>and</strong>s of Pinus patula signal the species’ poor adaptati<strong>on</strong> to theAndean envir<strong>on</strong>ment, possibly indicating lack of a crucial micr<strong>on</strong>utrientor of the mycorrhizal fungi that facilitate the tree’s nutrient absorpti<strong>on</strong>in its native envir<strong>on</strong>ment. Animals have meanwhile brokenoff many terminal shoots, giving rise to a bushy growth, which mayprevent the trees from developing trunks suitable for the sawmill.Growth is slow.Wait a minute. Are you telling me that a project which was designed to absorbcarb<strong>on</strong> may actually be emitting it?
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 229‘At an assembly thisengineer told us thatthous<strong>and</strong>s of dollarswould enter the commune[for tree-planting]…thatafterwards we were goingto have sources of worktill after the harvest, thatwe were going to collectwho knows how muchm<strong>on</strong>ey. And the assemblysigned…you know,sometimes we countrypeople, we d<strong>on</strong>’t know, wefall for it naively.’SigSig community memberScholar Ver<strong>on</strong>ica Vidal found not <strong>on</strong>ly that the soils in PROFAFORplantati<strong>on</strong>s are releasing more carb<strong>on</strong> than the firm takes account of,but also that the pine plantati<strong>on</strong>s are capable of absorbing less carb<strong>on</strong>than the firm claims. She c<strong>on</strong>cluded that the net carb<strong>on</strong> balance inPROFAFOR plantati<strong>on</strong>s may well be negative: ‘We are facing a loselosesituati<strong>on</strong>, in which those who most lose are the future generati<strong>on</strong>sthat will have to face the problems of climate change.’ 12But according to PROFAFOR, local soils have been ‘degraded by extensiveuse’, <strong>and</strong> planting pine <strong>and</strong> eucalyptus in the paramo will restore them <strong>and</strong>prevent erosi<strong>on</strong>.Although some of the sites used by PROFAFOR, situated betweenroughly 3,200 <strong>and</strong> 4,800 metres, have been used for grazing, theyhave not usually been cultivated, due to their remoteness <strong>and</strong> theharsh climate. The idea that the soils <strong>on</strong> these sites, which still fulfiltheir original functi<strong>on</strong>s, are being degraded in any way that pineplantati<strong>on</strong>s could remedy is simply false. As for erosi<strong>on</strong>, it is the pineplantati<strong>on</strong>s <strong>and</strong> their firebreaks themselves that are likely to create thegreater problem.Wait, I’m getting c<strong>on</strong>fused here. PROFAFOR says that this envir<strong>on</strong>ment isin bad shape. Following the Spanish c<strong>on</strong>quest, many indigenous peoples hadto retreat to high altitudes because Hispanic <strong>and</strong> mestizo communities werespreading out in the inter-Andean valleys <strong>and</strong> the Spaniards were taking overl<strong>and</strong> for large estates or private ranches. The l<strong>and</strong> reform laws of 1964 <strong>and</strong> 1973helped intensify the exploitati<strong>on</strong> of the paramo even further by transferringhigher, less productive areas of hacienda l<strong>and</strong>s to indigenous peoples. Today,agriculture is being practised up to 3,900 metres, <strong>and</strong> cattle-raising up to 4,500metres. 13 On its plantati<strong>on</strong> sites, PROFAFOR says, the l<strong>and</strong> is so degradedthat farming is just ‘not profi table <strong>and</strong> the l<strong>and</strong> is not suitable for subsistenceactivities’. 14 In this c<strong>on</strong>text, surely pine trees will be both an ecological <strong>and</strong> anec<strong>on</strong>omic improvement, no? And a way, as PROFAFOR puts it, of ‘takingadvantage of l<strong>and</strong> that is not being used <strong>and</strong> that could generate income to thelocal ec<strong>on</strong>omy’?C<strong>on</strong>fusi<strong>on</strong> is <strong>on</strong>ly to be expected in a situati<strong>on</strong> like this, in whichPROFAFOR is saying <strong>on</strong>e thing (largely to an internati<strong>on</strong>al audience)<strong>and</strong> local people are saying another thing (largely to themselves).But it’s useful to remember that there’s a l<strong>on</strong>g global history to thekind of claim that PROFAFOR is making, that a certain set of comm<strong>on</strong>l<strong>and</strong>s are ‘waste’, ‘degraded’ or ‘unused’, <strong>and</strong> are idly waiting tobe brought into the commodity market before they can become ‘productive’.It’s a claim that was used in the Americas during the col<strong>on</strong>ialera to seize indigenous peoples’ cropl<strong>and</strong> <strong>and</strong> hunting <strong>and</strong> gathering
230 development dialogue september 2006 – carb<strong>on</strong> tradinggrounds <strong>and</strong> transform them into the private property of Europeans.It has also been used in India, with more mixed success, since the col<strong>on</strong>ialera, <strong>and</strong> in Africa as well. And it was used in Europe during thegreat eras of enclosure 200 <strong>and</strong> more years ago. In each of these casesthe claim c<strong>on</strong>cealed <strong>and</strong> justified takeovers of l<strong>and</strong> that was not <strong>on</strong>lyusable <strong>and</strong> ecologically rich, but used for all sorts of livelihood purposes.And the same is true of the paramo.PROFAFOR’s says that it would have liked to use native species but that‘the majority of native species have almost disappeared, <strong>and</strong> local knowledge ofindigenous tree species has been lost with the trees.’ 15Although the paramo z<strong>on</strong>e has never been thickly forested, peoplethere retain a knowledge of native trees. In <strong>on</strong>e PROFAFOR area,San Sebastián de SigSig in Azuay province, villagers are easily ableto name <strong>and</strong> describe uses for a dozen native species. 16 Yet the <strong>on</strong>lyAndean tree species used by the PROFAFOR project, <strong>and</strong> <strong>on</strong> a verysmall percentage of its sites, is Polylepis incana. This is a sub-paramospecies <strong>and</strong> it too is being planted in m<strong>on</strong>oculture.The English-language PROFAFOR brochure says that local people ‘have asay in species selecti<strong>on</strong> <strong>and</strong> they prefer planting n<strong>on</strong>-indigenous pine <strong>and</strong> eucalyptusspecies.’ 17 And the Ecuadorean government sees PROFAFOR as c<strong>on</strong>tributingto its own plans for aff oresting or reforesting 250,000 hectares in theAndean z<strong>on</strong>e over 15 years.But what do local people themselves say about the pine plantati<strong>on</strong>s?Lets look at the history.PROFAFOR said the communities would get both income <strong>and</strong> employmentfrom the project. In additi<strong>on</strong> to payments per planted hectare,they would get seedlings, technical assistance <strong>and</strong> training. Theywould have work for many years. They would have access to the plantati<strong>on</strong>sto collect mushrooms, resins, firewood <strong>and</strong> wood from thinning.And after 20-30 years they would be allowed to harvest the trees<strong>and</strong> sell the timber. All PROFAFOR asked in return was 100 per centof the rights to the carb<strong>on</strong> fixed in the trees. It sounded terrific.Pine plantings in Ecuador.I have a feeling you’re going to tell me that things didn’t turn out as promised.That’s an understatement. Let’s start by looking at what happened inthree communities that signed c<strong>on</strong>tracts with the company between1997 <strong>and</strong> 2000. Communities were offered payments of between usd165 <strong>and</strong> usd 189 per hectare planted. But the cost of plants <strong>and</strong> technicalassistance during the first three first years of plantati<strong>on</strong> was thendeducted, leaving the communities with about half of what they wereinitially offered (see Table 5).
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 231Table 5. Offered <strong>and</strong> actual payments for plantati<strong>on</strong>sCommunityArealeasedPaymentagreedperhectare(in USD)Totalamountoffered(in USD)Deducti<strong>on</strong>sfor plants <strong>and</strong>technicalassistance(in USD)Amountdisbursedto thecommunity(in USD)PercentdeductedSan Sebastián 400 ha $189 $75 ,600 $36,800 $38,800 49%de SigSigPisambilla 300 ha $165 $49,500 $22,500 $27,000 46%Moj<strong>and</strong>itaAvelino Dávila130 ha $165 $21, 450 $9,750 $11,700 46%Source: PROFAFOR Forestati<strong>on</strong> c<strong>on</strong>tractsWhen SigSig community asked how much technicians were being paidfor this technical assistance, they were told that PROFAFOR did nothave the ‘capacity to ask for these reports . . . it is an administrative matter’.Meanwhile, the price of the planting stock doubled or tripled. Andin the end it was the commune, <strong>and</strong> not PROFAFOR, as specified inthe c<strong>on</strong>tract, that had to transport the stock from the nursery.Well, but little misunderst<strong>and</strong>ings like this will crop up in every business transacti<strong>on</strong>.You just have to get <strong>on</strong> with it. What does this have to do with the bigpicture of addressing climate change?It doesn’t end there. After having deducted the cost of the seedlings<strong>and</strong> technical assistance, PROFAFOR was obligated to pay 80 percent of the remainder in three instalments during the first year afterthe c<strong>on</strong>tract was signed – as l<strong>on</strong>g as it wasn’t necessary to replant morethan 25 per cent of the seedlings. The remaining 20 per cent was thento be h<strong>and</strong>ed over to the community ‘following complete fulfilmentof the activities foreseen’ by the company for the sec<strong>on</strong>d <strong>and</strong> thirdyear after the c<strong>on</strong>tract was signed.There were several problems here that villagers weren’t ready for.First, when trees die because they ‘do not adapt’, the communityhas to take <strong>on</strong> the cost of new seedlings for re-plantati<strong>on</strong>. This happensquite frequently, because of the quality of the plants, the cold<strong>and</strong> windy c<strong>on</strong>diti<strong>on</strong>s of the high-altitude plantati<strong>on</strong> areas, or forother reas<strong>on</strong>s. According to Mary Milne of the Centre for Internati<strong>on</strong>alForestry Research, the re-plantati<strong>on</strong> rate for PROFAFOR is‘between 15 <strong>and</strong> 30 per cent <strong>and</strong> costs range between usd 865 <strong>and</strong> usd5,820, which have to be absorbed by the communities.’ 18A bigger problem is that because of the necessity of guaranteeinga l<strong>on</strong>g lifetime for the carb<strong>on</strong> sequestered in PROFAFOR’s trees,each community has to maintain the trees itself for 20-30 years beforebeing allowed to harvest them <strong>and</strong> sell the timber. (More recent
232 development dialogue september 2006 – carb<strong>on</strong> tradingPROFAFOR c<strong>on</strong>tracts dem<strong>and</strong> even l<strong>on</strong>ger terms, of up to 99 years.)But the m<strong>on</strong>ey runs out l<strong>on</strong>g before that. Nor are the communitiesgiven any informati<strong>on</strong> <strong>on</strong> where or how they might market the timber.But it’s not <strong>on</strong>ly a m<strong>on</strong>ey matter. The PROFAFOR c<strong>on</strong>tract also ensuresthat the community turns over communal l<strong>and</strong> <strong>and</strong> labour tothe company for free.How does that work?Well, take l<strong>and</strong> first. Under the c<strong>on</strong>tract, PROFAFOR gets – rentfree– large tracts of community l<strong>and</strong>, which then cannot be turnedto any other purpose than the producti<strong>on</strong> of carb<strong>on</strong> credits for theinternati<strong>on</strong>al market for 20 or 30 years.This is not farml<strong>and</strong>. Cultivati<strong>on</strong> goes <strong>on</strong> in other z<strong>on</strong>es of communalproperty where the l<strong>and</strong> has already been divided up am<strong>on</strong>g families.But PROFAFOR is wr<strong>on</strong>g to say that the l<strong>and</strong> is ‘degraded’, ‘isnot being used’ or ‘is not suitable for subsistence activities’, <strong>and</strong> that itis idly waiting to be transformed into an asset by being ‘incorporatedinto the nati<strong>on</strong>al ec<strong>on</strong>omy’.In additi<strong>on</strong> to having important hydrological functi<strong>on</strong>s, much of thel<strong>and</strong> is used for grazing or could be rented out for that purpose. Whenthe plantati<strong>on</strong>s are set up, families owning cattle may have to rentother l<strong>and</strong>s for their animals, purchase fodder, or reduce their herds.This has an impact <strong>on</strong> family savings, not <strong>on</strong>ly because the m<strong>on</strong>etarycompensati<strong>on</strong> villagers get from PROFAFOR is too small <strong>and</strong> mustbe used immediately for plantati<strong>on</strong> expenses, but also because, by itsnature, cash cannot play the role of the more stable, less liquid, traditi<strong>on</strong>alsavings embodied in family cattle. 19Small w<strong>on</strong>der that local people feel that they have essentially transferredthe l<strong>and</strong> <strong>and</strong> its potential to generate savings for exclusivePROFAFOR use. As <strong>on</strong>e said, ‘We cannot touch or do anything <strong>on</strong>the area signed over.’And does PROFAFOR really also appropriate communities’ labour for free?PROFAFOR claims that it provides thous<strong>and</strong>s of well-paid jobs to indigenouscommunities in Ecuador.A lot of these jobs are, in fact, <strong>on</strong>erous <strong>and</strong> unremunerated tasks thatthe communities find themselves unwillingly taking <strong>on</strong> because ofdebt. In fact, PROFAFOR has not <strong>on</strong>ly failed to provide the jobsit has offered, but has also forced communities to hire people fromoutside to carry out PROFAFOR work. Local people, it turns out,
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 233often do not possess the necessary technical skills PROFAFOR managementplans require. PROFAFOR’s training – workshops for twoleaders from each community, held in hotels or other venues in nearbycities – is widely seen as insufficient <strong>and</strong> too theoretical. In additi<strong>on</strong>,the plantati<strong>on</strong>s are often too remote or subject to too extremeclimatic c<strong>on</strong>diti<strong>on</strong>s for local people to work <strong>on</strong> themselves.Where tasks remain incomplete, the community has to fall back <strong>on</strong> itsown unpaid labour pool – a system called minga – to fulfil its c<strong>on</strong>tractualobligati<strong>on</strong>s. Essentially, villagers are forced to exploit their own systemof free communal labour in order to escape debt (see box below).Minga: Organising Labour without a MarketMinga is a communal pool of n<strong>on</strong>-marketedlabour typical of the indigenous communitiesof the Andes. Am<strong>on</strong>g the Quechuas,minga is directed at a specific collective materialobjective: planting <strong>and</strong> harvesting, orbuilding or maintaining access routes, irrigati<strong>on</strong>channels, schools or health centres.It is a complex mechanism for social interacti<strong>on</strong>in which, generally for <strong>on</strong>e day eachweek, both men <strong>and</strong> women, adults <strong>and</strong>children, are mobilised.People working under minga receive nom<strong>on</strong>ey. Rather, the system is <strong>on</strong>e of reciprocity<strong>and</strong> mutual help. When minga isgranted to achieve individual purposes, themingado, or beneficiary, enters into an obligati<strong>on</strong>to return minga to the mingueros, orworkers, at some point in the future.As <strong>on</strong>e villager from Chuchuqui said: ‘…they paid for dibbling for pine <strong>on</strong>ly, notfor eucalyptus. And they did not pay me,I worked under minga… Where we couldnot work, they hired people from Quito<strong>and</strong> Chimborazo <strong>and</strong> the community paidthe workers.’But surely the communities must have made some m<strong>on</strong>ey out of the deal?Well, it’s instructive to try to do the maths. Look at what happenedto SigSig. The community was to receive about usd 75,000 for 400hectares of Pinus patula plantati<strong>on</strong> to be sited <strong>on</strong> l<strong>and</strong> a three- to fourhourwalk from the settlement’s centre, at approximately 3,700 metres.Plotting, dibbling, planting <strong>and</strong> c<strong>on</strong>structi<strong>on</strong> of the firebreakwere carried out between June 1998 <strong>and</strong> December 1999. But some ofthe seedlings didn’t take, <strong>and</strong> the community had to hire outside labourto replant, using the funds supplied by PROFAFOR. The communitybuilt a house in the area of the plantati<strong>on</strong> in mid-1999 <strong>and</strong> aguard was hired for the first two years.In 2000 <strong>and</strong> again in 2004, fires swept through large parts of the plantati<strong>on</strong>.The community had to take <strong>on</strong> most of the costs of replanting– including labour, transportati<strong>on</strong> <strong>and</strong> food – with PROFAFOR
234 development dialogue september 2006 – carb<strong>on</strong> tradingpicking up <strong>on</strong>ly the costs of seedlings. The community has also hadto take resp<strong>on</strong>sibility for replanting, due to maladapted trees dying.Yet the 20 per cent of the funds that should have been disbursed to thecommunity three years after the c<strong>on</strong>tract was signed in 1998 have stillnot been received. And the plantati<strong>on</strong> has to be maintained for nearly15 more years until harvest. To top it off, if the community decidesnot to c<strong>on</strong>tinue carrying out PROFAFOR’s plantati<strong>on</strong> work at thattime, it must h<strong>and</strong> over 30 per cent of the income from the sale of thetimber to the company.In a workshop c<strong>on</strong>ducted with SigSig residents, an attempt was made todraw up a balance, showing how much the community had gained <strong>and</strong>lost from its agreement with PROFAFOR, although much of what thecommunity put into the plantati<strong>on</strong>s cannot be satisfactorily quantified,such as the minga <strong>and</strong> the work of the community leaders. Calculati<strong>on</strong>swere made for plotting, dibbling, firebreaks, right of way, replanting,seedlings, maintenance, management, training <strong>and</strong> so forth.The community c<strong>on</strong>cluded that, even without taking account of thevalue of the envir<strong>on</strong>mental liabilities the project has saddled local inhabitantswith, or the cost of the plantati<strong>on</strong>s for another 15 years interms of labour, inputs, insurance, security, tools, harvest <strong>and</strong> timbermarketing, its losses already amount to over usd 10,000.Isn’t there anything the community can do to save the situati<strong>on</strong>?PROFAFOR has a lot of power in this c<strong>on</strong>text. Once a c<strong>on</strong>tract issigned, there isn’t much communities can do to modify it, even when,as in SigSig, the agreement with the company was signed by <strong>on</strong>ly 50community members when there were over 200 registered. 20PROFAFOR can even claim payment of compensati<strong>on</strong> if its staff decidesthat a community has not fulfilled its obligati<strong>on</strong>s. This compensati<strong>on</strong>can amount to up to triple the original payments to the communities,or many tens of thous<strong>and</strong>s of dollars (see Table 6, below).One villager reported: ‘When I told the engineer Franco C<strong>on</strong>doythat we wanted to undo this agreement, he told us: “You cannot ridyourselves of the agreement, the commune is mortgaged.”’According to Ecuadorian law, C<strong>on</strong>doy is wr<strong>on</strong>g. Communal propertyof indigenous communities is not subject to mortgages or l<strong>and</strong>tax. Mortgages can <strong>on</strong>ly be c<strong>on</strong>tracted with private estate <strong>and</strong> l<strong>and</strong>holders,individuals or corporate bodies.‘We made an assessment<strong>and</strong>…it was like a bucketof cold water. On doingour accounts, we realisedhow much m<strong>on</strong>ey we haveput in, <strong>and</strong> the trees arestill small…Although wehave no m<strong>on</strong>ey left…wehave to look for a wardento look after the plants<strong>and</strong> pay him, we haveto prune, we have to putdown manure, all the care<strong>and</strong> then the harvest…weourselves have to fi nd a[timber] market… Howis that?! We are depletingour l<strong>and</strong>, we are providinglabour, doing harvesting<strong>and</strong> also giving 30 per cent.’SigSig community member
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 235Table 6. Penalty amounts in relati<strong>on</strong> to paid <strong>and</strong> offered amountsSource: PROFAFOR Forestati<strong>on</strong> C<strong>on</strong>tractsCommunitiesAmounts initiallyoffered(USD)Amountsdisbursed tocommunityAmountsof penaltyclausePenalty/disbursementratioCaguanapamba n.a. $15,716 $42,660 271%San Sebastián de SigSig $75 ,600 $38,800 $108,000 278%Pisambilla $49,500 $27,000 $81,000 300%Moj<strong>and</strong>ita Avelino Dávila $21, 450 $11,700 $35,100 300%In practice, however, C<strong>on</strong>doy is right, since even c<strong>on</strong>tracts involvingcomm<strong>on</strong> property are subject to penalty clauses <strong>and</strong> fines in the eventof a breach, <strong>and</strong> PROFAFOR is well able to enforce mortgage-likearrangements by taking advantage of the inter-ethnic power relati<strong>on</strong>sthat are a legacy of the col<strong>on</strong>ial era in the regi<strong>on</strong>.In <strong>on</strong>e community, Caguanapamba, where the leaders who had signedthe c<strong>on</strong>tract mismanaged the PROFAFOR funds they were entrustedwith, community members did not get paid for the first plantingoperati<strong>on</strong> <strong>and</strong> many seedlings were lost. The leader who succeededthem will now have to use the last instalment of funding in order topay off the people who did the original planting. To complete thefirebreak, he has had to rent a machine with community funds <strong>and</strong>rely <strong>on</strong> labour from minga.All right, I can see that things haven’t all g<strong>on</strong>e according to plan with carb<strong>on</strong>sinks in the Andes. But so what? Can you draw any general c<strong>on</strong>clusi<strong>on</strong>s fromall this?Carb<strong>on</strong> trading theory says that Southern countries have a hithertounrecognised <strong>and</strong> unpriced resource in the form of spare or unusedcarb<strong>on</strong>-absorbing potential. By bringing this dormant, unexploitedresource into something called ‘the market’, the theory goes,the South will be able to transform it into living capital or exchangeit for cash or other things, adding to its wealth <strong>and</strong> to that of worldsociety as a whole.Over hundreds of square kilometres of the Ecuadorian Andes, newtransacti<strong>on</strong>s involving carb<strong>on</strong> are indeed being made. But for themost part, they are not textbook ‘market’ transacti<strong>on</strong>s, nor do theyaddress climate change, nor have they resulted in communities’ realisingnew value from formerly unused assets.Instead, comm<strong>on</strong> l<strong>and</strong>, community labour <strong>and</strong> much of the paltry
236 development dialogue september 2006 – carb<strong>on</strong> tradingbut crucial savings of peasant communities have been transferred toa private firm for producti<strong>on</strong> of a new commodity which, althoughlargely noti<strong>on</strong>al, has the material effect of shoring up an anachr<strong>on</strong>isticpattern of fossil fuel use in The Netherl<strong>and</strong>s. While claimingto ‘absorb’ carb<strong>on</strong>, PROFAFOR has in fact been absorbing Andeanwealth while helping to enlarge the North’s ecological footprint inthe South. Indirectly, it is also transferring wealth from future generati<strong>on</strong>sto the present, through its failure to address climate change.The mechanisms that have d<strong>on</strong>e the real work in making this transferpossible are not the abstract, benign ‘wealth-creating’ trade mechanismsof ec<strong>on</strong>omics textbooks. On the c<strong>on</strong>trary, they are mechanismsthat compel, discriminate, narrow choices, increase dependence, reducetransparency, <strong>and</strong> centralise power <strong>and</strong> knowledge in bureaucracies<strong>and</strong> expert instituti<strong>on</strong>s – just the sort of thing that ‘markets’are comm<strong>on</strong>ly seen as combating. These mechanisms include:• Unfamiliar tree species planted in exclusive m<strong>on</strong>ocultures <strong>and</strong> requiringextensive technical interventi<strong>on</strong>.• N<strong>on</strong>-transparent <strong>and</strong> exploitative written legal c<strong>on</strong>tracts backed byhistorically-ingrained unequal power relati<strong>on</strong>s, through which aprivate company retains 100 per cent of the carb<strong>on</strong> sink credits fromplantati<strong>on</strong>s while local communities take <strong>on</strong> debt <strong>and</strong> resp<strong>on</strong>sibilitiesfor maintenance <strong>and</strong> managing envir<strong>on</strong>mental impacts.• An internati<strong>on</strong>ally disseminated discourse, according to which thel<strong>and</strong>s to be used for plantati<strong>on</strong>s have been ‘degraded’ by excessiveuse <strong>and</strong> cannot be ‘profitably’ used for subsistence activities such ascattle-raising.• Expert procedures of ‘verificati<strong>on</strong>’ of carb<strong>on</strong> flows that by theirnature are resistant to public scrutiny.One last technocratic mechanism that makes PROFAFOR’s manufactureof carb<strong>on</strong> credits possible is ‘forest certificati<strong>on</strong>’, a seal of envir<strong>on</strong>mental<strong>and</strong> social approval that was granted to 20,000 ha ofPROFAFOR’s plantati<strong>on</strong>s in 1999 by the Forest Stewardship Council(FSC). The FSC is an independent internati<strong>on</strong>al body with membershipfrom both industry <strong>and</strong> NGOs, but the actual job of decidingwhether a plantati<strong>on</strong> meets FSC st<strong>and</strong>ards falls to private firmshired by the plantati<strong>on</strong> company. In PROFAFOR’s case, this wasthe Societé Générale de Surveillance (SGS), which has also certifiedPROFAFOR’s carb<strong>on</strong> sequestrati<strong>on</strong>.These certificati<strong>on</strong>s reassure buyers who will never visit the Andesthat PROFAFOR’s product is a valid, envir<strong>on</strong>mentally-friendly commodityfrom plantati<strong>on</strong>s that ‘strive to strengthen <strong>and</strong> diversify theThe secti<strong>on</strong> <strong>on</strong> Ecuadoris extracted from theresearch of PatriciaGr<strong>and</strong>a, who studied theFACE-PROFAFOR projectfor Acci<strong>on</strong> Ecologica, anEcuadorian NGO, <strong>and</strong> theWorld Rainforest Movement.
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 237local ec<strong>on</strong>omy’ <strong>and</strong> ‘maintain or enhance the l<strong>on</strong>g-term social <strong>and</strong>ec<strong>on</strong>omic well-being of forest workers <strong>and</strong> local communities’.Ir<strong>on</strong>ically, the SGS certifiers noted as <strong>on</strong>e of PROFAFOR’s str<strong>on</strong>gpoints the ‘participati<strong>on</strong> of local communities in decisi<strong>on</strong>-making’, aswell as PROFAFOR’s c<strong>on</strong>tinued ‘commitment’ to use native species.Local communities’ lack of power to object to such claims helps lubricatePROFAFOR’S internati<strong>on</strong>al trade in carb<strong>on</strong> credits. No communitymember interviewed by Patricia Gr<strong>and</strong>a in 2004 even knewof the existence of the FSC, nor of its Principles <strong>and</strong> Criteria, norhow they might be enforced. Here, too, envir<strong>on</strong>mental markets havefailed to live up to their image in ec<strong>on</strong>omics textbooks.The story c<strong>on</strong>tinues –Carb<strong>on</strong> forestry in Ug<strong>and</strong>aDem.Rep.C<strong>on</strong>goRw<strong>and</strong>aSudanUg<strong>and</strong>aTanzaniaKenyaOne thing can be said for theUS-Guatemala carb<strong>on</strong> trademediated by CARE describedin a previous secti<strong>on</strong>: it at leastattempted to square the producti<strong>on</strong>of carb<strong>on</strong> for the Northwith local social goals. It wouldbe difficult to say the same fora Norwegian project to growcarb<strong>on</strong> credits in Ug<strong>and</strong>a thatstarted up a bit later. JournalistHarald Eraker, who investigatedthe project, labelled it as a caseof ‘CO 2 l<strong>on</strong>ialism’. 21The Ug<strong>and</strong>a project was closely tied to the c<strong>on</strong>structi<strong>on</strong> of c<strong>on</strong>venti<strong>on</strong>algas-fired power plants in Norway by Naturkraft <strong>and</strong> Industri kraftMidt-Norge corporati<strong>on</strong>s. The plants were supported by Norway’sLabour Party, C<strong>on</strong>servative Party <strong>and</strong> Progress Party <strong>on</strong> the groundthat they could be made envir<strong>on</strong>mentally-friendly through the purchaseof carb<strong>on</strong> credits.Some of these credits were to be provided by Tree Farms, a Norwegianforestry company operating in Africa. In 1995, Tree Farms (orFjordgløtt, as it was then called) had received a grant from NORAD,the Norwegian aid agency, to explore the scope for activities in East
238 development dialogue september 2006 – carb<strong>on</strong> tradingAfrica. 22 The following year, the company set up in Tanzania <strong>and</strong>Ug<strong>and</strong>a, <strong>and</strong>, later, in Malawi as well. In Ug<strong>and</strong>a, it obtained fromthe authorities an extremely low-cost 50-year lease <strong>on</strong> 5,160 hectareseast of the town of Jinja in the Bukaleba forest reserve <strong>on</strong> Lake Victoria,which it planned to plant mainly with eucalyptus <strong>and</strong> fast-growingpines. Bukaleba is <strong>on</strong>e of more than 700 large <strong>and</strong> small stateownedcentral forest reserves set aside for forestry <strong>and</strong> forest protecti<strong>on</strong>,covering in all 7 per cent of the l<strong>and</strong> area of Ug<strong>and</strong>a. 23Shortly after the Kyoto Protocol was adopted in December 1997,Fjordgløtt increased its capitalisati<strong>on</strong> <strong>and</strong> invited outside investors tobuy shares. By 2000, Tree Farms c<strong>on</strong>trolled at least 20,000 hectaresof l<strong>and</strong> in the regi<strong>on</strong> <strong>and</strong> was in the process of acquiring a further70,000 in Tanzania (see box <strong>on</strong> page 242: ‘The M<strong>on</strong>ey Came from aPlace Far Away’: Tanzanian L<strong>and</strong>, Norwegian Carb<strong>on</strong>). The firm hadplanted 600 hectares, mainly with fast-growing pines (Pinus caribaea,P. oocarpa, P. tecunumani) <strong>and</strong> eucalyptus (Eucalyptus gr<strong>and</strong>is), with IndustrikraftMidt-Norge securing a first opti<strong>on</strong> <strong>on</strong> the associated carb<strong>on</strong>credits.What does the Ug<strong>and</strong>an government get in return for turning over its l<strong>and</strong> tothis company for 50 years?It gets a <strong>on</strong>e-off fee of USD 410 <strong>and</strong> an annual rent of about usd 4.10for each hectare planted with trees. The rent, paid in fast-depreciatingUg<strong>and</strong>an currency, is adjusted every 10 years according to the indexof infl ati<strong>on</strong> as defined by the Bank of Ug<strong>and</strong>a. No rent is paid forareas that the companies have not planted with trees. For six squarekilometres of plantati<strong>on</strong> established by 2001, then, Tree Farms hadpaid Ug<strong>and</strong>a, when infl ati<strong>on</strong> is factored in, less than usd 11,000. For50 years’ use of the same area of l<strong>and</strong>, given current rates of infl ati<strong>on</strong>,it was set to pay less than usd 110,000.Norwegian journalist HaraldEraker investigated earlyattempts by Norwegianpower <strong>and</strong> forestry firms tosequester carb<strong>on</strong> <strong>on</strong> Ug<strong>and</strong>anl<strong>and</strong>.That’s outrageous!Yes. Several years after the deal was made, the deputy commissi<strong>on</strong>erfor forestry in the Ministry of Water, L<strong>and</strong>s <strong>and</strong> Envir<strong>on</strong>ment,Ignatius Oluka-Akileng, told NorWatch, an independent news servicem<strong>on</strong>itoring Norwegian business activities abroad, that the authoritieshad recently realised that investors were ‘taking advantage of thesystem’ to get cheap l<strong>and</strong>.The fact that no rent is paid for areas not yet planted with trees makessuch arrangements particularly attractive to l<strong>and</strong> speculators. Yetit has proved hard for the Ug<strong>and</strong>an authorities to negotiate betterterms. According to <strong>on</strong>e reliable source, when Ug<strong>and</strong>an officials tried
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 239to negotiate a higher rent for 12,000 hectares in the Kik<strong>on</strong>da forestreserve with the Institut für Entwicklung und Umwelt, a Germancompany headed by a former politician in the European Parliament,the company refused, saying: ‘Our plane to Germany leaves t<strong>on</strong>ight;if you d<strong>on</strong>’t sign now, there will be no deal.’One problem is that forest authorities often simply d<strong>on</strong>’t know howmuch foreign companies might profit from carb<strong>on</strong> trading (see box<strong>on</strong> page 271: No Need to Know? The Secret Ec<strong>on</strong>omy of Carb<strong>on</strong>), orhow l<strong>on</strong>g they plan to keep plantati<strong>on</strong> l<strong>and</strong> out of other uses to ensurethat carb<strong>on</strong> c<strong>on</strong>tinues to be stored <strong>on</strong> it. Forest authorities, to saynothing of local people, are also poorly equipped to c<strong>on</strong>fr<strong>on</strong>t ministers,politicians <strong>and</strong> government climate negotiators who take advantageof their positi<strong>on</strong> <strong>and</strong> inside knowledge of European corporate<strong>and</strong> governmental carb<strong>on</strong> plans to get funding that helps them gainc<strong>on</strong>trol of ‘degraded’ state forest l<strong>and</strong>.Well, it’s not as though the l<strong>and</strong> is being used for anything else.Actually, it is. Since the 1960s <strong>and</strong> 1970s, local farmers <strong>and</strong> fishermenhave moved in <strong>and</strong> out of Norwegian as well as German c<strong>on</strong>cessi<strong>on</strong>areas in Bukaleba. In fact, many people had migrated into the areaalready by the early 20th century. Although an outbreak of sleepingsickness then caused people to flee, when the tsetse fly vector wasbrought under c<strong>on</strong>trol in the 1970s, people moved back to Bukaleba,<strong>and</strong> Idi Amin authorised a cattle-herding project in the middle ofthe reserve. Politicians under the Milt<strong>on</strong> Obote regime in the 1980salso supported settlements in the forest reserve, <strong>on</strong>e minister observingthat ‘trees d<strong>on</strong>’t vote, but people do.’ 24 People were <strong>on</strong>ce againevicted in 1989-90. Crops were destroyed <strong>and</strong> houses torn down.Most evictees settled just outside the borders of the forest reserve, butthen slowly started venturing back into the reserve to farm <strong>and</strong> fish.By 2000, five fishing <strong>and</strong> farming villages were inside the Tree Farmsarea in the Bukaleba forest reserve, <strong>and</strong> people from at least eight villagesoutside the reserve were cultivating the earth <strong>on</strong> Tree Farms’lease. Iganga district, the locati<strong>on</strong> of the reserve, was densely populatedwith migrants from other parts of Ug<strong>and</strong>a, as well as from neighbouringcountries. With scant opportunities for work outside agriculture,<strong>and</strong> with growing numbers, pressure <strong>on</strong> l<strong>and</strong> was str<strong>on</strong>g. 25But these people must be there illegally.According to state law, yes. But some farmers claim that they are therightful owners, having bought the l<strong>and</strong> they are now working backin the 1980s, or that the l<strong>and</strong> they are farming has been owned bytheir family for generati<strong>on</strong>s.
240 development dialogue september 2006 – carb<strong>on</strong> tradingIn 2000, forest authorities told Tree Farms that farmers <strong>and</strong> fishermenliving in or using the Bukaleba reserve had been served noticeto vacate. 26 Tree Farms’ managing director had left the job of evictingfarmers to the authorities, stating that the company would not do ‘thedirty job of throwing them out’ itself.Apart from the people from the fishing village Walumbe Beach,however, no <strong>on</strong>e interviewed by NorWatch in 2000 said that theyhad been given notice to leave the reserve. Several had heard rumoursabout it, while others were clearly surprised at the news. Somehoped that they might be allowed to stay – a hope perhaps based <strong>on</strong>the fact that the envir<strong>on</strong>mental impact assessment comes close to recommendingthat fishermen be allowed to stay to avoid social unrest. 27Almost every farmer <strong>and</strong> fisherman told NorWatch that they had noother place to go, let al<strong>on</strong>e l<strong>and</strong> to farm. All expressed fears for thefuture, <strong>and</strong> asked NorWatch to c<strong>on</strong>vey to the Norwegian owners ofTree Farms their request that they be allowed to stay, or at least tofarm or fish in the reserve. 28Can’t Tree Farms provide jobs for local people to do?Tree Farms originally employed several hundred people to managethe Bukaleba plantati<strong>on</strong>s. In 2000, however, <strong>on</strong>ly 43 were left, accordingto the assistant administrator at the company’s forest stati<strong>on</strong>,with <strong>on</strong>ly 20 working <strong>on</strong> the plantati<strong>on</strong>s themselves.Tree Farms did allow farmers to grow maize, beans, <strong>and</strong> other productsbetween the rows of planted trees during the first few years,until the trees grew too high for other plant life to grow beneaththem. According to an EU-supported study, however, this scheme‘resembles a Middle Age feudal system but without the m<strong>and</strong>atory“noblesse oblige” <strong>and</strong> with the farmers paying for the bulk of the investmentcost of the plantati<strong>on</strong> establishment’. 29 Local farmers clear,plough, weed <strong>and</strong> manage the plantati<strong>on</strong> areas, providing free labourfor ground clearing <strong>and</strong> weeding. 30 Many farmers reported having topay the firm cash or a share of their crop to be allowed to farm <strong>on</strong> thecompany’s l<strong>and</strong>s. One extended family with five adults working <strong>on</strong><strong>on</strong>e acre told NorWatch that the previous year they had had to pay100 kilograms of maize to Tree Farms out of a harvest totalling 250kilograms. 31C<strong>on</strong>fl icts over l<strong>and</strong> <strong>and</strong> unpaid labour were seen by several localsas threatening the project’s future as a provider of both wood <strong>and</strong>carb<strong>on</strong> credits. Farmers have reportedly over-pruned trees, uprootedseedlings, <strong>and</strong> neglected weeding in efforts at surreptitious sabotage.32 The Ug<strong>and</strong>an forest authorities, meanwhile, reprim<strong>and</strong>ed Tree‘When the UWA peoplecame with their treeplantingactivities, theystopped us from gettingimportant materialsfrom the forest. We werestopped from going upto get malewa (bambooshoots), which is a veryimportant traditi<strong>on</strong>al foodin the area <strong>and</strong> is a sourceof income. There werecertain products that weused to get from the forestfor the embalu cerem<strong>on</strong>y(circumcisi<strong>on</strong> ritual) to beperformed in the propertraditi<strong>on</strong>al way.’Cosia Masolo, evictedvillage elder <strong>and</strong> father of20 now living <strong>on</strong> a 0.3hectare piece of l<strong>and</strong> inMabembe, Buwabwalasub-county
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 241Farms for low technical st<strong>and</strong>ards <strong>and</strong> dem<strong>and</strong>ed that the company‘do some real investment to produce quality tree st<strong>and</strong>s’. 33The eucalyptus plantati<strong>on</strong>s have also suffered termite attacks. By2001, the Tree Farms project was way behind schedule <strong>and</strong> sufferingfrom lack of funds. To raise some quick m<strong>on</strong>ey, the company waseven forced to clear 50 hectares for commercial maize crops, arousingfurther criticism from the forestry authorities.But is the project at least storing some carb<strong>on</strong>?Tree Farms’ original management plan called for their plantati<strong>on</strong>s inthe Bukaleba reserve to cover some 4,260 hectares of the company’stotal area of 5,160 hectares by 2005. The firm anticipated being ableto sell 500 t<strong>on</strong>nes of CO 2 credits per hectare, or 2.13 milli<strong>on</strong> t<strong>on</strong>nesof carb<strong>on</strong> dioxide in all. 34 The accounting that resulted in this figurewas wildly optimistic.For <strong>on</strong>e thing, proper carb<strong>on</strong> accounting for the project would requirefollowing around thous<strong>and</strong>s of evictees, many of whom wouldprobably have to clear l<strong>and</strong> elsewhere, resulting in carb<strong>on</strong> emissi<strong>on</strong>sattributable to Tree Farms. This would be impossible, particularly ina country such as Ug<strong>and</strong>a, where poverty, l<strong>and</strong>lessness, <strong>and</strong> politicalinstability keep people c<strong>on</strong>stantly moving from <strong>on</strong>e end of the countryto the other.For another, advance sale of carb<strong>on</strong> credits would require that thel<strong>on</strong>g-term political future of Bukaleba be known in advance, so thatany re-invasi<strong>on</strong> of the area could be predicted <strong>and</strong> its effects <strong>on</strong> carb<strong>on</strong>storage precisely quantified <strong>and</strong> insured against or compensatedfor. No basis exists for deriving numbers of this sort.The future investment climate for such projects would also have to becalculated, as well as the probability of fires; the ecological effects ofplantati<strong>on</strong>s <strong>on</strong> local patches of native vegetati<strong>on</strong> through hydrologicalor other changes; the soil carb<strong>on</strong> loss attributable to clearing, ploughing<strong>and</strong> erosi<strong>on</strong> caused by the project. 35 Even to attempt to do all thiswould drive the costs of the project through the roof.If the original easy numbers posited by Tree Farms were accepted bythe market, however, they would translate into carb<strong>on</strong> profits of theorder of usd 10 milli<strong>on</strong>, well over a dozen times Tree Farms’ outlay<strong>on</strong> l<strong>and</strong>. This would not include possible income from timber <strong>and</strong>wood sales. Turning Bukaleba into a Norwegian carb<strong>on</strong> plantati<strong>on</strong>,more over, would mean that its l<strong>and</strong>s would not be available for l<strong>on</strong>gperiods either for agriculture or for plumping up Ug<strong>and</strong>a’s own carb<strong>on</strong>accounts.
242 development dialogue september 2006 – carb<strong>on</strong> trading‘The M<strong>on</strong>ey Came from a Place Far Away’:Tanzanian L<strong>and</strong>, Norwegian Carb<strong>on</strong>In additi<strong>on</strong> to its project in Ug<strong>and</strong>a (seemain text), Norway’s Tree Farms companywas also, by 2000, trying to acquiresavannah l<strong>and</strong> totalling over 70,000 hectaresin Tanzania. Between 1996 <strong>and</strong> 2000,some 1,900 hectares of trees were plantedin Mufindi <strong>and</strong> Kilombero districts atabout 2,000 metres above sea level, wherea seas<strong>on</strong>ally moist climate provided lots ofwater for thirsty industrial m<strong>on</strong>oculturesof Pinus patula <strong>and</strong> Eucalyptus saligna.The l<strong>and</strong> had been leased from the governmentat usd 1.90 per hectare per yearfor a 99-year period <strong>on</strong> c<strong>on</strong>diti<strong>on</strong> that it beused solely for forestry. Industrikraft Midt-Norge, the Norwegian power utility,meanwhile signed an opti<strong>on</strong>s c<strong>on</strong>tract topay Tree Farms nearly usd 4.50 per t<strong>on</strong>neof carb<strong>on</strong> dioxide supposedly sequestered.Over a 25-year period, this would giveTree Farms a carb<strong>on</strong> profit of about usd 27milli<strong>on</strong> for <strong>on</strong>e plantati<strong>on</strong> complex, Uchindile,compared to usd 565,000 paid tothe Tanzanian government in compensati<strong>on</strong>for losing the opportunity to do anythingelse with the l<strong>and</strong>.Yet according to Tree Farms ManagingDirector Odd Ivar Løvhaugen, the firmwould have invested in Tanzania’s forestrysector regardless of possible carb<strong>on</strong> m<strong>on</strong>ey.Løvhaugen emphasised that the com panyc<strong>on</strong>siders any trade in carb<strong>on</strong> credits merelyas a supplement to those from c<strong>on</strong>venti<strong>on</strong>alforestry. The Tree Farms carb<strong>on</strong>project would thus be in breach of the requirementsfor carb<strong>on</strong> projects outlined bythe Kyoto Protocol, which disallow creditsfrom activities that would have been undertakenwithout special carb<strong>on</strong> finance.Promising various social benefits, the companyhad succeeded in overcoming villagers’reluctance to cede their uncultivated l<strong>and</strong> tothe project, but in the end pledges to providehealth <strong>and</strong> educati<strong>on</strong> services were notkept. Up to 500 local villa gers were hiredto plant <strong>and</strong> nurse the trees, build roads,or watch over the plantati<strong>on</strong>s. But plantingtook place <strong>on</strong>ly between December <strong>and</strong>March, so the work could not replace agriculturalor animal husb<strong>and</strong>ry occupati<strong>on</strong>s.In additi<strong>on</strong>, the promised wage was too low– usd 1 a day, less than the government’srecommended minimum – for anythingother than daily subsistence. Many workerswere not paid at all. Some workers interviewedby NorWatch in 2000 had eightm<strong>on</strong>ths of wages owing to them.‘When we asked about the salaries’, commentedthe residents of Uchindile village,‘the company told us that the m<strong>on</strong>ey camefrom a place far away <strong>and</strong> that there wasnothing that could be d<strong>on</strong>e about it’.Source: Jorn Stave, NorWatch/The Futurein Our H<strong>and</strong>s, ‘Carb<strong>on</strong> Upsets: Norwegian“Carb<strong>on</strong> Plantati<strong>on</strong>s” in Tanzania’, inFriends of the Earth, Tree Trouble, Friendsof the Earth, Asunci<strong>on</strong>, 2000.In sum, the project was not just a ‘lose-lose’ initiative for forestry <strong>and</strong>local people, as c<strong>on</strong>cluded by the EU-funded study, 36 but in fact a‘lose-lose-lose’ state of affairs. The forestry effects of the scheme were
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 243‘The biggest problem ishow to secure food for thefamily. All our gardens,where we used to get food,have been taken over bythe park rangers’.Amina Gid<strong>on</strong>go,widow <strong>and</strong> mother ofseven children living in acave as a result of havingbeen evictedunhealthy, local villagers were suffering, <strong>and</strong>, as Trygve Refsdal, advisorto the Ug<strong>and</strong>an forest authorities, warned, Ug<strong>and</strong>a was in dangerof being subjected to a ‘new form of col<strong>on</strong>ialism’:Forest-planting in Ug<strong>and</strong>a <strong>and</strong> other poor countries must, firstly,aim to meet the needs of the country <strong>and</strong> the local people, notthe needs of the “internati<strong>on</strong>al community.” If these can be combined,it’s OK, but experience from similar initiatives show thatlocal interests, local needs, <strong>and</strong> traditi<strong>on</strong>al l<strong>and</strong> rights are easilypushed aside, <strong>and</strong> that l<strong>and</strong> c<strong>on</strong>fl icts arise when outside commercialinterests enter. 37Growing internati<strong>on</strong>al criticism ultimately prevented Tree Farmsfrom claiming carb<strong>on</strong> credits for the project. But trees c<strong>on</strong>tinued tobe planted. After lengthy negotiati<strong>on</strong>s, the Norwegian owners c<strong>on</strong>cededa little under 5 per cent of the l<strong>and</strong> they had leased from thegovernment to local people, but locals complained that they were stillpaid badly <strong>and</strong> that most of the labour was not sourced locally.But perhaps the Tree Farms experience will lead to less exploitative arrangementsin the future.Sadly, the evidence suggests otherwise. The internati<strong>on</strong>al carb<strong>on</strong>ec<strong>on</strong>omy has since played a big part in stimulating l<strong>and</strong> grabs by privatedevelopers in Ug<strong>and</strong>a’s state forests. In 2003, several officials ofthe Ug<strong>and</strong>an government, including not <strong>on</strong>ly former vice-presidentDr Specioza Kazimbwe but also officials familiar with the internati<strong>on</strong>alclimate negotiati<strong>on</strong>s, received large c<strong>on</strong>cessi<strong>on</strong>s for l<strong>and</strong> suitablefor afforestati<strong>on</strong> <strong>and</strong> reforestati<strong>on</strong>, while communities applyingfor c<strong>on</strong>cessi<strong>on</strong>s were left empty-h<strong>and</strong>ed <strong>and</strong> may be excluded fromaccess to the forests in the future.In additi<strong>on</strong>, a carb<strong>on</strong> project of the Ug<strong>and</strong>a Wildlife Authority (UWA)<strong>and</strong> The Netherl<strong>and</strong>s’s FACE Foundati<strong>on</strong> 38 to plant trees in a nati<strong>on</strong>alpark has c<strong>on</strong>tributed to a raft of social <strong>and</strong> envir<strong>on</strong>mental problems.Not again!I’m afraid so. The idea sounded innocent enough: to plant mainly nativetrees in encroached-up<strong>on</strong> areas inside <strong>and</strong> al<strong>on</strong>g the 211-kilometrel<strong>on</strong>gboundary of Mount Elg<strong>on</strong> nati<strong>on</strong>al park near the Kenyan border.In 1994, FACE undertook planting of 25,000 hectares <strong>and</strong> in returnwas given rights over the carb<strong>on</strong> supposedly sequestered – expected toamount to 2.11 milli<strong>on</strong> t<strong>on</strong>nes of CO 2 over 100 years. 39 UWA’s role wasto manage the plantati<strong>on</strong>s, protecting biodiversity, safeguard park borders<strong>and</strong> so <strong>on</strong>. In 2002, certifiers for the Societé Générale de Surveillance(SGS) found that a bit over 7,000 hectares had been planted.
244 development dialogue september 2006 – carb<strong>on</strong> tradingAs documented by Timothy Byakola of the Ug<strong>and</strong>an NGO <strong>Climate</strong><strong>and</strong> Development Initiatives, no <strong>on</strong>e denies that the project has hadsome good effects. It is acknowledged by locals as having improvedregenerati<strong>on</strong> <strong>on</strong> the boundaries of the park, particularly in areas thathad been badly encroached <strong>on</strong> by agriculture, <strong>and</strong> as having increasedstreamflow from the forest. In 2003, the UWA-FACE project waseven certified by SGS as a well-managed forest according to ForestStewardship Council (FSC) principles (for more <strong>on</strong> the FSC, see‘From The Netherl<strong>and</strong>s to the Andes – A tale from Ecuador’ <strong>on</strong> page247 <strong>and</strong> ‘Brazil – H<strong>and</strong>outs for repressi<strong>on</strong> as usual’ <strong>on</strong> page 302).But according to local council officials, the project employs fewpeople, <strong>and</strong> even then <strong>on</strong>ly during the planting period. And theevicti<strong>on</strong>s have made many homeless <strong>and</strong> hungry. In 2002, for instance,300 families were evicted from disputed l<strong>and</strong> by park rangersin Wanale, Mbale district. Complaining that they had lived <strong>on</strong> thel<strong>and</strong> for 40 years, with some even holding government l<strong>and</strong> titles,the families said that they were forced to seek refuge in neighbouringvillages where they now live in caves <strong>and</strong> mosques. Fires have tobe kept burning the whole night in the caves to protect against cold,<strong>and</strong> school-going children have had their studies disrupted. Dodgingarmed ranger patrols, children slip back to their families’ former gardensto steal what they regard as their own food. Local people havelodged a case seeking compensati<strong>on</strong> for destroyed property <strong>and</strong> thereturn of their l<strong>and</strong> with the Mbale district court.Hundreds of families have also been evicted in other locati<strong>on</strong>s, increasingsocial tensi<strong>on</strong>s. 40 In 2003, villagers disgruntled at UWA’smilitarised approach destroyed over 400 hectares of eucalyptus plantati<strong>on</strong>sin <strong>on</strong>e night. In February 2004, New Visi<strong>on</strong> newspaper reportedthat police were holding 45 people ‘suspected of encroaching <strong>on</strong>Mount Elg<strong>on</strong> nati<strong>on</strong>al park <strong>and</strong> destroying 1,700 trees’ planted by theUWA-FACE Foundati<strong>on</strong> project. 41 At a November 2004 communitymeeting held in Luwa trading center, Buwabwala sub-county, evictedlocals insisted that they would go back to the forest rather thanface starvati<strong>on</strong>. The park warden, for his part, promised that any<strong>on</strong>ecaught in the forest would be shot.In fact, so tense has the atmosphere become that Members of Parliamentfrom eastern Ug<strong>and</strong>a have appealed to the government to degazetteMt Elg<strong>on</strong>’s boundaries to ease the suffering.‘The boundaries weremade unilaterally,displacing over 10,000people. The wildlifepeople who operate thepark are very militarised,<strong>and</strong> have killed over 50people. People feel thatthe government favoursanimals more then thepeople.’David Wakik<strong>on</strong>a, Memberof Parliament, Manjiya 42But maybe a little short-term pain was necessary in order to preserve the forest<strong>and</strong> its carb<strong>on</strong>.But what else gets destroyed in the process? It’s not just a matter of
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 245Recent carb<strong>on</strong> forestryinitiatives in Ug<strong>and</strong>a havebeen researched by TimothyByakola of the Ug<strong>and</strong>an NGO<strong>Climate</strong> <strong>and</strong> DevelopmentInitiatives.temporary social dislocati<strong>on</strong>, but also farml<strong>and</strong> shortages, envir<strong>on</strong>mentaldamage outside the park, <strong>and</strong> disrupted relati<strong>on</strong>ships betweenlocal people <strong>and</strong> the forest.Today, with a populati<strong>on</strong> density of over 450 people per square kilometrein the farml<strong>and</strong>s around Mbale town <strong>and</strong> 250 per square kilometrein Kapchorwa district, the village areas bordering Mount Elg<strong>on</strong>nati<strong>on</strong>al park are the most densely populated in Ug<strong>and</strong>a, partly due toUWA evicti<strong>on</strong>s. Communities living close to the forest mainly growfood crops such as bananas, yams, sweet potatoes <strong>and</strong> vegetables atbare subsistence levels with few surpluses remaining for sale in localmarkets. Producti<strong>on</strong> of a few cash crops such as coffee <strong>and</strong> wheat isfast dwindling due to fragmentati<strong>on</strong> of l<strong>and</strong>. A typical peasant holdingin the area averages between 0.25 <strong>and</strong> 1.0 hectares, with a householdhaving an average of 10-15 members.One result is that soils are quickly losing fertility. Most trees <strong>and</strong>other vegetati<strong>on</strong> in the villages outside the park have been cut toprovide fuelwood for cooking <strong>and</strong> building materials, leaving opendenuded slopes. Deforestati<strong>on</strong> has left l<strong>and</strong> open to erosi<strong>on</strong> as moreareas are being c<strong>on</strong>verted to agriculture. In 1996, a <strong>on</strong>e-kilometrel<strong>and</strong>slide killed nine people in Budesi <strong>and</strong> Buwali parish, <strong>and</strong> duringthe heavy rains of the 1997 El Niño, another five by l<strong>and</strong>slides inBunabokha village in Budesi parish. Many locals are c<strong>on</strong>cerned thatrivers flowing from the mountain are now carrying higher sedimentloads, especially during rainy seas<strong>on</strong>s. Communities <strong>and</strong> communitydevelopment organisati<strong>on</strong>s note that fisheries have suffered.All this is due to there being too many people. That’s not UWA-FACE’s fault.It’s not so simple. L<strong>and</strong> scarcity in the area is partly a result of the ‘encroachment’of the nati<strong>on</strong>al park <strong>on</strong> l<strong>on</strong>gst<strong>and</strong>ing farml<strong>and</strong>, <strong>and</strong> theh<strong>and</strong> of the evicti<strong>on</strong> authorities has unquesti<strong>on</strong>ably been strengthenedby the project.Social networks have also been endangered when UWA cuts off villagers’access to intact forest <strong>and</strong> its animals, bamboo shoots, firewood,mushrooms, vegetables, herbs, medicines, building materials, <strong>and</strong>wood used in circumcisi<strong>on</strong> cerem<strong>on</strong>ies. In Bubita sub-county, councilofficials reported that firewood is now hard to find <strong>and</strong> that peoplehave resorted to using banana leaves to prepare food, meaning they canno l<strong>on</strong>ger eat foods that require l<strong>on</strong>g cooking, such as beans. Goats <strong>and</strong>cows have to eat banana stems because the forest where they used tograze <strong>on</strong> grass is now a no-go area. In Buwabwala, many young girlsare crossing over to neighbouring Kenya to earn m<strong>on</strong>ey to buy l<strong>and</strong> fortheir parents. Some have moved into prostituti<strong>on</strong> <strong>and</strong> c<strong>on</strong>tracted HIV.
246 development dialogue september 2006 – carb<strong>on</strong> tradingBut hasn’t the project improved the ec<strong>on</strong>omy of the regi<strong>on</strong>?Locals indignantly reject FACE Foundati<strong>on</strong> claims that the projecthas increased incomes, improved st<strong>and</strong>ards of living work, providedjobs in planting <strong>and</strong> nurseries, <strong>and</strong> given out seedlings for villagers toplant <strong>on</strong> their farms.A Funny Place to Store Carb<strong>on</strong>: L<strong>and</strong> Disputes at Mount Elg<strong>on</strong>Mount Elg<strong>on</strong> was first gazetted as a CrownForest in 1938 <strong>and</strong> became a central forestreserve in 1968 <strong>and</strong> a nati<strong>on</strong>al park in 1993.But the area has a l<strong>on</strong>g history of humanoccupati<strong>on</strong> <strong>and</strong> use. Already in the 1930s,many families were living within theboundary, with about 70 heritable licencesissued to families living <strong>and</strong> cultivatingthe forest reserve. In 1954, when the firstworking plan for Mount Elg<strong>on</strong> forest reservewas written, there were still around30 licensed families living there.Forest boundaries were originally markedby holes. In 1962, the forest was resurveyed<strong>and</strong> live boundary markers, including treesof exotic species, were put in place. However,the boundaries were not plotted <strong>on</strong>the nati<strong>on</strong>al l<strong>and</strong> grid, making it hard later<strong>on</strong> to establish where they had been whenthe markers were destroyed.Between 1970 <strong>and</strong> 1985, during an era ofbreakdown of law <strong>and</strong> order, high levels ofindustrial timber exploitati<strong>on</strong> <strong>and</strong> c<strong>on</strong>fusedforest policy, some 25,000 hectares of primehigh m<strong>on</strong>tane forest between 2000 <strong>and</strong>3000 metres in altitude were destroyed ordegraded through clearing for agriculturalactivities. Pit-sawing combined with swiddencultivati<strong>on</strong> reduced the densely-forestedlower slopes to barer l<strong>and</strong>scapes col<strong>on</strong>ised byKikuyu grass (Pennisetum cl<strong>and</strong>estinum). 43In 1993, Mount Elg<strong>on</strong> was designated as anati<strong>on</strong>al park. But local people were notc<strong>on</strong>sulted, in violati<strong>on</strong> of the law. Familiesfound inside the 1963 boundaries – someof whom had occupied the l<strong>and</strong> for over40 years – were given nine days to vacate,despite the underst<strong>and</strong>ing am<strong>on</strong>g many ofthem that the l<strong>and</strong> was theirs <strong>and</strong> that sucharbitrary evicti<strong>on</strong>s are in breach of l<strong>and</strong>laws as well as the subsequent 1995 C<strong>on</strong>stituti<strong>on</strong>,which recognises customary ownership.In August 2003, the Ug<strong>and</strong>a L<strong>and</strong> Alliancestarted proceedings against the AttorneyGeneral <strong>and</strong> the UWA <strong>on</strong> behalf of theBenet people (also known as Ndorobo), whoare indigenous to Mount Elg<strong>on</strong>. The Benet,who had been evicted in both 1983 <strong>and</strong> 1993,had decided to take the government to courtto claim their l<strong>and</strong> rights, <strong>and</strong> accused theUWA of harassment. The government cutoff educati<strong>on</strong> <strong>and</strong> health services to the area<strong>and</strong> forbade local people from working thel<strong>and</strong>. In October 2005, however, Justice J.B.Katutsi ruled that the Benet people ‘are historical<strong>and</strong> indigenous inhabitants of the saidareas which were declared a Wildlife ProtectedArea or Nati<strong>on</strong>al Park’. Katutsi ruledthat the area should be de-gazetted <strong>and</strong> thatthe Benet should be allowed to live <strong>on</strong> <strong>and</strong>c<strong>on</strong>tinue farming their l<strong>and</strong>. 44
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 247Costa Rica –‘Envir<strong>on</strong>mental services’ pi<strong>on</strong>eerCosta Rica has always beenNicaragua<strong>on</strong>e of the countries in LatinAmerica keenest to host carb<strong>on</strong>forestry projects <strong>and</strong> other‘envir<strong>on</strong>mental services’ marketschemes. In the mid-1990s,Costa Ricalooking for new ways to derivevalue from its forests, it decidedto become the first countryto bring its own governmentbacked<strong>and</strong> -certified carb<strong>on</strong>for estry credits into the globalmarket, 45 <strong>and</strong> even before Kyoto was signed was selling them to theNorwegian government <strong>and</strong> Norwegian <strong>and</strong> US corporati<strong>on</strong>s.PanamaTo work <strong>on</strong> the scheme, Costa Rica hired Pedro Moura-Costa, a Brazilianforester with experience in early Malaysian carb<strong>on</strong> forestry projectsbacked by New Engl<strong>and</strong> <strong>Power</strong> of the US <strong>and</strong> The Netherl<strong>and</strong>s’ FACE(see ’From The Netherl<strong>and</strong>s to the Andes – A tale from Ecuador’ <strong>and</strong>‘The story c<strong>on</strong>tinues – Carb<strong>on</strong> forestry in Ug<strong>and</strong>a’). Moura-Costain turn c<strong>on</strong>vinced Societé Générale de Surveillance (SGS), <strong>on</strong>e theworld‘s leading testing, inspecti<strong>on</strong> <strong>and</strong> certificati<strong>on</strong> companies, to useCosta Rica as a test site for learning how to make m<strong>on</strong>ey as a carb<strong>on</strong>credit certifier. On the back of his own experience, Moura-Costa thenset up a new carb<strong>on</strong> c<strong>on</strong>sultancy, EcoSecurities.Also significant was an early Costa Rican project called CARFIX, implementedby the voluntary organisati<strong>on</strong> Fundación para el Desarrollode la Cordillera Volcanica Central <strong>and</strong> funded by US Aid for Internati<strong>on</strong>alDevelopment (USAID), the Global Envir<strong>on</strong>mental Facility <strong>and</strong>Norwegian financiers. CARFIX earned its North American sp<strong>on</strong>sorscarb<strong>on</strong> credits by promoting ‘sustainable logging’ <strong>and</strong> tree plantati<strong>on</strong>s<strong>on</strong> ‘grazed or degraded l<strong>and</strong>s’, claiming to provide local people withincome they would otherwise have to earn through export agriculture<strong>and</strong> cattle producti<strong>on</strong> that endangers forests. 46 Following the emergenceof the Kyoto Protocol in 1997, Costa Rica pushed for the certificati<strong>on</strong>techniques it had pi<strong>on</strong>eered to be adopted around the globe, <strong>and</strong>signed further carb<strong>on</strong> deals with Switzerl<strong>and</strong> <strong>and</strong> Finl<strong>and</strong>.Costa Rica’s enthusiasm for carb<strong>on</strong> off set projects seems to suggest that thereare a lot of benefi ts in this market for the South, after all.
248 development dialogue september 2006 – carb<strong>on</strong> tradingThe enthusiasm is not unanimous, even in Costa Rica. In fact, theboom in carb<strong>on</strong> forestry fits into an existing trend of support form<strong>on</strong>oculture tree plantati<strong>on</strong>s that has aroused c<strong>on</strong>cern am<strong>on</strong>g localenvir<strong>on</strong>mentalists. Between 1960 <strong>and</strong> 1985, about 60 per cent ofCosta Rica’s forests disappeared due to cattle farming. Then therewas a ‘wood shortage’ scare, <strong>and</strong> the government subsidised m<strong>on</strong>oculturetree plantati<strong>on</strong>s extensively between 1980 <strong>and</strong> 1996. Helpedby govern ment incentives, over 130,000 hectares have been coveredby the plantati<strong>on</strong>s over the past 20 years. By 2000, plantati<strong>on</strong> m<strong>on</strong>oculturescovered over 3 per cent of Costa Rica’s territory.The Clean Development Mechanism (CDM), Costa Rican envir<strong>on</strong>mentalistsfear, may help spread the m<strong>on</strong>ocultures even further. Inthe late 1990s, a government official active in the climate negotiati<strong>on</strong>shelped promote a new law supporting m<strong>on</strong>ocultures. Half of a 3.5 percent fuel tax went into an ‘envir<strong>on</strong>mental service programme’ designedlargely to give incentives to private l<strong>and</strong>owners to be ‘green’ in a countryin which 20 per cent of the l<strong>and</strong> is nati<strong>on</strong>al parks, a few per cent indigenousterritories <strong>and</strong> the rest private l<strong>and</strong>. Under the programme, al<strong>and</strong>owner might get, for example, usd 90 per hectare per year to c<strong>on</strong>serveforest, or usd 500 per hectare over five years to establish a plantati<strong>on</strong>.In return, the state gets rights to the carb<strong>on</strong> in the plantati<strong>on</strong>,which it can use to bargain with in internati<strong>on</strong>al negotiati<strong>on</strong>s.A typical ecosystem <strong>on</strong> whicha Costa Rican plantati<strong>on</strong>might be established. Thecarb<strong>on</strong> released from thest<strong>and</strong>ing trees, removed tomake way for the plantati<strong>on</strong>,often will not appear inproject accounts.How much of this tax m<strong>on</strong>ey goes to forest c<strong>on</strong>servati<strong>on</strong>, <strong>and</strong> how much toplantati<strong>on</strong>s?Most payments under the envir<strong>on</strong>mental services programme go toforest c<strong>on</strong>servati<strong>on</strong>, but 20 per cent is used to subsidise m<strong>on</strong>ocultureplantati<strong>on</strong>s <strong>and</strong> agroforestry. This has provoked objecti<strong>on</strong>s from ecologists,academics <strong>and</strong> indigenous peoples who argue that m<strong>on</strong>ocultureplantati<strong>on</strong>s, often lucrative in themselves, can damage the soils, water<strong>and</strong> biodiversity that the programme is supposed to protect. The programmemay also so<strong>on</strong> be supported by a tax <strong>on</strong> water <strong>and</strong> electricity.Still, 20 per cent is a pretty small proporti<strong>on</strong>, isn’t it?Overall, Costa Rica is today putting usd 1.5 milli<strong>on</strong> annually into financing4,000-6,000 hectares per year of new plantati<strong>on</strong>s. That maynot seem much, but Costa Rica’s total territory is <strong>on</strong>ly a bit over 5milli<strong>on</strong> hectares. A UN Food <strong>and</strong> Agriculture Organizati<strong>on</strong> c<strong>on</strong>sultant’sstudy has suggested that the country set up even more plantati<strong>on</strong>s,up to 15,000 hectares per year, using carb<strong>on</strong> m<strong>on</strong>ey. Anotherstudy estimates that, during the period 2003-2012, some 61,000 hectaresof m<strong>on</strong>oculture plantati<strong>on</strong>s, or 7,600 a year, could be establishedin so-called ‘Kyoto areas’. That’s well above the current rate, 47
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 249implying that plantati<strong>on</strong>s could start competing aggressively for l<strong>and</strong>that might otherwise be given over to sec<strong>on</strong>dary regenerati<strong>on</strong> <strong>and</strong>c<strong>on</strong>servati<strong>on</strong> of native forest.In additi<strong>on</strong>, because CDM forestry projects, for ec<strong>on</strong>omic reas<strong>on</strong>s,would probably have to cover 1000 hectares <strong>and</strong> upwards (see below),they could well threaten the l<strong>and</strong> tenure of people carrying out otherforest projects in Costa Rica. The average l<strong>and</strong>holding in the countryis less than 50 hectares, with most parcels bel<strong>on</strong>ging to families.Well, sacrifi ces do have to be made for the climate, d<strong>on</strong>’t they?Ir<strong>on</strong>ically, <strong>on</strong>e of the things that the Costa Rican case helps show isthe impossibility of determining whether the climate would in factbenefit from a policy of pushing such projects. It also clarifies theproblems of fulfilling the c<strong>on</strong>diti<strong>on</strong>s set out in the Kyoto Protocol 48for reforestati<strong>on</strong> <strong>and</strong> forestati<strong>on</strong> carb<strong>on</strong> projects.Take, for example, a study <strong>on</strong> carb<strong>on</strong> projects d<strong>on</strong>e by the Forest<strong>and</strong> Climatic <strong>Change</strong> Project (FCCP) in Central America, jointlyexecuted by the Food <strong>and</strong> Agriculture Organizati<strong>on</strong> of the UN <strong>and</strong>the Central American Envir<strong>on</strong>mental <strong>and</strong> Development Commissi<strong>on</strong>(CCAD). 49 The study shows that available soil use maps are notprecise enough to show how carb<strong>on</strong> storage in prospective carb<strong>on</strong>sink areas (or ‘Kyoto areas’) has changed since the 1990s, <strong>and</strong> are alsohard to compare with each other. That would make accounting forincreased carb<strong>on</strong> storage over the period impossible.The study also suggests that it would be impossible to show to whatextent Kyoto carb<strong>on</strong> projects were additi<strong>on</strong>al to ‘those that the countryimplements as part of its forestry development projects’: ‘it is not possibleto predict in what exact proporti<strong>on</strong> these activities will be in orout of the Kyoto areas <strong>and</strong> any assumpti<strong>on</strong> in this respect is enormouslyuncertain’. In additi<strong>on</strong>, Kyoto carb<strong>on</strong> projects could find it hard to factorout the anthropogenic activities to encourage natural seed nurseriesthat are being promoted <strong>and</strong> funded without carb<strong>on</strong> finance.Above all, the FCCP study reveals the c<strong>on</strong>fl ict between c<strong>on</strong>venience<strong>and</strong> accuracy in measuring carb<strong>on</strong>. Measurements of soil carb<strong>on</strong> before<strong>and</strong> after the start of any carb<strong>on</strong> forestry project, it says, wouldbe too costly, even though such measurements are a key to carb<strong>on</strong> accountingfor plantati<strong>on</strong>s, which disturb soil processes c<strong>on</strong>siderably. 50Similarly, the study accepts for c<strong>on</strong>venience a blanket carb<strong>on</strong> storagefigure of 10 t<strong>on</strong>ne per hectare for grassl<strong>and</strong> sites that could be c<strong>on</strong>vertedto carb<strong>on</strong> forestry. However, Costa Rica boasts too wide a varietyof grassl<strong>and</strong>s <strong>and</strong> agricultural systems – most of them comprisinga lot of trees – for such a figure to be used everywhere. 51
250 development dialogue september 2006 – carb<strong>on</strong> tradingBut can’t you cover such unknowns just by taking the amount of carb<strong>on</strong> youthink you might be sequestering <strong>and</strong> reducing the fi gure by a certain percentage,just to be <strong>on</strong> the safe side?That’s what many carb<strong>on</strong> accountants do. The FCCP study, for example,suggests a 20 per cent deducti<strong>on</strong> from the figure designating total potentialof carb<strong>on</strong> sequestered to compensate for political <strong>and</strong> social risks <strong>and</strong>a 10 per cent deducti<strong>on</strong> to compensate for technical forestry risks.The problem with such ‘risk-discounted’ figures is that carb<strong>on</strong> sequestrati<strong>on</strong>is characterised by far more than just risk (see Chapter3). Uncertainty <strong>and</strong> scientific unknowns are other realities that biologicalcarb<strong>on</strong> accounting has to cope with. 53 In these c<strong>on</strong>diti<strong>on</strong>s, it’simpossible to be sure whether any particular numerical risk factor isc<strong>on</strong>servative enough to compensate for the unknowns involved.In Costa Rica, for instance, most m<strong>on</strong>oculture tree plantati<strong>on</strong>s areless than 20 years old, with a trend towards planting just two species– Gmelina arborea <strong>and</strong> Tect<strong>on</strong>a gr<strong>and</strong>is. Pest or disease epidemics cantherefore be expected, but their extent is incalculable. Furthermore,El Niño climate events may propagate enormous fires whose extent,again, cannot be calculated in advance. During the dry seas<strong>on</strong> of1998, in the humid tropical z<strong>on</strong>e where unc<strong>on</strong>trollable fires had neverbeen reported before, over 200,000 hectares were burned. Part of thisterritory is under m<strong>on</strong>oculture tree plantati<strong>on</strong>s. Given such realities,it’s unsurprising that the FCCP carb<strong>on</strong> project study could give noreas<strong>on</strong>s for its ‘technical’ risk figure of 10 per cent.At present, there is also little basis for guessing how much carb<strong>on</strong>sequestered in Costa Rican trees will re-enter the atmosphere <strong>and</strong>when. The FCCP study simply assumes that 50 per cent of the carb<strong>on</strong>sequestered by a given project will remain so <strong>on</strong>ce the timber hasbeen sold <strong>and</strong> used. However, the most comm<strong>on</strong> plantati<strong>on</strong> speciesin the country (Gmelina arborea) is logged at least <strong>on</strong>ce every 12 years<strong>and</strong> most of the timber is used to manufacture pallets to transport bananas.The pallets are thrown away the same year they are made <strong>and</strong>probably store carb<strong>on</strong> no l<strong>on</strong>ger than a few years – though no <strong>on</strong>e hasd<strong>on</strong>e the empirical studies necessary to be sure.The FCCP study also assumes that anthropogenic activities to fosternatural seed nurseries will result in sec<strong>on</strong>dary forests that will be inplace for at least 50 years. Accordingly, they make no deducti<strong>on</strong>s forre-emissi<strong>on</strong> of carb<strong>on</strong>. However, although current forestry law prohibitstransforming forests into grassl<strong>and</strong>s, both legal changes <strong>and</strong> illegaluse could result in large re-emissi<strong>on</strong>s whose size would be impossibleto determine in advance.A 12-year-old plantati<strong>on</strong>of Terminalia trees. Thecarb<strong>on</strong> released from erodedsoils, such as appear in thephotograph, is often missingin project accounts.
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 251Fossil Carb<strong>on</strong> vs. Tree Carb<strong>on</strong>:Two Envir<strong>on</strong>mental Historians Speak‘Carb<strong>on</strong> cannot be sequestered like bulli<strong>on</strong>.Biological preserves are not a kind ofFort Knox for carb<strong>on</strong>. Living systems storethat carb<strong>on</strong>, <strong>and</strong> those terrestrial biotas dem<strong>and</strong>a fire tithe. That tithe can be givenvoluntarily or it will be extracted by force.Taking the carb<strong>on</strong> exhumed by industrialcombusti<strong>on</strong> from the geologic past <strong>and</strong>stacking it into overripe living woodpilesis an approach of questi<strong>on</strong>able wisdom...Eliminate fire <strong>and</strong> you can build up, for awhile, carb<strong>on</strong> stocks, but at probable damageto the ecosystem up<strong>on</strong> the health ofwhich the future regulati<strong>on</strong> of carb<strong>on</strong> inthe biosphere depends. Stockpile biomasscarb<strong>on</strong>, whether in Yellowst<strong>on</strong>e Nati<strong>on</strong>alPark or in a Chilean eucalyptus plantati<strong>on</strong>,<strong>and</strong> you also stockpile fuel, the combusti<strong>on</strong>equivalent of burying toxic waste. Refuseto tend the domestic fire <strong>and</strong> the feral firewill return – as it recently did in Yellowst<strong>on</strong>e<strong>and</strong> Brazil’s Parc Naci<strong>on</strong>al das Emas,where years of fire exclusi<strong>on</strong> ended with alightning strike that seared 85 per cent ofthe park in <strong>on</strong>e fiery fl ash.’ 54 Stephen J. Pyne,Ariz<strong>on</strong>a State University‘Undeniably, having more trees will work inthe right directi<strong>on</strong> – but to a minute degree.For its practical effect [<strong>on</strong> climate change],telling people to plant trees is like tellingthem to drink more water to keep down risingsea-levels.’ 55Oliver Rackham,Cambridge UniversityTo try to overcome such problems, the Global <strong>Change</strong> Group of theTropical Agr<strong>on</strong>omic Centre for Research <strong>and</strong> Teaching (CATIE), hasbeen studying ways of putting n<strong>on</strong>-permanent biological carb<strong>on</strong> inthe same account as fossil carb<strong>on</strong> emissi<strong>on</strong>s, so that the two can beadded <strong>and</strong> subtracted. 56One proposal is called ‘t<strong>on</strong>ne-year’ accounting. The first step in t<strong>on</strong>neyearaccounting is to determine the period that a t<strong>on</strong>ne of carb<strong>on</strong> hasto be sequestered in order to have the same envir<strong>on</strong>mental effect as notemitting a t<strong>on</strong>ne of carb<strong>on</strong>. Because the lifetime of greenhouse gasesin the atmosphere is limited, this time period should be finite. If the‘equivalence factor’ is set at 100 years, then <strong>on</strong>e t<strong>on</strong>ne of carb<strong>on</strong> kept ina tree for 100 years <strong>and</strong> then released to the atmosphere is assumed tohave the same envir<strong>on</strong>mental effect as reducing carb<strong>on</strong> emissi<strong>on</strong>s froma fossil-fuelled power plant by <strong>on</strong>e t<strong>on</strong>ne.The sec<strong>on</strong>d step is to multiply the carb<strong>on</strong> stored over a particularyear or decade by the complement of this equivalence factor to findout what the climatic benefits are of that project for that year, <strong>and</strong> tolimit the carb<strong>on</strong> credits generated accordingly. So the forestry projectdoesn’t have to be permanent to generate carb<strong>on</strong> credits; it will justgenerate fewer credits the more short-lived it is.
252 development dialogue september 2006 – carb<strong>on</strong> tradingTrust Me, I’m a Doctor:Three Professi<strong>on</strong>als <strong>on</strong> How to Measure Carb<strong>on</strong> Off sets‘…I’ve often asked myself, when I’ve beenflying in an aircraft, <strong>and</strong> I’ve flown overcomplex l<strong>and</strong>scapes…how the hell can youmeasure carb<strong>on</strong> down there to a few percent? The people that measure the carb<strong>on</strong>,either by satellite measurements or byflux towers, or by, sort of, sort of lookingat the forest…all claim that within somereas<strong>on</strong> able degree of accuracy or precisi<strong>on</strong>you can do it. But when I look down<strong>on</strong> a complex l<strong>and</strong>scape, I have to be h<strong>on</strong>est,it’s…um…I get very impressed if theseguys are indeed correct. But, hey, the factthat when I look down in an aircraft <strong>and</strong>I think its going to be complicated, that’smy gut instinct versus the scientific community’s.And they claim they can dem<strong>on</strong>stratewhat precisi<strong>on</strong> <strong>and</strong> accuracy theycan get… One has to go with what thesescientists are saying.’ 57Dr Robert T. Wats<strong>on</strong>, Ex-Chairman,Intergovernmental Panel <strong>on</strong> <strong>Climate</strong> <strong>Change</strong>,interview with Cathy Fogel, Washingt<strong>on</strong> DC,6 October 2001‘If you know that saving the Amaz<strong>on</strong> isbetter for the atmosphere than keeping <strong>on</strong>ecar off the road, then you ought to be ableto calculate how many cars are equivalentto saving the Amaz<strong>on</strong>. The calculati<strong>on</strong>smay be difficult, but I d<strong>on</strong>‘t see why theproblems should be insurmountable.’ 58Dr Richard Tipper,Edinburgh Centre for Carb<strong>on</strong> Management‘Baselines are not a questi<strong>on</strong> of imaginati<strong>on</strong>.At the Internati<strong>on</strong>al Centre for Research inAgroforestry, we have developed a methodfor m<strong>on</strong>itoring <strong>and</strong> evaluati<strong>on</strong> of envir<strong>on</strong>mental<strong>and</strong> development projects that involvesproject baseline measurement for anyresp<strong>on</strong>se variable that <strong>on</strong>e deems important(e.g. household income, adopti<strong>on</strong> ofimproved farming technologies, etc.). Thissame method could easily be used for carb<strong>on</strong>accounting <strong>and</strong> take the guesswork outof ’without-project’ baselines, additi<strong>on</strong>ality<strong>and</strong> leakage. The simple soluti<strong>on</strong> to a problemthat has been overcomplicated in thedebate is: just measure it! It is really not thathard. Envir<strong>on</strong>mental m<strong>on</strong>itoring is a maturefield <strong>and</strong> rigorous methods exist for attributingproject impact.’ 59Dr Louis Verchot, Lead Scientist for<strong>Climate</strong> <strong>Change</strong>, Internati<strong>on</strong>al Centre forResearch in AgroforestryYou still haven’t menti<strong>on</strong>ed any problems.The first problem is that you still have to measure the carb<strong>on</strong> storedby a project over a particular year or decade. That runs into the sameproblems with ignorance, uncertainty <strong>and</strong> all the rest menti<strong>on</strong>edabove. Sec<strong>on</strong>d, no <strong>on</strong>e knows how l<strong>on</strong>g the ‘equivalence time’ shouldbe. Figures ranging all the way from 42 to 150 years have been menti<strong>on</strong>ed.60 Another difficulty is that even if <strong>on</strong>e settles <strong>on</strong> a figure of,
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 253A new teak plantati<strong>on</strong>near the San Carlos Riverin northern Costa Rica.Exposed soil heated bydirect tropical sunlight islikely to release significantquantities of carb<strong>on</strong>.A Costa Rican acaciaplantati<strong>on</strong>. The logs in theforeground have beendiscarded <strong>and</strong> left to rot.In a few years, they willrelease all their carb<strong>on</strong>back to the atmosphere.say, 100 years, it does not necessarily follow that carb<strong>on</strong> sequesteredfor 10 years will have <strong>on</strong>e-tenth the climatic effect of carb<strong>on</strong> sequesteredfor 100 years. Again, the problem is not that any given patchof trees is temporary, but that there’s so much uncertainty <strong>and</strong> ignoranceabout how to measure its relevance to climate. It’s not a matterof calculable ‘risk’, but something far more recalcitrant to marketaccounting.In additi<strong>on</strong>, t<strong>on</strong>ne-year accounting can make what allowances it doesmake for uncertainty <strong>on</strong>ly at the cost of generating carb<strong>on</strong> creditsslowly. That makes it unattractive to business. It also militates againstsmall projects. The CATIE study found that at prices of usd 18 pert<strong>on</strong>ne – more than actual prices as of 2006 – the t<strong>on</strong>ne-year methodologywould allow profits <strong>on</strong>ly in projects of over 40,000 hectares.Then there is a method called ‘average storage adjusted for equivalencetime’ (ASC), which generates credits more quickly.Other methods include the UN’s ‘temporary’ Certified Emissi<strong>on</strong>sReducti<strong>on</strong>s (tCERs), which expire at the end of the Kyoto Protocol’ssec<strong>on</strong>d commitment period <strong>and</strong> must be replaced if retired forcompliance in the first commitment period; <strong>and</strong> ‘l<strong>on</strong>g-term’ credits(lCER)s, which expire <strong>and</strong> must be replaced if the afforestati<strong>on</strong> orreforestati<strong>on</strong> project is reversed or fails to be verified. N<strong>on</strong>e of theseapproaches, however, address the basic problems of uncertainty <strong>and</strong>ignorance described in Chapter 3. In fact, not even the atmosphericlifetime of carb<strong>on</strong> dioxide emissi<strong>on</strong>s can be pinned down with anyprecisi<strong>on</strong>, as menti<strong>on</strong>ed above. For business, this translates into accountingheadaches <strong>and</strong> high ec<strong>on</strong>omic risk.In the end, CATIE came to the c<strong>on</strong>clusi<strong>on</strong> that CDM forestryprojects had to be big in order for it to be worthwhile to fulfil all theaccounting <strong>and</strong> other requirements. Out of a total of over 1,500 simulatedscenarios, <strong>on</strong>ly 8 per cent made it possible for projects under500 hectares to participate. The mean size of a profitable project was5,000 hectares. One way out would be to bundle smaller projectstogether <strong>and</strong> employ st<strong>and</strong>ardised assumpti<strong>on</strong>s <strong>and</strong> procedures, butagain that would magnify accounting mistakes <strong>and</strong> also would behard to achieve, given the Costa Rican l<strong>and</strong> tenure system.You’ve talked a lot about how much harder it is to measure how much carb<strong>on</strong> issequestered in tree projects than simply to keep fossil carb<strong>on</strong> in the ground. Butmaybe we d<strong>on</strong>’t need to compare carb<strong>on</strong> sequestered in trees with carb<strong>on</strong> storedin fossil deposits. We should think of forestry carb<strong>on</strong> projects like Costa Rica’sas replacing carb<strong>on</strong> released from forests, not as replacing carb<strong>on</strong> released fromfossil fuel combusti<strong>on</strong>. This should solve the measurement problem, since all wehave to do is compare biotic carb<strong>on</strong> with other biotic carb<strong>on</strong>.
254 development dialogue september 2006 – carb<strong>on</strong> tradingNo, the same problems hold: how do you quantify carb<strong>on</strong> savingsagainst an unspecifiable baseline, given the biological <strong>and</strong> social unknownsgoverning carb<strong>on</strong> flows in the above-ground systems? (SeeChapter 3.)Yes, climate change can be addressed by trying to c<strong>on</strong>serve forestsjust as it can be addressed by keeping fossil fuels in the ground. Butit can’t be verifiably addressed by burning forests <strong>and</strong> then ‘compensating’for this burning with biotic projects, any more than it can beverifiably addressed by mining fossil fuels <strong>and</strong> then ‘compensating’ forthe associated carb<strong>on</strong> transfer to the biosphere with biotic projects.What’s the future for Costa Rican carb<strong>on</strong> forestry projects?The government has recently declared that it will put more effort int<strong>on</strong><strong>on</strong>-forestry projects such as windmills <strong>and</strong> hydroelectric schemes,<strong>on</strong> the grounds that they are less complicated <strong>and</strong> yield higher-pricedcarb<strong>on</strong> credits. On the other h<strong>and</strong>, companies such as the US-basedRainforest Credits Foundati<strong>on</strong> 61 c<strong>on</strong>tinue to be eager to set up newcarb<strong>on</strong> schemes in Costa Rica, often without much prior c<strong>on</strong>sultati<strong>on</strong>with the government.Research for the secti<strong>on</strong><strong>on</strong> Costa Rica was d<strong>on</strong>eby Javier Baltodano ofFriends of the Earth,Costa Rica.India – A taste of the futureAfganistanPakistanNepalChinaBhut.Bang.BurmaIf countries in Latin Americapi<strong>on</strong>eered carb<strong>on</strong> projects, <strong>on</strong>eof the countries to attract themost l<strong>on</strong>g-term interest am<strong>on</strong>gcarb<strong>on</strong> traders <strong>and</strong> investorshas been India.IndiaBy August 2006, the countryled all others in number ofCDM projects registered with82, followed by Brazil with58. 62 Many more are in thepipeline. 63 The Indian governmentis also pressing for nuclearpower <strong>and</strong> large hydroelectric dams to be allowed to receiveCDM funding, <strong>and</strong>, according to some observers, hopes to use carb<strong>on</strong>m<strong>on</strong>ey for developments in the country’s Northeast that would dispossesslocal people of water, l<strong>and</strong> <strong>and</strong> forests. 64With about 350 projects at various stages of registrati<strong>on</strong>, the poten-
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 255tial for n<strong>on</strong>-plantati<strong>on</strong> CDM projects is estimated by <strong>on</strong>e source atmore than 170 milli<strong>on</strong> t<strong>on</strong>nes of carb<strong>on</strong> dioxide equivalent per year,including 90 milli<strong>on</strong> t<strong>on</strong>nes from renewable energy schemes, whilethe potential yield of l<strong>and</strong>-use <strong>and</strong> plantati<strong>on</strong> projects is put at about78 milli<strong>on</strong> t<strong>on</strong>nes of carb<strong>on</strong> dioxide equivalent annually. 65 A CDMNati<strong>on</strong>al Strategy Study predicts that India could take 10-15 percentof the global CDM market.As social activist Soumitra Ghosh <strong>and</strong> researcher Hadida Yasminexplain, a ‘friendly <strong>and</strong> indulgent’ nati<strong>on</strong>al CDM authority which‘clears CDM projects in India almost as so<strong>on</strong> as they are submitted’,a ‘ “clean” <strong>and</strong> aggressive corporate sector’, <strong>and</strong> a ‘happy b<strong>and</strong>of new-age nati<strong>on</strong>al as well as transnati<strong>on</strong>al validators, c<strong>on</strong>sultants<strong>and</strong> project developers have made India a veritable paradise for CDMprojects.’ 66 News about CDM projects <strong>and</strong> the income they will supposedlygenerate is boosting stock prices in even some of the worstpollutingsectors, such as sp<strong>on</strong>ge ir<strong>on</strong> (see below). Accordingly, manyof the big names of the Indian corporate world – Reliance, Tata,Birla, Ambuja, ITC – are moving in, in spite of earlier apprehensi<strong>on</strong>sthat market uncertainty <strong>and</strong> the complex procedures that CDM involveswould put off big companies.Some of these firms are coming up with smaller-scale projects in renewableenergy <strong>and</strong> energy efficiency. At an ITC paper <strong>and</strong> pulp operati<strong>on</strong>in Andhra Pradesh, for instance, six separate CDM projectsare being arranged inside the same factory. Bundled hydro <strong>and</strong> windprojects—<strong>and</strong> biomass—are also industry favourites due to a less riskyregistrati<strong>on</strong> procedure. However, nearly 85 per cent of Indian carb<strong>on</strong>credits are being generated by <strong>on</strong>ly two projects. Both projects – setup by blue-chip corporati<strong>on</strong>s SRF in Rajasthan <strong>and</strong> GFL in Gujarat –destroy HFCs, which are extremely powerful greenhouse gases usedin refrigerati<strong>on</strong>, air c<strong>on</strong>diti<strong>on</strong>ing, <strong>and</strong> industrial processes. 67Inevitably, social activists are raising questi<strong>on</strong>s about whether such<strong>on</strong>e-off gas destructi<strong>on</strong> projects provide ‘any credible sustainable development’to local communities. 68Why shouldn’t such projects be benefi cial to local communities?First, because HFCs are so bad for the climate, projects that destroythem can generate huge numbers of lucrative credits merely by boltinga bit of extra machinery <strong>on</strong>to a single existing industrial plant.As a result, there are no knock-<strong>on</strong> social benefits other than providingincome for the machinery manufacturer <strong>and</strong> some experience fora few technicians. Sec<strong>on</strong>d, such projects d<strong>on</strong>’t help society becomeless dependent <strong>on</strong> fossil fuels. They d<strong>on</strong>’t advance renewable energy
256 development dialogue september 2006 – carb<strong>on</strong> tradingsources, <strong>and</strong> they d<strong>on</strong>’t help societies organise themselves in ways thatrequire less coal, oil or gas. Third, by ensuring that the market forcredits from carb<strong>on</strong> projects is dominated by large industrial firms,they make it that much more difficult for renewable energy or efficiencyprojects to get a foothold.D<strong>on</strong>’t such projects also provide perverse incentives for governments not to doanything about polluti<strong>on</strong> except through the carb<strong>on</strong> market? If I were a governmenttrying to help the industries in my country get masses of carb<strong>on</strong> creditsfrom destroying a few HFCs, I would hesitate to pass laws to clean up HFCs.Such laws wouldn’t make industry any m<strong>on</strong>ey. In fact, they would cost industry.Instead, why not just allow the polluti<strong>on</strong> to go <strong>on</strong> until some<strong>on</strong>e comesal<strong>on</strong>g off ering m<strong>on</strong>ey if it is cleaned up? 69That’s a questi<strong>on</strong> that’s underst<strong>and</strong>ably going through the minds ofgovernment officials in many Southern countries (as well as of those ofcorporate executives in the North). As a result, it’s not clear whetherthe CDM market is actually a force for less polluti<strong>on</strong> or not.Another danger is that HFC projects could undermine the 1987 M<strong>on</strong>treal Protocol <strong>on</strong> Substances that Deplete the Oz<strong>on</strong>e Layer. Whilethis Protocol m<strong>and</strong>ates phasing out of HFCs in Southern countriesby 2010, the CDM has now provided a perverse incentive to hikeproducti<strong>on</strong> of HFCs in order to cash in as much as possible <strong>on</strong> creditsales. Although the CDM board has raised the issue with governments,no decisi<strong>on</strong> has been made to limit the number of HFC creditsor bar new plants from entering the CDM market.But at least HFC projects d<strong>on</strong>’t do any harm to local people, right?That’s a matter of opini<strong>on</strong>. If the industry getting the credits is hurtinglocal people, local people may well disagree with the project. NearGujarat, at Fluorochemicals Limited, proprietor of <strong>on</strong>e of India’s firstprojects to be registered with the CDM, villagers complain of air polluti<strong>on</strong>’seffects <strong>on</strong> their crops, especially during the rainy seas<strong>on</strong>, <strong>and</strong> believethe plant’s ‘solar oxidati<strong>on</strong> p<strong>on</strong>d’ adds to local water polluti<strong>on</strong>. 72Villagers near another factory hoping to benefit from CDM credits,Rajasthan’s SRF Fluorochemicals, believe that their aquifers are beingdepleted <strong>and</strong> their groundwater polluted, leading to allergies,rashes, crop failure, <strong>and</strong> a lack of safe drinking water.What about other industrial projects?One of the industries that is benefiting most from the CDM is thenotoriously dirty sp<strong>on</strong>ge ir<strong>on</strong> sector.
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 257The Fate of Small ProjectsThe CDM’s market structure biases itagainst small community-based projects,which tend not to be able to afford thehigh transacti<strong>on</strong> costs necessary for eachscheme (see Chapter 3). In India, for example,the Barefoot College has trained20 – 30 solar engineers, who have installedgrid solar power stati<strong>on</strong>s <strong>and</strong> solar lanternsacross the country. Such projects ‘have difficultyaccessing CDM finance,’ accordingto Bunker Roy of the College, due tothe need for ‘upfr<strong>on</strong>t financing’ <strong>and</strong> ‘bundling’projects together to save <strong>on</strong> transacti<strong>on</strong>costs. 70Another project, the FaL-G Brick Project,aims to promote fly ash bricks as an alternativeto burnt clay bricks in the Indian c<strong>on</strong>structi<strong>on</strong>sector. Fly ash, a waste productfrom thermal power plants, is mixed withlime from the acetylene industry <strong>and</strong> gypsumfrom chemical plants to form a materialfor making bricks that requires less fossilenergy than c<strong>on</strong>venti<strong>on</strong>al materials.The process is unsustainable in that it relies<strong>on</strong> a fossil fuel-intensive industry, whoselifespan it would extend through sales ofcarb<strong>on</strong> credits. In additi<strong>on</strong>, fly ash poses ahealth hazard to the workers who h<strong>and</strong>leit. The project thus adds to the numbersof people suffering health risks due to fossilfuels in two ways: by prol<strong>on</strong>ging fossilfuel polluti<strong>on</strong> around thermal power plantsbuying the credits, <strong>and</strong> by bringing a newgroup into c<strong>on</strong>tact with hazardous fly ash.The FaL-G project would ordinarily besubject to the same market h<strong>and</strong>icap assmall solar projects, since the brickmakersto be included tend to be small operati<strong>on</strong>s<strong>and</strong> the ‘volume of emissi<strong>on</strong> rightsgenerated by an individual plant is clearlynot sufficient to treat an individual plantas a separate small-scale CDM project’.The World Bank’s Community DevelopmentCarb<strong>on</strong> Fund, however, has steppedin to make it possible to ‘bundle’ togetherhundreds of these tiny plants – located instates as distant from each other as TamilNadu, Karnataka, Orissa, Uttar Pradesh<strong>and</strong> Punjab – under a single project umbrella,streamlining costs. 71What’s sp<strong>on</strong>ge ir<strong>on</strong>?Sp<strong>on</strong>ge ir<strong>on</strong> is an impure form of the metal obtained from removingthe oxygen from ir<strong>on</strong> ore. Its manufacture requires a lot of water <strong>and</strong>energy supplied by gas or, more frequently, coal.In what ways is it envir<strong>on</strong>mentally damaging?In Chhattisgarh state, the most polluted in the country, sp<strong>on</strong>ge ir<strong>on</strong>factories have c<strong>on</strong>taminated drinking water <strong>and</strong>, by lifting huge quantitiesof water from rivers <strong>and</strong> irrigati<strong>on</strong> canals, lowered water tables. 73Sp<strong>on</strong>ge ir<strong>on</strong> works, which are subsidized by the state, also cause heavyair polluti<strong>on</strong>, often in breach of polluti<strong>on</strong> c<strong>on</strong>trol norms, affectinghealth <strong>and</strong> agriculture. As of 2005, 33 out of 48 sp<strong>on</strong>ge ir<strong>on</strong> units inChhatisgarh were operating without having obtained statutory clear-
258 development dialogue september 2006 – carb<strong>on</strong> tradingances from the state’s Polluti<strong>on</strong> C<strong>on</strong>trol Board. 74 According to a reportof the State Polluti<strong>on</strong> C<strong>on</strong>trol Authority, 36 of the units are in violati<strong>on</strong>of envir<strong>on</strong>mental polluti<strong>on</strong> laws. In Siltara area of Raipur district, l<strong>and</strong>near 18 sp<strong>on</strong>ge ir<strong>on</strong> units has become barren. 75 Government soil testsfrom 30 separate sites in various villages found the soil to be c<strong>on</strong>taminatedwith ir<strong>on</strong>, affecting crop yields. Stored paddy seeds fail to regenerate,<strong>and</strong> even 50 kilometres away, producti<strong>on</strong> has suffered. Vegetablesgrown in the area turn reddish due to excessive air polluti<strong>on</strong>.In the last eight years al<strong>on</strong>e, 17,200 hectares were acquired for industrialpurposes in the state, displacing many villagers. Entrepreneurstypically acquire their first parcel of l<strong>and</strong> through official channelssuch as the State Industrial Development Corporati<strong>on</strong>, which in turnacquires its holdings from private owners at below market rates. Theentrepreneurs are then are able to buy adjoining parcels at bargainprices after the polluti<strong>on</strong> from their factories renders them useless forfarming. Sellers are often left with few resources to restart their liveselsewhere, <strong>and</strong> are seldom able to find employment at the factories.And many new plants are c<strong>on</strong>templated or under c<strong>on</strong>structi<strong>on</strong>.The internet faceof Jindal Steel <strong>and</strong><strong>Power</strong>. The reality isquite different.It sounds like there are some serious problems with this industry. But that’s agood argument for CDM involvement, isn’t it? Isn’t it the functi<strong>on</strong> of CDMto help clean things up?Is the CDM helping to clean the industry up, or is it providing newfinance <strong>and</strong> a pleasant image for a socially <strong>and</strong> envir<strong>on</strong>mentallydamaging status quo? Let’s look at the evidence.Start with the biggest sp<strong>on</strong>ge ir<strong>on</strong> operator, Jindal Steel <strong>and</strong> <strong>Power</strong>Ltd. (JSPL). JSPL runs what it claims to be the largest sp<strong>on</strong>ge ir<strong>on</strong>plant in the world near Raigarh city, where it is developing not <strong>on</strong>ebut four separate CDM projects that have already been approved byIndia’s government <strong>and</strong> validated. JSPL’s carb<strong>on</strong> projects are likely to
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 259make it <strong>on</strong>e of the largest energy CDM operati<strong>on</strong>s anywhere in theworld, generating many milli<strong>on</strong>s of t<strong>on</strong>nes of so-called carb<strong>on</strong> dioxide‘reducti<strong>on</strong>s’. Spread over 320 hectares, the plant has simply wipedout the <strong>on</strong>ce flourishing agricultural village of Patrapali, which it stillgives as its address.C<strong>on</strong>cerned citizens <strong>and</strong> a voluntary organizati<strong>on</strong> have filed a caseagainst JSPL in the state High Court over a proposed expansi<strong>on</strong> ofits existing facilities. City dwellers object to increasing air <strong>and</strong> waterpolluti<strong>on</strong> <strong>and</strong> ill health. Rural dwellers are angry at losing their l<strong>and</strong>s.JSPL’s plans include a 20-billi<strong>on</strong>-rupee expansi<strong>on</strong> over three surroundingvillages which, with a populati<strong>on</strong> of close to 3000, are located<strong>on</strong> fringe of mixed deciduous, sal, bamboo, <strong>and</strong> teak forests.Agriculture is a major occupati<strong>on</strong>, <strong>and</strong> villagers are also engaged inthe collecti<strong>on</strong> of n<strong>on</strong>-timber forest produce. In 2005, villagers from22 communities submitted written resoluti<strong>on</strong>s that they did not wantto sell or d<strong>on</strong>ate their l<strong>and</strong> to industry.For more than a decade, villagers from 18 communities have alsoopposed a dam JSPL wants to build <strong>on</strong> the Kurkut river to cater toits needs for water <strong>and</strong> power, managing to halt c<strong>on</strong>structi<strong>on</strong> whenvarious village heads wrote to the Chief Minister. Having alreadylost 240 hectares of their revenue l<strong>and</strong> to JSPL, farmers in Khairpurvillage in Raigarh are meanwhile refusing to surrender any more,<strong>and</strong> complain about musclemen <strong>and</strong> touts sent by JSPL to pressurethem to capitulate. They are also c<strong>on</strong>cerned about a new reservoirJSPL is c<strong>on</strong>structing that would inundate their entire agricultural area(which is irrigated <strong>and</strong> yields two crops a year) <strong>and</strong> force them to migratein search of other work.Aren’t there ways of mediating between the factory <strong>and</strong> local villagers?A public hearing <strong>on</strong> the JSPL expansi<strong>on</strong> – m<strong>and</strong>ated by Indian law– was scheduled for 4 January 2005. But local people’s c<strong>on</strong>cerns <strong>and</strong>objecti<strong>on</strong>s could not be heard, because JSPL brought a large numberof supporters <strong>and</strong> the proceedings were disrupted. The meeting wasrescheduled for 18 January 2005 <strong>and</strong> then 29 January. An allianceof local civil society organizati<strong>on</strong>s pointed out that both postp<strong>on</strong>ementswere made without the statutory 30 days’ notice period, <strong>and</strong>that the Hindi versi<strong>on</strong> of the report <strong>and</strong> executive summary had notbeen made available. In the event, no actual public hearing was c<strong>on</strong>ducted<strong>on</strong> 29 January, in spite of the fact that more than 10,000 peopleshowed up. Instead, people were asked to queue up to register theircomplaints <strong>and</strong> oppositi<strong>on</strong> without interacting with the public hearingpanel. The envir<strong>on</strong>mental impact assessment prepared for the expansi<strong>on</strong>does not properly address the project’s impact <strong>on</strong> local forests
260 development dialogue september 2006 – carb<strong>on</strong> tradingor the dumping of solid wastes <strong>and</strong> fly ash <strong>and</strong> the associated heavymetal c<strong>on</strong>taminati<strong>on</strong> of water sources. A ‘no objecti<strong>on</strong>’ certificateJSPL claimed to have obtained from the village council of Tamnar fora thermal power plant has meanwhile proved to be a forgery.But surely JSPL must be an isolated case.Unfortunately, no. Villagers are also protesting the officially- sancti<strong>on</strong>edacquisiti<strong>on</strong> of 21 hectares by M<strong>on</strong>net Steel Industries, another CDMsp<strong>on</strong>ge ir<strong>on</strong> beneficiary, in Singhanpur, saying that ‘we will die but willnot give up our l<strong>and</strong> <strong>and</strong> homes’. In May 2005, Nalwa Sp<strong>on</strong>ge Ir<strong>on</strong>,MSP Steel, Salasar Industries, Shivshakti Factory <strong>and</strong> Anjani Steels – allCDM beneficiaries – were issued a notice by the local forest officer regardingsoot polluti<strong>on</strong> damaging trees <strong>and</strong> crops. N<strong>on</strong>e of the industrialunits in the area is following envir<strong>on</strong>mental laws of the country <strong>and</strong>the state, the notice said. All of the firms have seen resoluti<strong>on</strong>s passedagainst their l<strong>and</strong> acquisiti<strong>on</strong>s in local village assemblies. 76MSP Steel, whose CDM project has already been approved by India’sgovernment, has meanwhile illegally occupied reserved forest in theJamga<strong>on</strong> area of Raigadh next to its plant, stirring protests <strong>and</strong> resoluti<strong>on</strong>sfrom the assemblies of nearby villages. According to a doctorfrom the Jamga<strong>on</strong> Primary Health Center, in the year since theplant went into operati<strong>on</strong>, cases of asthma <strong>and</strong> other respiratory <strong>and</strong>gastric diseases have increased 20 times. MSP has also felled trees <strong>and</strong>started building a factory <strong>and</strong> road <strong>on</strong> farml<strong>and</strong> in Manuapali withoutproper permissi<strong>on</strong>. In March 2005, local villagers blocked a nati<strong>on</strong>alhighway in protest against M<strong>on</strong>net’s plans to acquire 120 hectares oftheir l<strong>and</strong>. Villagers have also protested <strong>and</strong> petiti<strong>on</strong>ed against l<strong>and</strong>acquisiti<strong>on</strong> by Ind Agro Synergy Ltd., another firm with an alreadyvalidated CDM project in the works. Many firms are also in breachof the law stating that electrostatic precipitators have to be in operati<strong>on</strong>to curb air polluti<strong>on</strong>.‘There are some localNGOs complaining thatthe CDM is just there toclean up after the North.But these groups d<strong>on</strong>’tgo to [United Nati<strong>on</strong>s]C<strong>on</strong>ferences of the Parties.’Ram Babu,PriceWaterhouseCoopers,Mumbai, 2005But perhaps it’s just in Chhattisgarh that the CDM is associated with suchoperati<strong>on</strong>s.Again, no. In West Bengal, a sp<strong>on</strong>ge ir<strong>on</strong> plant run by Jai BalajiSp<strong>on</strong>ge Limited of Kolkata in Ranigunj, Burdwan has a waste heatrecovery project set to generate over 400,000 t<strong>on</strong>nes of carb<strong>on</strong> dioxideequivalent in credits through the Kyoto Protocol’s first commitmentperiod. In 2004, angry residents of nearby Mangalpur villageforcibly closed the gates of the factory in a symbolic protest againstpolluti<strong>on</strong>. They claim that the firm dumps fly ash <strong>on</strong> open fields, agriculturall<strong>and</strong>, <strong>and</strong> a children’s playground, <strong>and</strong> that emissi<strong>on</strong>s haveincreased. Old people <strong>and</strong> children, the worst sufferers, complain of
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 261breathing problems <strong>and</strong> persistent colds <strong>and</strong> coughs. Walls <strong>and</strong> windowsof hutments in the village are covered with black spots. Accordingto <strong>on</strong>e villager, paddy producti<strong>on</strong> is decreasing each year.Numerous fines have been levied against the plant for polluti<strong>on</strong> since2001. Uni<strong>on</strong> leaders say that polluti<strong>on</strong> has been reduced, but chargemanagement with running the plant’s electrostatic precipitator <strong>on</strong>lyduring the day, to save m<strong>on</strong>ey.Some 90 per cent of the factory’s workers, mostly illiterate <strong>and</strong> fromneighbouring states, are temporary. N<strong>on</strong>-uni<strong>on</strong>ised workers get <strong>on</strong>lyusd 1.50 per day <strong>and</strong> sometimes have to work 16 hours a day <strong>on</strong> a nowork-no pay basis. No drinking water or toilets are available. Mostworkers, permanent staff <strong>and</strong> uni<strong>on</strong> leaders interviewed at the factorywere unaware of the CDM project <strong>and</strong> of carb<strong>on</strong> trading <strong>and</strong> its financialimplicati<strong>on</strong>s. One local NGO worker had learned about the CDMproject <strong>on</strong>ly from the Telegraph, a newspaper published in Kolkata.Another CDM project of about the same size, aimed at using wasteheat from kilns <strong>and</strong> blast furnace gases from pig ir<strong>on</strong> producti<strong>on</strong> togenerate electricity, is run by SRBSL in Durgapur, Burdwan. Most ofthe 1700 workers are c<strong>on</strong>tract labourers, who get <strong>on</strong>ly usd 1.30–1.50for 12 hours’ work, without the medical benefits provided for the 30staff. Releases of dust, smoke <strong>and</strong> gases from the plant again result inrespiratory problems am<strong>on</strong>g local residents, especially the very young<strong>and</strong> very old. Workers’ living quarters are covered with a thick layerof coal dust. Water tables <strong>and</strong> paddy yields have declined, <strong>and</strong> p<strong>on</strong>dsor ring wells always remain covered with a foul, thick layer of blackdust. Local farmers <strong>and</strong> labourers have also been deprived of what wascomm<strong>on</strong> l<strong>and</strong> used in part for cultivati<strong>on</strong>. N<strong>on</strong>e of the people interviewed– the management representative, the uni<strong>on</strong> leader, factoryworkers or villagers – were aware of carb<strong>on</strong> trading.West Bengal polluting firms in other sectors are also cashing in <strong>on</strong> theopportunity to get carb<strong>on</strong> m<strong>on</strong>ey. Jaya Shree Textiles in Prabasnagar,for example, has upgraded boilers <strong>and</strong> modified motors to reduce energyuse, but still pollutes the locality. Its workers remain uninformedabout the extra finance supplied by its CDM project.What about smaller projects – <strong>on</strong>es that d<strong>on</strong>’t generate so many credits? Arethere any local objecti<strong>on</strong>s to them?Some of the many biomass carb<strong>on</strong> projects planned for India arealso rousing local c<strong>on</strong>cerns. One example is the 20-megawatt RK<strong>Power</strong>gen Private Limited generating plant at Hiriyur in Chitradurgadistrict of Karnataka, which is currently preparing a Project DesignDocument for applicati<strong>on</strong> to the CDM. According to M. Tepaswami,
262 development dialogue september 2006 – carb<strong>on</strong> tradinga 65-year-old resident of nearby Babboor village, RK <strong>Power</strong>gen isresp<strong>on</strong>sible for serious deforestati<strong>on</strong>. ‘First, the plant cut the trees ofour area <strong>and</strong> now they are destroying the forests of Chikmangalur,Shimoga, Mysore <strong>and</strong> other places. They pay 550 rupees per t<strong>on</strong>ne ofwood, which they source using c<strong>on</strong>tractors. The c<strong>on</strong>tractors, in turn,source wood from all over the state.’ Another villager claimed that‘poor people find it difficult to get wood for cooking <strong>and</strong> other purposes’.Jobs promised by the firm, Tepaswami complains, were givento outsiders.Meanwhile, employees at the Karnataka <strong>Power</strong> Transmissi<strong>on</strong> Corporati<strong>on</strong>claim that its ‘equipment is adversely affected due to the fac tory’spolluti<strong>on</strong>’, while local villagers complain of reduced crop yields <strong>and</strong>plunging groundwater levels. Project managers deny the allegati<strong>on</strong>s. ‘Ifthere is deforestati<strong>on</strong>’, said plant manager Amit Gupta, ‘then local peopleare to be blamed because they are supplying the wood to us’. 77Biomass projects have generally not been designed to benefit the agriculturalsector or increase farmer incomes, <strong>and</strong> m<strong>on</strong>ey from sale ofcrop residues or the produce of energy plantati<strong>on</strong>s <strong>on</strong> wastel<strong>and</strong>s d<strong>on</strong>ot accrue to l<strong>and</strong>less households. Nor do biogas projects necessarilybenefit rural residents. The Bagepalli CDM Biogas Programmeproposed for Kolan district of Karnataka state is to set up 5500 twocubic-metrebiogas digesters for households that have an average oftwo cattle each or more. That excludes the ordinary rural poor, who,<strong>on</strong> average, own fewer livestock. 78What about plantati<strong>on</strong> projects <strong>and</strong> other forestry ‘sink’ projects? Are they alsorunning into trouble?Carb<strong>on</strong> forestry projects made a late start in the CDM market becausethey are so c<strong>on</strong>troversial. The necessary legal framework, laid out inthe Marrakesh accords of 2001, was agreed <strong>on</strong>ly in late 2005 at the M<strong>on</strong>treal climate negotiati<strong>on</strong>s. So there is little c<strong>on</strong>crete to point to yet.But carb<strong>on</strong> forestry is definitely <strong>on</strong> the cards for India. The WorldBank, forestry <strong>and</strong> other private sector interests, academics <strong>and</strong> thegovernment are all busy laying plans <strong>and</strong> calculating wildly differentfigures for the carb<strong>on</strong> credits India could get from trees. 79 In 2003,the Indian pulp <strong>and</strong> paper lobby issued a blueprint for ‘Re-GreeningIndia’ as part of its l<strong>on</strong>gst<strong>and</strong>ing campaign to be allowed to lease‘degraded’ forest l<strong>and</strong> <strong>on</strong> which to grow industrial plantati<strong>on</strong>s. Thepossibility of the plantati<strong>on</strong>s earning carb<strong>on</strong> credits was discussed indetail. 80 A Nati<strong>on</strong>al Envir<strong>on</strong>ment Policy Draft circulated by the Ministryof Envir<strong>on</strong>ment <strong>and</strong> Forests (MoEF) in 2004 meanwhile c<strong>on</strong>firmsa new, ‘liberalised’ envir<strong>on</strong>mental policy that promotes carb<strong>on</strong>‘Government fi gures showthat there are about 5crore (50 milli<strong>on</strong>) hectaresof “wastel<strong>and</strong>” in India,l<strong>and</strong> which…now liesopen to exploitati<strong>on</strong>through carb<strong>on</strong> forestryschemes. What the centralgovernment does notsay is that most of this“wastel<strong>and</strong>” bel<strong>on</strong>gs toAdivasis <strong>and</strong> other forestdependentcommunities,who will be the fi rst to loseout from the developmentof such schemes.’Madhya Pradesh activist‘Joint Forest Management<strong>and</strong> Community ForestManagement are beingused as tools to excludethe Adivasis from theirsurvival sources, <strong>and</strong> arecompelling them to slipinto poverty <strong>and</strong> migratein search of work. Insteadof…recognising Adivasirights to the forest, thegovernment is seekingtheir evicti<strong>on</strong> through allpossible means.’Local activist
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 263Village inthe H<strong>and</strong>iarange.trading <strong>and</strong> other envir<strong>on</strong>mental services trades. The move towardscarb<strong>on</strong> forestry also chimes with a gr<strong>and</strong>iose existing plan <strong>on</strong> the partof the MoEF to bring 30 milli<strong>on</strong> hectares of ‘degraded’ forest <strong>and</strong>other l<strong>and</strong>s under industrial tree <strong>and</strong> cash crop plantati<strong>on</strong> by 2020,through a new type of collaborati<strong>on</strong> with the private sector, stategovernments <strong>and</strong> local communities. 81Am<strong>on</strong>g the scores of CDM projects being c<strong>on</strong>templated for India areforestry projects in Madhya Pradesh <strong>and</strong> Andhra Pradesh states. Here,an organisati<strong>on</strong> called Community Forestry Internati<strong>on</strong>al (CFI) hasbeen surveying opportunities for using trees to soak up carb<strong>on</strong>. CFIdeclares that it helps ‘policy makers, development agencies, NGOs,<strong>and</strong> professi<strong>on</strong>al foresters create the legal instruments, human resourcecapacities, <strong>and</strong> negotiati<strong>on</strong> processes <strong>and</strong> methods to supportresident resource managers’ in stabilising <strong>and</strong> regenerating forests. 82Its work in Madhya Pradesh has been supported by the US Agencyfor Internati<strong>on</strong>al Development <strong>and</strong> the US Department of Agriculture’sForest Service, <strong>and</strong> in Andhra Pradesh, by the <strong>Climate</strong> <strong>Change</strong><strong>and</strong> Energy Divisi<strong>on</strong> of Canada’s Department of Foreign Affairs <strong>and</strong>Internati<strong>on</strong>al Trade.CFI suggests that, in India, the CDM would be a viable incomegeneratingactivity for rural indigenous communities. But there arestr<strong>on</strong>g reas<strong>on</strong>s to doubt this.
264 development dialogue september 2006 – carb<strong>on</strong> tradingWhy?In India, as everywhere else, it’s not abstract theory, but rather theinstituti<strong>on</strong>al structure into which CDM would fit, that provides thekey clues to its likely social <strong>and</strong> climate outcomes.Take, for example, a CDM scheme investigated by CFI that wouldbe sited in Harda district, Madhya Pradesh state. Here CFI sees theCDM’s role as providing financial support for Joint Forest Management(JFM), an instituti<strong>on</strong> that has been the subject of much celebrati<strong>on</strong>of late in India 83 <strong>and</strong> which would be a likely medium for a greatdeal of Indian carb<strong>on</strong> forestry.What is Joint Forest Management?Joint Forest Management is supposed to provide a system for forestprotecti<strong>on</strong> <strong>and</strong> sustainable use through the establishment of villageforest protecti<strong>on</strong> committees (VFPCs), through which government<strong>and</strong> development aid funds are channelled. Formalised by state governments<strong>and</strong> largely funded by the World Bank, JFM was designedpartly to ensure that forest-dependent people gain some benefit fromprotecting forests. 84 It’s already implemented in every regi<strong>on</strong> of India.L<strong>on</strong>g before carb<strong>on</strong> trading was ever c<strong>on</strong>ceived of, JFM had becomean instituti<strong>on</strong> used <strong>and</strong> c<strong>on</strong>tested by village elites, NGOs, foresters,state officials, envir<strong>on</strong>mentalists <strong>and</strong> development agencies alike invarious attempts to transform commercial <strong>and</strong> c<strong>on</strong>servati<strong>on</strong> spaces<strong>and</strong> structures of forest rights for their respective advantages. 85So there should be a lot of evidence already for whether it works or not.Yes, but there’s not much agreement about what that evidence means.CFI sees the JFM programme as having improved the st<strong>and</strong>ard of livingin Adivasi villages, as well as their relati<strong>on</strong>ship with the Forest Department.It also found that JFM had helped regenerate forests in Rahetga<strong>on</strong>forest range, resulting in higher income for VFPCs, although admittingthat in H<strong>and</strong>ia forest range, social c<strong>on</strong>fl icts had resulted in decreasedJFM-related investment by the Forest Department. 86On the other h<strong>and</strong>, many indigenous (or Adivasi) communitymembers, activists <strong>and</strong> NGOs see JFM as a system which furtherentrenches Forest Department c<strong>on</strong>trol over Adivasi l<strong>and</strong>s <strong>and</strong> forestmanagement, although the practices of different village committeesvary. 87 Mass Tribal Organisati<strong>on</strong>s, forest-related NGOs <strong>and</strong> academicshave published evidence that JFM village forest protecti<strong>on</strong> committees,composed of community members, functi<strong>on</strong> principally aslocal, village-level branches <strong>and</strong> extensi<strong>on</strong>s of state forest authority. 88‘If large protected areas orplantati<strong>on</strong>s are managedfor l<strong>on</strong>g-term carb<strong>on</strong>sequestrati<strong>on</strong> <strong>and</strong> storage,local people may loseaccess to other productssuch as fi bre or food…[whereas] governments<strong>and</strong> companies arebest placed to benefi tfrom such schemes…[T]he frequently weakorganisati<strong>on</strong> (or hightransacti<strong>on</strong> costs ofimproving organisati<strong>on</strong>)of the rural poor <strong>and</strong>l<strong>and</strong>less will reduce theiraccess to the carb<strong>on</strong> off setmarket, particularlygiven the many complexrequirements of carb<strong>on</strong>off set interventi<strong>on</strong>s. Otherbarriers to the involvementof rural people centre <strong>on</strong>their prevailing smallscale<strong>and</strong> complex l<strong>and</strong>use practices, without cleartenure systems.’ 94Stephen Bass,Internati<strong>on</strong>al Institutefor Envir<strong>on</strong>ment <strong>and</strong>Development
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 265Who’s Encroaching? Forest Peoples <strong>and</strong> the LawMilest<strong>on</strong>es in the state’s efforts to appropriatel<strong>and</strong> from forest-dependent communitiesin India include the Indian ForestAct of 1878 <strong>and</strong> the 1980 Forest C<strong>on</strong>servati<strong>on</strong>Act, which theoretically provided thecentral government with ultimate c<strong>on</strong>trolover most forest l<strong>and</strong>.In 2002, quoting a Supreme Court ruling,the Ministry of Envir<strong>on</strong>ment <strong>and</strong> Forestsissued a circular to all state/uni<strong>on</strong> territorygovernments to evict all ‘encroachers’from forest l<strong>and</strong>. Between March 2002 <strong>and</strong>March 2004, it is estimated that ‘encroachers’were evicted from 152,000 hectares offorest l<strong>and</strong>, although neither the SupremeCourt nor the MoEF had clarified whetherthe term included people carrying out illegal,commercial logging activities, orAdivasi people, or both. In 2002, an estimated10 milli<strong>on</strong> Adivasi people faced thethreat of evicti<strong>on</strong>. The new wave of evicti<strong>on</strong>sis helping to create c<strong>on</strong>diti<strong>on</strong>s c<strong>on</strong>ducivefor commercial carb<strong>on</strong> forestry.On 23 December 2004, however, the MoEFissued a further circular c<strong>on</strong>fessing thatdue to the lack of definiti<strong>on</strong> of ‘encroacher’,many Adivasi people had been unjustlyevicted from their l<strong>and</strong>s. Moreover, followingheightened protest by Adivasis <strong>and</strong>support organisati<strong>on</strong>s in late 2004, the centralgovernment agreed in early 2005 to introducethe Scheduled Tribes <strong>and</strong> ForestDwellers (Recogniti<strong>on</strong> of Forests Rights)Bill before Parliament. The Bill would provideAdivasi communities with legal recogniti<strong>on</strong>of their forest rights in areas of traditi<strong>on</strong>aloccupati<strong>on</strong> <strong>and</strong> use. It would alsohelp regularise l<strong>and</strong>s being cultivated byAdivasis, c<strong>on</strong>vert so-called forest villages 91to revenue villages (with title deeds), <strong>and</strong>settle disputed l<strong>and</strong> claims.But Adivasi <strong>and</strong> support organisati<strong>on</strong>s stillhave to fight to prevent the Bill being dilutedbefore it is passed by Parliament.Communities interviewed in Harda in 2004 said that VFPC chairmen<strong>and</strong> committee members have become to a large extent ‘the ForestDepartment’s men’.What’s wr<strong>on</strong>g with that?These local JFM bodies are accused of imposing unjust <strong>and</strong> unwantedpolicies <strong>on</strong> their own communities, of undermining traditi<strong>on</strong>almanagement systems <strong>and</strong> of marginalising traditi<strong>on</strong>al <strong>and</strong> formal selfgoverninglocal village authorities. 89 In <strong>on</strong>e case in Madhya Pradesh,forest authorities <strong>and</strong> the police shot dead villagers opposing JFM <strong>and</strong>VFPC policies, in an echo of hostilities between the Forest Department<strong>and</strong> various classes of other forest users that go back a century(see box above).According to many Mass Tribal Organisati<strong>on</strong>s, communities <strong>and</strong> activists,JFM was effectively imposed <strong>on</strong> them without appropriate
266 development dialogue september 2006 – carb<strong>on</strong> tradingc<strong>on</strong>sultati<strong>on</strong> <strong>and</strong> has resulted in the marginalisati<strong>on</strong>, displacement <strong>and</strong>violati<strong>on</strong> of the customary <strong>and</strong> traditi<strong>on</strong>al rights of the Adivasis in thestate. 90 Many state governments implemented JFM programmes <strong>on</strong>disputed l<strong>and</strong>s. Many Adivasis have lost l<strong>and</strong> <strong>and</strong> access to essentialforest goods.Current problems with JFM in Madhya Pradesh, according to manylocal people <strong>and</strong> activists, include:• C<strong>on</strong>fl icts within communities as a result of ec<strong>on</strong>omic disparitiesbetween VFPC members <strong>and</strong> n<strong>on</strong>-members.• C<strong>on</strong>fl icts between Adivasi groups <strong>and</strong> other communities generatedby the impositi<strong>on</strong> of VFPC boundaries without reference tocustomary village boundaries.• Curtailment of nistar rights (customary rights to local natural goods).• C<strong>on</strong>fl icts over bans <strong>on</strong> grazing in the forest <strong>and</strong> <strong>on</strong> collecting timberfor individual household use.• Indiscriminate fining.According to some Harda activists, JFM has opened deeper rifts within<strong>and</strong> between Adivasi villages <strong>and</strong> between different Adivasi groups,<strong>and</strong> has engendered c<strong>on</strong>fl ict between communities <strong>and</strong> the Forest Department.Although funding for the local JFM scheme is now exhausted,VFPCs are still in place in many villages, recouping salaries fromthe interest remaining in their JFM accounts <strong>and</strong> from fines imposed<strong>on</strong> members of their own <strong>and</strong> neighbouring communities. Communitiesinterviewed also claim that VFPC financial dealings are nottransparent. In July 2004, n<strong>on</strong>-VFPC villagers in Harda reported thatthey would like to see funding of VFPCs stopped <strong>and</strong>, ultimately, thecommittees disb<strong>and</strong>ed. They also wanted to see forest management returnedto them <strong>and</strong> their rights to their traditi<strong>on</strong>al l<strong>and</strong>s <strong>and</strong> resourcesrestored. 92 In the words of anthropologist K. Sivaramarkishnan, ‘whenenvir<strong>on</strong>mental protecti<strong>on</strong> is to be accomplished through the exclusi<strong>on</strong>of certain people from the use of a resource, it will follow existing patternsof power <strong>and</strong> stratificati<strong>on</strong> in society’. 93So maybe these embattled village forest protecti<strong>on</strong> committees are not the idealbodies to carry out CDM carb<strong>on</strong> projects.That would be an understatement. CFI’s proposal that, in order toreduce transacti<strong>on</strong> costs, a federati<strong>on</strong> of VFPCs ought to be createdin the H<strong>and</strong>ia range to carry out a pilot carb<strong>on</strong> offset project is alsoquesti<strong>on</strong>able. So, too, is CFI’s suggesti<strong>on</strong> that the Forest Departmentshould adjudicate cases of c<strong>on</strong>fl ict there, a proposal that many communityresidents would find unacceptable.Fieldwork <strong>on</strong> the involvementof the Chhattisgarh <strong>and</strong> WestBengal sp<strong>on</strong>ge ir<strong>on</strong> industry incarb<strong>on</strong> trading, as well as <strong>on</strong>energy, forestry <strong>and</strong> climatechange in India, was carriedout in 2006 by SoumitraGhosh of the NGO Nesp<strong>on</strong><strong>and</strong> the Nati<strong>on</strong>al Forum ofForest Peoples <strong>and</strong> ForestWorkers (NFFPFW) (above)in collaborati<strong>on</strong> with HadidaYasmin <strong>and</strong> Arindam Das ofNesp<strong>on</strong>, Devjeet N<strong>and</strong>i ofNFFPFW (see next page)<strong>and</strong> Nabo Dutta of NagarikMancha.Fieldwork <strong>on</strong> the likelyc<strong>on</strong>sequences of carb<strong>on</strong>forestry in India wasundertaken by Emily Caruso(right) of the Forest PeoplesProgramme in collaborati<strong>on</strong>with Vijaya Bhaskara Reddy(left), Yakshi Shramik, AdivasiSangathan <strong>and</strong> local activistsin July 2004.
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 267Hadida YasminArindam DasDevjeet N<strong>and</strong>iBut it seems there could be an even more fundamental problem. If JFM projectsare going forward anyway, even without the CDM, they’re not saving carb<strong>on</strong>over <strong>and</strong> above what would have been saved anyway. So how could they generatecredits?That’s not clear. And there are plenty of other problems with CFI’s carb<strong>on</strong>sequestrati<strong>on</strong> claims as well. For example, CFI doesn’t take intoaccount the changes in numbers of people <strong>and</strong> in community <strong>and</strong> familycompositi<strong>on</strong> to be expected over the project’s 20-25 year lifetime.CFI’s estimates of fuelwood used by communities in the Rahetga<strong>on</strong>range are also inaccurate. CFI believes every family uses two head loadsof fuelwood per week, but recent interviewees suggested that a morerealistic figure would be 18-22, especially during the winter <strong>and</strong> them<strong>on</strong>so<strong>on</strong> seas<strong>on</strong>. CFI also makes the questi<strong>on</strong>able assumpti<strong>on</strong> that localcommunities would relinquish their forest-harvesting activities for thesake of very little m<strong>on</strong>etary income from carb<strong>on</strong> sales, <strong>and</strong> that incomeflowing to VFPCs would be transparently distributed.In order to assess how much carb<strong>on</strong> would be saved, CFI comparedvegetati<strong>on</strong> in forest plots at different stages of growth <strong>and</strong> subject todifferent kinds of pressure from humans. Yet while the total area offorest to be c<strong>on</strong>sidered is 142,535 hectares, the total number of 50square metre plots assessed was 39, representing a total study areaof <strong>on</strong>ly 9.75 hectares. That may be an adequate sample in biologicalterms. But it’s hardly enough to assess the range of social influences<strong>on</strong> carb<strong>on</strong> storage in different places.Have any prospective carb<strong>on</strong> forestry projects been looked at in other parts ofIndia?Many. To take just <strong>on</strong>e more nearby example, in Adilabad, AndhraPradesh state, CFI saw possibilities of sequestering carb<strong>on</strong> by reforesting<strong>and</strong> afforesting n<strong>on</strong>-forest or ‘degraded’ forest l<strong>and</strong>s whose carb<strong>on</strong>c<strong>on</strong>tent has been depleted by a large <strong>and</strong> growing human <strong>and</strong> cattlepopulati<strong>on</strong>, unc<strong>on</strong>trolled grazing of cattle in forests <strong>and</strong> ‘encroachment’<strong>on</strong> <strong>and</strong> c<strong>on</strong>versi<strong>on</strong> of forest l<strong>and</strong>s for swidden cultivati<strong>on</strong>.The best opti<strong>on</strong>, CFI felt, would be to regenerate teak <strong>and</strong> mixed deciduousforests. Cl<strong>on</strong>al eucalyptus plantati<strong>on</strong>s would, it thought, accumulatecarb<strong>on</strong> faster, <strong>and</strong> would have other commercial uses suchas timber <strong>and</strong> pulp, as well as incremental returns for any interestedinvestor, but would cost more to establish <strong>and</strong> maintain, <strong>and</strong> wouldbe sure to be c<strong>on</strong>demned by Adivasi communities <strong>and</strong> activists as anew form of col<strong>on</strong>ialism. 95
268 development dialogue september 2006 – carb<strong>on</strong> tradingSo who would carry out these regenerati<strong>on</strong> projects?Here CFI came to a different c<strong>on</strong>clusi<strong>on</strong> than in Madhya Pradesh. InAndhra Pradesh, it decided, the best agencies for taking <strong>on</strong> forest regenerati<strong>on</strong>would be women’s self-help groups (SHGs).Which are what?SHGs were set up by the state-level Inter-Tribal Development Agencyduring the 1990s as a mechanism for improving the finances of householdsthrough micro-credit schemes <strong>and</strong> capacity-building, as well aslinking households with financial instituti<strong>on</strong>s <strong>and</strong> government authorities.CFI says that they’re much more dynamic, accountable <strong>and</strong> transparentthan other local instituti<strong>on</strong>s, such as forest protecti<strong>on</strong> committees,which are viewed as inefficient, untransparent, untrustworthy,<strong>and</strong> troubled in their relati<strong>on</strong>ship with the Forest Department.Sounds perfect.Except that it’s hard to see how the virtues of the women’s self-helpgroups could work for the carb<strong>on</strong> ec<strong>on</strong>omy. For <strong>on</strong>e thing, CFI statesthat <strong>on</strong>ly if the SHGs come together in a federati<strong>on</strong> would carb<strong>on</strong> offsetforestry projects be financially viable, given the high trans acti<strong>on</strong>costs involved in preparing <strong>and</strong> carrying them out. Yet it does notexplain how such a federati<strong>on</strong> could come about in rural communities,nor how SHGs could become involved in CDM projects <strong>and</strong>link themselves to the carb<strong>on</strong> market. Nor does it menti<strong>on</strong> that SHGscurrently work in relative isolati<strong>on</strong> from the Panchayat Raj instituti<strong>on</strong>s(the ultimate village-level formal self-governing authority inrural India), the Forest Department <strong>and</strong> local forest protecti<strong>on</strong> committees.But surely there’s nothing to worry about yet. Maybe we can just learn as wego al<strong>on</strong>g.The problem is that the mere fact that studies like CFI’s are being carriedout already gives legitimacy to the idea of carb<strong>on</strong> offsets in theSouth. Few outsiders will notice that the c<strong>on</strong>clusi<strong>on</strong>s are suspect.Still, you’ve <strong>on</strong>ly been talking about problems with JFM, not with carb<strong>on</strong> off -set trading as such.Whether or not JFM is involved, many Indian activists fear that by creatinga market for carb<strong>on</strong>, CDM projects will engender change in therelati<strong>on</strong>ship between Adivasis <strong>and</strong> their l<strong>and</strong>s <strong>and</strong> forests. In order toavoid c<strong>on</strong>fl ict, any CDM project prop<strong>on</strong>ent will need to clarify whoowns the l<strong>and</strong>, the project <strong>and</strong> the carb<strong>on</strong>. 96 This immediately militates
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 269The ‘Voluntary Market’ Comes to India: A Case StudyWhen the rock group Coldplay released itshit album A Rush of Blood to the Head, theb<strong>and</strong> said that part of the climate damagecaused by its producti<strong>on</strong> would be offsetby the planting of 10,000 mango trees insouthern India.More than four years after the album’s release,however, many of Coldplay’s goodintenti<strong>on</strong>s have withered in the dry soilof Karnataka state, where the saplings itsp<strong>on</strong>sored were planted. The middlemanin Coldplay’s initiative was the UK’s Carb<strong>on</strong>Neutral Company, which had claimedthat the scheme would soak up carb<strong>on</strong> dioxideemissi<strong>on</strong>s <strong>and</strong> help improve the livelihoodsof local farmers.The Carb<strong>on</strong> Neutral Company c<strong>on</strong>tractedthe task of planting the trees to a groupcalled Women for Sustainable Development(WSD), who got GBP 33,000 for thedeal. WSD is headed by An<strong>and</strong>i SharanMeili, born in Switzerl<strong>and</strong> of Indian origin<strong>and</strong> a Cambridge graduate. She nowclaims that the scheme was doomed fromthe outset.In the villages of Varlak<strong>on</strong>da, Lakshmisagara<strong>and</strong> Muddireddihalli, am<strong>on</strong>g the dozen thatMieli said had received mango saplings, no<strong>on</strong>e had heard of Coldplay. Most of thosewho received saplings said they had notbeen given the nedessary funding for labour,insecticide or spraying equipment.One Lakshmisagara villager, Jayamma,managed to get 50 of her 150 trees to survive<strong>on</strong>ly because she had a well <strong>on</strong> herl<strong>and</strong>. ‘I was promised 2,000 rupees everyyear to take care of the plants <strong>and</strong> a bag offertiliser. But I got <strong>on</strong>ly the saplings,’ shesaid. Some other villagers were also offeredsaplings but didn’t have enough water t<strong>on</strong>ourish them.In nearby Varlak<strong>on</strong>da, about 10 fam ilieswere given approximately 1,400 saplings.Of these, just 600 survived. Another farmerwho took 100 saplings, said: ‘[Meili] promisedus that she’d arrange the water.’ Butvillagers said a tanker came <strong>on</strong>ly twice.One of the few successes is the stretch of300 mango trees owned by Narayanamma,69, <strong>and</strong> her husb<strong>and</strong> Venkatarayappa, 74.They were apparently the <strong>on</strong>ly couple toreceive 4,000 rupees from Meili. At thesame time, they spent 30,000 rupees <strong>on</strong>tankers <strong>and</strong> labourers. ‘We were promisedm<strong>on</strong>ey for maintenance every year but gotnothing’, said Narayanamma.Sitting in her spacious house in Bangalore,Meili said that she had distributed 8,000saplings, but acknowledged that 40 per centhad died. The project had foun dered, shesaid, because of inadequate funding. Sheaccused Future Forests of having a ‘c<strong>on</strong>descending’attitude. ‘They do it for theirinterests, not really for reducing emissi<strong>on</strong>s.They do it because it’s good m<strong>on</strong>ey,’ shesaid.The Carb<strong>on</strong> Neutral Company said thatWSD had a c<strong>on</strong>tractual resp<strong>on</strong>sibility toprovide irrigati<strong>on</strong> <strong>and</strong> support to farmers.Richard Tipper, the director of theEdinburgh Centre for Carb<strong>on</strong> Management,which m<strong>on</strong>itored the project forCarb<strong>on</strong> Neutral, said that the Karnatakaproject had ‘experienced major problems’because WSD had not raised the necessarym<strong>on</strong>ey to administer the project <strong>and</strong> becauseof a l<strong>on</strong>g drought.
270 development dialogue september 2006 – carb<strong>on</strong> tradingIf the Karnataka project does not offset thecarb<strong>on</strong> emissi<strong>on</strong>s that Coldplay specified,the Carb<strong>on</strong> Neutral Company claims, itwill make good the amount from otherprojects. Coldplay is supporting a similarproject, which Carb<strong>on</strong> Neutral says ismore successful, in Chiapas, Mexico.A source close to Coldplay said that theb<strong>and</strong> had ‘signed up to the scheme in goodfaith’ with the Carb<strong>on</strong> Neutral Company<strong>and</strong> that ‘it’s in their h<strong>and</strong>s. For a b<strong>and</strong> <strong>on</strong>the road all the time, it would be difficultto m<strong>on</strong>itor a forest.’Source: Amrit Dhill<strong>on</strong> <strong>and</strong> Toby Harnden,‘How Coldplay’s Green Hopes Died in theArid Soil of India’, Sunday Telegraph (L<strong>on</strong>d<strong>on</strong>),30 April 2006.against Adivasi peoples, since in India, the government claims formalownership <strong>and</strong> c<strong>on</strong>trol over indigenous l<strong>and</strong>s <strong>and</strong> resources. Access <strong>and</strong>ownership rights are likely to be transformed into benefit-sharing <strong>and</strong>stakeholder-type relati<strong>on</strong>ships. Adivasi communities may lose their capacityto sustain food security, livelihoods, <strong>and</strong> fundamental social,cultural <strong>and</strong> spiritual ties. L<strong>and</strong>s Adivasis depend <strong>on</strong> could be classifiedas ‘wastel<strong>and</strong>’ <strong>and</strong> turned over to carb<strong>on</strong> producti<strong>on</strong>. In short, itis unclear how CDM projects could do anything but further entrenchdiscriminati<strong>on</strong> against Adivasi communities by government authorities<strong>and</strong> rural elites.CDM afforestati<strong>on</strong> projects can be established <strong>on</strong> l<strong>and</strong>s that have notbeen forested for 50 years, <strong>and</strong> reforestati<strong>on</strong> projects <strong>on</strong> l<strong>and</strong>s thatwere not forested <strong>on</strong> 31 December 1989. 97 But forest c<strong>on</strong>servati<strong>on</strong>projects are also <strong>on</strong> the horiz<strong>on</strong>. Although c<strong>on</strong>servati<strong>on</strong> schemes arenot yet eligible for CDM, c<strong>on</strong>servati<strong>on</strong> financiers <strong>and</strong> the World Bank<strong>and</strong> Global Envir<strong>on</strong>ment Fund are increasingly promoting the idea ofprotected areas as an additi<strong>on</strong>al source of carb<strong>on</strong> credits. 98 Indigenouspeoples will clearly be in for a fight should carb<strong>on</strong> sequestrati<strong>on</strong> <strong>and</strong>protected area projects come together <strong>on</strong> their territories.Overall, what’s the future for CDM in India?The country is still seen as a ‘fr<strong>on</strong>t runner’ for CDM projects. Thegovernment is determined to press forward, <strong>and</strong> a lot of carb<strong>on</strong> salesmanshipcan be expected in the years ahead. 99 But foreign investorsare worried that many projects may not get the green light from theCDM Executive Board due to being indistinguishable from businessas usual. ‘The sustainability just isn’t there,’ said <strong>on</strong>e c<strong>on</strong>sultant employedby a European company to source carb<strong>on</strong> credits.
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 271No Need to Know? The Secret Ec<strong>on</strong>omy of Carb<strong>on</strong>In 2004, the women’s self-help group of<strong>Power</strong>guda village of Andhra Pradesh,India, was given cash in exchange forplanting P<strong>on</strong>gamia trees. The tree’s seedscan be used to make a petrol substitute.The women were given a certificate <strong>and</strong>usd 645 for ‘offsetting’ the emissi<strong>on</strong>s producedby a World Bank workshop <strong>on</strong> climatechange held in Washingt<strong>on</strong>, DC. 100The Bank claims that 30 years of biofueluse by government authorities in AndhraPradesh will compensate climatically forthe workshop’s emissi<strong>on</strong>s.The women didn’t know why they had receivedthe m<strong>on</strong>ey. They were also un awareof the benefits that went to the carb<strong>on</strong>traders, releasers <strong>and</strong> agencies involved.The ir<strong>on</strong>y is that northern Andhra Pradeshhas recently been hit by <strong>on</strong>e of the mostdevastating droughts ever, very possibly asa result of global warming. In the summerof 2004, the number of suicides in the provinceam<strong>on</strong>g farmers driven to desperati<strong>on</strong>by their crippling debts reached 3,000.The lack of discussi<strong>on</strong> with affected partiesthat was evident in Andhra Pradeshappears to be a comm<strong>on</strong> denominator ofcarb<strong>on</strong> -saving projects nearly everywhere:• The Project Design Documents of fourdifferent Indian biomass power projectseach repeated, word for word, allegedfavourable comments made by a villagehead. All of the projects – Rithwick,Perpetual, Indur <strong>and</strong> Sri Balaji– are located in Andhra Pradesh state,but all have different characteristics <strong>and</strong>are spread over hundreds of kilometres.Even spelling mistakes were repeated inthe documents, suggesting that c<strong>on</strong>sultati<strong>on</strong>was not genuine. The private c<strong>on</strong>sultantswho prepared the documents,PriceWaterhouseCoopers <strong>and</strong> Ernst <strong>and</strong>Young, resp<strong>on</strong>ded lamely that identicalprojects in similar geographical locati<strong>on</strong>swere likely to have similar Project DesignDocuments. 101• A senior legal officer at the West BengalPolluti<strong>on</strong> C<strong>on</strong>trol Board, BiswajitMukherjee, was surprised to learn aboutCDM support for sp<strong>on</strong>ge ir<strong>on</strong> industriesin his state. How, Mukherjee w<strong>on</strong>dered,can companies with l<strong>on</strong>g records of polluti<strong>on</strong>,including some still paying penaltiesto the West Bengal government, start‘clean development’ projects? 102• In Ug<strong>and</strong>a, community members livingclose to the UWA-FACE carb<strong>on</strong> plantati<strong>on</strong>project near Mount Elg<strong>on</strong> said thatthey knew nothing about the project’scarb<strong>on</strong> credits. Members of the Bubitasub-county local council <strong>and</strong> top districtofficials were also in the dark. Residentswanted to know about the financial benefitsFACE Foundati<strong>on</strong> receives, particularlybecause the project encumbers theirl<strong>and</strong> for a l<strong>on</strong>g time, <strong>and</strong> planned to takethe matter up with their local parliamentarian.• The Ug<strong>and</strong>an acting deputy commissi<strong>on</strong>erfor forestry in the Ministry ofWater, L<strong>and</strong>s <strong>and</strong> Envir<strong>on</strong>ment, IgnatiusOluka-Akileng, told an interviewerin 2001 that his forestry directorateknew little about carb<strong>on</strong> trades involvingstate forest l<strong>and</strong>s, nor how much foreigncompanies were to gain from them,<strong>and</strong> begged the interviewer to help findinformati<strong>on</strong>.
272 development dialogue september 2006 – carb<strong>on</strong> tradingSri Lanka – A ‘clean energy’ projectthat was not so cleanToday’s smart business m<strong>on</strong>ey isgoing into buying carb<strong>on</strong> creditsIndiafrom projects that destroy industrialgases or methane (see thepreceding ‘India – A taste of thefuture’). These are the cheapestcredits <strong>and</strong> they can be obtainedwith the least trouble. Yet theydo nothing to address the flow offossil fuels out of the ground.Sri LankaBut carb<strong>on</strong> projects that promoteenergy efficiency or renewableenergy technologies do exist. The Kyoto Protocol’s Clean DevelopmentMechanism has dozens of such schemes in its pipeline, althoughthey generate <strong>on</strong>ly a miniscule proporti<strong>on</strong> of total credits. Some ofthese projects are even small <strong>and</strong> community-based.So far, however, such projects are merely a bit of expensive windowdressingfor the big industrial projects generating cheaper credits. In acompetitive market, they appear to have little future.But are all such projects desirable even <strong>on</strong> their own terms? For example,are all renewable energy projects good just because they canbe described as ‘renewable’?I d<strong>on</strong>’t underst<strong>and</strong>. What could possibly be wr<strong>on</strong>g with promoting renewableenergy?It depends <strong>on</strong> how it’s used. Let’s take, for example, <strong>on</strong>e of the world’svery first attempts to ‘compensate for’ or ‘offset’ industrial carb<strong>on</strong>- dioxideemissi<strong>on</strong>s – a rural solar electrificati<strong>on</strong> programme in Sri Lanka.The story begins in 1997, when the legislature of the US state ofOreg<strong>on</strong> created a task force that later legally required all new powerplants in the state to offset all of their carb<strong>on</strong> dioxide emissi<strong>on</strong>s. Whencompanies put in bids for the c<strong>on</strong>tract to build a new 500-megawatt,natural-gas fired power stati<strong>on</strong> in Klamath Falls, they also had topresent plans for ‘compensating’ for its CO 2 emissi<strong>on</strong>s. The winnerof the c<strong>on</strong>tract, PacificCorp <strong>Power</strong> Marketing, proposed a diversifiedusd 4.3 milli<strong>on</strong> dollar carb<strong>on</strong>-offset portfolio, allocating usd 3.1milli<strong>on</strong> to finance off-site carb<strong>on</strong> mitigati<strong>on</strong> projects. In particular,
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 273the firm put usd 500,000 into a revolving fund to buy photovoltaic(solar-home) systems <strong>and</strong> install them in ‘remote households withoutelectricity in India, China <strong>and</strong> Sri Lanka’. 103 In 1999, PacificCorp<strong>Power</strong> <strong>and</strong> the City of Klamath Falls signed the necessary financeagreement with a US solar-energy company called the Solar ElectricLight Company, or SELCO. 104In all, SELCO agreed to install 182,000 solar-home systems in thesethree Asian countries, 120,000 in Sri Lanka al<strong>on</strong>e. 105 The idea was thatthe solar systems would reduce the carb<strong>on</strong> dioxide emissi<strong>on</strong>s givenoff by the kerosene lamps comm<strong>on</strong>ly used in households that are ‘offgrid’,or without grid-c<strong>on</strong>nected electricity. On average, SELCO calculated,each such household generates 0.3 t<strong>on</strong>s of carb<strong>on</strong> dioxide peryear. 106 SELCO argued that the installati<strong>on</strong> of a 20- or 35-watt solarhomesystem would displace three smoky kerosene lamps <strong>and</strong> a 50-watt system would displace four. Over the next 30 years, it claimed,these systems would prevent the release of 1.34 milli<strong>on</strong> t<strong>on</strong>s of carb<strong>on</strong>into the atmosphere, entitling the Klamath Falls power plant to emitthe same amount.So what’s the problem? It sounds like a win-win situati<strong>on</strong>. The Klamath Fallsplant makes itself ‘carb<strong>on</strong>-neutral’, while deprived Asian households get a new,clean, green, small-scale source of energy for lighting!Not quite. Aside from the fact that such projects can’t, in fact, verifythat they make fossil fuel burning ‘carb<strong>on</strong>-neutral’ (see Chapter 3),the benefits to the South that carb<strong>on</strong> offsetting promises d<strong>on</strong>’t necessarilymaterialise, either.Why not?Start with the structure of the trade. Just as industries in the North havehistorically relied <strong>on</strong> the envir<strong>on</strong>mental subsidy that cheap mineralextracti<strong>on</strong> in the South has provided, in the PacificCorp/SELCOproject a Northern industry used decentralised solar technologyto reorganise off-grid spaces in the South into spaces of ec<strong>on</strong>omicopportunity that subsidised their costs of producti<strong>on</strong> through carb<strong>on</strong>dioxide offsetting. 107 Once again, the South was subsidising producti<strong>on</strong>in the North – this time not through a process of extracti<strong>on</strong>, butthrough a process of sequestrati<strong>on</strong>.You’ll have to explain that to me.Traditi<strong>on</strong>ally, fossil fuel extracti<strong>on</strong> has resulted in the overuse of agood that can’t be seen – the global carb<strong>on</strong> sink. And the inequalityin the use of that sink between North <strong>and</strong> South has been invisible.Now, however, that inequality is becoming more visible within cer-
274 development dialogue september 2006 – carb<strong>on</strong> tradingtain l<strong>and</strong>scapes in the form of physical <strong>and</strong> social changes like thoseassociated with the PacificCorp/SELCO project.The solar comp<strong>on</strong>ent of the Klamath Falls plant, in essence, proposedto ‘mine’ carb<strong>on</strong> credits from off-grid areas in Sri Lanka. However,the existence of these off-grid areas is partially due to social inequalitieswithin Sri Lanka. In this case, the project was taking advantageof <strong>on</strong>e particularly marginalised community of Sri Lankan workers inorder to support its own disproporti<strong>on</strong>ate use of fossil fuels.Well, maybe. But so what? Pacifi cCorp didn’t create the inequalities in resourceuse that it was going to benefi t from. Why should it be up to Pacifi cCorpto solve social problems in Sri Lanka? Besides, aren’t we in danger of makingthe best the enemy of the good here? Pacifi cCorp may have bought the right togo <strong>on</strong> using a lot of fossil fuels, but at least the Sri Lankan workers got a littlesomething out of the deal to improve their lives, too.Well, as a matter of fact, that really wasn’t the case, either. In practice,the PacificCorp/SELCO arrangement in Sri Lanka wound up supportingwhat <strong>on</strong>e Sri Lankan scholar-activist, Paul Casperz, calls afeudal system of ‘semi-slavery’ <strong>on</strong> plantati<strong>on</strong>s.Semi-slavery? Come <strong>on</strong>! Aren’t you being a bit infl ammatory? How could decentralised,sustainable solar power possibly have anything to do with that?Solar power didn’t create the problem, of course. But polluti<strong>on</strong> markets’interventi<strong>on</strong>s like this <strong>on</strong>e in the tea estate sector have a way ofperpetuating inequality, just as in Los Angeles (see Chapter 3). Thetrick, as so often in the world of development <strong>and</strong> envir<strong>on</strong>ment, is tounderst<strong>and</strong> that a bit of technology is never ‘just’ a neutral lump ofmetal or a piece of machinery benignly guided into place by the intenti<strong>on</strong>sof its providers, but winds up becoming different things indifferent places.In Sri Lanka, the kerosene-lamp users that PacificCorp/SELCO endedup targeting earned their living in what is known as the ‘estate’or tea plantati<strong>on</strong> sector. This is a sector in which nearly 90 per centof the people are without grid-c<strong>on</strong>nected electricity, compared to 60per cent of the n<strong>on</strong>-estate rural sector <strong>and</strong> <strong>on</strong>ly 5 per cent of urb<strong>and</strong>wellers.A large proporti<strong>on</strong> of this off-grid populati<strong>on</strong> was – <strong>and</strong> is – from theminority estate Tamil community, 108 which lives <strong>and</strong> works in c<strong>on</strong>diti<strong>on</strong>sof debt dependence <strong>on</strong> tea <strong>and</strong> rubber plantati<strong>on</strong>s establishedby the British during the col<strong>on</strong>ial period. Unfair labour practices inthe sector have c<strong>on</strong>tinued to keep estate society separate from <strong>and</strong>unequal to the rest of Sri Lankan society. Daily wages average usd
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 2751.58 <strong>and</strong> the literacy rate is approximately 66 per cent, compared to92 per cent for the country as a whole. 109 The estate populati<strong>on</strong> is alsounderserved when it comes to infrastructure. A sample survey of 50estates found that 62 per cent of estate residents lacked individual latrines<strong>and</strong> 46 per cent did not have a water source within 100 metresof their residence. 110Due partly to its cost, electrificati<strong>on</strong>, unlike health care, water supply,<strong>and</strong> sanitati<strong>on</strong>, has never been <strong>on</strong>e of the core social issues thatsocial-service organisati<strong>on</strong>s working am<strong>on</strong>g the estate populati<strong>on</strong> getinvolved in.That would seem to make the estate sector the perfect choice for a solar technologyproject. I still d<strong>on</strong>’t see the problem.There’s no questi<strong>on</strong> that electrificati<strong>on</strong> could do a lot of good forworkers <strong>and</strong> their families. By displacing smoky kerosene lamps, itwould provide a smoke-free envir<strong>on</strong>ment that reduces respiratoryailments, as well as quality lighting that reduces eyestrain <strong>and</strong> createsa better study envir<strong>on</strong>ment for the school-going generati<strong>on</strong> 111 whoare eager to secure employment outside the plantati<strong>on</strong> ec<strong>on</strong>omy. Researchershave found clear c<strong>on</strong>necti<strong>on</strong>s between off-grid technology<strong>and</strong> educati<strong>on</strong>al achievement.But as tea estates are regulated <strong>and</strong> highly structured enclave ec<strong>on</strong>omies,SELCO could not approach workers without the cooperati<strong>on</strong><strong>and</strong> approval of estate management. The chief executive of <strong>on</strong>e plantati<strong>on</strong>corporati<strong>on</strong>, Neeyamakola Plantati<strong>on</strong>s, was willing to allowSELCO access to the ‘market’ that his off-grid workers represented.He himself liked the idea of solar electrificati<strong>on</strong>, but for an entirelydifferent set of reas<strong>on</strong>s.How’s that?Sri Lanka’s 474 plantati<strong>on</strong> estates were privatised recently. Facingfierce competiti<strong>on</strong> from other tea-producing countries, they need tolower producti<strong>on</strong> costs <strong>and</strong> increase worker productivity in order tocompensate for low tea prices <strong>on</strong> the global market <strong>and</strong> wage increasesm<strong>and</strong>ated by the Sri Lankan government. Neeyamakola hadalready introduced some productivity-related incentives <strong>and</strong> thoughtthat solar-home systems could provide another. Furthermore, witha regular electricity supply, workers could watch more televisi<strong>on</strong>. 112Seeing how other people in the country lived, they’d want to raisetheir st<strong>and</strong>ards of living too. For that, they’d need m<strong>on</strong>ey. To earnmore m<strong>on</strong>ey, they’d work harder or l<strong>on</strong>ger, or both. 113So, in 2000, Neeyamakola was <strong>on</strong>ly too happy to sign an agreement
276 development dialogue september 2006 – carb<strong>on</strong> tradingwith SELCO for a pilot project <strong>on</strong> its Vijaya rubber <strong>and</strong> tea estate inSri Lanka’s Sabaragamuwa province, where over 200 families lived.It sounds to me like the perfect match. If Neeyamakola focused <strong>on</strong> the bottomline, what’s so bad about that? It’s a matter of unleashing the profi t motive forthe incremental improvement of society <strong>and</strong> the envir<strong>on</strong>ment.No <strong>on</strong>e expected Neeyamakola, SELCO or PacificCorp to operateas charities. The point is to underst<strong>and</strong> whether such a business partnershipwas ever capable of doing the things it intended to do, whateffects the partnership had <strong>on</strong> the societies involved, <strong>and</strong> who mightbe held resp<strong>on</strong>sible for the results.So what happened?At first, the pilot project was to be limited to workers living in <strong>on</strong>eof the four administrative divisi<strong>on</strong>s into which the Vijaya estate wasdivided, Lower Divisi<strong>on</strong>, <strong>and</strong> in nearby villages. Some four-fifths ofthese workers were estate Tamils living in estate-provided ‘line housing’.The other fifth were Sinhalese who lived within walking distance.In the first three m<strong>on</strong>ths, <strong>on</strong>ly 29 families decided to participate inthe solar electrificati<strong>on</strong> project: 22 of Lower Divisi<strong>on</strong>’s 63 families <strong>and</strong>seven Sinhala workers who lived in adjacent villages. In the end, theproject installed <strong>on</strong>ly 35 systems before it was cancelled in 2001.What went wr<strong>on</strong>g?Two things. The first thing that happened was that, in the historical<strong>and</strong> corporate c<strong>on</strong>text of the estate sector, the SELCO project woundup strengthening the already oppressive hold of the plantati<strong>on</strong> companyover its workers.But how could that happen? Solar energy is supposed to make people moreindependent, not less so.This gets back to the nature of Neeyamakola as a private firm. Fromthe perspective of plantati<strong>on</strong> management, the electrificati<strong>on</strong> projecthad nothing to do with carb<strong>on</strong> mitigati<strong>on</strong> <strong>and</strong> everything to do withprofitability <strong>and</strong> labour regulati<strong>on</strong>.Neeyamakola’s c<strong>on</strong>cern was to increase productivity. Its idea was touse access to loans for solar-home systems to entice estate labourersinto working additi<strong>on</strong>al days. The Neeyamakola accounting departmentwould deduct a 500-rupee loan repayment every m<strong>on</strong>th <strong>and</strong>send it to SELCO. 114
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 277In order to qualify for a loan, workers had to be registered employeeswho worked at least five days a m<strong>on</strong>th <strong>on</strong> the estate. 115 The loan addedanother layer of worker indebtedness to management. In this case, theindebtedness would last the five years that it would take the worker torepay the loan taken from the corporati<strong>on</strong>. 116From workers’ point of view, the system <strong>on</strong>ly added to the company’sc<strong>on</strong>trol over their lives. Historically, the <strong>on</strong>ly way that estateworkers have been able to get financing to improve their livingc<strong>on</strong>diti<strong>on</strong>s has been through loans that keep them tied to the unfairlabour practices <strong>and</strong> dismal living c<strong>on</strong>diti<strong>on</strong>s of estate life. Toupgrade their housing, for instance, workers have to take out loansfrom the Plantati<strong>on</strong> Housing <strong>and</strong> Social Welfare Trust. One c<strong>on</strong>diti<strong>on</strong>of these loans is that ‘at least <strong>on</strong>e family member of each familywill be required to work <strong>on</strong> the plantati<strong>on</strong> during the 15-yearlease period’, 117 during which estate management takes m<strong>on</strong>thly deducti<strong>on</strong>sfrom wages. Hampered by low pay <strong>and</strong> perpetual indebtedness,workers find it difficult to move <strong>on</strong> <strong>and</strong> out of the estateec<strong>on</strong>omy.I see. And what’s the sec<strong>on</strong>d problem?Inequality <strong>and</strong> social c<strong>on</strong>fl ict of many different kinds. First, as Neeyamakolaoffered solar-home systems primarily to estate workers, mostof whom are members of the Tamil ethnic minority, the nearby offgridvillagers of the Sinhalese majority felt discriminated against <strong>and</strong>marginalised. Disgruntled youth from adjacent villages as well asfrom estate families who weren’t buying solar systems threw rocks atthe solar panels <strong>and</strong> otherwise tried to v<strong>and</strong>alise them.Sec<strong>on</strong>d, local politicians <strong>and</strong> uni<strong>on</strong> leaders saw solar electricity as athreat to their power, since both groups use the promise of gettingthe local area c<strong>on</strong>nected to the c<strong>on</strong>venti<strong>on</strong>al electricity grid as a wayof securing votes. So they started issuing threats to discourage prospectivebuyers.Third, the village communities living around the Vijaya estate fearedthat if too many people <strong>on</strong> the estate purchased solar systems, theCeyl<strong>on</strong> Electricity Board would have a reas<strong>on</strong> for not extending thegrid into their area. And without the grid, they felt, small-scale industry<strong>and</strong> other entrepreneurial activities, which would generateec<strong>on</strong>omic development <strong>and</strong> increase family income, would remainout of reach, making their social <strong>and</strong> ec<strong>on</strong>omic disadvantages permanent.118 (Any delay in the extensi<strong>on</strong> of the grid to the area occasi<strong>on</strong>edby the PacificCorp/SELCO Neeyamakola project, of course,would have its own effects <strong>on</strong> the use of carb<strong>on</strong>, <strong>and</strong> would have to
278 development dialogue september 2006 – carb<strong>on</strong> tradingbe factored into PacificCorp/SELCO’s carb<strong>on</strong> accounts. There is noindicati<strong>on</strong> that this was d<strong>on</strong>e.)Added to all of this was inequality within the community of estateworkers themselves. One c<strong>on</strong>sequence of Neeyamakola’s focus <strong>on</strong>getting more out of its workers was that many estate residents whosework is productive for society in a wider sense were ineligible for thesystems.One example is the primary school teacher in the Tamil-mediumgovernment school that served the estate populati<strong>on</strong>. The daughterof retired estate workers, the teacher received a reliable m<strong>on</strong>thly salary,could have met a m<strong>on</strong>thly payment schedule, <strong>and</strong> was willing topay, but was ineligible for a system because her labour was not seen asc<strong>on</strong>tributing directly to the estate’s ec<strong>on</strong>omic productivity <strong>and</strong> profitmargin. Retired estate workers <strong>and</strong> their families were excluded forthe same reas<strong>on</strong>. SELCO, a firm new to Sri Lanka, was unable to ensurecommunity-wide benefits or distributive equity within the communityas a prerequisite in the design of the pilot project.On the Vijaya estate, in short, the decentralised nature of solar power– in other c<strong>on</strong>texts a selling point for the technology – had quite anotherimpact <strong>and</strong> meaning in the c<strong>on</strong>text of Sri Lanka’s estate sector.It provided the company that was c<strong>on</strong>trolling the ‘technology transfer’with a new technique to exert c<strong>on</strong>trol over its labour force <strong>and</strong>ensure competitive advantage, while exacerbating underlying c<strong>on</strong>flicts over equity.It’s interesting to note, incidentally, that solar projects in Sri Lankaoften fall short even at the household level, where many families endup reducing their c<strong>on</strong>sumpti<strong>on</strong> of kerosene by <strong>on</strong>ly 50 per cent. 119There are many reas<strong>on</strong>s for this. Kerosene use is necessary to make upfor faulty management while household members become acquaintedwith the energy-storage patterns of the battery <strong>and</strong> system operati<strong>on</strong>.Households also face problems managing stored energy, with childrenoften using it all up watching afterno<strong>on</strong> televisi<strong>on</strong>. And localweather patterns <strong>and</strong> topography likewise take their toll. In somehilly areas with multiple m<strong>on</strong>so<strong>on</strong>s, solar can supplement kerosenesystems at best for a six- to nine-m<strong>on</strong>th period, depending <strong>on</strong> thetiming <strong>and</strong> durati<strong>on</strong> of the m<strong>on</strong>so<strong>on</strong>.This secti<strong>on</strong> is based <strong>on</strong>the research of Dr CynthiaCar<strong>on</strong>. After completing herPh. D. at Cornell University inthe US <strong>on</strong> electricity sectorrestructuring in Sri Lanka, DrCar<strong>on</strong> moved to Sri Lanka.She has been awarded agrant from the MacArthurFoundati<strong>on</strong> <strong>and</strong> has beenresearching forced migrati<strong>on</strong>,resettlement <strong>and</strong> Muslimnati<strong>on</strong>alism <strong>and</strong> its relati<strong>on</strong>with Sri Lanka’s ethnicc<strong>on</strong>flict, as well as working<strong>on</strong> development <strong>and</strong> healthprojects.Did Pacifi cCorp’s electricity customers – or the Oreg<strong>on</strong> legislature – knowabout all this?Given the geographical <strong>and</strong> cultural distances involved, it would havebeen difficult for them to find out. On the other h<strong>and</strong>, it seems unlikelythat Northern c<strong>on</strong>sumers of electricity – if they are informed of
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 279such details – will accept carb<strong>on</strong>-offset projects that involve not <strong>on</strong>lydubious carb<strong>on</strong> accounting, but also blatantly exploitative c<strong>on</strong>diti<strong>on</strong>s<strong>and</strong> the reversal of poverty alleviati<strong>on</strong> efforts.This is another reas<strong>on</strong> for doubting how l<strong>on</strong>g-lived undertakings likePacificCorp/SELCO’s will be. From the beginning, they have been moreabout ‘preserving the ec<strong>on</strong>omic status quo’ <strong>and</strong> promoting cost efficiencyin Northern countries than about supporting equity in the South. 120OK, I can see there were some problems. But surely social <strong>and</strong> envir<strong>on</strong>mentalimpact assessments could have identifi ed some of these problems in advance.With proper regulati<strong>on</strong>, they could then have been prevented.This is a key issue. For example, the solar technology could have beenrec<strong>on</strong>figured so that an entire line of families could have pooled resources<strong>and</strong> benefited, rather than just individual houses.But setting up an apparatus to assess, modify, m<strong>on</strong>itor <strong>and</strong> overseesuch a project isn’t by itself the answer. Such an apparatus, after all,would have brought with it a fresh set of questi<strong>on</strong>s. Who would havecarried out the social impact assessment <strong>and</strong> would they have beensensitive to local social realities? Would its recommendati<strong>on</strong>s havebeen acceptable to Neeyamakola? Would its cost have been acceptableto PacificCorp? What kind of further oversight would have beennecessary to prevent an assessment from merely adding legitimacy toa project whose underlying problems were left untouched?Just as a technology is never ‘just’ a neutral piece of machinery whichcan be smoothly slotted into place to solve the same problem in anysocial circumstance, so the success of a social or envir<strong>on</strong>mental impactassessment is dependent <strong>on</strong> how it will be used <strong>and</strong> carried outin a local c<strong>on</strong>text.But if success is so dependent <strong>on</strong> political c<strong>on</strong>text, how will it ever be possiblefor new renewable technologies to make headway anywhere? If it isn’t possible,then we might as well give in <strong>and</strong> keep using fossil fuel technologies! We mightas well go al<strong>on</strong>g with Exx<strong>on</strong>Mobil when they claim that we have to go <strong>on</strong> drillingoil since anything else would be to betray the poor!The alternative is not to accept the dominance of fossil fuel technologies.Their c<strong>on</strong>tinued dominance also does nothing to improve thepositi<strong>on</strong> of disadvantaged groups such as Sri Lanka’s estate Tamils.Nor is the alternative simply to accept the system of global <strong>and</strong> localinequality exemplified in Sri Lanka’s estate plantati<strong>on</strong> sector.The alternative, rather, is to act using our underst<strong>and</strong>ing that whatkeeps marginal communities such as that of Sri Lanka’s estate Tamils
280 development dialogue september 2006 – carb<strong>on</strong> tradingin the dark, so to speak, is not <strong>on</strong>ly a matter of ‘suboptimal’ use oftechnology, but also a deeper pattern of local <strong>and</strong> global politics. Cuttingfossil fuel use means underst<strong>and</strong>ing this deeper pattern.Up to now, climate activists <strong>and</strong> policy makers have often told eachother that ‘the essential questi<strong>on</strong> is not so much what will happen <strong>on</strong>the ground, but what will happen in the atmosphere’. 121 The exampleof the PacificCorp/SELCO/Neeyamakola rural solar electrificati<strong>on</strong>project helps show why this is a false dichotomy. What happens <strong>on</strong>the ground in communities affected by carb<strong>on</strong> projects is importantnot <strong>on</strong>ly because of the displacement of the social burdens of climatechange mitigati<strong>on</strong> from the North <strong>on</strong>to already marginalised groupsin the South. It is also important because what happens <strong>on</strong> the groundinfluences what happens in the atmosphere.Thail<strong>and</strong> – Biomass in the service ofthe coal <strong>and</strong> gas ec<strong>on</strong>omyBurmaThail<strong>and</strong>LaosCambodiaThe experience of Sri Lankashows that not all projects that gounder the name of ‘renewable energyschemes’ promote local betterment,foster local aut<strong>on</strong>omy, orhelp in the transiti<strong>on</strong> away fromfossil fuels.Other types of ‘renewable en ergy’projects may turn out to be ofequally questi<strong>on</strong>able climatic orsocial value when integrated intothe carb<strong>on</strong> market as supportsfor a system dominated by fossilMalaysiafuel technologies <strong>and</strong> corporateexpansi<strong>on</strong>. A good example is a‘biomass energy’ project seeking CDM support in Yala province inThail<strong>and</strong>’s troubled far south.VietnamThere, an approximately 23-megawatt power plant fuelled by rubberwoodwaste <strong>and</strong> sawdust is being developed by a diverse group of companieslinked by their interest in the carb<strong>on</strong> trade. They include:• Gulf Electric, an independent power producer 50 per cent owned
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 281by Thail<strong>and</strong>’s Electricity Generating Public Company (EGCO)<strong>and</strong> 49 per cent by Japan’s Electric <strong>Power</strong> Development Company(EPDC).• Asia Plywood (AP), a Yala rubberwood processor, next to <strong>on</strong>e ofwhose factories the plant would be located.• Det Norske Veritas (DNV), a Norwegian ‘risk management’ c<strong>on</strong>sultancywhich has managed to parlay its experience in certifyingthe credibility of pi<strong>on</strong>eer carb<strong>on</strong> schemes such as Yala into a majorshare in CDM’s c<strong>on</strong>sultancy market.EPDC is a largely fossil-fuel-oriented company <strong>and</strong> the largest singleuser of coal in Japan. 122 It operates 66 coal- fired <strong>and</strong> hydropowerstati<strong>on</strong>s <strong>and</strong> burned usd 652 milli<strong>on</strong> in fossil fuels in 2001 al<strong>on</strong>e. 123 Italso has an interest in six gas-fired power generating plants in operati<strong>on</strong>or under c<strong>on</strong>structi<strong>on</strong> in Thail<strong>and</strong>, totalling 2,733 megawatts. 124Nor, with a large new coal-fired power stati<strong>on</strong> under c<strong>on</strong>structi<strong>on</strong> inYokohama, does EPDC c<strong>on</strong>template any change of directi<strong>on</strong> in thefuture. ‘Coal offers stable supply <strong>and</strong> outst<strong>and</strong>ing ec<strong>on</strong>omical efficiency,’says a company presentati<strong>on</strong>, ‘hence we predict it will supportworld energy c<strong>on</strong>sumpti<strong>on</strong> throughout this century. Our great missi<strong>on</strong>is to ensure that coal is burned cleanly, thus reducing the burden<strong>on</strong> the envir<strong>on</strong>ment.’ 125Accordingly, EPDC’s main resp<strong>on</strong>se to global warming is coal gasificati<strong>on</strong>,which of course does nothing to halt the flow of fossil carb<strong>on</strong>to the surface, <strong>and</strong> the development of a nuclear power plant. ForEPDC, the point of investment in Yala would be to gain carb<strong>on</strong>credits to help it, <strong>and</strong> Japan generally, maintain current levels offossil -fuel combusti<strong>on</strong> in the face of Kyoto pressures.EGCO is also largely structured around fossil-fuel technologies. Oneof EGCO’s gas-fired power stati<strong>on</strong>s, in fact, is operated in partnershipwith UNOCAL, a US multinati<strong>on</strong>al fossil-fuel firm that is anti-Kyoto Protocol <strong>and</strong> sceptical about climate change.Gulf Electric, meanwhile, with a mainly gas-fuelled generating capacity,has become well known in recent years partly due to the overwhelmingdefeat in March 2003 of its proposal to build a 734-megawattBo Nok coal-fired power plant <strong>on</strong> the Gulf of Thail<strong>and</strong>. Localpeople in Prachuab Khiri Khan province c<strong>on</strong>cerned about polluti<strong>on</strong><strong>and</strong> other potentially destructive effects of the project had mounted asuccessful regi<strong>on</strong>al <strong>and</strong> nati<strong>on</strong>al campaign against it. Following theirvictory against Gulf, the company moved quickly to propose a gasfiredsubstitute plant further up the coast.If any further evidence were required that the sp<strong>on</strong>soring firms are
282 development dialogue september 2006 – carb<strong>on</strong> tradingnot treating the Yala project as a step away from fossil fuels, there isthe fact that they had originally planned to build the power plantwithout any carb<strong>on</strong> finance at all. It is <strong>on</strong>ly since the depths of theThai financial crisis, in 1998, that they have c<strong>on</strong>templated securingsupplementary funding through carb<strong>on</strong> trading. 126 Encouragingthem to develop the idea have been subsidies from Thail<strong>and</strong>’sEnergy Policy <strong>and</strong> Planning Office’s Energy C<strong>on</strong>servati<strong>on</strong> Promoti<strong>on</strong>Fund 127 as well as porti<strong>on</strong>s of both a usd 30 milli<strong>on</strong> OECF loan undera 1999 five-year Global Envir<strong>on</strong>mental Facility (GEF) project <strong>and</strong> aGEF outlay of usd 3 milli<strong>on</strong> toward commercial risk premiums. 128But if the point of the Yala project is to help keep corporati<strong>on</strong>s using fossil fuels,how can the credits it generates possibly be tokens of measurable climate benefi ts?The project’s prop<strong>on</strong>ents claim that it would save a measurable amountof carb<strong>on</strong> by ‘replacing’ some of the electricity in the Thai grid that’snow generated by burning fossil fuels.How do they know that the plant would do that?The validator, DNV, realised it had no way of determining that thenew project’s power would be replacing either combined-cycle naturalgas or oil-fuel electricity in the nati<strong>on</strong>al grid. 129 It was also told byThail<strong>and</strong>’s electricity authority that it was ‘often a mistake to see adirect link of displacement between an increase in <strong>on</strong>e comp<strong>on</strong>ent ofthe grid <strong>and</strong> a reducti<strong>on</strong> in another’. So DNV looked at the ‘average’carb<strong>on</strong> intensity of electricity from the Thai grid. It then subtractedthe figure corresp<strong>on</strong>ding to the projected carb<strong>on</strong> intensity of electricityfrom the project <strong>and</strong> multiplied that by the project’s output. DNVargued that the resulting figure is c<strong>on</strong>servative, since expansi<strong>on</strong> plansby the Thai electricity authority featured a ‘higher carb<strong>on</strong> intensityLeaders of the movementthat defeated the proposalfor a coal-fired power plantat Bo Nok <strong>on</strong> the Gulf ofThail<strong>and</strong> meet the press in2004. The proposed powerplant was a project of GulfElectric, a firm that hopesto gain carb<strong>on</strong> finance fora joint venture biomassplant using rubberwoodwaste. Jinthana Kaewkhaaw(right), a local villager with afourth-grade educati<strong>on</strong>, wasawarded an h<strong>on</strong>orary Ph. D.from Thail<strong>and</strong>’s alternativeMidnight University for hertireless efforts against the BoNok plant. Galok Wat-Aksorn(left) is the widow of anotherlocal leader, Charoen Wat-Aksorn (pictured <strong>on</strong> her T-shirt), who was murdered overa l<strong>and</strong> dispute c<strong>on</strong>nectedwith the struggle. The leaderswere voicing their supportfor another movementfurther south battling againstthe establishment of a gaspipeline <strong>and</strong> gas crackingplant that encroaches <strong>on</strong>Muslim wakaf comm<strong>on</strong>l<strong>and</strong> <strong>and</strong> degrades the localenvir<strong>on</strong>ment. The allianceof the two movements, <strong>on</strong>ecomposed of mainly Buddhistvillagers, the other composedof mainly Muslims, defiesgovernment attempts to pitThail<strong>and</strong>’s majority Buddhistcommunity against Muslims inthe south of the country.
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 283than the grid average used by the project’. This is in spite of the factthat the authority’s figures were a subject of hot dispute in Thail<strong>and</strong><strong>and</strong> carb<strong>on</strong> intensity per year varies by about 20 per cent. 130It all sounds a bit too much like guesswork, given that the object is the calculati<strong>on</strong>of a precise number of t<strong>on</strong>nes of CO 2 saved. How can they possibly be surethat if the project didn’t exist, exactly that amount of electricity would havebeen generated through nothing better than the current ‘average’ fuel mix?They can’t. But it’s a procedure that’s acceptable in principle to the UN.I assume the c<strong>on</strong>sultancy also factors in how much additi<strong>on</strong>al use of fossilgeneratedEPDC electricity the project might encourage in Japan?No.Why not? If the project helps reassure electricity c<strong>on</strong>sumers or investors inJapan that it’s OK to keep using coal-generated electricity there, doesn’t thatadd to the carb<strong>on</strong> debit of the project?Yes, it does. But Kyoto carb<strong>on</strong> accounting tends to ignore such realities,not that they could be measured anyway (see Chapter 3). SoDNV was under little obligati<strong>on</strong> to present an answer to the questi<strong>on</strong>in any of the hundreds of pages of highly technical documents <strong>on</strong> theYala project. Assessing the many indirect carb<strong>on</strong> or climatic effects ofthe project, according to DNV, ‘is not necessary in our opini<strong>on</strong>’. 131Let me ask another questi<strong>on</strong>, then. If the project was going to be built anyway,then what exactly does it ‘save’ that deserves a climate subsidy? It’s just businessas usual.That’s right, <strong>and</strong> the CDM rulebook dem<strong>and</strong>s that CDM projectsprove that they are not business as usual. As a result, the Yala project’sprop<strong>on</strong>ents have had to produce some evidence that it isn’t businessas usual.How have they d<strong>on</strong>e that?With difficulty. At first, project prop<strong>on</strong>ents claimed that, withoutcarb<strong>on</strong> credit sales, the project’s return <strong>on</strong> equity would be lowerthan ‘desirable’ or ‘normal’ but that the good publicity associatedwith a climate-friendly project would make up for this. When NGOspressed DNV to provide evidence for these claims, DNV said that itdid not have permissi<strong>on</strong> to make public the ‘c<strong>on</strong>fidential’ financialanalysis the project prop<strong>on</strong>ents had given it. Project prop<strong>on</strong>ents alsoasserted that the planning needed for the project was a ‘barrier’ thatrequired carb<strong>on</strong> finance to overcome, <strong>and</strong> that the project was tech-
284 development dialogue september 2006 – carb<strong>on</strong> tradingnologically novel in the Thai c<strong>on</strong>text. 132 Later <strong>on</strong>, the project developeralso noted that the project was sufficiently financially shaky thatit had to be put <strong>on</strong> hold in 2002.But even if that’s true, that wouldn’t prove that the project could be undertaken<strong>on</strong>ly with carb<strong>on</strong> fi nance.No. And there’s a lot of evidence that, in fact, the prospective carb<strong>on</strong>income of the project has no weight at all with the investors. For example,uncertainty about whether the project would ultimately be allowedto be registered with the CDM, or about whether the Thai governmentwould overcome its initially sceptical stance towards CDMprojects, does not seem to have had any effect <strong>on</strong> the project’s originalc<strong>on</strong>structi<strong>on</strong> schedule. What’s more, Sarath Ratanavadi, managing directorof Gulf Electric, was quoted in the Bangkok Post <strong>on</strong> 13 June 2003as saying that Gulf Electric <strong>and</strong> EPDC ‘will go ahead with the 800 milli<strong>on</strong>baht project [Yala biomass] even without CDM’.What was DNV’s resp<strong>on</strong>se to that?It protested that the project’s business-as-usual status ‘is not as obviousas asserted’ 133 <strong>and</strong> said it had c<strong>on</strong>sulted with EPDC about Sarath’sstatement.From a scientifi c point of view, that’s not terrifi cally c<strong>on</strong>vincing.No. For this project to be registered with the CDM would, in fact,probably be a net loss for climatic stability, since it would enable theJapanese government to write down its Kyoto commitment by half amilli<strong>on</strong> t<strong>on</strong>nes of carb<strong>on</strong> dioxide without providing anything verifiablein return. Nevertheless, the c<strong>on</strong>troversy over Yala is representativeof the level of debate that still prevails in fr<strong>on</strong>t of the UN committees<strong>and</strong> panels resp<strong>on</strong>sible for overseeing the CDM.Well, if the project’s benefi ts for the climate can’t be verifi ed or quantifi ed, perhapswe should forget about looking at it as a carb<strong>on</strong> project <strong>and</strong> just view it asa st<strong>and</strong>ard development project with an unusual prospective source of funding.Does it at least provide some benefi ts for local people?Many local residents in fact quietly oppose the new development <strong>on</strong>Asia Plywood’s Yala site as being likely to reinforce local imbalancesof power over air <strong>and</strong> water quality. They’ve l<strong>on</strong>g felt animosity towardAP for causing pulm<strong>on</strong>ary health <strong>and</strong> other problems throughsmoke <strong>and</strong> ash polluti<strong>on</strong> of local air, water <strong>and</strong> l<strong>and</strong>, <strong>and</strong> profess ‘notrust’ in the firm. Subdistrict officials even allege that the firm has notpaid its full share of taxes.
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 285Biomass is not alwaysbenign. Noo Nui, acomic figure from theshadow puppet folkloreof Southern Thail<strong>and</strong>,registers his oppositi<strong>on</strong>to a proposed powerplant using wastebiomass <strong>on</strong> the groundsthat it will ‘destroythe envir<strong>on</strong>ment’. Theproject in questi<strong>on</strong>didn’t try to gain accessto carb<strong>on</strong> finance, butis similar to <strong>on</strong>e in thesame regi<strong>on</strong> that did.But why should any of that make any diff erence to their view of the new project?Because for them, the important thing about the project is not thetheory behind it, but who is going to carry it out. Local people mightwell agree with DNV that the disposal of rubber wood residues atAsia Plywood <strong>and</strong> other installati<strong>on</strong>s is ‘<strong>on</strong>e of the most serious envir<strong>on</strong>mentalproblems in the Yala community’. But they view corporatereliability as a more important prerequisite for solving such problemsthan technical proposals. Refusing to abstract from the local politicalc<strong>on</strong>text, they see narrowly technical factors such as new equipmentor CDM certificati<strong>on</strong> as irrelevant as l<strong>on</strong>g as underlying c<strong>on</strong>fl icts betweencompany <strong>and</strong> community are not tackled. ‘If current problemsare not solved’, <strong>on</strong>e local health official interviewed asked, ‘how arenew problems going to be addressed?’Shouldn’t DNV have taken account of such views?DNV was well aware of local people’s view that AP should solve its existingproblems with ‘noise, wastewater <strong>and</strong> solid waste’ before attemptinganything else, <strong>and</strong> should communicate the details of c<strong>on</strong>structi<strong>on</strong>to the community as well as involve it in m<strong>on</strong>itoring. Yet it had fewincentives to take villagers’ political <strong>and</strong> social analysis seriously.DNV did write about a ‘comprehensive public participati<strong>on</strong> programme’to ‘accurately inform local residents, government officials<strong>and</strong> other c<strong>on</strong>cerned members of the public about the Project <strong>and</strong> expectedimpacts’ <strong>and</strong> ‘obtain feedback, mainly from the local communities<strong>and</strong> c<strong>on</strong>cerned government agencies, with regard to their opini<strong>on</strong>s<strong>and</strong> c<strong>on</strong>cerns about the Project’. Those to be c<strong>on</strong>sulted included
286 development dialogue september 2006 – carb<strong>on</strong> tradingthe subdistrict administrative authority’s committee <strong>and</strong> residents in‘surrounding villages’. Yet there is little evidence that this ‘comprehensive’programme was satisfactory to local residents. According toDNV itself, the meeting it claimed to hold with the Lam Mai subdistrictauthority took less than <strong>on</strong>e hour.Throughout, DNV presented the project <strong>and</strong> its participant firms asa ‘black box’ or neutral machine into which formulas for envir<strong>on</strong>mentalimprovement, participati<strong>on</strong> <strong>and</strong> good community relati<strong>on</strong>scould be fed with near-automatic results. Local envir<strong>on</strong>mental problemswere seen as stemming from a mere technical gap – <strong>on</strong>e that theCDM project would help fill.Similarly, when at an August 1999 public c<strong>on</strong>sultati<strong>on</strong> few resp<strong>on</strong>dentsagreed with the project, DNV put it down to ‘previous dissatisfacti<strong>on</strong>with the dust caused by AP’s operati<strong>on</strong>’ <strong>and</strong> claimed that, followingthe installati<strong>on</strong> of a new boiler which uses sawdust, ‘Lam Mai[subdistrict] residents no l<strong>on</strong>ger disagree with the Project’. 134Are you saying that that’s not true?It’s certainly not the impressi<strong>on</strong> given by a number of local residentsinterviewed more recently. To them, the workings of the firms involvedin the project, far from being enclosed in a ‘black box’, areboth open to view <strong>and</strong> of powerful interest.Several people interviewed pointed out that the AP’s ‘public participati<strong>on</strong>programme’ referred to so uncritically by DNV, instead of involvingdisseminati<strong>on</strong> of useful informati<strong>on</strong>, has featured expenses -paid tours for local people to biomass power plants in Thail<strong>and</strong>’s centralregi<strong>on</strong>. Such tours, they reported, have included hotel accommodati<strong>on</strong>,food <strong>and</strong> free visits for some male participants to localprostitutes, but no opportunities for close inspecti<strong>on</strong> of the plants inquesti<strong>on</strong> or chances to meet local people.Local residents also pointed to AP’s name <strong>on</strong> a pavili<strong>on</strong> that the companygave to a Buddhist temple adjacent to its factory after temple m<strong>on</strong>kscomplained about polluti<strong>on</strong> – an act incurring powerful reciprocal obligati<strong>on</strong>s.They noted that other modes of persuasi<strong>on</strong> have also beenused. One elderly resident interviewed reported receiving no less thanthree death threats as a result of voicing criticisms of the AP project.So some of the locals aren’t too keen <strong>on</strong> carb<strong>on</strong> trading?Who knows? They underst<strong>and</strong> well what biomass is, but they’ve neverhad a chance to discuss the carb<strong>on</strong> market. Most people are unawareof the AP project’s projected role in this new global trade.
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 287South Africa –Carb<strong>on</strong> credits from the citiesDurban Solid Waste (DSW),Botswanapart of Durban’s city councilNamibiaSwazil<strong>and</strong>Lesothobureaucracy, manages al<strong>and</strong>fill site called the BisasarRoad dump. The largest suchoperati<strong>on</strong> in South Africa<strong>and</strong> <strong>on</strong>e of the largest in theSouth AfricaSouthern hemisphere, thedump has been in operati<strong>on</strong>since 1980. Located inan area that was designatedfor people of Indian descentunder apartheid’s Group Areas Act of 1961, the dump is also a pri marysource of livelihood for the mainly African, <strong>and</strong> poorer, KennedyRoad settlement, established in the late 1980s <strong>and</strong> now numberingnearly 1,000, who recycle materials from the dump while strugglingwith officials <strong>and</strong> business to gain more secure rights to the l<strong>and</strong> theirhouses occupy.Although the site is licensed <strong>on</strong>ly to receive domestic waste, medicalwaste, sewage sludge, private corporate waste <strong>and</strong> large shipmentsof rotten eggs have also wound up there. Cadmium <strong>and</strong> lead emissi<strong>on</strong>sare over legal limits, <strong>and</strong> limits for suspended particulate matteralso often exceeded. C<strong>on</strong>centrati<strong>on</strong>s of methane, hydrogen chloride,<strong>and</strong> other organic <strong>and</strong> inorganic compounds including formaldehyde,benzene, toluene <strong>and</strong> trichloroethylene are high.That sounds dangerous.Local residents report many health problems, with six out of ten ofthe houses in <strong>on</strong>e downwind block <strong>on</strong> the nearby Clare Estate reportingcancer cases. The causes of each such individual case of disease arenotoriously difficult to pin down. They could include emissi<strong>on</strong>s fromincinerati<strong>on</strong> practices, which stopped in 1997, other emissi<strong>on</strong>s fromthe dump either before or after, or other factors. Lindsay Strachan,Project Manager of eThekwini Engineering <strong>and</strong> Projects, claims, forexample that the Kennedy Road settlement, which burns wood <strong>and</strong>other materials for heating <strong>and</strong> cooking, is just as likely as the BisasarRoad dump to be the source of health threats. 135But with some houses <strong>on</strong>ly 20 metres away from the l<strong>and</strong>fill siteMozambique
288 development dialogue september 2006 – carb<strong>on</strong> tradingboundary, it’s hardly surprising that many in the community wantthe dump shut down. Under pressure, the city council itself pledgedin 1987 to close the site <strong>and</strong> turn it into sports fields, picnic areas <strong>and</strong>play areas for children. When, in 1996, the council reneged a sec<strong>on</strong>dtime <strong>on</strong> the promise, some 6,000 local residents signed a petiti<strong>on</strong> ofprotest, with many blocking the dump site entrance <strong>and</strong> staging dem<strong>on</strong>strati<strong>on</strong>s<strong>and</strong> marches. Yet the site was kept open <strong>and</strong> even startedreceiving rubbish diverted from a dump in a wealthy white-dominatedDurban suburb, which was closing as it was ‘earmarked for upmarketproperty development’. 136The BisasarRoad l<strong>and</strong>filldump.In June 2002, Clare Estate resident Sajida Khan filed a lawsuit againstthe eThekwini municipality <strong>and</strong> the federal Department of Envir<strong>on</strong>mentalAffairs <strong>and</strong> Tourism for negligence in permitting the dump tostay open. After three years of delays, the case was due to be heard inthe autumn of 2005, but due to Khan’s poor health (see below), thecase will remain in the docket until she is declared fit enough to participate.In the meantime, the Department of Water <strong>and</strong> Forestry atthe provincial level has been delayed in rendering its decisi<strong>on</strong> <strong>on</strong> anappeal against keeping the dump open, estimated to have cost the cityR40,000 to fight. 137Very unpleasant, clearly. But what does all this have to do with mitigatingclimate change?In 2002, the World Bank’s Prototype Carb<strong>on</strong> Fund (PCF) signed anagreement with DSW to promote a prospective CDM project to ex-
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 289tract methane from the Bisasar l<strong>and</strong>fill <strong>and</strong> burn it to generate up to45 megawatts of electricity for supply to the nati<strong>on</strong>al grid.I’m not sure I underst<strong>and</strong>. How can a project that emits carb<strong>on</strong> dioxide usingfuel from a smelly l<strong>and</strong>fi ll site be climate-friendly?The idea is that the electricity generated by the project would ‘replace’electricity that otherwise would have been generated by burningcoal. It’s claimed that the project would generate enough powerto light up 20,000 informal houses or 10,000 formal-sector houses.Because burning methane is less climatically damaging than simplyreleasing it, <strong>and</strong> better than burning coal (the dirtier fuel usuallyused) the project is better than the alternative.‘The poor countries areso poor they will acceptcrumbs. The World Bankknow this <strong>and</strong> they aretaking advantage of it.’Sajida Khan, BisasarRoad community residentSajida KhanThe alternative? There’s <strong>on</strong>ly <strong>on</strong>e?Well, of course, in reality there are many alternatives. But the carb<strong>on</strong>credit market dem<strong>and</strong>s that there be <strong>on</strong>ly <strong>on</strong>e alternative. If there’smore than <strong>on</strong>e alternative, then you’ll have more than <strong>on</strong>e numbercorresp<strong>on</strong>ding to the carb<strong>on</strong> ‘saved’, <strong>and</strong> you w<strong>on</strong>’t be able to assigna single number to the number of carb<strong>on</strong> credits your project is producing.So you w<strong>on</strong>’t have anything definite to sell.But how can other alternatives be ignored?They are classified as ‘implausible’.Who says they’re implausible? What about using the m<strong>on</strong>ey to close the dumpdown <strong>and</strong> treat some of the waste? What about just pumping the l<strong>and</strong>fi ll gas intothe nearby Petr<strong>on</strong>et gas pipeline network so that it would not need to be burned<strong>on</strong> site? Or fi nding ways of using electricity more effi ciently? Or more n<strong>on</strong>-fossilcommunity-level power sources? N<strong>on</strong>e of these sound implausible to me.Nevertheless, n<strong>on</strong>e of them can be acknowledged as alternatives, becauseto do so would make it impossible to calculate the credits for theproject under c<strong>on</strong>siderati<strong>on</strong>. That’s <strong>on</strong>e of the ways that a seemingly‘technical’ accounting system can help limit the political choices a societycan make to small, incremental variati<strong>on</strong>s <strong>on</strong> business as usual.How was such a <strong>on</strong>e-sided view of the choices available enforced?In the early phase of the project, authority for deciding what would<strong>and</strong> would not be possible in South Africa in the absence of theBisasar Road scheme was quietly given to two individuals at thePCF in Washingt<strong>on</strong>, DC – S<strong>and</strong>ra Greiner <strong>and</strong> Robert Chr<strong>on</strong>owski. 138Their decisi<strong>on</strong> was clothed in many pages of impressive numbers <strong>and</strong>reinforced through meetings <strong>and</strong> professi<strong>on</strong>al review.
290 development dialogue september 2006 – carb<strong>on</strong> tradingDidn’t anybody questi<strong>on</strong> whether two people in Washingt<strong>on</strong> had the right todecide what the alternative energy future of Durban might be?How? Informati<strong>on</strong> disseminati<strong>on</strong> <strong>and</strong> public c<strong>on</strong>sultati<strong>on</strong> <strong>on</strong> the projectproposal were carried out over the internet, to which <strong>on</strong>ly a small minorityof the local community have access. Time allocated for objecti<strong>on</strong>sin late 2004 was a mere 10 days. And few outside the immediatearea were either interested in or aware of what was going <strong>on</strong>.Meanwhile, Durban officials claimed that without the usd 15 milli<strong>on</strong>provided by the Prototype Carb<strong>on</strong> Fund, they would not bothertrying to recover the methane as fuel, since the electricity generatedin the process costs so much more per kilowatt hour than the localpower utility charges for its coal-fired power. 139All right, fair enough. But assuming that’s true, all it proves is that c<strong>on</strong>tinuedraw methane release <strong>and</strong> coal-fi red power is a choice that would have a reas<strong>on</strong>ableec<strong>on</strong>omic rati<strong>on</strong>ale, not that it is the <strong>on</strong>ly choice that could be made.That’s all that’s required, under the rules, for the project to createcarb<strong>on</strong> credits.The fence separatingthe dumpsite fromthe surroundingcommunities.All right. But who would buy carb<strong>on</strong> credits from the dump?All PCF investors get pro rata shares of PFC project credits. These investorsinclude British Petroleum, Mitsubishi, Deutsche Bank, Tokyo Electric<strong>Power</strong>, Gaz de France <strong>and</strong> RaboBank, as well as the governments ofthe Netherl<strong>and</strong>s, Norway, Finl<strong>and</strong>, Canada, Sweden <strong>and</strong> Japan.Is this a good thing for local people who live around the dump?That depends a lot <strong>on</strong> who you ask.Well, what does the PCF say?The PCF says that improving the ‘financial positi<strong>on</strong> of DSW’ wouldalso benefit local people <strong>and</strong> send a ‘clear signal’ to them that ‘theenvir<strong>on</strong>ment is a number-<strong>on</strong>e c<strong>on</strong>cern in South Africa <strong>and</strong> is beingdealt with in the best way possible’.And what does the local community say?Again, that depends <strong>on</strong> who you ask. But let’s start with Sajida Khan,a member of the Indian community <strong>on</strong> the border of the dump.Khan, who was diagnosed in 1996 with cancer, <strong>and</strong> whose nephewdied of leukaemia, had this to say in 2002: ‘To gain the emissi<strong>on</strong>sreducti<strong>on</strong>s credits they will keep this site open as l<strong>on</strong>g as possible.Which means the abuse will c<strong>on</strong>tinue as l<strong>on</strong>g as possible so they can
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 291c<strong>on</strong>tinue getting those emissi<strong>on</strong>s reducti<strong>on</strong>s credits. To them howmuch m<strong>on</strong>ey they can get out of this is more important than what effectit has <strong>on</strong> our lives.’ 140Khan <strong>and</strong> some other community members see PCF support for themethane project as having thrown a lifeline to the dump. They notethat the PCF’s crediting period for the project is seven years, twice renewable,making a total of 21 years. According to the PCF, ‘becauseof the growing waste generati<strong>on</strong> per capita in the municipality…thereis no plan to close…the Bisasar Road site…during the PCF projectlife.’ To Khan <strong>and</strong> colleagues, this new lease <strong>on</strong> life for the dump, togetherwith the PCF claim that Bisasar Road is an ‘envir<strong>on</strong>mentallyprogressive…world-class site’ leave a very bitter taste in the mouth.‘[The Prototype Carb<strong>on</strong>Fund is after] a cheapbang for their buck; theybasically just get the lowcost credits…they pillagethe country <strong>and</strong> d<strong>on</strong>’tc<strong>on</strong>tribute to its sustainabledevelopment.’Sheriene Rosenberg,SouthSouthNorth,South AfricaUnderst<strong>and</strong>ably so. But are there other views?One of the municipality’s top officials resp<strong>on</strong>sible for the project,Lindsay Strachan, has little patience with opini<strong>on</strong>s like Khan’s. Becauseprotesters ‘can’t think globally any more,’ he complains, ‘theproject is literally slipping through our fingers.’ 141 Strachan claimsthe city is committed to closing the dump <strong>and</strong> c<strong>on</strong>tinuing to extractmethane thereafter, although a carb<strong>on</strong> project document he helpedwrite states that ‘it is not reas<strong>on</strong>able’ to expect that the municipalitywould close the dump before it is full, <strong>and</strong> that no plans exist for c<strong>on</strong>structi<strong>on</strong>of replacement sites. 142But there are more than just two sides to this story. Most of the Africanresidents of the nearby Kennedy Road settlement also support extendingthe life of the dump. For <strong>on</strong>e thing, the dump provides most of theircurrent livelihood. For another, the new World Bank carb<strong>on</strong> projecthas shrewdly promised to provide jobs <strong>and</strong> a few local scholar ships. TheBank also pushed DSW to c<strong>on</strong>duct ‘c<strong>on</strong>sultative exercises’ in KennedyRoad, which c<strong>on</strong>stituted <strong>on</strong>e of the few occasi<strong>on</strong>s that the communityhad been officially recognised. Kennedy Road residents could not helpbut c<strong>on</strong>trast that recogniti<strong>on</strong> with what they perceive as the BisasarRoad community’s lack of sympathy for their <strong>on</strong>going struggles to securerights to the l<strong>and</strong> they live <strong>on</strong> so precariously.But presumably the World Bank <strong>and</strong> DSW are merely trying to divide thelocal Indian <strong>and</strong> African communities from each other?Kennedy Road activists are no more under any illusi<strong>on</strong>s about theagendas of outside agencies than they are in the fr<strong>on</strong>t line of internati<strong>on</strong>aldebate over climate change. But, as Raj Patel of the localCentre for Civil Society at the University of KwaZulu-Natal observes,when communities have been systematically denied dignity,
292 development dialogue september 2006 – carb<strong>on</strong> trading‘c<strong>on</strong>sultati<strong>on</strong>s’ such as those staged by DSW under World Bank pressuremay be the <strong>on</strong>ly ‘substitute for marginalisati<strong>on</strong>’ available. 143Patel also observes, however, that as of 2006 the dump ‘seems to havereceded as a site of struggle’ for Kennedy Road residents, ‘simply becausethere are new places <strong>and</strong> new ways to fight, <strong>and</strong> bigger thingsto fight for than the meagre prospect that a family member will get ajob picking garbage <strong>on</strong> the dump.’ 144In favour of the carb<strong>on</strong> project, isn’t there also the argument that by extractingmethane, the scheme not <strong>on</strong>ly prevents quantities of a powerful greenhouse gasfrom being dispersed in the atmosphere, but also benefi ts local air quality?The project might clear the air, to some degree – although a lot of associatedpollutants would still be released, including carb<strong>on</strong> m<strong>on</strong>oxide<strong>and</strong> various hydrocarb<strong>on</strong>s.Clean air, however, is a right South Africans are c<strong>on</strong>stituti<strong>on</strong>allyguaranteed even in the absence of carb<strong>on</strong> trading schemes. In a sense,therefore, Kyoto commodity producti<strong>on</strong> is being staked here to then<strong>on</strong>-enforcement of envir<strong>on</strong>mental law. DSW, PCF <strong>and</strong> their c<strong>on</strong>sultantsare helping to enclose not <strong>on</strong>ly local communities’ air, butalso their future. In the process the World Bank is also underminingits own stated c<strong>on</strong>cern with ‘good governance’ <strong>and</strong> the rule of law,because it’s providing an incentive not to enforce the c<strong>on</strong>stituti<strong>on</strong>.What’s the future of the project?Uncertain. Project opp<strong>on</strong>ents, backed by sympathisers in a range ofcountries, have definitely had an impact. Sajida Khan <strong>and</strong> others havefiled formal complaints, citing technical, envir<strong>on</strong>mental, health <strong>and</strong>social problems. Several newspaper articles were published <strong>on</strong> Khan<strong>and</strong> her struggles, <strong>and</strong> in November 2004, World Bank staff wereforced to visit Durban to have a look for themselves. In additi<strong>on</strong>, inlate August 2005, DSW submitted a Project Design Document to theCDM Executive Board for two much smaller methane projects at LaMercy <strong>and</strong> Mariannhill, which together would yield <strong>on</strong>ly <strong>on</strong>e- sixtiethof the carb<strong>on</strong> credits of Bisasar Road. Although the two projects hadpreviously been part of a package including the Bisasar Road scheme,the documents c<strong>on</strong>spicuously avoided menti<strong>on</strong>ing it.‘What are we going todo about carb<strong>on</strong> trading?Our president [ThaboMbeki] is saying, “Whereis this project? Whereis any project? Where’sanything?” [There is]a big rush to get SouthAfrica <strong>on</strong> the map. [Yetnow, due to appeals,] thefi rst project in Africa isstopped in its tracks <strong>and</strong>…literally slipping throughour fi ngers… Japan iscalling me. But I say wehave no project… [The2 per cent of people whoobject] are saying that thisis in my backyard, I can’tthink globally any more…South Africa probablyw<strong>on</strong>’t be able to say thatwe spearheaded the CDMmarket or better still wespearheaded the emissi<strong>on</strong>sreducti<strong>on</strong>s market…There is disappointment,but such projects will go<strong>on</strong> elsewhere, in Brazil orChile or India or Iran orKampala.’Lindsay Strachan,Manager ofEngineering <strong>and</strong> Projects,Durban Solid WasteAre there other carb<strong>on</strong> projects afoot in South Africa?Quite a few. One is a project associated with Sasol, a chemicals, mining<strong>and</strong> synthetic fuels company so huge – with nearly usd 12 billi<strong>on</strong>in assets <strong>and</strong> usd 1.4 billi<strong>on</strong> in profits in 2004 – that it has a citynamed after it.
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 293Kennedy Road residents <strong>on</strong>the march for communityrights. Many have opposedclosing the dump <strong>and</strong> havecriticised opp<strong>on</strong>ents of theBisasar Road CDM scheme.Sasol is looking for carb<strong>on</strong> finance for an 865-kilometre pipeline thatwill carry natural gas from the Temane <strong>and</strong> P<strong>and</strong>e fields in Mozambiqueto its facilities in Sasolburg <strong>and</strong> Secunda. The gas will supplementcoal as the feedstock for Sasol’s liquid fuel synthesis processesat its plant at Secunda, a town 100 kilometres west of Johannesburg,<strong>and</strong> replace it entirely in Sasolburg, which lies 60 kilometres south ofJohannesburg.Sasol justifies its bid for carb<strong>on</strong> m<strong>on</strong>ey by claiming that since gas is acleaner-burning fuel than coal, it will be releasing a massive 6.5 milli<strong>on</strong>t<strong>on</strong>nes less of CO 2 equivalent into the atmosphere annually thanit would if it had decided to c<strong>on</strong>tinue using coal. That makes theproject <strong>on</strong>e of the biggest CDM projects in Africa to date.Bigger than Bisasar Road?Yes. The project would generate twice the credits of Bisasar Road,even though the emissi<strong>on</strong>s it is ‘saving’ are of carb<strong>on</strong> dioxide, whichis eleven times less potent a greenhouse gas than the methane seepingout of the Bisasar dump.How does Sasol justify the claim that it’s helping the climate?Without carb<strong>on</strong> m<strong>on</strong>ey, Sasol argues in its CDM documents, it wouldhave had to c<strong>on</strong>tinue using coal as its <strong>on</strong>ly feedstock. True, thereare signs that the firm was going to diversify its feedstock sources
294 development dialogue september 2006 – carb<strong>on</strong> tradinganyway. Sasol’s coal mine in Sasolburg ‘reached the end of its ec<strong>on</strong>omiclife in 2001,’ 145 <strong>and</strong> trucking in replacement coal from Secundawas not ‘ec<strong>on</strong>omically sustainable’. 146 Yet the company insists that theobvious choice for a new feedstock source was not gas from Mozambiquebut rather digging a new coal strip mine near Sasolburg. Althoughthere was ‘public c<strong>on</strong>cern’ over this proposed mine, whichwould have been sited <strong>on</strong> the banks of the Vaal river, 147 as well as ‘adesire from Sasol <strong>and</strong> the South African government to reduce localair polluti<strong>on</strong>’, the company insists that there was no incentive or legalobligati<strong>on</strong> not to go with coal. 148 The pipeline opti<strong>on</strong>, <strong>on</strong> the otherh<strong>and</strong>, was blocked by ‘numerous <strong>and</strong> difficult-to-manage barriers’including capital costs, political instability, <strong>and</strong> fluctuating gas prices– all of which needed carb<strong>on</strong> finance to overcome.I guess that’s reas<strong>on</strong>able – if you think a fossil fuel company should be grantedcarb<strong>on</strong> credits at all.The <strong>on</strong>ly trouble is that Sasol’s claims are c<strong>on</strong>tradicted by several ofits own executives’ accounts of how the pipeline opti<strong>on</strong> was chosen.For example, at a June 2005 meeting of the South African Nati<strong>on</strong>alEnergy Associati<strong>on</strong> at the Siemens Headquarters in S<strong>and</strong>t<strong>on</strong>, outsideof Johannesburg, Sasol’s Natural Gas Supply Manager, Peter Geef,noted that the Mozambique pipeline had already been ‘completelypaid for’ <strong>and</strong> that there were no outst<strong>and</strong>ing financial inputs. Up<strong>on</strong>being questi<strong>on</strong>ed about the CDM, Geef resp<strong>on</strong>ded that ‘yes, we areindeed trying to get some carb<strong>on</strong> finance for this pipeline…you get alot of pay-back in terms of dollars per t<strong>on</strong>ne’, but that ‘we would haved<strong>on</strong>e this project anyway’. 149‘You shouldn’t be sellingoff your crown jewelsso the North can keeppolluting.’ 169Sheriene Rosenberg,SouthSouthNorth,South Africa, June 2005So essentially Sasol is asking for carb<strong>on</strong> fi nance not to do something it wouldnot have d<strong>on</strong>e otherwise, but as a b<strong>on</strong>us for what it has already d<strong>on</strong>e but justwished was more profi table.Exactly. Even Richard Worthingt<strong>on</strong> of the South African <strong>Climate</strong>Acti<strong>on</strong> Network (SACAN), who supports carb<strong>on</strong> trading projects intheory, says that the project merely entrenches Sasol’s pipeline m<strong>on</strong>opoly.He adds that the company’s quest for extra income from carb<strong>on</strong>credit sales ‘is just baseless greed’. 150What about the other South African projects you menti<strong>on</strong>ed.Another South African l<strong>and</strong>fill gas CDM project is located at theBellville South Waste Disposal (BSWD) dump in the north of CapeTown municipality. This project aims at capturing 70 per cent of thesite’s methane, instead of the current 30 per cent, which is merelyfl a r e d . 151 The methane would then be used as fuel by local industry.
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 295Sasol’s Sasolburgplant, seen fromthe south.Used in the early 1930s for sewage disposal, the site has been a dumpingground since the 1960s. Originally far from human settlement, itis now surrounded by the largely coloured <strong>and</strong> Indian Belhar community.152 Although the site was closed for a time due to the ‘closeproximity to residential areas <strong>and</strong> the risk of c<strong>on</strong>taminati<strong>on</strong> to theunderlying Cape Flats aquifer’, 153 it was later reopened, enraging localresidents, who formed two separate organisati<strong>on</strong>s in oppositi<strong>on</strong>: theL<strong>and</strong>fill M<strong>on</strong>itoring Group <strong>and</strong> the richer <strong>and</strong> more Indian-basedBelhar Development Forum. Both groups were relieved by the city’spledge to close the site in 2006 but alarmed at negotiati<strong>on</strong>s that arenow under way to extend its life until 2009.Does the extensi<strong>on</strong> of the life of the dump have anything to do with the CDMproject?Project developer Walter Loots, head of Cape Town Solid Waste, deniesthis. Cape Town ‘is running out of l<strong>and</strong>fill space’, Loots says, <strong>and</strong> ‘the<strong>on</strong>ly alternative would be a higher-cost regi<strong>on</strong>al l<strong>and</strong>fill 60 kilometresout of town’. 154 It hasn’t been revealed whether any increase in availablegas caused by keeping the dump open was included in the CDM accountingfor the project, as was the case at Bisasar Road in Durban.And who’s developing the project?Unlike the larger Bisasar Road scheme, Bellville is being developedunder the close supervisi<strong>on</strong> of a n<strong>on</strong>-profit c<strong>on</strong>sultancy, South-SouthNorth (SSN), in a municipality in which climate change issueshave their own office. It has also gained ‘Gold St<strong>and</strong>ard’ statusas a project meeting the highest st<strong>and</strong>ards for envir<strong>on</strong>mental <strong>and</strong>social sustainability.
296 development dialogue september 2006 – carb<strong>on</strong> tradingSasol gas flaring. Suchflaring is alleged byenvir<strong>on</strong>mentalists tobe in breach of SouthAfrican law.What’s the Gold St<strong>and</strong>ard again?The Gold St<strong>and</strong>ard was originally an attempt by the World WideFund for Nature to correct the CDM’s ‘failure to dem<strong>on</strong>strate “additi<strong>on</strong>ality”<strong>and</strong> deliver added envir<strong>on</strong>mental <strong>and</strong> social benefits’. 155It is now being overseen by the Swiss-based organisati<strong>on</strong> BASE. Asdiscussed in Chapter 3, the Gold St<strong>and</strong>ard gives a special certificate toCDM projects that deliver ‘real c<strong>on</strong>tributi<strong>on</strong>s to sustainable developmentin host countries plus l<strong>on</strong>g-term benefits to the climate’. 156 Theassociated credits are sold at a premium.However, it’s not clear how a project that is widely opposed by thelocal community could make a ‘by no means insignificant c<strong>on</strong>tributi<strong>on</strong>towards local sustainability’. The project can be c<strong>on</strong>sidered ‘ecologicallysound,’ moreover, <strong>on</strong>ly in a very relative sense. As WalterLoots admits, current l<strong>and</strong>fill practices are not sustainable. 157 Organicmaterial <strong>and</strong> n<strong>on</strong>-organic material are not separated, 158 even thoughwaste sorting could c<strong>on</strong>ceivably create badly needed employment.This makes the capture of methane at Bellville ‘an inefficient soluti<strong>on</strong>to an avoidable problem’. 159 Yet the city can hardly spend m<strong>on</strong>ey <strong>on</strong>waste separati<strong>on</strong> <strong>and</strong> recycling when 155,000 families in informal settlementsstill have no roadside collecti<strong>on</strong> of waste. 160‘The carb<strong>on</strong> marketdoesn’t care aboutsustainable development.All it cares about is thecarb<strong>on</strong> price.’Jack Cogen,president, Natsource(the largest private buyerof carb<strong>on</strong> credits)The Gold St<strong>and</strong>ard doesn’t seem to be encouraging projects that have l<strong>on</strong>gerlastingsocial <strong>and</strong> envir<strong>on</strong>mental benefi ts for the community, then.Not in this case, no.
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 297But surely there must be more encouraging examples somewhere that can pointa way forward for the carb<strong>on</strong> market.Well, there are plenty of positive initiatives in all the countries menti<strong>on</strong>edin this chapter. Costa Rica has stopped oil explorati<strong>on</strong> in sensitiveareas. Indian groups are organising to stop sp<strong>on</strong>ge ir<strong>on</strong> producti<strong>on</strong>across four states. Thai villagers are working against coal-firedpower plants.The trouble is that such initiatives exist in oppositi<strong>on</strong>, as it were, tothe carb<strong>on</strong> credit market, which is designed to extend fossil fuel use.If you look for ‘alternatives’ within the CDM <strong>and</strong> the carb<strong>on</strong> ‘offset’market, you’re likely to be repeatedly disappointed.Let’s nail down this point by looking at <strong>on</strong>e final South African CDMproject – probably as good a carb<strong>on</strong> project as you’re likely to see anywhere.This is the Kuyasa low-cost housing energy upgrade project.Certified by the CDM Executive Board <strong>on</strong> 27 August 2005, Kuyasais the first Gold St<strong>and</strong>ard project in the world to generate certifiedemissi<strong>on</strong>s reducti<strong>on</strong>s credits <strong>and</strong> has been widely applauded both nati<strong>on</strong>ally<strong>and</strong> internati<strong>on</strong>ally.There! That’s the sort of example I want to know about. Tell me more.Well, I’m not sure you’ll want to hear it. What Kuyasa shows, in theend, is that such ‘good’ schemes are unlikely to survive in the carb<strong>on</strong>credit market <strong>and</strong> seem virtually incompatible with it.How do you fi gure that?Well, let’s go over the history of the project <strong>and</strong> its virtues first.Planning for the Kuyasa scheme, located in a neighbourhood inthe township of Khayelitsha outside of Cape Town, got underwayin 2002. Its pilot phase, launched in July 2003, involved retrofittingeight Rec<strong>on</strong>structi<strong>on</strong> <strong>and</strong> Development Programme (RDP) homes<strong>and</strong> two crèches with insulated ceilings (where there would normallyjust be a corrugated steel roof), replacing regular lighting with lowwattcompact florescent bulbs, <strong>and</strong> installing solar water heaters <strong>on</strong>the roofs. Partly because residents would have used grid electricity toheat their water in the absence of the solar heaters, the project is heldto reduce dem<strong>and</strong> for coal-fired electricity. The claim is that in total,2.85 t<strong>on</strong>nes less CO 2 are generated per household per year as a resultof the project. The project’s next phase will see the target group exp<strong>and</strong>from 10 to 2,309 RDP homes throughout Kuyasa.The scheme’s pilot phase has been a source of great pride for theproject developers – the city of Cape Town <strong>and</strong> SSN – as well as its
298 development dialogue september 2006 – carb<strong>on</strong> tradingBellville, viewedfrom thedumpsite.beneficiaries. It is also, unusually, actively supported by local residents,who have been c<strong>on</strong>sulted from the beginning. Kuyasa’s warddevelopment forum put together a broad-based steering committeeof community members who assisted in the design of the project, decidedwhich households would participate in it, <strong>and</strong> mapped out howthe project would move forward into its next phase. The steeringcommittee also helped facilitate c<strong>on</strong>tacts <strong>and</strong> a flow of ideas betweenthe community <strong>and</strong> the project developers.The project has a particularly high Gold St<strong>and</strong>ard rating in terms of‘social sustainability <strong>and</strong> local development <strong>and</strong> has a minimal impactapart from the reducti<strong>on</strong> of GHG <strong>on</strong> the natural envir<strong>on</strong>ment’. 161Kuyasa also creates jobs in installing <strong>and</strong> maintaining the solar waterheaters, which are locally manufactured. Furthermore, the R625average annual savings <strong>on</strong> electricity bills can go back into the localec<strong>on</strong>omy <strong>and</strong> create further ec<strong>on</strong>omic spin-offs. 162One pilot project participant, Muzelli, an unemployed man in his thirtiesc<strong>on</strong>fined to a wheelchair, c<strong>on</strong>firmed that he now saves over R600per year <strong>on</strong> his electricity bills, which he is able to send back home tosupport his children still living in the Eastern Cape. When the weathergets cold at night (it can drop below 10 degrees Celsius during winterevenings), all of Muzelli’s neighbours come over to visit, as his ceilingkeeps the house much warmer than anywhere else in the neighbourhood.Though he admitted that he did not know much about climatechange, Muzelli made it clear that people support the project for manyreas<strong>on</strong>s, namely the m<strong>on</strong>ey they save <strong>and</strong> having warmer houses. ‘This
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 299is a good project,’ he stated. ‘People are very impatient to get theirhomes upgraded; they really want this project.’ 163Thus Kuyasa has been held up as an example of the potential of carb<strong>on</strong>trading both to fight climate change <strong>and</strong> to improve living c<strong>on</strong>diti<strong>on</strong>sin local communities.Trusha Reddy researchedthe Bisasar Road projectwhile she was an internat the Centre for CivilSociety at the Universityof KwaZulu-Natal <strong>and</strong>later, as a freelancejournalist, <strong>Climate</strong> Care’slight bulb project.Graham Eri<strong>on</strong> of YorkUniversity Facultyof Envir<strong>on</strong>mentalStudies <strong>and</strong> OsgoodeHall Law Schoolc<strong>on</strong>ducted research<strong>on</strong> Sasol, Bellville,Kuyasa <strong>and</strong> BisasarRoad while a visitingscholar at theUniversity of KwaZulu-Natal’s Centre forCivil Society.This has got to be the future of the carb<strong>on</strong> credit market, then.Unfortunately not. The reality is that rather than being an example ofwhat the CDM can deliver, Kuyasa is a testament to what it can’t.What do you mean?The project can’t survive off carb<strong>on</strong> finance. Instead, it is financedpredominantly by <strong>on</strong>e-off government grants, as an explicitly ‘publicsector project’. 164Project prop<strong>on</strong>ents estimate that carb<strong>on</strong> m<strong>on</strong>ey can cover no morethan 20 per cent of the scheme’s costs, depending <strong>on</strong> the spot marketprice of the Certified Emissi<strong>on</strong>s Reducti<strong>on</strong>s (CERs) it sells. 165 (Thefirst 10,000 CERs from the project were sold at 15 euros each to theUK to ‘offset’ jet fl ights <strong>and</strong> other emissi<strong>on</strong>s associated with the 2005G8 summit meeting at Gleneagles, Scotl<strong>and</strong>. 166 But ‘very few CERpurchasers will pay upfr<strong>on</strong>t’. 167 ) SSN staff member Lester Malengis,who has worked <strong>on</strong> the scheme for two years, admits: ‘This is first aproject that uplifts Kuyasa, not a carb<strong>on</strong> project… . That funding isnot sustainable.’ 168The project is possible <strong>on</strong>ly because of generous funding from thenati<strong>on</strong>al Department of Envir<strong>on</strong>mental Affairs <strong>and</strong> Tourism in Pretoria,the Western Cape provincial government, <strong>and</strong> Electricité deFrance (as part of their Corporate Social Resp<strong>on</strong>sibility campaign). 169In additi<strong>on</strong>, SSN <strong>and</strong> the city of Cape Town have d<strong>on</strong>ated hundredsof hours of unremunerated labour. For Richard Worthingt<strong>on</strong> of theSouth African <strong>Climate</strong> Acti<strong>on</strong> Network, Kuyasa has <strong>on</strong>ly ‘got towhere it got to because it’s been treated as a charity case. It’s beendamned expensive <strong>and</strong> not at all an example of how to put a projecttogether’. 170Nor, according to Emily Tyler of SouthSouthNorth, who was closelyinvolved in the development of Kuyasa, has registrati<strong>on</strong> as a CDMproject helped. ‘The CDM actually adds little value (indeed, it addscosts) to the very sorts of projects it was designed to encourage,’Tyler wrote in a whistle-blowing editorial in February 2006. Thereis, she said, ‘no financial value added by the CDM for the projecttypes which most closely fit the CDM’s avowed objectives.’ Only by
300 development dialogue september 2006 – carb<strong>on</strong> tradingThe Voluntary Market Comes to South AfricaIn 2005, after two years of being unemployed,Sibi<strong>on</strong>gile Mthembu got lucky.Mthembu, 24, a lifel<strong>on</strong>g resident of Guguletu,a sprawling township 20 kilometresfrom Cape Town created under the apartheidera, was recruited off the street by alocal energy c<strong>on</strong>sultancy to h<strong>and</strong> out freeenergy-efficient light bulbs.The c<strong>on</strong>sultancy had in turn been commissi<strong>on</strong>edby <strong>Climate</strong> Care, a British company,to distribute the bulbs. The idea wasthat they would replace the more typical<strong>and</strong> wasteful inc<strong>and</strong>escent variety. Afterhaving bought the bulbs (<strong>and</strong> c<strong>on</strong>vincedthe city of Cape Town to pay to distributethem), <strong>Climate</strong> Care was then in a positi<strong>on</strong>to sell the CO 2 emissi<strong>on</strong>s estimated tohave been saved to British c<strong>on</strong>sumers <strong>and</strong>companies who want to ‘offset’ their owncarb<strong>on</strong> emissi<strong>on</strong>s.The neighbourhoods where Mthembuwent about his 10-day temporary job werefull of l<strong>on</strong>g-st<strong>and</strong>ing problems. Houseswere crumbling, with faulty wiring, unpaintedceilings <strong>and</strong> damp walls. Yet atusd 150 per m<strong>on</strong>th, when most residentsearn c<strong>on</strong>siderably less – many from jobssuch as selling loose cigarettes <strong>and</strong> sweets –the rent exceeds what the poor can afford.‘Some people are pensi<strong>on</strong>ers,’ explainedPat Mgengi, <strong>on</strong>e resident:‘They d<strong>on</strong>’t even get that amount of m<strong>on</strong>eyevery m<strong>on</strong>th. They tried taking people outof the houses <strong>and</strong> we put them back. Evenafter paying the full amount asked somed<strong>on</strong>’t have the title deeds. We are going tocourt time <strong>and</strong> again. We are just trying tolive like any other human being.’In this community, the light bulbs Sibi<strong>on</strong>gileMthembu offered around would notordinarily be <strong>on</strong> any<strong>on</strong>e’s shopping list. At15 watts, the compact fluorescent bulbs arefar more energy efficient than traditi<strong>on</strong>alhigher-wattage bulbs <strong>and</strong> last about 10times l<strong>on</strong>ger. But they cost usd 2.80 each,as opposed to traditi<strong>on</strong>al inc<strong>and</strong>escent bulbsat 50 cents, <strong>and</strong> are not sold locally.Not surprisingly, Mthembu’s bulbs hadmany takers. Mgengi said he accepted thefour that he was offered simply becausethey were free. ‘We just accept what theyintroduce to us.’But few local people will be able to affordto buy replacements. And when asked byresidents if he would come back to delivermore bulbs if any were broken, Mthembuadmits, he <strong>and</strong> his fellow light bulb distributorshad to lie. Of the 69 low energybulbs reported as broken from thehouseholds surveyed by <strong>Climate</strong> Care twom<strong>on</strong>ths after the project started, n<strong>on</strong>e hasyet been replaced.<strong>Climate</strong> Care argues that this project is generatingreal carb<strong>on</strong> savings, since it wouldnot have g<strong>on</strong>e ahead without the firm’s interventi<strong>on</strong><strong>and</strong> is ‘not required by legislati<strong>on</strong>,not comm<strong>on</strong> practice (<strong>and</strong>) not financiallyviable without carb<strong>on</strong> funding’.However, in the wake of electricity blackouts,power generator Eskom recently decidedto provide five milli<strong>on</strong> free energyefficient light bulbs to low-income households,am<strong>on</strong>g a host of other energy - savingmeasures. Sibi<strong>on</strong>gile Mthembu is now employeddelivering Eskom’s energy-efficientlight bulbs to 86,000 houses in Guguletu.These are houses that <strong>Climate</strong> Care missed
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 301out <strong>on</strong> its 10-day sojourn in Africa in 2005,<strong>and</strong> that were supposedly not going to receivesuch bulbs without <strong>Climate</strong> Care’sm<strong>on</strong>ey.Am<strong>on</strong>g <strong>Climate</strong> Care’s biggest customersfor its carb<strong>on</strong> credits are British Airways<strong>and</strong> British Gas, both major c<strong>on</strong>tributorsto climate change. British Gas has recentlybeen in the news for pursuing legal acti<strong>on</strong>against Bolivia for taking a democratic decisi<strong>on</strong>to nati<strong>on</strong>alize its oil resources. It iscurrently a partner in two large gas fieldsin the country <strong>and</strong> has eight explorati<strong>on</strong>blocks that have not yet started producti<strong>on</strong>.British Airways, meanwhile, is busy promotingBritish airport expansi<strong>on</strong>, rampingup its inter-city commuter fl ight services,<strong>and</strong> launching a budget airline to popularshort-haul holiday destinati<strong>on</strong>s.Yet <strong>Climate</strong> Care defends both companiesas being am<strong>on</strong>g the ‘best envir<strong>on</strong>mentalperformers’. ‘The climate crisis is so urgentthat we should not worry about the motivati<strong>on</strong>of our clients,’ the company declaresin its 2004 Annual Report.Source: Trusha Reddy, ‘Blinded by theLight’, New Internati<strong>on</strong>alist, June 2006.Some names have been changed to protectsources.bypassing the bureaucracy required for quality c<strong>on</strong>trol at the CDM,seeking extra d<strong>on</strong>or funding, <strong>and</strong> selling credits <strong>on</strong> the higher-pricedvoluntary market to offset emissi<strong>on</strong>s from corporate travel, pers<strong>on</strong>allifestyle <strong>and</strong> so forth, could Kuyasa have broken even. 171But maybe later <strong>on</strong> the project will be able to st<strong>and</strong> <strong>on</strong> its own two feet as acommercial propositi<strong>on</strong>.That seems unlikely. In fact, a special project has had to be set up bythe internati<strong>on</strong>al Renewable Energy <strong>and</strong> Energy Efficiency Partnershipto help clean energy prop<strong>on</strong>ents find new sources of funding forKuyasa-like projects. 172 There has been talk about relying <strong>on</strong> communityresidents to cover some costs, 173 allowing manufacturers to leasesolar water heaters to low-income communities, 174 <strong>and</strong> even sellingKuyasa’s carb<strong>on</strong> credits several times <strong>on</strong> the voluntary ‘offset’ marketas well as through the CDM.But that last choice would be c<strong>on</strong>sumer fraud!Yes. The more times Kuyasa sold each of its credits, the more greenhousegas emissi<strong>on</strong>s elsewhere it would be licensing. If the projectsold even <strong>on</strong>e of its credits twice, the project’s net effect <strong>on</strong> the climatewould become negative even <strong>on</strong> its own carb<strong>on</strong> accounting. Sothis was never a serious opti<strong>on</strong> <strong>and</strong> is roundly rejected by SSN.
302 development dialogue september 2006 – carb<strong>on</strong> tradingDoes that mean that for the time being, Kuyasa will have to be dependent <strong>on</strong>the kindness of taxpayers <strong>and</strong> politicians?Yes. Unfortunately, it’s not as if government has no other fundingpriorities. Housing activist Peter van Hausen notes, for example, thatthere is currently a backlog of 260,000 houses that need to be built inCape Town, <strong>and</strong> 20,000 more are required each year. 175 This backloghas almost doubled since 1994. In the l<strong>on</strong>g term, it is a lot to ask ofpublic authorities that they spend tax m<strong>on</strong>ey <strong>on</strong> energy upgrades forpeople who already own their homes when hundreds of thous<strong>and</strong>sdo not. 177Thus, while Kuyasa is exactly the type of project that many people hopedthe CDM could deliver, now that it exists, the carb<strong>on</strong> market simplycannot support it. Carb<strong>on</strong> credit buyers will naturally gravitate towardsmuch less envir<strong>on</strong>mentally <strong>and</strong> socially desirable projects such as BisasarRoad, Bellville or Sasol – assuming any of them come <strong>on</strong> line.‘The rich developedcountries have emittedmost of the greenhousegases currently in theatmosphere <strong>and</strong> nowthe more enlightenedof them are prepared topay to further polluteour atmosphere, or moreexactly, they will providem<strong>on</strong>ey so that they canc<strong>on</strong>tinue their polluti<strong>on</strong>while we decrease ours.’ 176South African <strong>Climate</strong>Acti<strong>on</strong> Network, July 2002Brazil –H<strong>and</strong>outs for repressi<strong>on</strong> as usualIn a carb<strong>on</strong> project in MinasGerais, eastern Brazil, carb<strong>on</strong>trading instituti<strong>on</strong>s have used<strong>and</strong> exacerbated coercive powerrelati<strong>on</strong>s in yet another attemptto produce an imaginary carb<strong>on</strong>commodity. As in Ecuador <strong>and</strong>Ug<strong>and</strong>a, the Forest StewardshipCouncil (FSC) has played a bigrole <strong>and</strong>, as in South Africa, theWorld Bank as well.VenzuelaColombiaPeruBoliviaArgentinaParaguayBrazilIs this another tree plantati<strong>on</strong> project?Partly, but it’s a good deal more complicated. The company claimingto be saving carb<strong>on</strong> <strong>and</strong> helping the climate is a pig ir<strong>on</strong>-producing<strong>and</strong> plantati<strong>on</strong> management company called Plantar S.A.How is Plantar helping the climate? Is the pig ir<strong>on</strong> it makes produced by solarenergy? Or is it perhaps used to make solar cells?
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 303Unfortunately, no. The ir<strong>on</strong> is produced by burning charcoal <strong>and</strong>releasing carb<strong>on</strong> dioxide into the atmosphere, <strong>and</strong> is actually used tomake things like cars, which of course release yet more carb<strong>on</strong> dioxide.In that case, how can Plantar claim that it deserves carb<strong>on</strong> credits? It sounds likeit’s an active part of the industrial system that is accelerating climate change.Plantar <strong>and</strong> its colleagues at the World Bank have tried many lines ofargument. At first, they said that without carb<strong>on</strong> finance, there wouldbe an ‘accelerated reducti<strong>on</strong> in the plantati<strong>on</strong> forestry base in the stateof Minas Gerais, within the next decade, caused by harvesting of existingforests (now in the last cycle of their rotati<strong>on</strong>s) <strong>and</strong> lack of investmentinto replanting’. 178 In the absence of carb<strong>on</strong> finance, Plantar <strong>and</strong>the Bank insisted, ‘the company would not invest in the replanting ofits forests for the pig ir<strong>on</strong> producti<strong>on</strong>, ab<strong>and</strong><strong>on</strong>ing them after the finalharvest of the existing plantati<strong>on</strong>s’. 179 When reminded that CDM rulesdo not allow credit to be provided for ‘avoided deforestati<strong>on</strong>’, the Bankrewrote its design documents to emphasise other justificati<strong>on</strong>s.Which were…?First, that Plantar was not avoiding deforestati<strong>on</strong> but rather preventingan otherwise necessary switch in the fuels for its pig ir<strong>on</strong> operati<strong>on</strong>sfrom eucalyptus charcoal to more carb<strong>on</strong>-intensive coal orcoke.Let me get this straight. This company says it deserves carb<strong>on</strong> credits for notdoing something?That’s right. Plantar claims that without carb<strong>on</strong> m<strong>on</strong>ey, the companywould switch over from using charcoal to using fossil fuel. It’s calledan ‘avoided fuel switch’. Because the carb<strong>on</strong> dioxide released by thecharcoal is supposedly mostly absorbed by the new trees grown fornew charcoal, less carb<strong>on</strong> enters the atmosphere than would enter itfrom the burning of coal.But why would Plantar switch over to using coal? Isn’t there enough charcoalto go around?Plantar claims that without extra carb<strong>on</strong> finance for a 23,100-hectareplantati<strong>on</strong> scheme, the charcoal-fired pig ir<strong>on</strong> industry would face a‘supply bottleneck’. It says current plantati<strong>on</strong>s are being depleted <strong>and</strong>the lack of forest incentives will render new plantati<strong>on</strong>s financiallyunfeasible without World Bank carb<strong>on</strong> financing. 180 Plantati<strong>on</strong> l<strong>and</strong>will be ‘c<strong>on</strong>verted to pasture or agricultural l<strong>and</strong>’. 181
304 development dialogue september 2006 – carb<strong>on</strong> tradingIs that true?Well, it does somewhat strain credulity. Plantar is saying that carb<strong>on</strong>credits for its 23,100 hectare project are the <strong>on</strong>ly thing that can ensurecharcoal supplies, even though Minas Gerais al<strong>on</strong>e boasts 2 milli<strong>on</strong>hectares of eucalyptus plantati<strong>on</strong>s. Plantar itself owns rural propertiescovering more than 180,000 hectares, mainly devoted to eucalyptusfor charcoal <strong>and</strong> almost all located in Minas Gerais, 182 <strong>and</strong> providesmanagement services for more than 590,000 hectares of plantati<strong>on</strong>sfor itself <strong>and</strong> other companies in Brazil spread across 11 large units.The firm also has large investments in the development <strong>and</strong> producti<strong>on</strong>of high-yielding cl<strong>on</strong>al eucalyptus varieties <strong>and</strong> is reported to beproducing over 40 milli<strong>on</strong> cl<strong>on</strong>al seedlings per year, 183 with yields of35-42 cubic metres per year, c<strong>on</strong>tributing to its reputati<strong>on</strong> as a committed,low-cost <strong>and</strong> highly competitive producer of charcoal <strong>and</strong>many other plantati<strong>on</strong> timber products. 184 In additi<strong>on</strong>, Plantar has recentlyg<strong>on</strong>e to the trouble of getting plantati<strong>on</strong>s it uses to producebarbeque charcoal certified by the FSC.Why should the failure to get carb<strong>on</strong> credits for <strong>on</strong>ly 4 per cent of thetotal area under the firm’s management <strong>and</strong> 13 per cent of its own directholdings result in a failure to invest in replanting? If the financial prospectsfor new plantati<strong>on</strong> development are so poor, why did Plantar purchasethe l<strong>and</strong>s in questi<strong>on</strong> before it was c<strong>on</strong>sidering carb<strong>on</strong> finance?Some 143 local groups <strong>and</strong> individuals put it more str<strong>on</strong>gly in a letterto the CDM Executive Board of June 2004:[T]he claim that without carb<strong>on</strong> credits Plantar…would haveswitched to coal as an energy source is absurd… Yet now [Plantar]is using this threat to claim carb<strong>on</strong> credits for c<strong>on</strong>tinuing to dowhat they have been doing for decades – plant unsustainable eucalyptusplantati<strong>on</strong>s for charcoal… It is comparable to loggersdem<strong>and</strong>ing m<strong>on</strong>ey, otherwise they will cut down trees… [TheCDM] should not be allowed to be used by the tree plantati<strong>on</strong> industryto help finance its unsustainable practices. 185Even the project’s validator, Det Norske Veritas (DNV), a Norwegian‘risk management’ c<strong>on</strong>sultancy, admitted to being sceptical aboutPlantar’s claim that it would not invest in replanting in the absence ofthe CDM project, ‘given Plantar S.A.’s relatively str<strong>on</strong>g investment capabilitiesas <strong>on</strong>e of the major eucalypt seedling producers in Brazil’.How did DNV check Plantar’s claim?They simply went to Plantar <strong>and</strong> asked them if it was really true ornot. Unsurprisingly, Plantar executives assured them that the ‘ internal
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 305rate of return for planting new trees today is not attractive in absenceof the sale of CDM credits’.Meanwhile, the World Bank <strong>and</strong> its c<strong>on</strong>sultants admit that there areseveral possible ‘l<strong>and</strong> management scenarios for the Curvelo ranch inthe absence of the carb<strong>on</strong> project’. 186That means that there are several possible baselines with diff erent carb<strong>on</strong> profi les.Yes.That means that there are several diff erent fi gures for how much carb<strong>on</strong> theproject might save.Yes.That means that there can be no single number of carb<strong>on</strong> credits generated bythe project.No, there can’t.Doesn’t that bother the project accountants?No. They simply choose the baseline scenario they claim is ‘mostplausible’ <strong>and</strong> discard the others.So there’s actually no scientifi c basis for assigning any particular number of carb<strong>on</strong>credits to the project?No. It’s essentially arbitrary. What’s more, even if Plantar could provethat it was avoiding the use of a quantifiable amount of coal in MinasGerais, it would still have to prove that the coal would not be usedsomewhere else for 10, 50, 100 or 300 years. Or it would have to quantifythe extent to which its local avoidance of fossil fuels was helpingindirectly to build an alternative, n<strong>on</strong>-fossil energy ec<strong>on</strong> omy worldwide.In the end, it’s anybody’s guess how Plantar’s carb<strong>on</strong> credits arerelated to climate.Revealingly, even those technocrats who are committed to the idea ofcarb<strong>on</strong>-saving projects are beginning to be uneasy about companies’dem<strong>and</strong>s to be given carb<strong>on</strong> m<strong>on</strong>ey for what they are doing already. InJanuary 2003, the CDM Methodologies Panel rejected the claim of another‘avoided fuel switch’ carb<strong>on</strong> project located adjacent to Plantar’sthat it was an improvement <strong>on</strong> ‘business as usual’. 187 In November 2003,the project submitted another accounting methodology. But the Panelwas still unsatisfied. Could carb<strong>on</strong>-saving projects that merely c<strong>on</strong>tinuecurrent practice really be ‘ additi<strong>on</strong>al’? The panel decided that the claimthrows up problems of ‘moral hazard’. 188
306 development dialogue september 2006 – carb<strong>on</strong> trading‘Moral hazard’? What does that mean?It’s a term often used in the insurance business. By insuring houses ,for example, an insurance company, if it’s not careful, can create anincentive for its customers not to take proper precauti<strong>on</strong>s againstfire. Similarly, offering businesses a way of getting subsidies for whatthey’re doing already, without any way of verifying their claims aboutwhat would happen otherwise, creates incentives for them not tomake any improvements.Are there other justifi cati<strong>on</strong>s Plantar cites for getting carb<strong>on</strong> credits?Several. Plantar has also looked to get carb<strong>on</strong> credits for afforestati<strong>on</strong>;improvements in charcoal producti<strong>on</strong> that minimise methanere leases; rehabilitating cerrado (savannah), the biome it itself has hadsuch a h<strong>and</strong> in depleting; <strong>and</strong> improving grassl<strong>and</strong>s.C<strong>on</strong>ducting research into thestory of Plantar have beenMarcelo Calazans (below)<strong>and</strong> Winnie Overbeek of theBrazilian NGO FASE-ES inEspirito Santo, assisted by aninternati<strong>on</strong>al team working <strong>on</strong>carb<strong>on</strong> trading more generallyincluding, (next page fromtop) Adam Ma’anit <strong>and</strong> HeidiBachram of Carb<strong>on</strong> TradeWatch, Jutta Kill of SinksWatch, <strong>and</strong> Ben Pears<strong>on</strong>of Clean DevelopmentMechanism Watch (<strong>and</strong> nowwith Greenpeace Australia).What do local people make of all this?They find it hard to believe that Plantar could secure extra finance foranything that falls under the rubric of ‘envir<strong>on</strong>ment’ or ‘development’.‘We were surprised <strong>and</strong> bewildered by the news’, a group of over50 trade uni<strong>on</strong>s, churches, local deputies, academics, human <strong>and</strong>l<strong>and</strong> rights organisati<strong>on</strong>s <strong>and</strong> others protested in a letter of 26 March2003. 189 They see the company as having illegally dispossessed manypeople of their l<strong>and</strong>, destroyed jobs <strong>and</strong> livelihoods, dried up <strong>and</strong> pollutedlocal water supplies, depleted soils <strong>and</strong> the biodiversity of thenative cerrado biome, threatened the health of local people, <strong>and</strong> exploitedlabour under appalling c<strong>on</strong>diti<strong>on</strong>s (see ‘Plantar vs. local people– Two versi<strong>on</strong>s of history’, <strong>on</strong> page 309). 190So they see the carb<strong>on</strong> scheme as shoring up an unjust <strong>and</strong> destructive socialarrangement.Yes. But local residents oppose not <strong>on</strong>ly the way Plantar is trying toget paid for using former cerrado <strong>and</strong> farml<strong>and</strong> for a carb<strong>on</strong> dump.They also oppose the way the carb<strong>on</strong> project appropriates alternativefutures that they are pressing for:The argument that producing pig ir<strong>on</strong> from charcoal is less bad thanproducing it from coal is a sinister strategy… What about the emissi<strong>on</strong>sthat still happen in the pig ir<strong>on</strong> industry, burning charcoal?What we really need are investments in clean energies that at thesame time c<strong>on</strong>tribute to the cultural, social <strong>and</strong> ec<strong>on</strong>omic well-beingof local populati<strong>on</strong>s… We can never accept the argument that <strong>on</strong>e activityis less worse [sic] than another <strong>on</strong>e to justify the serious negative
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 307impacts that Plantar <strong>and</strong> its activities have caused… [W]e want to preventthese impacts <strong>and</strong> c<strong>on</strong>struct a society with an ec<strong>on</strong>omic policythat includes every man <strong>and</strong> woman, preserving <strong>and</strong> recovering ourenvir<strong>on</strong>ment. 191In the face of all this oppositi<strong>on</strong>, how does the project go forward?The scheme probably couldn’t have got off the ground without thehelp <strong>and</strong> sp<strong>on</strong>sorship of the Prototype Carb<strong>on</strong> Fund (PCF) of theWorld Bank, which would feed any credits it generates to its roster ofNorthern corporate <strong>and</strong> government clients. Plantar was the Bank’sfirst carb<strong>on</strong> sink project <strong>and</strong> the Bank expected it to ‘prepare theground for similar projects in the future’. 192 Plantar’s carb<strong>on</strong> schemealso gains legitimacy from the involvement of the FSC, as do similarschemes in Ecuador <strong>and</strong> Ug<strong>and</strong>a (see ‘From the Netherl<strong>and</strong>s to theAndes – A tale from Ecuador’ <strong>and</strong> ‘The story c<strong>on</strong>tinues – carb<strong>on</strong> forestryin Ug<strong>and</strong>a’).What if Plantar can’t deliver the credits? Suppose the plantati<strong>on</strong> burns downor the project verifi ers fi nd problems with the carb<strong>on</strong> accounting?One of the buyers of Plantar’s carb<strong>on</strong> credits, The Netherl<strong>and</strong>s, insiststhat if more than 30 per cent of its credits are delivered late, Plantarwill have to pay a penalty. The World Bank would get off withoutpaying anything.But doesn’t the involvement of the World Bank, as an internati<strong>on</strong>ally reputabledevelopment instituti<strong>on</strong>, at least guarantee certain envir<strong>on</strong>mental st<strong>and</strong>ards <strong>and</strong>provide safeguards against abuse of local people?On the c<strong>on</strong>trary. Many local people feel that the Bank’s involvementmerely legitimises envir<strong>on</strong>mental damage <strong>and</strong> the intimidati<strong>on</strong> thatPlantar uses to c<strong>on</strong>trol local people – intimidati<strong>on</strong> which, as in Thail<strong>and</strong>,is nowhere acknowledged in carb<strong>on</strong> project documents.Many local residents are afraid to let interviewers cite their names.Some receive death threats. When a representative of the Rural Uni<strong>on</strong>of Workers of Curvelo went to the climate negotiati<strong>on</strong>s in Milan inDecember 2003 to raise awareness about the negative envir<strong>on</strong>mental<strong>and</strong> social effects of Plantar’s operati<strong>on</strong>s (which w<strong>on</strong> a special ir<strong>on</strong>icNGO award there for ‘worst CDM sinks project’), the company’s directorsbullied other uni<strong>on</strong> members into signing a letter of supportfor the company, threatening massive layoffs if carb<strong>on</strong> credits werenot forthcoming. (One l<strong>on</strong>gst<strong>and</strong>ing uni<strong>on</strong> opp<strong>on</strong>ent of the expansi<strong>on</strong>of eucalyptus plantati<strong>on</strong>s in Minas Gerais did manage to insertthe legible notati<strong>on</strong> ‘under pressure’ beside her signature.)
308 development dialogue september 2006 – carb<strong>on</strong> tradingPlantar: Local People Speak‘Plantar has planted all over, even up to theSeu Zé do Buritim river spring. Thirty-fivethous<strong>and</strong> hectares of l<strong>and</strong>…they sprayedpesticides with a plane. There used to bedeer <strong>and</strong> other animals in the area. The nativefauna lived together with the cattle.But since they applied the pesticide, every<strong>on</strong>e of them got killed… The eucalyptusplanted over here is meant for charcoal. Itis a disaster for us. They say it provides jobs,but the maximum is 600 work places in aplantati<strong>on</strong> of 35,000 hectares. And, whenevereverything has been planted, <strong>on</strong>e hasto wait for six years. So, what work does itgenerate? … We used to produce coffee –the Vera coffee – <strong>and</strong> pasta <strong>and</strong> cott<strong>on</strong>. Severaldifferent little factories in their suitableregi<strong>on</strong>s. Nowadays, there is <strong>on</strong>ly the eucalyptus.It has destroyed everything else…Why do they come to plant in the l<strong>and</strong> suitedfor agriculture instead of more suitableareas? Because there it takes 10 to 20 years<strong>and</strong> over here <strong>on</strong>ly seven. All the best piecesof l<strong>and</strong> went to the eucalyptus plantati<strong>on</strong>s,pushing the small producers away <strong>and</strong> destroyingthe municipalities… These companiesd<strong>on</strong>’t want uni<strong>on</strong>s. They immediatelyco-opt the uni<strong>on</strong> leaders <strong>and</strong> they beginto make them part of their inner circle ofmanagers <strong>and</strong> directors… The eucalyptusgives the water back to the earth after someyears. But when it is time to give it back,they plant a new <strong>on</strong>e that will absorb thewater returned by the old <strong>on</strong>e. This newplantati<strong>on</strong> will develop really quickly, because,besides the rainwater, it will receivethe water from the old eucalyptus…they areusing the carb<strong>on</strong> credits to plant these eucalyptusthat will grow very quickly.’Local man who asked for an<strong>on</strong>ymityout of fears for his safety, 2003‘Eucalyptus has been grown with blood.’Ant<strong>on</strong>io, local farmer, 2003Unbowed, the local movement has subsequently appealed directly toEuropean investors not to put m<strong>on</strong>ey into the Plantar carb<strong>on</strong> project.Peasant <strong>and</strong> trade uni<strong>on</strong> representatives travelled to Cologne to intervenein the Carb<strong>on</strong> Expo trade fair held there in June 2004, in whichthe Bank participated. 193Throughout the disputes over the carb<strong>on</strong> project, the World Bank hastaken the side of Plantar. For example, in 2003 it posted <strong>on</strong> its websitea letter from Plantar to PCF investors replying to dozens of localgroups, without posting the original letter to which it was a reply.What about FSC? How are they involved?FSC has certified <strong>on</strong>ly 32,232 hectares of Plantar’s operati<strong>on</strong>s – less than18 per cent of its l<strong>and</strong>holdings. 194 These hectares are used to producebarbeque charcoal, as well as charcoal that would be used for the PCFproject. However, Plantar has not hesitated to announce <strong>on</strong> its websitethat certificati<strong>on</strong> ‘ensures that our forest is managed in an envir<strong>on</strong>mentallyresp<strong>on</strong>sible, socially beneficial <strong>and</strong> ec<strong>on</strong>omically viable way’. This
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 309gives the impressi<strong>on</strong> that FSC’s certificate is valid for all of the company’splantati<strong>on</strong>s. It also claims in a letter to PCF investors that ‘100per cent of the Project Area is being <strong>and</strong> will be certified’. 195As in Ecuador, FSC thus has a h<strong>and</strong>, if <strong>on</strong>ly an indirect <strong>on</strong>e, in producinga fictitious commodity claiming to be ‘carb<strong>on</strong>’.Photo EssayPlantar vs. local people –Two versi<strong>on</strong>s of historyDem<strong>on</strong>strati<strong>on</strong>in early 2005against the ‘greendesert’ createdby commercialeucalyptusplantati<strong>on</strong>sestablished byPlantar <strong>and</strong> othercompanies.Local People: Before the advent of giant eucalyptus plantati<strong>on</strong>s, theinhabitants of the cerrado (savannah) of northern Minas Gerais usedthe savannah for crops, cattle, wild foods, medicines <strong>and</strong> crafts. Small<strong>and</strong> medium-sized companies relied <strong>on</strong> cerrado products to manufacturepasta, leather, saddles, shoes, cott<strong>on</strong> oil, textiles, castor oil, textiles,sweets, <strong>and</strong> liquor <strong>and</strong> other products of the native pequi fruit.
310 development dialogue september 2006 – carb<strong>on</strong> tradingRice, beans <strong>and</strong> maize were planted <strong>and</strong> traditi<strong>on</strong>al dairy farming<strong>and</strong> livestock-raising was practised. Under the dictatorship, however,l<strong>and</strong>s that the geraizeiros, or cerrado inhabitants, had traditi<strong>on</strong>ally used<strong>and</strong> claimed ownership over, but which were not formally titled <strong>and</strong>were under the jurisdicti<strong>on</strong> of the state (devolutas l<strong>and</strong>s), were leasedfraudulently for 20 years to eucalyptus-planting firms, who also receivedfinancial incentives. Many rural dwellers were expelled fromthe l<strong>and</strong>, while others were persuaded to ab<strong>and</strong><strong>on</strong> it by promises ofjobs <strong>and</strong> better living c<strong>on</strong>diti<strong>on</strong>s; still others sold up after becomingisolated <strong>and</strong> seeing their water supply dry up or become c<strong>on</strong>taminatedwith pesticides. The cerrado was cut down, fields were fenced <strong>and</strong> c<strong>on</strong>solidated,<strong>and</strong> agriculture, stock-raising <strong>and</strong> food products factories,which depended <strong>on</strong> the biodiversity of the cerrado, collapsed, leavingmany unemployed. Through dispossessi<strong>on</strong> <strong>and</strong> impoverishment, residentshave been forced to accept low wages <strong>and</strong> dangerous workingc<strong>on</strong>diti<strong>on</strong>s, often as illegal out-sourced labour, or flee to favelas <strong>on</strong> theoutskirts of cities, where they are also trapped in a cycle of poverty.Exactly how much of Minas Gerais’ m<strong>on</strong>oculture of eucalyptus plantati<strong>on</strong>stoday is <strong>on</strong> devolutas l<strong>and</strong>s is disputed, but the area is large. Aninvestigative commissi<strong>on</strong> of the Minas Gerais parliament found thatir<strong>on</strong> <strong>and</strong> steel companies were granted ‘a large part of the devolutasl<strong>and</strong>s in northern Minas Gerais’. Whatever the exact figure, however,the questi<strong>on</strong> must be investigated, since according to Brazilian law,corporati<strong>on</strong>s cannot acquire this type of l<strong>and</strong>, <strong>on</strong>ly peasants. By right,such l<strong>and</strong>s should be given back to rural dwellers <strong>and</strong> used food producti<strong>on</strong>,<strong>and</strong> restorati<strong>on</strong> of the cerrado. Many geraizeiros have broughta case against the state over their expulsi<strong>on</strong> from their l<strong>and</strong> when itwas expropriated <strong>and</strong> leased to the companies. They want to c<strong>on</strong>vertplantati<strong>on</strong>s back into native cerrado.Plantar: Plantar has never owned nor used any so-called devolutasl<strong>and</strong>s. It has never c<strong>on</strong>tributed to the evicti<strong>on</strong> of indigenous peoples.Plantar has never placed any c<strong>on</strong>straints <strong>on</strong> the commercialisati<strong>on</strong>of cerrado fruits, <strong>on</strong> which a few families may rely to earn their living,or <strong>on</strong> those who collect fruits for subsistence purposes. It is veryhard to imagine how a company that does not occupy more than4.5 per cent of the Curvelo Township area could cause a crisis in thefruit- collecting ec<strong>on</strong>omy. Besides preserving both legal reserves <strong>and</strong>permanent c<strong>on</strong>servati<strong>on</strong> areas, Plantar also c<strong>on</strong>tributes to the c<strong>on</strong>servati<strong>on</strong>of traditi<strong>on</strong>al species of the cerrado. Anyway, the areas wherePlantar works are not ec<strong>on</strong>omically dependent <strong>on</strong> cerrado products but<strong>on</strong> cattle-raising. This has heavy envir<strong>on</strong>mental impacts, adds littlevalue, <strong>and</strong> creates fewer employment opportunities than are createdby the forestry industry. For example, in Felixlândia, Plantar acquiredSome of Plantar’splantati<strong>on</strong>s fromthe air.
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 311a former cattle-raising farm which did not provide more than 20 jobs.In the same area, we currently have almost 300 permanent employees.In Curvelo, Plantar provides more than 1000 direct jobs, not to menti<strong>on</strong>indirect <strong>on</strong>es. Plantar has not caused massive job layoffs <strong>and</strong> hassignificantly exp<strong>and</strong>ed due to forestry management services providedto third parties.Locals: The 4.5 per cent figure doesn’t include other companies’eucalyptus plantati<strong>on</strong>s in Curvelo, including those of Cossisa <strong>and</strong>Vallourec & Mannesmann Florestal (a company that is also tryingto get carb<strong>on</strong> credits for maintaining a plantati<strong>on</strong> operati<strong>on</strong> that hasdisplaced local people). In any case, knowing that Plantar has covered4.5 per cent of the municipality with eucalyptus does not changethe plantati<strong>on</strong>s’ impacts <strong>on</strong> the lives of people nearby. Plantar’s comparis<strong>on</strong>between the 20 workers <strong>on</strong> a former cattle ranch <strong>and</strong> the 300workers working there now is misleading. No local people were infact hired. Unemployment in Felixlândia in fact increased. In additi<strong>on</strong>,while eucalyptus plantati<strong>on</strong>s may provide employment duringthe first two years – in preparati<strong>on</strong> of the l<strong>and</strong>, planting, pesticide applicati<strong>on</strong>or irrigati<strong>on</strong> – they provide very little work during the subsequentfive years before cutting.It’s true that local people do not use cerrado areas under Plantar’s c<strong>on</strong>trolfor fruit collecti<strong>on</strong>. These areas are very small <strong>and</strong> offer little. Butlocal communities have suffered from Plantar’s restricti<strong>on</strong>s <strong>on</strong> theirtraditi<strong>on</strong> of letting their cows graze freely. Plantar has put cattle infenced areas or taken them away to another area without informingthe owner. This has led to cases of lost cattle. L<strong>and</strong> reform <strong>and</strong> smallscaleagriculture are the <strong>on</strong>ly ways of creating a future for the Brazilianrural populati<strong>on</strong>. Tree plantati<strong>on</strong>s <strong>on</strong>ly worsen the un equal distributi<strong>on</strong>of l<strong>and</strong> in the country. In Espirito Santo, eucalyptus plantati<strong>on</strong>sexpelled thous<strong>and</strong>s <strong>and</strong> thous<strong>and</strong>s of people into the poor neighbourhoodsof urban centres <strong>and</strong> an uncertain future. Turning overthe 23,100 hectares of the Plantar project to small-scale diversified<strong>and</strong> ecological agriculture would create at least 23,100 more humanfriendlyjobs, with salaries at least four times higher than those of themajority of Plantar workers, according to the c<strong>on</strong>crete experience ofthe local Movimento dos Pequenos Agricultores (Movement of SmallPeasants). The Movement is also developing an alternative reforestati<strong>on</strong>project, using not eucalyptus but tree species with multiple uses<strong>and</strong> local envir<strong>on</strong>mental value.
312 development dialogue september 2006 – carb<strong>on</strong> tradingHarvest time<strong>on</strong> Plantar’splantati<strong>on</strong>s.Locals: What with the eucalyptus industry’s transformati<strong>on</strong> of localrural society, people often have no livelihood opti<strong>on</strong>s other thansmall-scale charcoal producti<strong>on</strong>, <strong>and</strong> build clay ovens in the cerradofor the purpose. Collecting commercial eucalyptus is against the law,however, so independent producers often burn what’s left of nativetrees, <strong>and</strong> the resulting charcoal is often eventually purchased by thecorporati<strong>on</strong>s. Although the companies are legally allowed to use acertain percentage of charcoal made from native cerrado trees as l<strong>on</strong>gas it comes with a certificate, they are said to pay more for nativecharcoal without the certificate. This allows them to use more thanthe legal amount of native charcoal. Companies still use around 15-20per cent native charcoal.Plantar: The use of charcoal made out of native vegetati<strong>on</strong> is a realitythat bothers pig ir<strong>on</strong> manufacturers, envir<strong>on</strong>mentalists <strong>and</strong> authoritiesalike. That’s why it’s a goal of the Plantar project to establish sustainableplantati<strong>on</strong>s, capable of supplying 100 per cent well-managed eucalyptusplantati<strong>on</strong> charcoal for pig ir<strong>on</strong> manufacturing, thus curbingnegative impacts brought by the use of native vegetati<strong>on</strong>.Forestclearancefor Plantarplantati<strong>on</strong>.
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 313Locals: Plantar also c<strong>on</strong>tinues to destroy cerrado directly in order touse the l<strong>and</strong> for plantati<strong>on</strong>s. For instance, Plantar bought cerrado l<strong>and</strong>sin the Campo Alegre <strong>and</strong> Paiol communities in Minas Gerais <strong>and</strong>planted eucalyptus <strong>on</strong> it. As late as 2000, Plantar was felling cerradoin Lagoa do Capim. In December 2002, Plantar l<strong>and</strong> was also clearedat the river spring of Pindaíba. Native tree trunks can still be seenthere. Dozens of municipalities have declared a state of emergencyover water. Near Paiol de Cima, <strong>on</strong>e stream has completely dried upafter having previously flowed 11 m<strong>on</strong>ths of the year. In Felixlândia,a spring called Cabeceira do Buriti is degraded. Flows in the Buritiriver are down <strong>and</strong> herbicides have been applied without c<strong>on</strong>sultati<strong>on</strong>Plantar eucalyptusplantati<strong>on</strong> with deadnative buriti tree inthe foreground. Theburiti is a symbol ofthe cerrado regi<strong>on</strong>whose wide riverbasins it thrives in.The tree needs a lotof water to survive,<strong>and</strong> its demise showsthat water levels havedropped.
314 development dialogue september 2006 – carb<strong>on</strong> tradingDried-out swamp forestnear ab<strong>and</strong><strong>on</strong>ed farm,October 2003.with local people, killing fish <strong>and</strong> birds. Plantar has planted eucalyptusat river springs, drying them up <strong>and</strong> also c<strong>on</strong>taminating themwith pesticides that kill animal life in the streams. Plantar’s c<strong>on</strong>taminati<strong>on</strong>of local drinking water sources with pesticides has also causedthe death of many emas, large l<strong>and</strong> birds related to ostriches. Thecommunities of Cobú, Paiol de Cima, Canabrava <strong>and</strong> Boa Mortehave been forced to dig artesian wells. Cattle-ranching does not causesuch negative impacts <strong>on</strong> water, <strong>and</strong> produces a greater diversity ofgoods, including meat, milk, leather <strong>and</strong> manure.Plantar: We have been accused of drying up rivers, but in fact somestreams dry up naturally for a few m<strong>on</strong>ths, due to the seas<strong>on</strong>alityof rainfall normal to the cerrado. They recover later. Of course, aswith any fast-growing species, eucalyptus needs underground water.Never theless, scientific studies have shown that, as l<strong>on</strong>g as they areproperly managed, as our plantati<strong>on</strong>s are, eucalyptus plantati<strong>on</strong>s d<strong>on</strong>ot reduce water supply to specific regi<strong>on</strong>s. Careless grazing <strong>and</strong> othertraditi<strong>on</strong>al practices are more harmful to hydrological systems thaneucalyptus plantati<strong>on</strong>s.Locals: A Minas Gerais Parliamentary Investigati<strong>on</strong> Commissi<strong>on</strong>found in 2002 that Plantar was practising illegal outsourcing of labourthat negatively affected the safety <strong>and</strong> livelihoods of charcoalworkers. It cited ‘precarious labour relati<strong>on</strong>s, abominable workingc<strong>on</strong>diti<strong>on</strong>s, slave <strong>and</strong> child labour <strong>and</strong> deforestati<strong>on</strong> of the cerrado’ aswell as ‘infamous’ wage levels. It also found problems with housing,hygiene, drinking water, food <strong>and</strong> transport, <strong>and</strong> noted that Plantarwas in breach of Internati<strong>on</strong>al Labour Organisati<strong>on</strong> provisi<strong>on</strong>s regardingfreedom of trade uni<strong>on</strong> organising. The Federal Public Ministryof Labour has sued Plantar for illegal subc<strong>on</strong>tracting <strong>and</strong> forced it
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 315Quilombolacharcoal workers.The quilombolaare descendantsof African slaveswho, during thecol<strong>on</strong>ial era, escapedfrom farms to thehinterl<strong>and</strong>, wherethey founded theirown communitieswith their owndistinctive culture,which survives today.to sign an agreement to change its behaviour, which was subsequentlyfound not to be in compliance. During the 1990s, the M<strong>on</strong>tes ClarosPastoral L<strong>and</strong> Commissi<strong>on</strong>, a church-related organisati<strong>on</strong>, also verifiedthe existence of slave labour <strong>on</strong> Plantar property. In March 2002,the Curvelo Regi<strong>on</strong>al Labour Office (DRT) issued Plantar with asumm<strong>on</strong>s for using slave <strong>and</strong> child labour in timber extracti<strong>on</strong> <strong>and</strong>charcoal producti<strong>on</strong> <strong>and</strong> fined the company after finding 194 workerswithout any registrati<strong>on</strong> <strong>on</strong> its plantati<strong>on</strong>s in Curvelo. 196
316 development dialogue september 2006 – carb<strong>on</strong> tradingPlantar charcoalovens.Plantar: Plantar has never used child labour or slave labour. Ourworking c<strong>on</strong>diti<strong>on</strong>s are in complete accordance with labour laws.Besides complying with Forestry Stewardship Council st<strong>and</strong>ards,the company is frequently audited under its Internati<strong>on</strong>al St<strong>and</strong>ardsOrganisati<strong>on</strong>-certified quality management system <strong>and</strong> is certified byABRINQ Foundati<strong>on</strong> as a ‘child-friendly company’. Representativesfrom the Intergovernmental Panel <strong>on</strong> <strong>Climate</strong> <strong>Change</strong> have visitedPlantar’s facilities. Plantar may have been cited over working c<strong>on</strong>diti<strong>on</strong>sby a Parliamentary Investigati<strong>on</strong> Commissi<strong>on</strong> (al<strong>on</strong>g with everyother company in the sector), but no irregularities were found. Thebenefits provided to employees are a benchmark for the industry <strong>and</strong>include occupati<strong>on</strong>al health care, half scholarships for all employeesfrom basic educati<strong>on</strong> to graduate degrees, <strong>and</strong> free meals <strong>and</strong> foodsupply kits to lower-income employees. Instead of undertaking a legaldispute with the Curvelo Regi<strong>on</strong>al Labour Office (DRT) after beingcited over outsourcing, Plantar has already agreed to manufacturecharcoal with its own workforce.Locals: Plantar’s agreement to manufacture charcoal with its ownworkforce needs to be evaluated to see whether it is really improvingc<strong>on</strong>diti<strong>on</strong>s for workers, who in general earn a maximum of <strong>on</strong>lyusd 100 a m<strong>on</strong>th. As unemployment is rife, most workers are frightenedof menti<strong>on</strong>ing any problem that occurs, including the creati<strong>on</strong>of new c<strong>on</strong>tracting companies nominally part of Plantar with nameslike Plantar Energética. Plantar charcoal workers are c<strong>on</strong>tinuouslyexposed to smoke c<strong>on</strong>taining toxic gases as well as pesticides <strong>and</strong>are at a high risk of accidents. In Espirito Santo, the Attorney Generalfor Workers’ C<strong>on</strong>diti<strong>on</strong>s opened a c<strong>on</strong>fidential investigati<strong>on</strong> in
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 317Jorge, a former Plantarworker: ‘When I startedworking at Plantar I wasOK. One day I faintedafter lunch. I wasalready applying theinsecticides, fungicides.I had headaches, I feltweak. My superior toldme, “I am firing youbecause you d<strong>on</strong>’t knowif you are sick or not.”Six or seven peopledied. Plantar said it washeart failure. Now I’munable to work. I d<strong>on</strong>’tdare eat the fish fromthe streams here.’2001 after the death of several former Plantar workers. One, Aurinodos Santos Filho, died with a pump filled with pesticides <strong>on</strong> his backwhile working <strong>on</strong> a eucalyptus plantati<strong>on</strong> in Espirito Santo in 2001;he was <strong>on</strong>ly 34 years old. Aurino’s family has not received any compensati<strong>on</strong>from the company. Plantar does nothing for workers whobecome disabled as a result of their work for the company; many havealready died. Plantar makes labour organising difficult by rotatingworkers am<strong>on</strong>g far-flung sites. Worker leaders are registered as ‘urbanlabourers’ to prevent them from becoming rural uni<strong>on</strong> members.
318 development dialogue september 2006 – carb<strong>on</strong> tradingQuilombolacharcoalworker.Locals: When it built a new tree nursery, Plantar, without c<strong>on</strong>sultinglocal inhabitants, diverted a road that has always been used by thecommunities of Paiol de Cima, Meleiros, Cachoeira do Choro, Paiolde Baixo, Canabrava, Gomos <strong>and</strong> others, extending travel distancesfor local inhabitants, including 900 students from the Serfio EugenioSchool, by more than five kilometres. Plantar also dammed up thelocal Boa Morte river to supply the nursery with water, as well as pollutingwater with fertilisers <strong>and</strong> other agrochemicals, causing complaintsfrom downstream water users.Plantar: The detour has not caused any damage to local people. Theoriginal route is still there <strong>and</strong> can be used by pedestrians, cyclists<strong>and</strong> horse riders. Vehicle traffic has been diverted to prevent seedlingsfrom being affected by dust, <strong>and</strong> drivers prefer to take the detour anywaybecause the road is of better quality. Public <strong>and</strong> school buses nol<strong>on</strong>ger get stuck in the mud during rainy periods.Most of the photographs <strong>and</strong>informati<strong>on</strong> in this secti<strong>on</strong> arecourtesy of Tamra Gilberts<strong>on</strong>of Carb<strong>on</strong> Trade Watch <strong>and</strong>form part of an internati<strong>on</strong>alexhibiti<strong>on</strong> developed by her <strong>on</strong>the Plantar case.Locals: In 2003, the old road was fenced off, making it impossibleeven for pedestrians to use. Even for any<strong>on</strong>e daring to jump the fence,the road is unusable, since it is blocked by the company’s nursery.School buses never had problems with the old road.
With the help ofCarb<strong>on</strong> Trade Watch,different generati<strong>on</strong>s(above <strong>and</strong> below)learn how to film theirstruggle to share withoutsiders, includingcommunities near a BPrefinery in Scotl<strong>and</strong>.The carb<strong>on</strong> credits BPobtained from Plantar<strong>and</strong> other carb<strong>on</strong>projects would allow itto maintain high levelsof fossil fuel polluti<strong>on</strong> inEurope.offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 319
320 development dialogue september 2006 – carb<strong>on</strong> trading1 Freeman J. Dys<strong>on</strong>, ‘Can We C<strong>on</strong>trol Carb<strong>on</strong> Dioxidein the Atmosphere?’, Energy 2, 1977, pp. 287-291.2 Paul Faeth et al., Evaluating the Carb<strong>on</strong>Sequestrati<strong>on</strong> Benefits of Forestry Projects inDeveloping Countries, World Resources Institute/EPA, Washingt<strong>on</strong>, 1994; S<strong>and</strong>ra Brown et al., Carb<strong>on</strong>Sequestrati<strong>on</strong> Final Evaluati<strong>on</strong>: Final Report toCARE Guatemala for PNO3 Agroforestry Project,Winrock Internati<strong>on</strong>al, Arlingt<strong>on</strong>, VA, 1999. Theproject also featured the first ever ‘additi<strong>on</strong>ality’analysis; that is, an analysis that claimed the projectdeserved carb<strong>on</strong> credits because it would not havehappened without the sp<strong>on</strong>soring corporati<strong>on</strong>’sc<strong>on</strong>cern about climate change. See Mark Trexleret al., ‘Forestry as a Global Warming Mitigati<strong>on</strong>Strategy: An Analysis of the Guatemala Carb<strong>on</strong>Sequestrati<strong>on</strong> Forestry Project’, World ResourcesInstitute, Washingt<strong>on</strong>, 1989.3 See www.careusa.org/careswork/project.asp.4 World Rainforest Movement Bulletin No. 37, August2000, available at www.wrm.org.uy/bulletin/37/Camerica.html; <strong>and</strong> www.careusa.org/careswork/project.asp. Guatemala Agroforestry estimates100 t<strong>on</strong>nes of carb<strong>on</strong> sequestered per hectare forforests <strong>and</strong> 30 t<strong>on</strong>nes for regrowth.5 Brown et al., op. cit. supra note 2.6 World Bank, Guatemala – Integrated Managementof Natural Resources in the Western Altiplano(MIRNA). Project Appraisal Document, World Bank,Washingt<strong>on</strong>, 2001.7 Larry Lohmann, ‘Democracy or Carbocracy?Intellectual Corrupti<strong>on</strong> <strong>and</strong> the Future of the<strong>Climate</strong> Debate’, Corner House Briefing No. 24,2001, pp. 36-44, http://www.thecornerhouse.org.uk.8 Brown et al., op. cit. supra note 2.9 Verónica Vidal, La Aplicaci<strong>on</strong> de Politicas sobreCambio Climatico en el Sector Forestal del Ecuador,Memoria de Investigación Doctorado en GestiónAmbiental y Ec<strong>on</strong>omía Ecológica, Aut<strong>on</strong>omousUniversity of Barcel<strong>on</strong>a, October 1999.10 Since 1994, PROFAFOR has arranged forestati<strong>on</strong>c<strong>on</strong>tracts in the provinces of the Ecuadorian Sierra:Imbabura, Pichincha, Chimborazo, Cañar, Azuay<strong>and</strong> Loja. It has also signed c<strong>on</strong>tracts in coastalprovinces, in the buffer z<strong>on</strong>e of the Mache-ChindulEcological Reserve within the polyg<strong>on</strong> formed by ElCarmen, Pedernales, Cojimíes, Muisne, Atacames,Bilsa <strong>and</strong> Quinindé – that is to say, in the north ofthe province of Manabi <strong>and</strong> in the south of theprovince of Esmeraldas.11 Robert Hofstede, ‘Impactos Ecológicos dePlantaci<strong>on</strong>es Forestales’, in Robert Hofstede et al.,Geografía, Ecología y Forestación de la Sierra Altadel Ecuador: Revisión de Literatura, Editorial AbyaYala, Ecuador, 1998. See also Robert Hofstede, LaImportancia Hídrica Del Páramo y Aspectos de SuManejo, EcoPar, August 1997.12 Vidal, op. cit. supra note 9.13 G. Medina et al., ‘El Páramo como Espacio deMitigación de Carb<strong>on</strong>o Atmosférico, Serie Páramo,1’, GTP/Abya Yala, Quito, 1999, quoted in Ver<strong>on</strong>icaVidal, ‘Impactos de la Aplicación de Políticas sobreCambio Climático en la Forestación del Páramo deEcuador’, Ecología Política, No. 18, 1999, pp. 49-54.14 See http://www.stichtingface.nl.15 Ibid.16 See also C. Borga et al., Plantas Nativas paraReforestación en el Ecuador, Fundación Natura,Quito, 1980.17 See http://www.stichtingface.nl.18 Mary Milne, ‘Transacti<strong>on</strong> Costs of Forest Carb<strong>on</strong>Projects’, Center for Internati<strong>on</strong>al ForestryResearch, available at http://www.une.edu.au/febl/Ec<strong>on</strong>omics/carb<strong>on</strong>/CC05.PDF.19 M<strong>on</strong>tserrat Alban <strong>and</strong> Maria Arguello, Un Análisisde los Impactos Sociales y Ec<strong>on</strong>ómicos de losProyectos de Fijación de Carb<strong>on</strong>o en el Ecuador: ElCaso de PROFAFOR-FACE, Internati<strong>on</strong>al Institutefor Envir<strong>on</strong>ment <strong>and</strong> Development, L<strong>on</strong>d<strong>on</strong>, 2004.20 The agreement was signed using as a reference adocument from the property registry <strong>and</strong> some falsetitle deeds.21 Harald Eraker, ‘CO 2 l<strong>on</strong>ialism: Norwegian TreePlantati<strong>on</strong>s, Carb<strong>on</strong> Credits <strong>and</strong> L<strong>and</strong> C<strong>on</strong>flicts inUg<strong>and</strong>a’, NorWatch/The Future in Our H<strong>and</strong>s, Oslo,2000.22 NORAD, letter to NorWatch, 30 March 2000.23 Trygve Refsdal in teleph<strong>on</strong>e c<strong>on</strong>versati<strong>on</strong> withHarald Eraker, March 2000.24 Ibid.25 B. Koppers, Social Impact Assessment of theProposed Natural Forest Resources Management<strong>and</strong> C<strong>on</strong>servati<strong>on</strong> Program, K C<strong>on</strong>sult, Oslo,October 1999.26 D. N. Byarugaba, Commissi<strong>on</strong>er for Forestry,‘Utilisati<strong>on</strong> of Bukaleba Forest Reserve’, 25 January2000. An MP, Bunya West, wrote an open letterdated the same day which reacted harshly to aproposed soluti<strong>on</strong> for the l<strong>and</strong> c<strong>on</strong>flict put forwardby a parliamentarian from the district <strong>on</strong> behalfof Norwegian <strong>and</strong> German c<strong>on</strong>cessi<strong>on</strong>aires. Theproposal entailed that while those <strong>on</strong>ly engaged infisheries could keep a l<strong>and</strong>ing site for fishing boats,other intruders had to leave the reserve by the endof July that year.
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 32127 John R. W. Aluma, ‘Report <strong>on</strong> Envir<strong>on</strong>ment ImpactAssessment of the Management Plan for BukalebaForest Reserve under Busoga Forestry CompanyLimited’, c<strong>on</strong>sultant’s report, September 1999.28 The company’s envir<strong>on</strong>mental impact assessment,too, has noted the fears of local people: ‘The [local]communities have expressed very str<strong>on</strong>g desireto be permitted to c<strong>on</strong>tinue to stay there [in thereserve] as it would be extremely difficult to findalternative locati<strong>on</strong>s <strong>and</strong> activities for livelihoods.’Yet the summary of the impact assessment statesthat the farmers <strong>and</strong> fishermen ‘c<strong>on</strong>sider the projectas a positive socio-ec<strong>on</strong>omic development’ for thearea. Ibid.29 Koppers, op. cit supra note 25.30 Nsita Steve Amooti, Forest Officer, ‘Field Visit toBukaleba Forest Reserve’, 24 November 1999.31 According to <strong>on</strong>e report, farmers must also pay acash rent ranging from 10,000 to 85,000 Ug<strong>and</strong>anshillings per hectare, at a time when Tree Farmsis <strong>on</strong>ly paying 5,000 shillings per year to theauthorities for every hectare planted with trees.Ibid.32 Koppers, op. cit supra note 25.33 Amooti, op. cit. supra note 30.34 Odd Ivar Løvhaugen, email to Harald Eraker, 20January 2000.35 Intergovernmental Panel <strong>on</strong> <strong>Climate</strong> <strong>Change</strong>,Special Report: L<strong>and</strong> Use, L<strong>and</strong>-Use <strong>Change</strong>, <strong>and</strong>Forestry, Draft Summary for Policymakers, Oxford,Oxford University Press, 2000.36 Koppers, op. cit supra note 25.37 Trygve Refsdal, email to Harald Eraker, 24 March2000.38 As noted in the previous secti<strong>on</strong>, FACE Foundati<strong>on</strong>(Forests Absorbing Carb<strong>on</strong>-Dioxide Emissi<strong>on</strong>s)c<strong>on</strong>tributes financially to the ‘reforestati<strong>on</strong>’ of about150,000 hectares worldwide. FACE is an initiative ofthe Dutch Electricity Generati<strong>on</strong> Board.39 According to a Societé Générale de Surveillance(SGS) assessment report d<strong>on</strong>e in 2001, the projectis expected to result in an increase in the averagestorage capacity of 3.73 milli<strong>on</strong> t<strong>on</strong>nes of carb<strong>on</strong>dioxide over its 99-year lifespan. SGS is theworld’s largest inspecti<strong>on</strong>, verificati<strong>on</strong> <strong>and</strong> testingorganisati<strong>on</strong>.40 New Visi<strong>on</strong>, M<strong>on</strong>day, 15 April 2002. New Visi<strong>on</strong> isUg<strong>and</strong>a’s leading daily newspaper.41 Chris Lang, ‘Ug<strong>and</strong>a: Face Foundati<strong>on</strong>, Carb<strong>on</strong>C<strong>on</strong>flict <strong>and</strong> FSC Certificati<strong>on</strong>’, World RainforestMovement Bulletin 101, December 2005, www.wrm.org.uy.42 New Visi<strong>on</strong>, 30 June 2004.43 Miriam van Heist, L<strong>and</strong> Unit Map of Mount Elg<strong>on</strong>Nati<strong>on</strong>al Park, IUCN technical report, Gl<strong>and</strong>,unpublished, 1994.44 Lang, op. cit supra note 41.45 Axel P. Gosseries, ‘The Legal Architecture of JointImplementati<strong>on</strong>: What Do We Learn from the PilotPhase?’ New York University Envir<strong>on</strong>mental LawJournal 7, 1999, pp. 99-100.46 Michael Dutschke <strong>and</strong> Axel Michaelowa, ‘JointImplementati<strong>on</strong> as a Development Policy – The Caseof Costa Rica’, HWWA Discussi<strong>on</strong> Paper No. 49, 1997.47 M. Alfaro et al., ‘Evaluación del Sector Forestalde Costa Rica para la Mitigación del CambioClimático en el Marco del MDL: Informe Final’,Proyecto Bosques y Cambio Climático en AméricaCentral, Organización de las Naci<strong>on</strong>es Unidas parala Agricultura y la Alimentación (FAO), ComisiónCentroamericana de Ambiente y Desarrollo(CCAD), San José, Costa Rica, 2003.48 ‘The Marrakesh Accords <strong>and</strong> the MarrakeshResoluti<strong>on</strong>’, www.unfccc.int/cop7/documents/accords_draft.pdf.49 Alfaro et al., op. cit supra note 47.50 Ibid.51 At present most of the timber c<strong>on</strong>sumed by thecountry comes from wooded grassl<strong>and</strong>s. Forexample, in the year 2001 al<strong>on</strong>e, approximately260,000 cubic metres of timber were legallyextracted from some 170,000 hectares of woodedgrassl<strong>and</strong>s, amounting to 3 per cent of the nati<strong>on</strong>alterritory (Estado de la Nación, San Jose, 2003).52 See Paul Harremoës et al., The Precauti<strong>on</strong>aryPrinciple in the 20 th Century: Late Less<strong>on</strong>s fromEarly Warnings, Earthscan, L<strong>on</strong>d<strong>on</strong>, 2002.53 See, for example, P. B. Reich et al., ‘NitrogenLimitati<strong>on</strong> C<strong>on</strong>strains Sustainability of EcosystemResp<strong>on</strong>se to CO 2 ’, Nature 440, 13 April 2006, pp.922-925; D. A. Stainforth et al., ‘Uncertainty inPredicti<strong>on</strong>s of the <strong>Climate</strong> Resp<strong>on</strong>se to Rising Levelsof Greenhouse Gases’, Nature 433, 27 January 2005,pp.403-07; W. Knorr et al., ‘L<strong>on</strong>g-Term Sensitivityof Soil Carb<strong>on</strong> Turnover to Warming’, Nature 433,20 January 2005, pp. 298–302; D. Read et al., TheRole of L<strong>and</strong> Carb<strong>on</strong> Sinks in Mitigating Global<strong>Climate</strong> <strong>Change</strong>, Royal Society, L<strong>on</strong>d<strong>on</strong>, 2001; R.Gill et al., ‘N<strong>on</strong>linear Grassl<strong>and</strong> Resp<strong>on</strong>ses to Past<strong>and</strong> Future Atmospheric CO 2 ’, Nature 417, 16 May2002, pp. 279–283; J. G. Canadell et al., ‘Quantifying,Underst<strong>and</strong>ing <strong>and</strong> Managing the Carb<strong>on</strong> Cycle inthe Next Decades’, Climatic <strong>Change</strong> 67, 2–3, 2004,pp. 147–160; R. A. Hought<strong>on</strong>, ‘Counting TerrestrialSources <strong>and</strong> Sinks of Carb<strong>on</strong>’, Climatic <strong>Change</strong> 48,200, pp. 525-534; Y. Pan et al., ‘New Estimates of
322 development dialogue september 2006 – carb<strong>on</strong> tradingCarb<strong>on</strong> Storage <strong>and</strong> Sequestrati<strong>on</strong> in China’s Forests:Effects of Age-Class <strong>and</strong> Method <strong>on</strong> Inventory-BasedCarb<strong>on</strong> Estimati<strong>on</strong>’, Climatic <strong>Change</strong> 67, Nos. 2-3,2004, pp. 211-236.54 Stephen J. Pyne, ‘Fire Planet: The Politics <strong>and</strong>Culture of Combusti<strong>on</strong>’, Corner House Briefing,Sturminster Newt<strong>on</strong>, UK, 1999, www.thecornerhouse.org.uk.55 See http://www.fern.org/campaign_area.html?id=6.56 L. Y. Pedr<strong>on</strong>i <strong>and</strong> B. Locatelli, ‘C<strong>on</strong>tabilidadde créditos para carb<strong>on</strong>o forestal: métodos eimplicaci<strong>on</strong>es. Análisis de Opci<strong>on</strong>es del Mecanismopara un Desarrollo Limpio’, submitted to theMINAE-OCIC Workshop, January 2002.57 Quoted in Cathleen Fogel, ‘Biotic Carb<strong>on</strong>Sequestrati<strong>on</strong> <strong>and</strong> the Kyoto Protocol: theC<strong>on</strong>structi<strong>on</strong> of Global Knowledge by theIntergovernmental Panel <strong>on</strong> <strong>Climate</strong> <strong>Change</strong>’,Internati<strong>on</strong>al Envir<strong>on</strong>mental Agreements 5, 2, 2005,pp. 191-210.58 Larry Lohmann, ‘Carb<strong>on</strong> C<strong>on</strong>? Group Charges“Intellectual Corrupti<strong>on</strong>” over Global WarmingProposal’, Multinati<strong>on</strong>al M<strong>on</strong>itor, September 2000,p. 26.59 Open email, 21 April 2005.60 Gregg Marl<strong>and</strong> et al., ‘Accounting for SequesteredCarb<strong>on</strong>: The Questi<strong>on</strong> of Permanence’,Envir<strong>on</strong>mental Science <strong>and</strong> Policy 4, 2001, pp. 259-268; Michael Dutschke, ‘Fracti<strong>on</strong>s of Permanence– Squaring the Cycle of Sink Carb<strong>on</strong> Accounting’,Mitigati<strong>on</strong> <strong>and</strong> Adaptati<strong>on</strong> Strategies for Global<strong>Change</strong> 7, 2002, pp. 381-402.61 See http://www.rainforestcredits.org.62 China, Korea, Chile, Mexico, Viet Nam <strong>and</strong>Argentina are also prominent. See http://www.cdm.unfccc.int for up-to-date figures <strong>on</strong> CDM projects.63 ‘Doubts Raised over Some Indian CDM Projects’,Point Carb<strong>on</strong>, 10 January 2006. Tracking CDMprojects in India is extremely difficult. ThoughIndia has set up a Nati<strong>on</strong>al CDM Authority(NCDMA), with a dedicated website, <strong>and</strong> NGOssuch as the Tata Energy Research Institute (TERI)<strong>and</strong> Germany’s Gesellschaft fur TechnischeZusammenarbeit (GTZ) offer India-specific data,informati<strong>on</strong> <strong>on</strong> CDM projects remains partial <strong>and</strong>inadequate. It is difficult to determine which projectis selling what amount of credits to whom, <strong>and</strong> tofind other relevant market informati<strong>on</strong>. Even thenumber of projects in the pipeline is difficult toascertain. Validators’ websites <strong>and</strong> the UNFCCC’slist of projects being validated reveal names ofCDM projects in India that are not <strong>on</strong> the NCDMAlist. The fact that CDM projects in India do notrequire envir<strong>on</strong>mental impact assessments ormanagement plans makes them all the more difficultto m<strong>on</strong>itor <strong>and</strong> assess. Most surveys of CDM inIndia are carried out by supporters such as theNCDMA, the Asian Development Bank, <strong>and</strong> NGOssuch as TERI, GTZ, or Japan’s Institute for GlobalEnvir<strong>on</strong>mental Strategies, <strong>and</strong> as a rule do not gobey<strong>on</strong>d explaining business opportunities affordedby the CDM. There is little journalistic coverage ofthe physical performance of CDM projects <strong>and</strong> howthey affect communities, <strong>and</strong> no systematic critique.64 Anna Pinto, Centre for Organisati<strong>on</strong>, Research <strong>and</strong>Educati<strong>on</strong>, ‘Carb<strong>on</strong> Sinks, Carb<strong>on</strong> Trade, CDM <strong>and</strong>the Indigenous Peoples of the Northeast Regi<strong>on</strong> ofIndia’, draft, Guwahati, 2006.65 Institute for Global Envir<strong>on</strong>mental Strategies;Ministry of the Envir<strong>on</strong>ment, Japan; <strong>and</strong> WinrockInternati<strong>on</strong>al, India, CDM Country Guide for India,Sec<strong>on</strong>d Editi<strong>on</strong>, Tokyo, 2005, p. 43.66 Soumitra Ghosh <strong>and</strong> Hadida Yasmin, ‘Trade in<strong>Climate</strong>: The Saga of CDM, India Style’, draft paper,Siliguri, 2006. This paper is part of a forthcomingReport <strong>on</strong> CDM Projects in India by Soumitra Ghosh,Devjeet N<strong>and</strong>i, Nabo Dutta, Hadida Yasmin <strong>and</strong>Arindam Das.67 Ritu Gupta, Shams Kazi, <strong>and</strong> Julian Cheatle, ‘Carb<strong>on</strong>Rush’, Down to Earth, Centre for Science <strong>and</strong>Envir<strong>on</strong>ment, 15 November 2005.68 Ibid.69 Ibid.70 Natuur en Milieu, ‘The Future of the CleanDevelopment Mechanism’, Proceedings of theRenewable Soluti<strong>on</strong>s C<strong>on</strong>ference, M<strong>on</strong>treal, 1-2December 2005; see http://www.natuurenmilieu.nl/page.php?pageID=76&itemID=1596&themaID=7.71 Ibid.72 Gupta et al., supra note 67.73 Informati<strong>on</strong> <strong>on</strong> the sp<strong>on</strong>ge ir<strong>on</strong> industry <strong>and</strong> CDMin this <strong>and</strong> succeeding paragraphs is drawn fromGhosh et al., Report <strong>on</strong> CDM Projects, forthcoming(see supra note 66).74 Minister for Forests <strong>and</strong> Envir<strong>on</strong>ment GanishramBhagat, resp<strong>on</strong>se to a questi<strong>on</strong> raised by MLANobel Verma in the Vidhan Sabha, 2 March 2005.75 In a written reply to a questi<strong>on</strong> from MLA DharamjitSingh, the State Minister for Forests, Envir<strong>on</strong>ment<strong>and</strong> Housing informed the Vidhan Sabha <strong>on</strong> 24February 2006 that in the Dharsinva Block of Raipurdistrict, crops in 4,611 hectares of l<strong>and</strong> bel<strong>on</strong>gingto the farmers of 17 villages had been severelydamaged due to polluti<strong>on</strong> spread by sp<strong>on</strong>ge ir<strong>on</strong>plants. Crops have also been damaged in Kesla,Bodri, Chakarbhata, Dagori <strong>and</strong> Silphari villages ofBilha Block in Bilaspur district.
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 32376 General Manager, District Trade <strong>and</strong> IndustryCentre, Raigarh, 2005.77 Gupta et al., op. cit. supra note 67.78 Ghosh et al., Report <strong>on</strong> CDM Projects, op. cit. supranote 66.79 Two researchers using software developed at theWorld Resources Institute in Washingt<strong>on</strong> estimatedthat as much as a staggering 7 billi<strong>on</strong> t<strong>on</strong>nes worthof carb<strong>on</strong> credits could be sequestered by Indianplantati<strong>on</strong>s between 2000 <strong>and</strong> 2050 (SuruchaiBhadwal <strong>and</strong> Roma Singh, ‘Carb<strong>on</strong> Sequestrati<strong>on</strong>Estimates for Forestry Opti<strong>on</strong>s under DifferentL<strong>and</strong> Use Scenarios in India’, Current Science83, 11, 2002, pp. 1380-1386, http://www.ias.ac.in/currsci/dec102002/1380.pdf, p. 1380). A PlanningCommissi<strong>on</strong> document has projected a vastly lowerfigure of 5 milli<strong>on</strong> t<strong>on</strong>nes of carb<strong>on</strong> dioxide saved ayear, netting India about USD 125 milli<strong>on</strong> during theKyoto Protocol’s first commitment period (PlanningCommissi<strong>on</strong> of India, Nati<strong>on</strong>al Acti<strong>on</strong> Plan forOperati<strong>on</strong>alising Clean Development Mechanism inIndia, New Delhi, 2003, http://planningcommissi<strong>on</strong>.nic.in/reports/genrep/fin_CDM.pdf, p. 97). Thefact that these two figures differ by a factor of 28reflects the delirium that characterises the theory ofcarb<strong>on</strong> plantati<strong>on</strong> ‘offsets’ (see Chapter 3).80 Since 1992, the Indian pulp <strong>and</strong> paper industry hasbeen trying to lease ‘degraded’ state forests toestablish private plantati<strong>on</strong>s in order to meet thegrowing dem<strong>and</strong> for raw materials. In 1994, whenthe Indian government tried to pass a law makingthis transformati<strong>on</strong> possible, it faced stiff resistancefrom not <strong>on</strong>ly community groups <strong>and</strong> NGOs, butalso the Planning Commissi<strong>on</strong>, which set up anexpert committee to look into the matter. Thecommittee categorically refuted the industry claimthat degraded l<strong>and</strong>s do not support biodiversity <strong>and</strong>are not used by local communities. It went <strong>on</strong> toshow that leasing out of forests to industries wouldprove to be both ecologically <strong>and</strong> socially harmful,<strong>and</strong> would be an injustice to communities, who useall forests for livelihood <strong>and</strong> other reas<strong>on</strong>s, <strong>and</strong>that no forests in the country could be said to be‘absolutely degraded’ (N. C. Saxena et al., Report <strong>on</strong>the Prospects of Making Degraded Forests Availableto Private Entrepreneurs, Planning Commissi<strong>on</strong> ofIndia, New Delhi, 1999).81 Ghosh et al., Report <strong>on</strong> CDM Projects, op. cit. supranote 66.82 See http://www.communityforestryinternati<strong>on</strong>al.org.83 See, for example, Irshad A. Khan, ‘Joint ForestManagement: Most Significant Forest Sector PolicyReform of Twentieth Century’, note, World Bank,New Delhi, 2003.84 N<strong>and</strong>ini Sundar et al., Branching Out: Joint ForestManagement in India, Oxford University Press,New Delhi, 2001; Arvind Khare et al., ‘Joint ForestManagement: Policy, Practice <strong>and</strong> Prospects:India Country Study’, Internati<strong>on</strong>al Institute forEnvir<strong>on</strong>ment <strong>and</strong> Development, L<strong>on</strong>d<strong>on</strong>, 2000;Dermot Shields et al., ‘Incentives for Joint ForestManagement in India: Analytical Methods <strong>and</strong>Case Studies’, World Bank Technical PaperNo. 394, Washingt<strong>on</strong>, 1998; Shashi Kant et al.,‘Complementarity of Instituti<strong>on</strong>s – a Prerequisitefor the Success of Joint Forest Management: AComparative Case of Four Villages in India’, WorldBank, Washingt<strong>on</strong>, 2002.85 K. Sivaramakrishnan, ‘Modern Forestry: Trees <strong>and</strong>Development Spaces in West Bengal’, in LauraRival, ed., The Social Life of Trees: AnthropologicalPerspectives <strong>on</strong> Tree Symbolism, Berg, Oxford, pp.273-96.86 Mark Poffenberger et al., ‘Communities <strong>and</strong><strong>Climate</strong> <strong>Change</strong>: The Clean DevelopmentMechanism <strong>and</strong> Village-based Forest Restorati<strong>on</strong>in Central India’, Community Forestry Internati<strong>on</strong>al<strong>and</strong> Indian Institute of Forest Management,Santa Barbara, 2001, p. 71, http://www.communityforestryinternati<strong>on</strong>al.org/publicati<strong>on</strong>s/research_reports/harda_report_with_maps.pdf.87 See M. Sarin et al., ‘Devoluti<strong>on</strong> as a Threat toDemocratic Decisi<strong>on</strong>-making in Forestry? Findingsfrom Three States in India, Overseas DevelopmentInstitute, ODI Working Paper No. 19, 2003, http://www.odi.org.uk <strong>and</strong> G. Brahmane et al., ‘The Adivasis<strong>and</strong> the World Bank-Aided Madhya PradeshForestry Project: A Case Study of IndigenousExperience’, discussi<strong>on</strong> document prepared for theWorkshop <strong>on</strong> Indigenous Peoples, Forests <strong>and</strong> theWorld Bank: Policies <strong>and</strong> Practice, 9-10 May 2000,Washingt<strong>on</strong> DC, http://www.forestpeoples.org.88 Shramik Adivasi Sanghathan, ‘Village ForestProtecti<strong>on</strong> Committees in Madhya Pradesh: AnUpdate <strong>and</strong> <str<strong>on</strong>g>Critical</str<strong>on</strong>g> Evaluati<strong>on</strong>’, 2004, availablefrom http://www.forestpeoples.org. See also N.Kumar, ‘All is Not Green with JFM in India’, Forests,Trees <strong>and</strong> People, No. 42, June 2000, pp. 46-50, <strong>and</strong>A. Roychaudhury, ‘The Woods are Lovely…’, Down toEarth 17, 1995, pp. 25-30.89 ‘Report of the Joint Missi<strong>on</strong> <strong>on</strong> Madhya PradeshForestry Project’, May 1999; Samata, ‘Impact ofJFM in North Coastal Andhra Pradesh – A People’sPerspective’, Samata <strong>and</strong> CRY-Net, Hyderabad,2000; <strong>and</strong> M. Sarin et al., ‘Devoluti<strong>on</strong> as a Threat toDemocratic Decisi<strong>on</strong>-making in Forestry? Findingsfrom Three States in India (Orissa, Madhya Pradesh,Uttarakh<strong>and</strong>)’, Overseas Development Institute,Working Paper No. 197, ODI, L<strong>on</strong>d<strong>on</strong>, 2003, pp. 33,35, 49-50, 56, 57, 61.
324 development dialogue september 2006 – carb<strong>on</strong> trading90 G. Brahmane et al, op. cit. supra note 87.91 Inhabitants of so-called forest villages lack l<strong>and</strong> titledeeds (pattas) <strong>and</strong> are classified as ‘encroachers’ <strong>on</strong>state forest l<strong>and</strong>.92 For further informati<strong>on</strong> <strong>on</strong> the current situati<strong>on</strong>regarding JFM in Madhya Pradesh, see ShramikAdivasi Sanghathan, op. cit. supra note 88.93 K. Sivaramakrishnan, op. cit. supra note 85.94 Stephen Bass et al., ‘Rural Livelihoods <strong>and</strong> Carb<strong>on</strong>Management’, Natural Resources Issues PaperNo. 1, Internati<strong>on</strong>al Institute for Envir<strong>on</strong>ment <strong>and</strong>Development, L<strong>on</strong>d<strong>on</strong>, 2000, http://www.iied.org,pp. 4-5.95 See, for example, C. K. Janu, ‘The South IndianAdivasi Experience in the Nagar Hole Nati<strong>on</strong>alPark <strong>and</strong> Muthanga Wildlife Sanctuary’, speech atthe World Parks C<strong>on</strong>gress, Durban, South Africa,8-18 September 2003, available at http://www.forestpeoples.org/Briefings/Indigenous%20Rights/wpc_india_nagarahole_eng.htm.96 Marrakesh Accords <strong>and</strong> the Marrakesh Declarati<strong>on</strong>,B<strong>on</strong>n, 2001, http://unfccc.int/cop7/accords_draft.pdf,Annex (A) 1. (c).97 For example, Global Envir<strong>on</strong>ment Fund,‘C<strong>on</strong>servati<strong>on</strong> of Transboundary Biodiversity inthe Minkébé-Odzala-Dja Inter-z<strong>on</strong>e in Gab<strong>on</strong>,C<strong>on</strong>go, <strong>and</strong> Camero<strong>on</strong>: Project Brief’, World Bank,Washingt<strong>on</strong>, 2004, http://www.gef<strong>on</strong>line.org/projectDetails.cfm?projID=1095.98 See Stephen Bass et al., op. cit. supra note 94.99 ‘Doubts Raised over Some Indian CDM Projects’,Point Carb<strong>on</strong>, op. cit., supra note 63.100 This is an example of a n<strong>on</strong>-CDM carb<strong>on</strong> tradingproject. The project bypassed government <strong>and</strong>the CDM Executive Board <strong>and</strong> was implementedbetween two private entities. It was thus notsubject to any legal requirements involvingregistrati<strong>on</strong>, m<strong>on</strong>itoring or verificati<strong>on</strong>.101 ‘C<strong>on</strong>sulting Firms Deny Wr<strong>on</strong>gdoing in DraftingIndian PDDs’, Point Carb<strong>on</strong>, 11 November 2005,http://www.pointcarb<strong>on</strong>.com.102 Ghosh et al., Report <strong>on</strong> CDM Projects, supra note 66.103 US Envir<strong>on</strong>mental Protecti<strong>on</strong> Agency, Inside theGreenhouse, EPA, Washingt<strong>on</strong>, 1997, www.epa.gov/globalwarming/greenhouse/greenhouse2/oreg<strong>on</strong>.html. Solar-home systems are purchased <strong>on</strong> credit.SELCO was to use m<strong>on</strong>ey from Klamath Falls topurchase stock. It would then be reimbursed byestate management using deducti<strong>on</strong>s from projectparticipants’ m<strong>on</strong>thly salaries.104 SELCO, a Maryl<strong>and</strong>-based firm with offices inBangalore, Colombo <strong>and</strong> Ho Chi Minh City, wasestablished in 1997. Its Sri Lankan branch folded in2005.105 Solar-industry analysts believe that the Sri Lankanmarket for solar-home systems is at least <strong>on</strong>e milli<strong>on</strong>households, not including the war-torn provincesof the north <strong>and</strong> east. (Pers<strong>on</strong>al communicati<strong>on</strong>,Mr Pradeep Jayawardene, Shell Renewables LankaLtd. At the time of an interview with Cynthia Car<strong>on</strong>,this number did not include the war-torn provincesin the north <strong>and</strong> east where ethnic c<strong>on</strong>flict hascreated ec<strong>on</strong>omic instability <strong>and</strong> uncertainty forSri Lanka’s business community. With the 2002ceasefire agreement between the Government ofSri Lanka <strong>and</strong> the Liberati<strong>on</strong> Tigers of Tamil Eelam(LTTE), the solar market might open up in the LTTEdominatedprovinces in the isl<strong>and</strong>’s north <strong>and</strong> east.)As of August 2002, about 30,000 systems had beeninstalled isl<strong>and</strong>-wide, 20,000 with support fromthe World Bank’s Energy Services Delivery Project.(Lalith Gunaratne, email corresp<strong>on</strong>dence 12 August2002.) For more <strong>on</strong> the difficulties of financing solarhomesystems for rural electrificati<strong>on</strong>, see CynthiaCar<strong>on</strong>, ‘Examining Alternatives: The Energy ServicesDelivery Project in Sri Lanka’, Energy for SustainableDevelopment 6, 1, 2002, pp. 37-45.106 SELCO, ‘Developing Countries Receive SolarFunding from Oreg<strong>on</strong>’s Klamath Cogenerati<strong>on</strong>Project Carb<strong>on</strong> Offset Portfolio.’ SELCO PressRelease No. 4, 13 September 1999. Each lamp emitsabout 0.10355 t<strong>on</strong>s of carb<strong>on</strong> dioxide per year.107 J. T. Roberts <strong>and</strong> P. E. Grimes, ‘World System Theory<strong>and</strong> the Envir<strong>on</strong>ment: Toward a New Synthesis’, in R.E. Dunlap et al. (eds), Sociological Theory <strong>and</strong> theEnvir<strong>on</strong>ment: Classical Foundati<strong>on</strong>s, C<strong>on</strong>temporaryInsights, Rowman <strong>and</strong> Littlefield, Lanham, 2002,p. 184.108 Due to the country’s ethnic c<strong>on</strong>flict, areasof the north <strong>and</strong> east also have large off-gridpopulati<strong>on</strong>s (80-100 per cent). Either the grid hasbeen destroyed or the affected areas are underrebel c<strong>on</strong>trol. In 1999-2000, the government <strong>and</strong>the private sector were unable to undertakeinfrastructure development activities in this regi<strong>on</strong>.109 At the same time (1999), the country’s overall literacyrate was close to 92 per cent. Estate educati<strong>on</strong> isunderstaffed. In 1999, the nati<strong>on</strong>al teacher-studentratio was 1:22, while in the plantati<strong>on</strong> sector itwas 1:45.110 From a study c<strong>on</strong>ducted by the Plantati<strong>on</strong> Housing<strong>and</strong> Social Welfare Trust.111 A. W. Little, Labouring to Learn: Towards a PoliticalEc<strong>on</strong>omy of Plantati<strong>on</strong>s, People, <strong>and</strong> Educati<strong>on</strong> inSri Lanka, St. Martin’s Press, New York, 1999.112 Some families already used a car battery to powertelevisi<strong>on</strong> sets.
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 325113 Pers<strong>on</strong>al interview with Cynthia Car<strong>on</strong>, 18 August2000.114 Five days at Rs. 122.15 (USD 1.58), or USD 7.90.115 There were three cadres of employment <strong>on</strong> theestate: resident-permanent (from the estate lines),n<strong>on</strong>-resident permanent (from nearby villages), <strong>and</strong>temporary-casual.116 Many workers already had loans to upgrade theirexisting housing. Estate management took m<strong>on</strong>thlydeducti<strong>on</strong>s from the wages of workers who hadhousing loans administered by the Plantati<strong>on</strong>Housing <strong>and</strong> Social Welfare Trust (PHSWT). Underthe PHSWT housing-loan scheme, ‘at least <strong>on</strong>efamily member of each family will be required towork <strong>on</strong> the plantati<strong>on</strong> during the 15-year leaseperiod’, according to the trust itself. The <strong>on</strong>ly sourceof funding available to workers to improve theirliving c<strong>on</strong>diti<strong>on</strong>s has been through loans that keepthem tied to the unfair labour practices <strong>and</strong> dismalliving c<strong>on</strong>diti<strong>on</strong>s of estate life.117 Figures are from the Plantati<strong>on</strong> Housing <strong>and</strong> SocialWelfare Trust.118 While there are no studies that show a directcorrelati<strong>on</strong> between c<strong>on</strong>centrati<strong>on</strong>s of off-gridtechnologies such as solar power <strong>and</strong> decisi<strong>on</strong>s notto extend the grid into those areas (Lalith Gunaratne,email communicati<strong>on</strong> with Cynthia Car<strong>on</strong>, 12 August2002), the fear that off-grid electrificati<strong>on</strong> could keepan entire area permanently off-grid was very real foradjacent residents. Solar-home systems generatebetween 35 <strong>and</strong> 50 watts of power, enough to meetrequirements for domestic lighting <strong>and</strong> electr<strong>on</strong>icentertainment such as TV <strong>and</strong> radio. The relativelow generati<strong>on</strong> capacity of solar home systems doesnot appear to enable equitable opportunities forec<strong>on</strong>omic development in off-grid areas.119 Car<strong>on</strong>, op. cit. supra note 105.120 S<strong>on</strong>ja Boehmer-Christiansen, ‘Science, Equity <strong>and</strong>the War against Carb<strong>on</strong>’, Science, Technology <strong>and</strong>Human Values 28, 1, 2003, p. 82.121 Paul Faeth et al., op. cit. supra note 2.122 J-<strong>Power</strong> Group, ‘FY 2005 Group Management Plan’,FY2005-2007, Presentati<strong>on</strong> Materials, J-<strong>Power</strong>,Tokyo, 5 April 2005.123 Electric <strong>Power</strong> Company Development (EPCD),‘Project Design Document for a Rubber WoodResidue <strong>Power</strong> Plant in Yala, Thail<strong>and</strong>’, Tokyo, EPCD,August 2002.124 J-<strong>Power</strong>, op. cit. supra note 122, p. 26.125 Ibid., p. 15.126 Food <strong>and</strong> Agriculture Organizati<strong>on</strong>, Regi<strong>on</strong>alWood Energy Development Programme Opti<strong>on</strong>sfor Dendropower in Asia: Report <strong>on</strong> the ExpertC<strong>on</strong>sultati<strong>on</strong>, Manila, 1-3 April 1998, FAO, Bangkok,2000.127 Global Envir<strong>on</strong>ment Facility, Project Brief for projectTHA/99/G31, World Bank, Washingt<strong>on</strong>, DC, 1999.128 United Nati<strong>on</strong>s Industrial DevelopmentOrganizati<strong>on</strong>, Thail<strong>and</strong>: Case Study, CapacityMobilizati<strong>on</strong> to Enable Industrial Projects underthe Clean Development Mechanism, Vienna, 2002;Electric <strong>Power</strong> Company Development, op. cit.129 EPCD, op. cit. supra note 123, p. 29.130 Mitsubishi Securities, AT Biopower Rice Husk <strong>Power</strong>Project, 2003, http://cdm.unfccc.int/EB/Panels/meth.131 Einar Telnes, DNV, pers<strong>on</strong>al communicati<strong>on</strong> withLarry Lohmann, 30 May 2002.132 Jane Ellis, ‘Evaluating Experience with Electricity-Generating GHG Mitigati<strong>on</strong> Projects’, OECDEnvir<strong>on</strong>mental Directorate, IEA, COM/ ENV/EPOC/IEA/SLT(2003) 8, Paris, 2003.133 Einar Telnes, DNV, pers<strong>on</strong>al communicati<strong>on</strong> withLarry Lohmann, 27 November 2002.134 EPCD, op. cit. supra note 123.135 Lindsay Strachan, pers<strong>on</strong>al interview with TrushaReddy, 13 June 2005.136 Trusha Reddy, ‘Facing a Double Challenge’,University of KwaZulu-Natal Centre for Civil Society,Durban, 2005, http://www.carb<strong>on</strong>tradewatch.org.137 Lindsay Strachan, interview with Trusha Reddy, 13June 2005.138 World Bank Prototype Carb<strong>on</strong> Fund, Durban, SouthAfrica: L<strong>and</strong>fill Gas to Electricity, Project DesignDocument, Final Draft, World Bank, Washingt<strong>on</strong>,January 2003.139 Reddy, op. cit. supra note 136.140 Carb<strong>on</strong> Trade Watch, The Sky’s Not the Limit: TheEmerging Emissi<strong>on</strong>s Trading Markets, Transnati<strong>on</strong>alInstitute, Amsterdam, 2002, http://www.carb<strong>on</strong>tradewatch.org.141 Reddy, op. cit. supra note 136.142 Prototype Carb<strong>on</strong> Fund, ‘Durban Gas to ElectricityProject – Project Design Document’, July 2004,http://carb<strong>on</strong>finance.org/pcf/Router.cfm?Page=Projects&ProjectID=3132#DocsList, p. 8. Lindsay Strachanacknowledges that closure of the dump would leadto a 12.5 per cent reducti<strong>on</strong> in methane producti<strong>on</strong>(Tom Robbins, ‘Durban Signs SA’s First Carb<strong>on</strong>Finance Deal’, Business Day, 13 November 2002).143 Raj Patel, Centre for Civil Society, University ofKwaZulu-Natal, pers<strong>on</strong>al communicati<strong>on</strong> with LarryLohmann, 4 May 2005.
326 development dialogue september 2006 – carb<strong>on</strong> trading144 Raj Patel, pers<strong>on</strong>al communicati<strong>on</strong> with LarryLohmann, 12 January 2006.145 Sasol, ‘Project Identificati<strong>on</strong> Note: Sasol Natural GasC<strong>on</strong>versi<strong>on</strong> Project’, submitted to the DesignatedNati<strong>on</strong>al Authority, South Africa, 31 January 2005, p. 4.146 Ibid., p. 5.147 Ibid.148 Ibid.149 Peter Geef, Presentati<strong>on</strong> to South Africa Nati<strong>on</strong>alEnergy Associati<strong>on</strong>, S<strong>and</strong>t<strong>on</strong>, South Africa, 21 June2005.150 Richard Worthingt<strong>on</strong>, pers<strong>on</strong>al interview withGraham Eri<strong>on</strong>, 20 June 2005.151 SouthSouthNorth, ‘Project Design Document:Bellville South L<strong>and</strong>fill Gas Recovery <strong>and</strong> UseProject’, n.d.www.southsouthnorth.org; ‘BellvilleL<strong>and</strong>fill Gas Recovery <strong>and</strong> Use Project’, http://southsouthnorth.org/country_project_details.asp?country_id=5&project_id=72&project_type=1.152 Ibid.153 City of Cape Town, ‘Cape Town Integrated WasteManagement Plan’, www.capetown.gov.za.154 Walter Loots, interview with Graham Eri<strong>on</strong>, 14 July2005.155 BASE, ‘Gold St<strong>and</strong>ard Backgrounder’, www.cdmgoldst<strong>and</strong>ard.org, p. 1.156 Ibid., p. 3.157 City of Cape Town, op. cit. supra note 153, pp. 6-25.158 Walter Loots, interview with Graham Eri<strong>on</strong>, 14 July2005.159 Ibid.160 Ibid.161 Sheriene Rosenberg, SouthSouthNorth, pers<strong>on</strong>alinterview with Graham Eri<strong>on</strong>, 30 June 2005.162 Ibid.163 Muzelli, interview with Graham Eri<strong>on</strong>, 6 July 2005.164 SouthSouthNorth, ‘Kuyasa Low-Cost Urban HousingEnergy Upgrade Project, Khayelitsha (Cape Town),South Africa’, www.southsouthnorth.org.165 Ibid.166 Ibid.167 SouthSouthNorth, ‘The Kuyasa Low-costHousing Energy Upgrade Project’, undated, www.southsouthnorth.org.168 Lester Malgas, SouthSouthNorth, interview withGraham Eri<strong>on</strong>, 30 June 2005.169 Sheriene Rosenberg, SouthSouthNorth, interviewwith Graham Eri<strong>on</strong>, 30 June 2005. The Internati<strong>on</strong>alCouncil for Local Envir<strong>on</strong>mental Initiatives isalso menti<strong>on</strong>ed as a funder by the RenewableEnergy <strong>and</strong> Energy Effi ciency Partnership, ‘TheREEEP/ SSN Sustainable Financing ModelProject: Background <strong>and</strong> Introductory Paper’,September 2005, http://www.trampolinesystems.com/trampoline/archive/reeep/-documents/renewableenergyurbanlowincome/REEEP%20SSN%20Sustainable%20Financing%20Model%20Project_BackgroundPaper.doc.170 Richard Worthingt<strong>on</strong>, interview with Graham Eri<strong>on</strong>,20 June 2005.171 Emily Tyler, ‘CDM for Small, Sustainable Projects:Where is the Value Added?’, EcosystemMarketplace Katoomba Group, 7 February 2006,http://www.ecosystemmarketplace.com.172 Renewable Energy <strong>and</strong> Energy EfficiencyPartnership, ‘CDM Housing Project to BecomeReplicable Energy Savings Model for South Africa’,n.d., http://www.reeep.org/index.cfm?articleid=1198&ros=1.173 Ibid.; Sheriene Rosenberg, SouthSouthNorth,interview with Graham Eri<strong>on</strong>, 30 June 2005; CraigHaskins, interview, 4 July 2005.174 Renewable Energy <strong>and</strong> Energy EfficiencyPartnership, op. cit. supra note 172.175 Peter van Hausen, interview with Graham Eri<strong>on</strong>, 19July 2005.176 ‘Can We Justify Selling Africa’s Atmosphere?’,<strong>Climate</strong> Acti<strong>on</strong> News, July 2002, p. 1.177 Sheriene Rosenberg, SouthSouthNorth, interviewwith Graham Eri<strong>on</strong>, 30 June 2005.178 Ecosecurities <strong>and</strong> Prototype Carb<strong>on</strong> Fund, BaselineDeterminati<strong>on</strong> for Plantar: Evaluati<strong>on</strong> of theEmissi<strong>on</strong>s Reducti<strong>on</strong> Potential of the Plantar Project,final versi<strong>on</strong>, World Bank, Washingt<strong>on</strong>, March 2002,p. 25.179 Ibid., p 26.180 Werner Kornexl, ‘Envir<strong>on</strong>mental Assessmentof Plantar Project / Minas Gerais’, World Bank,Washingt<strong>on</strong>, 18 October 2001, http://www.carb<strong>on</strong>finance.org.181 Ecosecurities <strong>and</strong> Prototype Carb<strong>on</strong> Fund, op. cit.supra note 178, p. 49.182 Scientific Certifying Systems, ‘Sumario Publico 01– Plantar S. A.’, Oakl<strong>and</strong>, 2001.183 See http://www.fao.org/DOCREP/003/y3198E/Y3198E07.htm.184 Scientific Certifying Systems, op. cit. supra note 182.185 A. P. L. Suptitz, et al., Open letter to CDM ExecutiveBoard, Minas Gerais, June 2004.
offsets – the fossil ec<strong>on</strong>omy’s new arena of c<strong>on</strong>flict 327186 Ecosecurities <strong>and</strong> Prototype Carb<strong>on</strong> Fund, op. cit.supra note 178, p. 77.187 UNFCCC, CDM document F-CDM-NMmp ver 03– NM0029, January 2003, http://cdm.unfccc.int/UserManagement/FileStorage/CDMWF_872626378.188 UNFCCC, ‘Report of the Eighth Meeting of theMethodologies Panel’, B<strong>on</strong>n, November 2003,http://cdm.unfccc.int/Panels/meth/Meth08rep_ext.pdf, p. 3.189 FASE et al., ‘Open Letter’ to those resp<strong>on</strong>sible for,<strong>and</strong> investing in, the Prototype Carb<strong>on</strong> Fund (PCF),http://www.cdmwatch.org, 26 March 2003, http://www.fern.org/pubs/ngostats/Planteng.htm.190 For further detail <strong>on</strong> the negative impacts of theseplantati<strong>on</strong>s, see World Rainforest Movement,Certifying the Uncertifiable: Forestry StewardshipCouncil Certificati<strong>on</strong> of Tree Plantati<strong>on</strong>s inThail<strong>and</strong> <strong>and</strong> Brazil, World Rainforest Movement,M<strong>on</strong>tevideo, 2003, http://www.wrm.org.uy/actors/FSC/uncertifiable.html.191 FASE et al., Open Letter to Executives <strong>and</strong>Investors in the PCF, 23 May 2003, http://www.sinkswatch.org/pubs/Carta%20PLantar%202%20-%20ingles.doc. See also letter to members of theCDM Executive Board, June 2004, http://www.sinkswatch.org/pubs/Avoided%20fuel%20switch%20letter%20english.doc.192 Ecosecurities <strong>and</strong> Prototype Carb<strong>on</strong> Fund, op. cit.supra note 178.193 Robin Wood, ‘Stop Plantar!’, press release,Cologne, 9 June 2004. See also CDM Watch <strong>and</strong>Sinks Watch, ‘How Plantar Sinks the World Bank’sRhetoric’, 2004, http://www.sinkswatch.org/pubs/world%20bank%20<strong>and</strong>%20sinks%20final.pdf.194 Scientific Certifying Systems, Sumario Publico 03– Plantar S. A., Oakl<strong>and</strong>, 2003.195 See letter from Plantar to PCF investors,http://www.sinkswatch.org/pubs/PlantarLettertothePCFParticipantsCommittee.doc,Belo Horiz<strong>on</strong>te, 11 April 2003, p. 6.196 Jornal Estado de Minas, 4 April 2002, p. 13.
Chapter 5Ways forwardIn which the claim that ‘there is no alternative’ to carb<strong>on</strong> trading is dissected<strong>and</strong> set aside, <strong>and</strong> emerging alliances for a more democratic <strong>and</strong> eff ectiveclimate politics are explored.This special report has argued that the carb<strong>on</strong> market is getting in theway of soluti<strong>on</strong>s to the climate crisis.Yet many envir<strong>on</strong>mentalists – especially in the North – say that carb<strong>on</strong>trading is unavoidable. Citing the Kyoto Protocol, the EU ETS<strong>and</strong> other trading schemes, they argue that, like it or not, it’s impossibleto imagine any future nati<strong>on</strong>al or internati<strong>on</strong>al climate regimethat does not include carb<strong>on</strong> markets. ‘The <strong>on</strong>ly policy measures withteeth involve cap <strong>and</strong> trade’, goes <strong>on</strong>e often-heard refrain. ‘And the<strong>on</strong>ly way of overcoming US oppositi<strong>on</strong> to climate acti<strong>on</strong> is throughcarb<strong>on</strong> trading; to criticise carb<strong>on</strong> markets is to play into the h<strong>and</strong>s ofGeorge W. Bush <strong>and</strong> the oil companies.’There’s no time to start all over again, many envir<strong>on</strong>mentalists add,so the best we can do is roll up our sleeves <strong>and</strong> pitch in to try to makecarb<strong>on</strong> trading a little less unworkable, a little less counterproductive<strong>and</strong> a little less unfair than it would be otherwise.I can see you think this is the counsel of despair. But what’s the alternative?That’s a questi<strong>on</strong> that’s often asked – again, especially in the North.Let’s start by trying to appreciate what a very strange questi<strong>on</strong> it is.Polluti<strong>on</strong> trading is a completely new idea, recently pushed <strong>on</strong> theworld by a small circle of neoliberal instituti<strong>on</strong>s in the US. (Thequarrel between George W. Bush <strong>and</strong> carb<strong>on</strong> trading advocates suchas the framers of the Kyoto Protocol is in part merely a friendly disputebetween two overlapping facti<strong>on</strong>s of US business.) Polluti<strong>on</strong>trading’s main appeal is that it promises to save m<strong>on</strong>ey for the richover the short term. As a polluti<strong>on</strong> c<strong>on</strong>trol policy, it has a bad to indifferentrecord in the very few places it’s been tried, <strong>and</strong> is sure to failelsewhere if the pollutant involved is that slippery, ubiquitous compoundcalled carb<strong>on</strong> dioxide.By c<strong>on</strong>trast, many so-called ‘alternative’ approaches are of extremelyl<strong>on</strong>g st<strong>and</strong>ing, have a range of beneficial effects, <strong>and</strong> have a prior
330 development dialogue september 2006 – carb<strong>on</strong> tradingrecord of some success across a range of societies <strong>and</strong> issues. Moststriking of all, many are already being widely used.That raises the questi<strong>on</strong>: why should any<strong>on</strong>e use the word ‘alternative’to refer to these approaches, while speaking as if carb<strong>on</strong> tradingwere a ‘mainstream’ strategy? Carb<strong>on</strong> trading is not, in fact, part ofmost climate policy proposals. It is not what people are mainly relying<strong>on</strong> in their efforts to tackle climate change. It’s not the <strong>on</strong>ly initiativethat has teeth <strong>and</strong> not ‘what we have to work with’. On the c<strong>on</strong>trary,it’s a dubious sideshow that’s wasted a great deal of time becauseit’s been treated as a main event. It may appeal to Northern advisersat internati<strong>on</strong>al financial instituti<strong>on</strong>s under pressure to offer single‘silver bullet’ soluti<strong>on</strong>s to global problems. 1 But it’s not working, <strong>and</strong>clearing it out of the way would be <strong>on</strong>e good first step towards morec<strong>on</strong>structive acti<strong>on</strong>.I’m c<strong>on</strong>fused. Could you give some examples of the more established <strong>and</strong> successfulstrategies you’re talking about?Well, you could start with a package of approaches that’s currentlygetting a lot of attenti<strong>on</strong> in Northern countries, where immediatesteep cuts in fossil fuel emissi<strong>on</strong>s are most crucial. Roughly speaking,this package c<strong>on</strong>sists of• large-scale public works• subsidy shifting• c<strong>on</strong>venti<strong>on</strong>al regulati<strong>on</strong>• green taxes <strong>and</strong> other n<strong>on</strong>-trading market mechanisms• legal acti<strong>on</strong>– all backed <strong>and</strong> m<strong>on</strong>itored by popular movements <strong>and</strong> evaluatedagainst ambitious short- <strong>and</strong> l<strong>on</strong>g-term targets.Sounds like a complicated blueprint to implement.Actually, it’s not a blueprint. Neither is carb<strong>on</strong> trading. Political acti<strong>on</strong>isn’t the implementati<strong>on</strong> of blueprints. The future isn’t decidedby planners sitting in rooms by themselves <strong>and</strong> then slotting theirplans into a black box of default political instituti<strong>on</strong>s. It’s more a matterof alliance-building, of move <strong>and</strong> counter-move. The packagementi<strong>on</strong>ed above isn’t a theory but a historical observati<strong>on</strong> of the currentstate of an <strong>on</strong>going process of discussi<strong>on</strong>, c<strong>on</strong>fl ict, c<strong>on</strong>sultati<strong>on</strong><strong>and</strong> bridge-building in which a lot of political instituti<strong>on</strong>s themselvescome into questi<strong>on</strong>. Proposals for acti<strong>on</strong> flow out of such processes;the processes do not flow out of them.
ways forward 331‘Tinkering around theedges w<strong>on</strong>’t solve theproblem. Just beatingthe carb<strong>on</strong> lobby w<strong>on</strong>’tsolve the problem. Fullsocial pricing <strong>and</strong> betterinformati<strong>on</strong> distributi<strong>on</strong>are not enough. Usingresources wisely willrequire instituti<strong>on</strong>alchange.’Gar Lipow, 2006All right, no need to go <strong>on</strong> about it. But could you spell out the thinking surroundingthe strategies you menti<strong>on</strong>?First, sweeping public works programmes could help reorganiseNorthern societies’ infrastructure away from fossil fuel dependencyin a way that polluti<strong>on</strong> trading <strong>and</strong> taxes are incapable of doing. Suchprogrammes could, for example, revamp transport systems; decentraliseelectricity networks to make them more efficient, reliable, secure<strong>and</strong> receptive to solar, wind <strong>and</strong> micro-hydro power; 2 <strong>and</strong> helpoverhaul inefficient heating systems.Phasing out subsidies for fossil fuel explorati<strong>on</strong>, extracti<strong>on</strong>, refining,transport <strong>and</strong> use is a sec<strong>on</strong>d climate-friendly structural shift thatcannot be made through trading schemes but <strong>on</strong>ly through collectivedecisi<strong>on</strong>-making. The subsidies in questi<strong>on</strong> underwrite a hugerange of activities from domestic <strong>and</strong> foreign pipeline developmentto superhighway c<strong>on</strong>structi<strong>on</strong>, airport expansi<strong>on</strong>, l<strong>on</strong>g-distance shipping,military operati<strong>on</strong>s, tax exempti<strong>on</strong>s for aviati<strong>on</strong> <strong>and</strong> bunker fuelusers, low-cost credit <strong>and</strong> insurance for fossil fuel firms <strong>and</strong> c<strong>on</strong>sumerrebates for sports utility vehicles. 3 <strong>Power</strong>ful enough political movementscould shift such towards a coherent programme of, for example:renewable energy development; community-based planningfor lower-carb<strong>on</strong> lifestyles; support for local movements protectingl<strong>and</strong>, forests <strong>and</strong> smallholder agriculture; better insulati<strong>on</strong> <strong>and</strong> heating;promoti<strong>on</strong> of public debate <strong>and</strong> exchange <strong>on</strong> climate change; <strong>and</strong>just treatment for those who would otherwise suffer from the transiti<strong>on</strong>to less carb<strong>on</strong>-intensive industry, including fossil fuel workers<strong>and</strong> the poor. If coordinated regi<strong>on</strong>ally, increased support for renewableenergy development could well spur global change more rapidlythan negotiati<strong>on</strong>s at the United Nati<strong>on</strong>s, since it would threatenthe competitiveness of countries that c<strong>on</strong>tinued to insist <strong>on</strong> extremefossil -fuel dependence. 4 Cutting off public subsidies for the export ofclimate- <strong>and</strong> people-unfriendly technologies would have the virtuousside effect of supporting local efforts to defend low-carb<strong>on</strong> lifewaysagainst large-scale <strong>and</strong> often corrupti<strong>on</strong>-ridden projects involvingfossil fuels. 5But wait a minute. Aren’t fossil fuels the cheapest source of energy for Southerncountries?It’s not so simple – not when the history of subsidies is taken accountof, costs such as health impacts, crop losses, <strong>and</strong> polluti<strong>on</strong> damage arefactored in, <strong>and</strong> fuel price risks are acknowledged. 6Moreover, most foreign-backed fossil fuel projects in the South d<strong>on</strong>’tprovide cheap energy to the South itself, but rather result in fossil
332 development dialogue september 2006 – carb<strong>on</strong> tradingfuels being exported <strong>and</strong> c<strong>on</strong>sumed in the industrial North. For example,Nigeria, the world’s eighth largest oil exporter, imports 76 percent of its petrol, <strong>and</strong> 34 per cent of its kerosene, at a cost of usd 3.6billi<strong>on</strong>. In the oil-producing Niger delta regi<strong>on</strong>, firewood is the primaryenergy source for 73 per cent of the people. 7In additi<strong>on</strong> to shifting subsidies away from fossil fuel development, it’salso important to curb subsidies for deforestati<strong>on</strong> provided by nati<strong>on</strong>algovernments, export credit agencies, the World Bank <strong>and</strong> others.These include subsidies for pulp mills, industrial m<strong>on</strong>oculture plantati<strong>on</strong>s,mining in forested areas <strong>and</strong> other enterprises that result in displacement,impoverishment <strong>and</strong> ecological degradati<strong>on</strong>. 8 Such a movewould help in both slowing down <strong>and</strong> adapting to climate change.Shifting subsidies away from military budgets, particularly that of theUS, would also free up m<strong>on</strong>ey for tackling climate change. 9A third element of a strategy for structural change in the North, inadditi<strong>on</strong> to public works <strong>and</strong> subsidy shifting, would be more seriousc<strong>on</strong>venti<strong>on</strong>al regulati<strong>on</strong> setting efficiency <strong>and</strong> carb<strong>on</strong> use st<strong>and</strong>ardsfor buildings, vehicles <strong>and</strong> urban development <strong>and</strong> l<strong>and</strong>-use planning.As noted in Chapter 3, such regulati<strong>on</strong> is often capable of improvingefficiency faster, at a lower cost, <strong>and</strong> in a less coercive way than marketmechanisms such as trading or taxes. 10 It can do things that trading,taxes <strong>and</strong> voluntary programmes cannot do. 11Fourth, as structural change provides more low-carb<strong>on</strong> choices (betterpublic transport, more efficient machinery), carb<strong>on</strong> taxes <strong>and</strong> taxes<strong>on</strong> material intensity (focusing <strong>on</strong> unnecessary or throwaway use ofmetals, water, wood, plastics <strong>and</strong> so forth) come to have a greater effect.12 Revenues from such taxes could then be used to reduce taxes<strong>on</strong> labour, fund low-carb<strong>on</strong> energy <strong>and</strong> increase efficiency, or offerrebates to buyers of greener, more efficient equipment.Further market instruments that do not dem<strong>and</strong> impossible types ofquantificati<strong>on</strong> could then be applied in the service of innovati<strong>on</strong>. ‘Envir<strong>on</strong>mentalcompetiti<strong>on</strong> statutes’ that require polluters to pay costs thattheir competitors incur in reducing polluti<strong>on</strong> are a good example. 13The courts provide yet another important arena for acti<strong>on</strong> bey<strong>on</strong>d thetrading floor. ‘If generally accepted scientific assessments are accurate,global warming is likely to be the most expensive envir<strong>on</strong>mentalproblem ever’, explains US law professor Andrew Strauss. ‘Determinati<strong>on</strong>sare going to have to be made about who is going to bear thesecosts…[<strong>and</strong>] litigati<strong>on</strong> will very likely play a role.’ Oxford climatemodeller Myles Allen <strong>and</strong> others advocate the use of public nuisance,product liability <strong>and</strong> human rights law against greenhouse gas polluters.14 Allen’s colleague, science <strong>and</strong> technology scholar Steve Rayner,
ways forward 333suggests that the ‘threat of civil liability may prove to be a much morepowerful’ incentive to the US electricity utility industry to reduce itsemissi<strong>on</strong>s’ than the threat of regulati<strong>on</strong>. 15 Internati<strong>on</strong>al law may providestill further avenues for acti<strong>on</strong> against global warming, throughlawsuits against banks <strong>and</strong> export credit agencies for corrupti<strong>on</strong> <strong>and</strong>human rights violati<strong>on</strong>s c<strong>on</strong>nected with fossil fuel projects. 16Getting reacquainted with what worksIn the South as well as the North, community-level or popular strategiesof proven worth in fostering climatic stability also need to bebetter recognised by envir<strong>on</strong>mentalists <strong>and</strong> systematically strengthenedinstead of being penalised <strong>and</strong> undermined by nati<strong>on</strong>al governments,the World Bank, export credit agencies, the World Trade Organizati<strong>on</strong><strong>and</strong> so <strong>on</strong>. For example:• Networks protecting community forests, other local comm<strong>on</strong>s <strong>and</strong>low-input swidden or integrated farming systems (increasingly supplementedwith biogas energy producti<strong>on</strong>) are a powerful forceagainst climatically destabilising l<strong>and</strong> clearance, commercial logging,high-input intensive agriculture <strong>and</strong> l<strong>on</strong>g-distance food transport.• Movements against trade liberalisati<strong>on</strong>, privatisati<strong>on</strong> <strong>and</strong> commodificati<strong>on</strong>worldwide help to slow growth in unnecessary transport<strong>and</strong> protect local subsistence regimes against threats from fossilfuel-intensive sectors. 17• Popular movements against oil wars, gas <strong>and</strong> oil pipelines, fossilfuel extracti<strong>on</strong>, power plant polluti<strong>on</strong> <strong>and</strong> airport <strong>and</strong> highwayexpansi<strong>on</strong> also help curb extracti<strong>on</strong> of fossil fuels.• It is increasingly clear that small renewable energy sources overwhich local communities have power, whether off-grid or <strong>on</strong>grid,are becoming a cheap alternative to fossil fuel-oriented centralisedgenerating systems in many areas of the South.Insofar as they defend local resilience <strong>and</strong> promote community solidarity<strong>and</strong> organisati<strong>on</strong>, such strategies are crucial not <strong>on</strong>ly in slowing climatechange but also in adapting to it. 18 As scholars Elizabeth Mal<strong>on</strong>e<strong>and</strong> Steve Rayner observe, ‘fostering flexibility means fostering powerat the local level’. 19 As emissi<strong>on</strong>s trading expert Ruth Greenspan Bellexplains in an article <strong>on</strong> sulphur dioxide trading in China, fosteringthat power requires closer attenti<strong>on</strong> to realities <strong>on</strong> the ground than polluti<strong>on</strong>trading advocates have usually been willing to pay:In their enthusiasm for efficiency over other values, the advocatesfor market-based instruments for envir<strong>on</strong>mental c<strong>on</strong>trol have re-
334 development dialogue september 2006 – carb<strong>on</strong> tradingversed the order in which envir<strong>on</strong>mental soluti<strong>on</strong>s are found.They have given their prescripti<strong>on</strong>s without first doing a physicalexaminati<strong>on</strong> of the patient; in other words, they have first recommendedenvir<strong>on</strong>mental instruments <strong>and</strong> sec<strong>on</strong>darily tried to bendinstituti<strong>on</strong>s to support the already identified cure… . Those whoadvise governments to adopt reforms for which the instituti<strong>on</strong>albasis does not yet exist put the cart before the horse, a costly mistakethat directs weak countries in the directi<strong>on</strong> of soluti<strong>on</strong>s theyhave little hope of implementing. Instead, the d<strong>on</strong>ors <strong>and</strong> advisersshould…take into account existing capabilities <strong>and</strong> instituti<strong>on</strong>s[<strong>and</strong>] find examples of small, albeit imperfect, efforts that seem tobe working <strong>and</strong> building <strong>on</strong> them. 20Well, this is all very interesting, but is any of it really going to happen?A lot of it already has happened, or has clear precedents. A lot of thestrategies menti<strong>on</strong>ed above have a far l<strong>on</strong>ger record of use than polluti<strong>on</strong>trading – <strong>and</strong> a more successful <strong>on</strong>e. Public works <strong>and</strong> subsidyshiftinghave been used for millennia to change societies’ energy-usepatterns – cases range from the ancient irrigati<strong>on</strong> systems of Asia to theUS’s undermining of rail travel <strong>and</strong> subsidisati<strong>on</strong> of interstate highways<strong>and</strong> suburban sprawl following the Sec<strong>on</strong>d World War. 21 Taxati<strong>on</strong> wasused during the Xia <strong>and</strong> Shang Dynasties in China, in ancient Aksum<strong>and</strong> Ghana, ancient Egypt, Greece, Rome, <strong>and</strong> in the Aztec <strong>and</strong> Incaempires. C<strong>on</strong>venti<strong>on</strong>al polluti<strong>on</strong> <strong>and</strong> energy regulati<strong>on</strong> has been aroundfor at least 150 years <strong>and</strong> has many achievements to its credit, includingin the US from the 1970s <strong>on</strong>ward at both nati<strong>on</strong>al <strong>and</strong> state levels. 22Local forest or water comm<strong>on</strong>s regimes, meanwhile, have playeda climate-stabilising role for decades or, in many cases, centuries. 23Popular movements against privatisati<strong>on</strong> <strong>and</strong> resource wars have beenachieving c<strong>on</strong>crete results for just as l<strong>on</strong>g. Hundreds of communities<strong>on</strong> at least four c<strong>on</strong>tinents have been successfully protecting theirlocal areas from oil drilling for decades. 24 In Costa Rica, the governmenthas halted efforts by US oil companies to explore <strong>and</strong> extracthydrocarb<strong>on</strong>s from some of the country’s richest ecosystems. 25Many of these strategies are already being explicitly directed at climatechange. <strong>Climate</strong>-related regulati<strong>on</strong> <strong>and</strong> climate-related tax codes arealready <strong>on</strong> the books in many countries. In 2000, the Carib bean nati<strong>on</strong>of St. Lucia announced a unilateral plan for a fossil fuel-free energyfuture. 26 Following the lead of the city of Växjö, 27 Sweden isalso planning to ab<strong>and</strong><strong>on</strong> the use of oil within 15 years <strong>and</strong> ultimatelyother fossil fuels as well. 28 Although its claim to have cut emissi<strong>on</strong>sfrom 1997 to 1999 is questi<strong>on</strong>able, 29 China’s government has introducedtaxes <strong>and</strong> targets promoting efficiency <strong>and</strong> renewable energy
ways forward 335more stringent than those in the US, including laws allowing energyfrom renewable sources to be sold into the grid at a higher price <strong>and</strong>encouraging more energy-efficient buildings. 30 Even in the US, universities,towns, cities, states <strong>and</strong> companies are taking their own acti<strong>on</strong>sagainst fossil fuel overuse, often without even menti<strong>on</strong>ing carb<strong>on</strong>trading. 31 Underst<strong>and</strong>ing that strict regulati<strong>on</strong> is inevitable <strong>and</strong>worried about losing out when it comes, even many large US corporati<strong>on</strong>sare pressing their government for str<strong>on</strong>ger interventi<strong>on</strong>. 32Shifting subsidies away from fossil fuels, similarly, already has a lot ofsupport. Backers range from grassroots groups in the South to Greenpeaceto student organisati<strong>on</strong>s, the <strong>Climate</strong> Crisis Coaliti<strong>on</strong>, Platform,the US <strong>Climate</strong> Emergency Council <strong>and</strong> the government of Sweden. 33The Kyoto Protocol itself commits its signatories to ‘progressive reducti<strong>on</strong>or phasing out’ of damaging subsidies for fossil fuels. The Organizati<strong>on</strong>for Ec<strong>on</strong>omic Cooperati<strong>on</strong> <strong>and</strong> Development estimates thatremoving such subsidies would al<strong>on</strong>e reduce emissi<strong>on</strong>s by 18 per centby 2050 while increasing world income by 0.7 per cent. 34 Oilwatch hasproposed that nati<strong>on</strong> states halt oil <strong>and</strong> gas extracti<strong>on</strong> in protected areas<strong>and</strong> that they be compensated by countries that pledge to reduce drasticallytheir carb<strong>on</strong> dioxide emissi<strong>on</strong>s. 35 Roughly 90 per cent of the USvoting public now favours more subsidies <strong>and</strong> government regulati<strong>on</strong>to encourage renewable energy. 36Dem<strong>on</strong>strators take tothe streets in M<strong>on</strong>trealin December 2005<strong>on</strong> the occasi<strong>on</strong> ofthe 11th C<strong>on</strong>ferenceof the Parties of theUNFCCC.
336 development dialogue september 2006 – carb<strong>on</strong> tradingCalls for more sweeping taxes <strong>on</strong> carb<strong>on</strong> use are also reverberatingworldwide. 37 In additi<strong>on</strong>, movements dem<strong>and</strong>ing instituti<strong>on</strong>al divestiturefrom banks investing in fossil fuels are getting under way, <strong>and</strong>there are growing links between movements c<strong>on</strong>cerned with carb<strong>on</strong>trading <strong>and</strong> those c<strong>on</strong>cerned with related forms of privatisati<strong>on</strong> inhealth, water, educati<strong>on</strong>, transport, energy <strong>and</strong> genetic informati<strong>on</strong>,<strong>and</strong> with biotechnology <strong>and</strong> nuclear energy. Legal acti<strong>on</strong>, too, is alreadybeing taken. In Nigeria, local communities have challengedoil companies as well as their own government in the courts over gasfl aring <strong>and</strong> polluti<strong>on</strong>. 38 Envir<strong>on</strong>mentalists are also suing US <strong>and</strong> Germanexport credit agencies for funding fossil-fuel projects abroad. 39 InDecember 2005, Alaskan <strong>and</strong> Canadian Inuit peoples sent a petiti<strong>on</strong>to the Inter-American Commissi<strong>on</strong> <strong>on</strong> Human Rights claiming thatthe US was violating their human rights by refusing to cut greenhousegas emissi<strong>on</strong>s. 40 In July 2004, eight states filed a tort-based suitagainst electricity generators in a court in New York <strong>on</strong> global warningnuisance grounds. In June 2006, the US Supreme Court agreed toc<strong>on</strong>sider a dem<strong>and</strong> by 12 states, together with various cities <strong>and</strong> envir<strong>on</strong>mentalorganisati<strong>on</strong>s, that the George W. Bush regime regulatecarb<strong>on</strong> dioxide to combat global warming. 41In short, the questi<strong>on</strong> ‘what’s your alternative to carb<strong>on</strong> trading?’needs to be turned <strong>on</strong> its head. Carb<strong>on</strong> trading itself is an ‘alternative’– although it’s perhaps too marginal, academic <strong>and</strong> parochial, whenc<strong>on</strong>sidered in a global c<strong>on</strong>text, to deserve even that title. Strategiessuch as those detailed above have a better claim to be c<strong>on</strong>sidered partof a living mainstream. To treat the two as if they were <strong>on</strong> a par signalsa catastrophic loss of political <strong>and</strong> historical perspective.Choosing alliesOK, I take your point. But if so many of the n<strong>on</strong>-trading approaches you menti<strong>on</strong>are well-established <strong>and</strong> widely-supported, why aren’t they achieving betterresults? Carb<strong>on</strong> trading may be a waste of time <strong>and</strong> resources, but the strategiesyou menti<strong>on</strong> d<strong>on</strong>’t seem to be doing so well against global warming, either!That’s true, but it’s important to remember that strategies such asthose detailed above are not <strong>on</strong>ly ‘technically’ more realistic thancarb<strong>on</strong> trading, but politically more realistic as well – provided thatenvir<strong>on</strong>mentalists <strong>and</strong> other activists fulfill their resp<strong>on</strong>sibility to helpbuild alliances that can help make them so.In what ways are they more realistic?In many ways. Unlike carb<strong>on</strong> trading, these approaches are built <strong>on</strong>the basic truth that most fossil fuels will have to be left in the ground.
ways forward 337Unlike carb<strong>on</strong> trading, they recognise irreversibility <strong>and</strong> the differencesbetween risk, uncertainty, ignorance <strong>and</strong> indeterminacy <strong>and</strong>d<strong>on</strong>’t try to calculate the incalculable. Unlike carb<strong>on</strong> trading, theyacknowledge explicitly the real-world functi<strong>on</strong>s <strong>and</strong> limitati<strong>on</strong>s ofc<strong>on</strong>venti<strong>on</strong>al development instituti<strong>on</strong>s. Unlike carb<strong>on</strong> trading, theytake into the account the realities of internati<strong>on</strong>al politics. Crucially,unlike carb<strong>on</strong> trading, they make no b<strong>on</strong>es about the fact that dealingwith the climate crisis is going to involve democratic political organising<strong>and</strong> an uphill political struggle.But does dealing with the crisis have to involve democratic political organising?Realistically, there may be no time for that. Maybe envir<strong>on</strong>mentalists should justtry to make a quick deal with governments <strong>and</strong> business to solve the problem.That’s the working assumpti<strong>on</strong> of many carb<strong>on</strong> trading supporters inthe North. The idea is that envir<strong>on</strong>mentalists should throw their supportbehind policies that offer corporati<strong>on</strong>s or rich-country governmentsthe short-term cost savings associated with emissi<strong>on</strong>s trading,plus property rights in the atmosphere, plus a flow of cheap creditsfrom carb<strong>on</strong> projects <strong>and</strong> new opportunities for investment. In return,corporati<strong>on</strong>s or rich-country governments will back emissi<strong>on</strong>scuts while channelling funding <strong>and</strong> green technology to the South.One difficulty with this plan is that many corporati<strong>on</strong>s have understoodfrom the start that carb<strong>on</strong> markets are structured in a way thatwill allow them to take the gravy while leaving envir<strong>on</strong>mentalists withnot hing. They know that rent-seeking under the EU ETS or horsetradingunder the UNFCCC will enable them to delay emissi<strong>on</strong>s cutsindefinitely (see Chapter 3). They know that carb<strong>on</strong> trading often takesthe teeth out of other, existing forms of regulati<strong>on</strong>. 42 They know thatevery polluti<strong>on</strong> trading scheme to date has involved rewarding polluterswith free assets. They know the system can be gamed. They know that‘giving carb<strong>on</strong> a price’ need not be an inducement to structural change,especially if they can c<strong>on</strong>trol that price. And they know that carb<strong>on</strong>‘offset’ projects offer still further opportunities to entrench ‘business asusual’. Firms are often delighted when envir<strong>on</strong>mentalists support thecol<strong>on</strong>ialist claim that the global green future lies in an exp<strong>and</strong>ed exportof machinery <strong>and</strong> expertise from North to South <strong>and</strong> lose no time insetting up mechanisms that allow industry <strong>and</strong> the World Bank to reapnew rewards from a parade of methane-burning schemes, large hydroelectricdams, coal-fired generating plants <strong>and</strong> exp<strong>and</strong>ed m<strong>on</strong>oculturesthat benefit the world’s rich while leaving the course of climate changeuntouched. Many polluters like carb<strong>on</strong> trading not because they thinkit will pay for a just transiti<strong>on</strong> to a low-carb<strong>on</strong> future, but because theyare c<strong>on</strong>vinced it w<strong>on</strong>’t.
338 development dialogue september 2006 – carb<strong>on</strong> tradingWhile the refrains ‘there is no alternative’ <strong>and</strong> ‘it’s too late to turnback now’ play in the background, envir<strong>on</strong>mentalists following thisplan are now running through a predictable repertoire of salvage attempts:schemes for ‘certifying’ carb<strong>on</strong> projects, efforts to persuadegovernments to aucti<strong>on</strong> allowances rather than giving them away,toothless complaints about officials’ ‘lack of political will’ to set adequateemissi<strong>on</strong>s caps, press releases seizing <strong>on</strong> small c<strong>on</strong>cessi<strong>on</strong>s as‘major victories’. The more committed envir<strong>on</strong>mentalists become tothis dynamic, <strong>and</strong> the more they slot themselves into roles as marketverifiers, m<strong>on</strong>itors <strong>and</strong> corporate c<strong>on</strong>sultants <strong>and</strong> trainees, the lessthey’re able to face the extent to which they’ve been snookered. Theharder it has become, too, to acknowledge that they’ve made politicalalliances with the wr<strong>on</strong>g parties <strong>and</strong> that in the end, the fight againstglobal warming has to be part of the larger fight for a more just, democratic<strong>and</strong> equal world.But why should any<strong>on</strong>e have to choose their allies? Aren’t we all in this together?Global warming is, after all, global. It’s going to hurt every<strong>on</strong>e. You make itseem as if there’s some kind of class war going <strong>on</strong>. It sounds so ideological.In climate politics, as in everything else, different sides have differentstakes, different vulnerabilities, different backgrounds, differentcommitments, different interests <strong>and</strong> different kinds of power. That’slargely what this special report has been about. For the sake of a viablefuture, these differences need to be explored <strong>and</strong> understood, notignored. Too often the peremptory exclamati<strong>on</strong> ‘You’re just beingideological!’ – like the peremptory questi<strong>on</strong> ‘But what’s your alternative?’– functi<strong>on</strong>s merely to shut down a c<strong>on</strong>versati<strong>on</strong> that needs to bec<strong>on</strong>tinued <strong>and</strong> exp<strong>and</strong>ed. 43I’m still not c<strong>on</strong>vinced. In Chapter 3 you made fun of carb<strong>on</strong> trading by sayingthat it could <strong>on</strong>ly functi<strong>on</strong> eff ectively <strong>and</strong> equitably in an ideal world in whichevery political problem had already been solved <strong>and</strong> every instituti<strong>on</strong> transformedvirtually into its opposite. Now it seems like you’re saying that the sameis true for any strategy for c<strong>on</strong>tending with global warming.No. <strong>Climate</strong> activists who are realistic about politics – <strong>and</strong> politicianswho are realistic about climate change – must start from where theworld is today <strong>and</strong> c<strong>on</strong>tend with the instituti<strong>on</strong>s that exist today. Thatmeans choosing political allies to whom global warming is more thanjust a new threat to or opportunity for profit <strong>and</strong> market share, <strong>and</strong>who will have an interest in defending <strong>and</strong> building the instituti<strong>on</strong>scapable of coping with it.If carb<strong>on</strong> trading, per impossibile, could be carried out the way its envir<strong>on</strong>mentalistprop<strong>on</strong>ents claim to want it to be carried out, it would
ways forward 339hold little appeal for the biggest polluting businesses. If it is carried outas it is today, then its envir<strong>on</strong>mentalist prop<strong>on</strong>ents have lost their battle.Either way, envir<strong>on</strong>mentalists are deceiving themselves if they thinkthat carb<strong>on</strong> trading is going to ‘jiu-jitsu’ ruling elites into serious acti<strong>on</strong><strong>on</strong> climate change. There are no detours around political organising.No Detours around PoliticsQ. At the talks you give to American audiences,you are often asked the questi<strong>on</strong>,‘What should I do?’A. Only by American audiences. I’m neverasked this in the Third World. When yougo to Turkey or Colombia or Brazil, theyd<strong>on</strong>’t ask you ‘What should I do?’ Theytell you what they’re doing… These arepoor, oppressed people, living under horrendousc<strong>on</strong>diti<strong>on</strong>s, <strong>and</strong> they would neverdream of asking you what they should do.It’s <strong>on</strong>ly in highly privileged cultures likeours that people ask this questi<strong>on</strong>. We haveevery opti<strong>on</strong> open to us, <strong>and</strong> have n<strong>on</strong>e ofthe problems that are faced by intellectualsin Turkey, or campesinos in Brazil… Butpeople [in the US] are trained to believethat there are easy answers, <strong>and</strong> it doesn’twork that way… You want a magic key,so you can go back to watching televisi<strong>on</strong>tomorrow? It does not exist. Somehow thefact of enormous privilege <strong>and</strong> freedomcarries with it a sense of impotence, whichis a strange but striking phenomen<strong>on</strong>…There is no difficulty in finding <strong>and</strong> joininggroups that are working hard <strong>on</strong> issuesthat c<strong>on</strong>cern you. But that’s not the answerthat people want. The real questi<strong>on</strong>people have, I think, is, ‘What can I do tobring about an end to these problems thatwill be quick <strong>and</strong> easy?’… But that’s notthe way things work. If you want to makechanges in the world, you’re going to haveto be there day after day doing the boring,straightforward work of getting a coupleof people interested in an issue, buildinga slightly better organisati<strong>on</strong>, carrying outthe next move, experiencing frustrati<strong>on</strong>,<strong>and</strong> finally getting somewhere… That’show you get rid of slavery, that’s how youget women’s rights, that’s how you get thevote, that’s how you get protecti<strong>on</strong> forworking people. Every gain you can pointto came from that kind of effort. 44Noam Chomsky, 2005Indeed, no aspect of the discussi<strong>on</strong> <strong>on</strong> global warming can be disentangledfrom debates about col<strong>on</strong>ialism, racism, gender, exploitati<strong>on</strong><strong>and</strong> the democratic c<strong>on</strong>trol of technology. What, for example, is tobe d<strong>on</strong>e about the fact that the world – <strong>and</strong> mainly the rich minority– uses the energy equivalent of 400 years of plant growth every yearthanks to being able to burn the ‘buried sunshine’ of fossil fuels? 45 Toswitch enough of the world’s energy producti<strong>on</strong> from fossil fuels tobiomass so as to stabilise atmospheric c<strong>on</strong>centrati<strong>on</strong>s of carb<strong>on</strong> dioxidewithout cutting energy use would require more l<strong>and</strong> than iscurrently used for all of the world’s crops. To switch enough energy
340 development dialogue september 2006 – carb<strong>on</strong> tradingproducti<strong>on</strong> from fossil fuels to centralised producti<strong>on</strong> of wind powerwithout cutting energy use would require devoting a parcel of 210milli<strong>on</strong> hectares, or a l<strong>and</strong> area bigger than Mexico, to wind turbines;c<strong>on</strong>verting entirely to solar would mean covering an area of 14 milli<strong>on</strong>hectares, the size of Bangladesh or Greece, with solar panels. 46Yet to resort to nuclear power would be disastrous for global security<strong>and</strong> disastrous for future generati<strong>on</strong>s. There’s no way around it: fossilfuels or not, keeping the rich supplied with the same amount ofenergy they use now implies resource takeovers with deep col<strong>on</strong>ialist<strong>and</strong> anti-democratic implicati<strong>on</strong>s.But by the same token, surviving global warming is not <strong>on</strong>ly a political problembut also a technical problem, no?Of course. The real difficulties, however, as experts from all sides of thepolitical spectrum tend to agree, are more political than technical.So we d<strong>on</strong>’t need a technological revoluti<strong>on</strong> to deal with the issue?No. A wealth of studies have already traced out, in some theoreticaldetail, enforceable pathways that industrialised countries can take towardsa n<strong>on</strong>-col<strong>on</strong>ialist, safe <strong>and</strong> c<strong>on</strong>vivial n<strong>on</strong>-fossil future – pathwaysthat neither require nor would benefit from emissi<strong>on</strong>s trading.In the US, for example, Amory Lovins <strong>and</strong> his colleagues at theRocky Mountain Institute have charted a n<strong>on</strong>-nuclear ‘roadmap forgetting the United States completely, attractively, <strong>and</strong> profitably offoil’ while creating jobs, improving security <strong>and</strong> rebalancing trade,featuring efficiency, biofuels, saved natural gas, <strong>and</strong>, opti<strong>on</strong>ally, hydrogen.47 Lovins’ proposals rely <strong>on</strong> a suite of government policies thatwould allow more decentralised power generati<strong>on</strong>; cut fossil-fuelsubsidies; decouple profits from utility electricity sales; let utilitiesprofit from customers’ lowered energy use; tax aviati<strong>on</strong>, driving <strong>and</strong>petrol; impose a tax <strong>on</strong> inefficient products while giving rebates forefficient <strong>on</strong>es; encourage ‘smart growth’; promote research <strong>and</strong> development;provide informati<strong>on</strong> about available efficiency improvements;invest in energy supply infrastructure <strong>and</strong> greener equipment;<strong>and</strong> help retrain workers for lower-carb<strong>on</strong> commerce. Systems analystGar Lipow reck<strong>on</strong>s that in 30 years the US could phase out fossil fuelsentirely, at an annual cost of less than a third of the country’s currentmilitary budget, or less than the tax breaks given to the very rich overthe past 40 years: ‘it is a myth that global warming is a technical ratherthan a political problem’. 48In Europe, Friends of the Earth Engl<strong>and</strong>, Wales <strong>and</strong> Northern Irel<strong>and</strong>has documented how a 48-71 per cent reducti<strong>on</strong> in carb<strong>on</strong> dioxide
ways forward 341Waiting their ChanceEnormous reserves of comm<strong>on</strong> sense <strong>and</strong>ingenuity worldwide are awaiting properopportunities to be tapped in the serviceof minimising <strong>and</strong> coping with climatechange.The great bulk of this shrewdness <strong>and</strong> inventivenessis of course to be found in theordinary people of the South. But in theNorth as well, huge potential is waiting tobe unblocked.In the US, opportunities for efficiencyabound that can ‘pay for themselves in anextremely short time’, 51 provided that governmentdoes not shy away from regulati<strong>on</strong>.These include c<strong>on</strong>trol systems thatreduce energy c<strong>on</strong>sumpti<strong>on</strong> in irrigati<strong>on</strong>systems by up to 99 per cent, super- adobec<strong>on</strong>structi<strong>on</strong>, 52 houses <strong>and</strong> commercialbuildings that save up to 90 per cent ofheating <strong>and</strong> cooling costs, ultra-light rail,<strong>and</strong> so <strong>on</strong>. The Intergovernmental Panel<strong>on</strong> <strong>Climate</strong> <strong>Change</strong> estimates that if gooddesign <strong>and</strong> insulati<strong>on</strong> were extended globally,greenhouse gas emissi<strong>on</strong>s could be cutby up to 40 per cent. 53Zero-carb<strong>on</strong> housing is already up <strong>and</strong>running in the UK <strong>and</strong> Germany. WokingBorough Council near L<strong>on</strong>d<strong>on</strong> has reducedcarb<strong>on</strong> emissi<strong>on</strong>s in council buildings<strong>and</strong> properties by over 77 per centsince 1990 through more localised powersources, financed by energy efficiency savings.Architects Atelier Ten have designeda way of keeping buildings cool withoutair c<strong>on</strong>diti<strong>on</strong>ing, using a termite mound astheir model. 54 Even the big corporate sectoris waiting its chance. In Britain, 74 companies’emissi<strong>on</strong>s reducti<strong>on</strong> efforts have alreadyyielded usd 11.9 billi<strong>on</strong> in gross savings,largely from efficiency. 55Technological change can be swift, giventhe right c<strong>on</strong>text. During the Sec<strong>on</strong>dWorld War, it took US car manufacturers<strong>on</strong>ly six m<strong>on</strong>ths to c<strong>on</strong>vert to military producti<strong>on</strong>,<strong>and</strong> the country took <strong>on</strong>ly 12 yearsto switch from steam to diesel/electric locomotives<strong>and</strong> from unc<strong>on</strong>trolled automotiveemissi<strong>on</strong>s to catalytic c<strong>on</strong>versers. During1975-2000, the US used 3.43 per centless water per year per dollar of GDP, <strong>and</strong>,during 1977-85, helped by regulati<strong>on</strong>, madevery rapid oil <strong>and</strong> energy savings. Thanksin part to building <strong>and</strong> appliance efficiencyst<strong>and</strong>ards, per capita electricity use in Californiahas remained virtually flat since themid-1970s, while it has risen by more thanhalf in the rest of the US. 56emissi<strong>on</strong>s could be achieved in the UK by 2020 in the all-importantelectricity sector, without any new nuclear power or geo-sequestrati<strong>on</strong>,<strong>and</strong> with a decline in the use of natural gas. 49 As noted in Chapter3, c<strong>on</strong>sultant Roger Levett estimates that fuel use in the UK couldbe cut by 87 per cent <strong>and</strong> carb<strong>on</strong>-based fuels eliminated altogetherusing existing technologies. Levett points out that ‘near-zero carb<strong>on</strong>’housing is possible now, without any new technological breakthroughs,together with a 90 per cent reducti<strong>on</strong> in automobile carb<strong>on</strong>polluti<strong>on</strong> <strong>and</strong> improvement in the quality of life – provided that the
342 development dialogue september 2006 – carb<strong>on</strong> tradingstate undertakes planning <strong>and</strong> regulati<strong>on</strong> to help establish new ‘virtuouscircles’ including community restructuring, better public transport<strong>and</strong> higher vehicle occupancy. 50Markets, states <strong>and</strong> freedomsI’m still suspicious of all this talk about government acti<strong>on</strong>. Ec<strong>on</strong>omists <strong>and</strong>political leaders, particularly in the Anglo-American world, like to say thatmarkets promote freedom <strong>and</strong> choice while state regulati<strong>on</strong> amounts to ‘comm<strong>and</strong><strong>and</strong> c<strong>on</strong>trol’. Some Northern envir<strong>on</strong>mentalists even claim that to criticisethe carb<strong>on</strong> market is to embrace coerci<strong>on</strong> <strong>and</strong> ‘totalitarianism’. What doyou say to that?Merely that it reflects another serious loss of perspective <strong>and</strong> a lackof acquaintance with life outside the ec<strong>on</strong>omics classroom. Turningthings into commodities has always made possible some freedoms<strong>on</strong>ly by precluding others. During the Industrial Revoluti<strong>on</strong> in Europe,many people gained the freedom to move around <strong>and</strong> sell theirlabour but lost the freedom to raise their animals <strong>on</strong> the comm<strong>on</strong>s.Today, pensi<strong>on</strong> fund managers have the freedom to shunt massiveinvestments from country to country with <strong>on</strong>e or two clicks <strong>on</strong> acomputer mouse, while the citizens of those countries may not have achoice of affordable medicines. Similarly, having the opti<strong>on</strong> of drivingwherever you want to go can preclude having the choice of gettingaccess to amenities without a car, <strong>and</strong> eliminates the choice ofkeeping urban areas distinct from rural areas. 57 It may also narrowthe choices of ordinary people in the Niger delta or herders al<strong>on</strong>g theChad-Camero<strong>on</strong> oil pipeline. As Michael Jacobs quips, the marketis not always Adam Smith’s ‘invisible h<strong>and</strong>’ but often an ‘invisibleelbow’ instead. The questi<strong>on</strong> always needs to be asked: Whose choicesare we talking about, <strong>and</strong> which <strong>on</strong>es?Markets transform <strong>and</strong> centralise coerci<strong>on</strong> in certain ways; they d<strong>on</strong>ot get rid of it. 58 Every market is suffused with ‘comm<strong>and</strong> <strong>and</strong> c<strong>on</strong>trol’:policing of property <strong>and</strong> c<strong>on</strong>tracts; foreclosure; dispossessi<strong>on</strong>;surveillance; registrati<strong>on</strong>; st<strong>and</strong>ards; bureaucracy. Every market, too,entrenches the historical ‘comm<strong>and</strong> <strong>and</strong> c<strong>on</strong>trol’ that was used toestablish its physical infrastructure <strong>and</strong> price-setting or bargainingsystems, whether those c<strong>on</strong>trols were exercised through law or bruteforce. 59 The other side of the coin is that regulati<strong>on</strong>’s c<strong>on</strong>straint ofc<strong>on</strong>sumer choices, together with multiple, systemic investments inpublic works, can often exp<strong>and</strong> the range of other choices available topeople <strong>and</strong> their freedom to enjoy public goods. 60Similarly for climate change. The Kyoto Protocol <strong>and</strong> other tradingorientedapproaches limit present <strong>and</strong> future choices in far-reaching
ways forward 343ways – many of which have been explored at length in this special report– at the same time they open up new opportunities for big business.Approaches stressing the sort of structural change that tradingcan’t achieve, meanwhile, feature other kinds of restraint, distributedam<strong>on</strong>g other groups, but also other kinds of freedom. As the lateIvan Illich observed nearly 35 years ago, a low energy policy allowsfor a wide choice of ways of life. If, <strong>on</strong> the other h<strong>and</strong>, ‘a society optsfor high energy c<strong>on</strong>sumpti<strong>on</strong>, its social relati<strong>on</strong>s must be dictated bytechnocracy <strong>and</strong> will be equally distasteful whether labeled capitalistor socialist’. 61You’ve made a great deal of the hazards of turning over c<strong>on</strong>trol over the atmosphereto business through carb<strong>on</strong> markets. But isn’t it just as dangerous to turnover c<strong>on</strong>trol of the atmosphere to governments? Governments are often poor stewardsof the public interest. They dispose of comm<strong>on</strong> assets below market value,ensure that their distributi<strong>on</strong> makes the rich richer <strong>and</strong> the poor poorer, use theproceeds for private gain, <strong>and</strong> so forth. Look at the way governments h<strong>and</strong> outcommercial c<strong>on</strong>cessi<strong>on</strong>s or indigenous peoples’ l<strong>and</strong>s. In additi<strong>on</strong>, even if it’s truethat carb<strong>on</strong> markets allow corporati<strong>on</strong>s to seek gigantic unearned rents, surelymore c<strong>on</strong>venti<strong>on</strong>al forms of regulati<strong>on</strong> give them similar openings to ‘capture’ theregulatory apparatus, 62 or infl uence legislators voting <strong>on</strong> tax laws. So what’s thediff erence? You distrust market incentives <strong>and</strong> market forces, but do you reallythink there are such things as benign, omniscient governments, <strong>and</strong> that they arecapable of solving the climate crisis? And if not, how are you going to organise soas to bring about the kinds of government acti<strong>on</strong> you describe?That’s a useful questi<strong>on</strong>. But let’s start by challenging the dichot omybetween ‘market mechanisms’ <strong>and</strong> ‘government regulati<strong>on</strong>’ that itimplies. Carb<strong>on</strong> markets themselves are a complicated new form ofgovernment regulati<strong>on</strong>. As Karl Polanyi would have been the first topoint out, they require what he called an ‘enormous increase in c<strong>on</strong>tinuous,centrally-organised <strong>and</strong> c<strong>on</strong>trolled interventi<strong>on</strong>ism’ <strong>and</strong> ‘deliberatestate acti<strong>on</strong>’ (see Chapter 3). They exp<strong>and</strong> the power over theatmosphere not <strong>on</strong>ly of business but also, necessarily, of state agencies.They are no more neutral, technical ‘instruments’ for attaining external,political goals than the state itself is.Anybody worried about the powers, clumsiness <strong>and</strong> corruptibility ofthe state <strong>and</strong> its regulators – <strong>and</strong> who isn’t? – accordingly ought to beworried about carb<strong>on</strong> markets for the same reas<strong>on</strong>s. The differenceis that, with carb<strong>on</strong> markets, there are a lot of additi<strong>on</strong>al reas<strong>on</strong>s forc<strong>on</strong>cern. As Chapter 3 has detailed, carb<strong>on</strong> trading, in additi<strong>on</strong> togranting large corporate polluters new powers over the earth’s ecosystems,introduces so many further complicati<strong>on</strong>s, centralised c<strong>on</strong>trols,<strong>and</strong> opportunities for fraud that it makes democratic scrutiny<strong>and</strong> oversight virtually impossible.
344 development dialogue september 2006 – carb<strong>on</strong> tradingWhat is required is for the political support behind some of the movements<strong>and</strong> approaches menti<strong>on</strong>ed above to be deepened, extended<strong>and</strong> encouraged, not to be undermined <strong>and</strong> overshadowed by a set oflittle-tried, regressive gimmicks destined to fail in any case.Who said anything about overshadowing? I’m not against any of the activitiesyou menti<strong>on</strong>. I acknowledge the importance of public investment. I know regulati<strong>on</strong><strong>and</strong> taxes are necessary. I can underst<strong>and</strong> the central role of comm<strong>on</strong>s regimes,of greater self-suffi ciency <strong>and</strong> all sorts of local initiatives. But isn’t therea role for carb<strong>on</strong> trading in supplementing <strong>and</strong> supporting all these approaches?Trading is the wave, not the water. It’s merely <strong>on</strong>e part of what will make aglobal climate regime work. Let a hundred fl owers bloom!Let’s review the situati<strong>on</strong>. Since 1997 or so, carb<strong>on</strong> trading has cometo usurp the great bulk of the UN’s work <strong>on</strong> climate change, withexperts, diplomats <strong>and</strong> politicians devoting endless hours to trying towork out the insoluble complexities of a system that in the end functi<strong>on</strong>sprimarily to shore up fossil fuel dependence. Carb<strong>on</strong> tradingrewards the worst polluters with huge free public assets, deprivingclimate-friendlier enterprises of both m<strong>on</strong>ey <strong>and</strong> human brain power.Carb<strong>on</strong> trading undermines the impetus for regulati<strong>on</strong>, taxati<strong>on</strong> <strong>and</strong>reduced c<strong>on</strong>sumpti<strong>on</strong> in countries such as the UK, Sweden <strong>and</strong> theUS; slows innovati<strong>on</strong> in both North <strong>and</strong> South; provides greenwashfor climate-unfriendly practices such as coal mining, industrial treeplantati<strong>on</strong>s <strong>and</strong> large hydroelectric dams; <strong>and</strong> hogs the time of Southerncivil servants who could be far more beneficially engaged. Perhapsmost important, carb<strong>on</strong> trading mainly benefits <strong>and</strong> empowersprecisely those instituti<strong>on</strong>s most active in blocking <strong>and</strong> interferingwith low-carb<strong>on</strong> lifeways <strong>and</strong> climate-friendly industrial change.Take, for instance, <strong>on</strong>e of the biggest players in the carb<strong>on</strong> market,the World Bank. The Bank itself admits that ‘renewable energy technologies– wind, mini-hydro, <strong>and</strong> biomass-electric – are the leastcostopti<strong>on</strong>…for off-grid electrificati<strong>on</strong>’ 63 of the sort needed by manyof the world’s 1.6 billi<strong>on</strong> people who do not have access to electricity,as well as being crucial to climate change mitigati<strong>on</strong>. As notedin Chapter 1, the Bank’s own internally-commissi<strong>on</strong>ed ExtractiveIndustries Review recommended that it get out of coal immediately<strong>and</strong> get out of oil by 2008. Yet the instituti<strong>on</strong> c<strong>on</strong>tinues to champi<strong>on</strong>large-scale, centralised fossil-fuel projects at the expense of renewableenergy – the Chad-Camero<strong>on</strong> pipeline, the Baku-Ceyhan pipeline<strong>and</strong> many others. 64 Eighty-two per cent of its oil projects are for exportto the North. Its carb<strong>on</strong> credit portfolio extends the life of fossilheavytechnologies in the North while providing <strong>on</strong>ly derisory supportfor climate-friendly initiatives in the South. The Bank’s top two
ways forward 345energy - loan beneficiaries are oil c<strong>on</strong>tractor Halliburt<strong>on</strong> <strong>and</strong> oil companyShell; number five is Exx<strong>on</strong>-Mobil <strong>and</strong> number 12 is Enr<strong>on</strong>. 65The main victims of the Bank’s infrastructure <strong>and</strong> market-first policies,<strong>on</strong> the other h<strong>and</strong>, are ordinary people with low-carb<strong>on</strong> livelihoods– who often achieve their results in the teeth of the instituti<strong>on</strong>sthat support trading – as well as the comm<strong>on</strong>s that support them. 66Carb<strong>on</strong> trading’s main private sector beneficiaries, whether oil companies,plantati<strong>on</strong> firms, or electric utilities, share a similar orientati<strong>on</strong>.By their own admissi<strong>on</strong>, private banks involved in carb<strong>on</strong> trading ‘can’tdeal with communities’, while brokers point out again <strong>and</strong> again that‘the carb<strong>on</strong> market doesn’t care about sustainable development’. In additi<strong>on</strong>,a global carb<strong>on</strong> credit market divides commu n ities from eachother in a way that impedes, rather than helps, the search for comm<strong>on</strong>soluti<strong>on</strong>s. Villagers near a carb<strong>on</strong> project in Chile are unlikely ever tosee firsth<strong>and</strong> how the project’s credits might help perpetuate polluti<strong>on</strong>in Japan, drown villages in Bangladesh, or keep motorways clogged inCanada. Well-off buyers of ‘offsets’ from wind farms in New Zeal<strong>and</strong>are unlikely to investigate what might link their ‘green’ purchases tothe havoc wreaked by pipelines pushed through Nigeria or Alaska.In what ways, then, does carb<strong>on</strong> trading ‘supplement’ or ‘support’other approaches to climate change? If carb<strong>on</strong> trading isn’t undermining<strong>and</strong> overshadowing genuine soluti<strong>on</strong>s to climate change, it’shard to imagine what would. 67All right, but does that necessarily have to be the case? After all, mightn’t carb<strong>on</strong>trading be helpful in fi nancing a just transiti<strong>on</strong> to a n<strong>on</strong>-fossil future?How?Well, fi rst of all, suppose – just suppose – that Northern governments could beforced by popular pressure to aucti<strong>on</strong> off tradable allowances instead of givingthem away free to business. Couldn’t the revenues be used to support the mostvulnerable secti<strong>on</strong>s of society through the transiti<strong>on</strong> to a n<strong>on</strong>-fossil ec<strong>on</strong>omy?Maybe. But just as the questi<strong>on</strong> arises of who gave European Uni<strong>on</strong>governments the right to give away so much of the earth’s carb<strong>on</strong>cyclingcapacity to some of their largest corporati<strong>on</strong>s under the EUETS, so too does the questi<strong>on</strong> of who would give governments theright to aucti<strong>on</strong> it.There are also a lot of other possible sources of support for the vulnerableduring that transiti<strong>on</strong>. For example, part of the subsidies nowbeing given to fossil fuel development could be put towards a justtransiti<strong>on</strong>. The need to support the fuel-poor <strong>and</strong> retrain the joblessis hardly by itself an argument for carb<strong>on</strong> trading.
346 development dialogue september 2006 – carb<strong>on</strong> tradingWhat about the internati<strong>on</strong>al level? If global warming is to be addressed, theNorth is going to have to pay the South not to use fossil fuels. Not <strong>on</strong>ly is theNorth in debt to the South for centuries of ecological <strong>and</strong> social appropriati<strong>on</strong>;it also needs to help out for the sake of its own future. Who’s going to put upthe cash for this if not Northern carb<strong>on</strong> credit buyers?Are you suggesting that the Clean Development Mechanism is helpingto ‘decarb<strong>on</strong>ise’ either the North or the South? Chapters 3 <strong>and</strong> 4have shown that that’s not going to happen.OK, but maybe something like the CDM could provide the necessary funds.What exactly would something like the CDM be? Again, let’s reviewthe situati<strong>on</strong>. In today’s internati<strong>on</strong>al carb<strong>on</strong> project credit market,the Northern polluters who are supposedly paying for ‘green development’in the South are in fact getting paid themselves. They get toc<strong>on</strong>tinue using fossil fuels at a bargain price. And they get to profitfrom exporting goods <strong>and</strong> expertise to enterprises most of whose c<strong>on</strong>tributi<strong>on</strong>to alleviating climate change is, to put it charitably, questi<strong>on</strong>able.Instead of supporting community-driven renewable energyprojects, for example, coal, oil <strong>and</strong> hydrofluorocarb<strong>on</strong> corporati<strong>on</strong>sare making m<strong>on</strong>ey from end-of-pipe technologies that they developthemselves. If the North is genuinely interested in paying for a renewablefuture in the South, that’s hardly the way to go about it.But suppose you had a rule, as the Centre for Science <strong>and</strong> Envir<strong>on</strong>ment proposedback in 1998, that no CDM trade could take place that did not involve a ‘transiti<strong>on</strong>to the use of n<strong>on</strong>-carb<strong>on</strong> or biomass energy sources’. 68 That could create ahuge market for solar energy <strong>and</strong> other renewable technologies in the South.To what extent could a mechanism like the CDM ever involve a transiti<strong>on</strong>away from carb<strong>on</strong>-based energy? Remember the basic principle ofthe CDM market: finance goes to projects <strong>on</strong>ly at the cost of licensing<strong>and</strong> supporting c<strong>on</strong>tinued extracti<strong>on</strong> <strong>and</strong> use of fossil fuels elsewhere.Nor have eight years of envir<strong>on</strong>mentalist pleading resulted in muchdem<strong>and</strong> for renewable energy projects from CDM credit buyers. Theseare not projects this market supports (see Chapters 3 <strong>and</strong> 4).That’s not to say that the ideal of global equity, reparati<strong>on</strong>s <strong>and</strong> fundingfor renewable technology isn’t important. But it’s not going to beachieved through trading; nor by elite instituti<strong>on</strong>s that have playedsuch a large part in the stupendous widening of the gap between rich<strong>and</strong> poor over the past 50 years, 69 such as the World Bank. Effectivereparati<strong>on</strong>s <strong>and</strong> a transiti<strong>on</strong> away from fossil fuels will have to beachieved through a broader-based political struggle, not an elite-toelitecommercial deal.
ways forward 347From an Open Letter by Oilwatch‘Never before have the limits of the currentdevelopment model based <strong>on</strong> hydrocarb<strong>on</strong>sbeen so clear or close.‘Never before has the relati<strong>on</strong>ship betweenoil <strong>and</strong> the networks of power that c<strong>on</strong>trolthe world been so clearly understood, norhave the relati<strong>on</strong>ships between oil <strong>and</strong> themain causes of misery that affect humanitybeen so evident…‘For the Southern part of the world, the oilmodel has meant the perpetuati<strong>on</strong> of inequitableexchange, technological dependence,indebtedness, <strong>and</strong> impoverishment.The ecological debt between North <strong>and</strong>South, which began during the col<strong>on</strong>ialyears, rose with unequal ec<strong>on</strong>omic <strong>and</strong> ecologicalexchange.‘We have accepted separately each <strong>on</strong>e ofthese aggressi<strong>on</strong>s. Or worse still, foughtam<strong>on</strong>g ourselves: inhabitants of <strong>on</strong>e countryfighting against another, oil workersagainst indigenous communities, peoplefrom the North against those from theSouth, the poor of the cities against indigenous<strong>and</strong> peasant peoples, those ill fromc<strong>on</strong>sumpti<strong>on</strong> against pacifists, those thatpropose against those that criticize… Andthe list goes <strong>on</strong> <strong>and</strong> <strong>on</strong>.‘What are the organizati<strong>on</strong>s <strong>and</strong> networkswith whom we can start a positive collaborati<strong>on</strong>in the fight against the oil civilizati<strong>on</strong>?What are the social, local <strong>and</strong> globalmovements that cannot be ignored in ourefforts? What are the internati<strong>on</strong>al agreements<strong>and</strong> programs that can best help usin this process? What are the new initiativesthat we could <strong>and</strong> should devise?‘To answer these <strong>and</strong> other needs, Oilwatchis inviting sympathetic networksto initiate a joint dialogue <strong>on</strong> our struggles<strong>and</strong> launch a global campaign againsta civilizati<strong>on</strong> based <strong>on</strong> oil.‘We invite you to share your opini<strong>on</strong>s,comments, suggesti<strong>on</strong>s <strong>and</strong> ideas, to builda new path together…where we can reflecteach <strong>and</strong> every <strong>on</strong>e of our struggles. Thisway, each <strong>and</strong> every <strong>on</strong>e of our battles willgain a new dimensi<strong>on</strong>.’ 70Oilwatch, 16 September 2005What instituti<strong>on</strong>s could c<strong>on</strong>ceivably play a part? There are no patanswers, but the questi<strong>on</strong> needs to be raised before going too far withproposals for paying ecological debt or funding a n<strong>on</strong>-fossil transiti<strong>on</strong>in the South.In the meantime, it might be useful to keep in mind how strange thedem<strong>and</strong> is that the North make up for its historical overuse of theearth’s carb<strong>on</strong>-cycling capacity by paying for clean development in theSouth, at a time when few moves are being made to curb that overuse.It’s a little like dem<strong>and</strong>ing reparati<strong>on</strong>s for slavery without abolishingslavery. The dem<strong>and</strong> is inc<strong>on</strong>testably legitimate, but it raises the questi<strong>on</strong>of whether the problem is being addressed at its root.
348 development dialogue september 2006 – carb<strong>on</strong> tradingAll right, but I’m still troubled by the feeling that the various n<strong>on</strong>-trading approachesfor structural change that you menti<strong>on</strong> aren’t – well – global enough.D<strong>on</strong>’t global problems such as global warming need global soluti<strong>on</strong>s? The ‘alternatives’I really want to see are global alternatives, not the hotchpotch oflocal, regi<strong>on</strong>al, <strong>and</strong> nati<strong>on</strong>al instituti<strong>on</strong>s, movements <strong>and</strong> initiatives you seemto have been talking about so far. Global warming is not going to be stopped byan uncoordinated <strong>and</strong> piecemeal attack, but <strong>on</strong>ly by a global regime.What do you mean by global? In what sense is the Kyoto Protocol,say, global? In what sense are movements supporting local forest comm<strong>on</strong>s,say, not global?The distinguished political journalist Neal Aschers<strong>on</strong> <strong>on</strong>ce referredto what he called the ‘dumbbell world’ in which Anglo-Americanforeign policy was most intensively discussed <strong>and</strong> defined. One endof the dumbbell, in Aschers<strong>on</strong>’s whimsical visi<strong>on</strong>, c<strong>on</strong>sisted of a circleenclosing a few government offices, posh neighbourhoods <strong>and</strong>airports in L<strong>on</strong>d<strong>on</strong>. The other c<strong>on</strong>sisted of a circle enclosing a fewgovernment offices, well-off neighbourhoods <strong>and</strong> airports in Washingt<strong>on</strong>.The two were linked by the c<strong>on</strong>trails of jets flying back <strong>and</strong>forth across the Atlantic.Often, what people refer to when they use the word ‘global’ is somethinglike Aschers<strong>on</strong>’s ‘dumbbell world’ – a diplomatic <strong>and</strong> politicalcommunity residing in very thin but very l<strong>on</strong>g habitats c<strong>on</strong>sisting ofbuildings <strong>and</strong> luxury homes in capital cities around the world, togetherwith the reclining seats <strong>on</strong> the jet aircraft that link them.What makes this community <strong>and</strong> what it does global? Its interestsare neither universal nor neutral, but particular to the group. Thelanguage it speaks is not a global language spoken by every<strong>on</strong>e, butmerely the provincial dialect of UN offices, state documents <strong>and</strong> neoclassicalec<strong>on</strong>omics; <strong>and</strong> its instituti<strong>on</strong>s are local instituti<strong>on</strong>s like allother local instituti<strong>on</strong>s. Like some other communities, this communitydoes have some frightening powers <strong>and</strong> friends, <strong>and</strong> some usefulpowers <strong>and</strong> friends. There are certain valuable things it can do; theM<strong>on</strong>treal Protocol <strong>on</strong> the oz<strong>on</strong>e layer is perhaps <strong>on</strong>e example. Butits territory, while very l<strong>on</strong>g, is also very thin, <strong>and</strong> the community’sunderst<strong>and</strong>ing of <strong>and</strong> influence over an issue as complex <strong>and</strong> interculturalas climate change is limited, even when it is able to organise itsown members around something like the Kyoto Protocol.Any approaches to climate change that are ‘globally effective’ are goingto have to be organised, fairly independently, in a great manycommunities outside the ‘dumbbell world’. That means treating the‘hotchpotch’ of local, nati<strong>on</strong>al <strong>and</strong> regi<strong>on</strong>al initiatives with a gooddeal of respect. The questi<strong>on</strong> ‘What’s your alternative?’ must always
ways forward 349be answered in the first instance with another questi<strong>on</strong>: ‘Alternativefor whom?’ The alternative that a denizen of the ‘dumbbell world’ islooking for may not be the <strong>on</strong>e that a corporate executive is likely toaccept – nor a villager in India.Defining the climate crisis, in good ‘dumbbell world’ fashi<strong>on</strong>, as aproblem to be solved through indefinite capital accumulati<strong>on</strong>, statesubsidies for large corporati<strong>on</strong>s <strong>and</strong> c<strong>on</strong>sultants, transnati<strong>on</strong>al capitalflows, internati<strong>on</strong>al trade <strong>and</strong> nati<strong>on</strong>al ‘development’, makes italmost impossible to c<strong>on</strong>nect top-down emissi<strong>on</strong>s targets with supportfor effective acti<strong>on</strong>s at the local level. It also tends to threatenthe reserves of flexibility many communities will need to preservein order to adapt to the degree of climate change that is already inevitable.As researcher R.W. Kates puts it: ‘If the global poor are toadapt to global change, it will be critical to focus <strong>on</strong> poor people <strong>and</strong>not <strong>on</strong> poor countries as does the prevailing North-South dialogue.The interests of the poor are not always the same as the interests ofpoor countries, since in the interests of “development”, the poor maygrow poorer.’ 71Anthropologist <strong>and</strong> development specialist Michael Thomps<strong>on</strong> <strong>and</strong>his colleagues put it in slightly different terms: ‘…the <strong>on</strong>ly frameworksthat can tell you anything about the likely efficacy of a policyare those at the most local level… What is needed is…an approachthat places the “mere details”…at the very centre of the stage <strong>and</strong> relegatesto the wings the alarm bell-ringers <strong>and</strong> their immaculate prescripti<strong>on</strong>s…’72C<strong>on</strong>clusi<strong>on</strong>: decentring climate politicsRadical university scholars are sometimes ridiculed for the funnywords they use. But behind some of their words lurk useful ideas.One such word is ‘decentring’.The old st<strong>and</strong>ard elite university curricula, many radical academicssay, should perhaps not be thrown out, but rather ‘decentred’: modified<strong>and</strong> exp<strong>and</strong>ed to include suppressed voices <strong>and</strong> achievements.Traditi<strong>on</strong>al fields of study should not be ab<strong>and</strong><strong>on</strong>ed, but supplemented<strong>and</strong> opened up to critique from outsiders with different stakes inthe issues, in the way Indian thinkers have been able to ‘digest’ col<strong>on</strong>ialism,73 Colombian peasants to rework early European ec<strong>on</strong>omicthinking for their own purposes 74 <strong>and</strong> feminists to get under the skinof the biases shaping the work of a Locke or Malthus.This is perhaps the way that the climate change literature now spilling<strong>on</strong>to the pages of newspapers worldwide has to be thought about.
350 development dialogue september 2006 – carb<strong>on</strong> tradingInsofar as this literature has been digested <strong>on</strong>ly by people of a singlesocial background, it has inspired <strong>on</strong>ly limited – <strong>and</strong> sometimes selfc<strong>on</strong>tradictory– political thinking. Its shocking c<strong>on</strong>clusi<strong>on</strong>s have ledall too often merely to empty calls for political leaders to ‘do something’or to the technical <strong>and</strong> market fixes that have been the subjectof this special report.The results are often as disturbing as the climate crisis itself. C<strong>on</strong>fr<strong>on</strong>tedby climatologists’ observati<strong>on</strong>s, for example, James Lovelock,the renowned scientist who created the c<strong>on</strong>cept of Gaia, the selfregulatingEarth, has advocated nuclear power as a way of saving ‘our’electricity. Urging his readers to prepare for future climatic surprisesin the same way that ‘travellers from the north’ take anti-malarialdrugs before going to the ‘tropical south’ or ‘check how the localwar is progressing’ before going to the Middle East, Lovelock c<strong>on</strong>cludesthat a ‘small permanent group of strategists’ unswayed by the‘noisy media <strong>and</strong> special interest lobbies’ is needed in order to ‘act fastenough for an effective defence against Gaia’. 75It would be easy to dismiss Lovelock for his advocacy of dictatorship,for his nuclear enthusiasms, or for the staggering if unc<strong>on</strong>scious racismthat sees c<strong>on</strong>fl ict in the Middle East – host to b<strong>and</strong>s of col<strong>on</strong>ialists <strong>and</strong>imperialists since l<strong>on</strong>g before St<strong>and</strong>ard Oil made its first deals in theregi<strong>on</strong> – as a matter of ‘local’ wars. But other figures with similar backgrounds<strong>and</strong> instituti<strong>on</strong>al loyalties draw similarly narrow <strong>and</strong> dangerousc<strong>on</strong>clusi<strong>on</strong>s from their underst<strong>and</strong>ing of the crisis. Robert Wats<strong>on</strong>,the oz<strong>on</strong>e specialist who, with admirable devoti<strong>on</strong>, helped organisescientists worldwide around a c<strong>on</strong>sensus emphasising the seriousnessof climate change while deftly countering George W. Bush’s climatemisinformati<strong>on</strong> campaign, now works to undermine renewable energyby defending an expansi<strong>on</strong> of the ‘clean coal’ industry from his post atthe World Bank. 76 The IPCC, the source of the can<strong>on</strong>ical summariesof climatic trends, generally bypasses serious study of the social rootsof the crisis in favour of ec<strong>on</strong>omic modelling <strong>and</strong> rubber stamps forcarb<strong>on</strong> trading. Sir Crispin Tickell, who early <strong>on</strong> raised c<strong>on</strong>sciousnesswith moving essays <strong>on</strong> global warming, now sits <strong>on</strong> the board of a carb<strong>on</strong>‘offset’ firm, <strong>Climate</strong> Care. Despairing of the possibility of keepingfossil fuels in the ground, Paul Crutzen, <strong>on</strong>e of atmospheric science’selder statesmen, now advocates using ballo<strong>on</strong>s or artillery shells to sowsulphur dioxide particles into the stratos phere to reflect sunlight <strong>and</strong>slow down the planet’s warming. 77Every individual showing c<strong>on</strong>cern over the climate crisis deserves respect.But respect also involves acknowledging that different peoplehave different backgrounds, loyalties <strong>and</strong> underst<strong>and</strong>ings. The noti<strong>on</strong>that the ideas of a Lovelock, a Wats<strong>on</strong> or an IPCC should go uninter-
ways forward 351rogated by Indian villagers, Peruvian fisherfolk, or poor communitiesacross the fence from Louisiana oil refineries is simply irrati<strong>on</strong>al. Suchideas need to be evaluated by people who know from experiencewhat commodificati<strong>on</strong> of l<strong>and</strong>, water <strong>and</strong> air mean to the poor, whatthe effects of nuclear c<strong>on</strong>taminati<strong>on</strong> are, <strong>and</strong> how the World Bank’sclimate policy works <strong>on</strong> the ground – <strong>and</strong> who have their own interests<strong>and</strong> are evolving their own c<strong>on</strong>tributi<strong>on</strong>s toward dealing withthe crisis. The initiatives of organisati<strong>on</strong>s <strong>and</strong> networks such as Oilwatch,Palang Thai, Platform, Friends of the Earth, the Centre forScience <strong>and</strong> Envir<strong>on</strong>ment, Rising Tide, the New Ec<strong>on</strong>omics Foundati<strong>on</strong>,the Durban Group for <strong>Climate</strong> Justice <strong>and</strong> tens of thous<strong>and</strong>sof other groups, many of them located at the grassroots in both South<strong>and</strong> North, already go far bey<strong>on</strong>d the default thinking of global elites.But work <strong>on</strong> climate change <strong>and</strong> the search for ways out of the crisiscan’t be carried forward fruitfully without an even more thoroughgoingdecentring of the debate.Any study of ‘alternatives’ must begin with this truth – not with acall for yet more formulas to feed to, <strong>and</strong> nourish, the instituti<strong>on</strong>sthat bear so much of the resp<strong>on</strong>sibility for the climate crisis <strong>and</strong> manyothers. This special report has been a modest plea for greater underst<strong>and</strong>ingof that truth.
352 development dialogue september 2006 – carb<strong>on</strong> trading1 Ruth Greenspan Bell, ‘Choosing Envir<strong>on</strong>mentalPolicy Instruments in the Real World’, Organisati<strong>on</strong>for Ec<strong>on</strong>omic Cooperati<strong>on</strong> <strong>and</strong> Development,Global Forum <strong>on</strong> Sustainable Development, OECD,Paris, 11 March 2003, pp. 4-5: ‘countries most introuble are not getting a well-rounded picture aboutwhat is achievable . . . trading is not the dominantapproach to US envir<strong>on</strong>mental protecti<strong>on</strong>, even in afully developed market system’.2 Walt Patters<strong>on</strong>, ‘Decentralising Networks’, Co-Generati<strong>on</strong> <strong>and</strong> Onsite <strong>Power</strong> Producti<strong>on</strong>, January/February 2005, http://www.chathamhouse.org.uk/pdf/research/sdp/WParticle0105.pdf; Mae Wan Hoet al., Which Energy?, Institute of Science in Society,L<strong>on</strong>d<strong>on</strong>, 2006; Amory B. Lovins et al., Winning theOil Endgame, Rocky Mountain Institute, Snowmass,CO, 2004, http://www.rmi.org/images/other/WtOE/WtOEg_72dpi.pdf.3 Lovins et al., op. cit. supra, pp. 19–22.4 Steve Rayner, Testim<strong>on</strong>y in House of Comm<strong>on</strong>sEnvir<strong>on</strong>mental Audit Committee, The Internati<strong>on</strong>alChallenge of <strong>Climate</strong> <strong>Change</strong>: UK Leadership in theG8 <strong>and</strong> EU. Fourth Report of Sessi<strong>on</strong> 2004–5, TheStati<strong>on</strong>ery Office, L<strong>on</strong>d<strong>on</strong>, 2005, Ev 136.5 Brett<strong>on</strong> Woods Project, ‘“Cleaning” Energy:Ambiguous Framework Proposes Coal <strong>and</strong>Large Hydro’, 19 June 2006, http://www.brett<strong>on</strong>woodsproject.org/art.shtml?x=538529.According to some estimates, the m<strong>on</strong>ey the WorldBank lends every year for fossil-fuel projects wouldbe enough to provide small-scale solar installati<strong>on</strong>ssupplying electricity to 10 milli<strong>on</strong> people in sub-Saharan Africa with electricity (Christian Aid, The<strong>Climate</strong> of Poverty: Facts, Fears <strong>and</strong> Hope, L<strong>on</strong>d<strong>on</strong>,May 2006, p. 22).6 See, e.g., Chris Greacen, ‘Inexpensive, SecureElectricity? Coal vs. Clean Energy’, 2005, http://www.palangthai.org.7 These figures are due to Greg Muttitt of Platform,http://www.carb<strong>on</strong>web.org.8 See, for example, http://www.wrm.org.uy.9 The Progressive Forum, ‘Interview with LesterBrown’, 26 April 2006, http://www.energybulletin.net/15705.html.10 Gar Lipow, Cooling It! No Hair Shirts Soluti<strong>on</strong>s toGlobal Warming, forthcoming, 2006, http://www.nohairshirts.com; Ross Gelbspan, ‘Toward a GlobalEnergy Transiti<strong>on</strong>’, Foreign Policy in Focus, January2004, http://www.fpif.org/pdf/petropol/ch5.pdf.11 For example, corporati<strong>on</strong>s often invest in c<strong>on</strong>trolover labour rather than energy-saving equipmentthat, given tax incentives, saves more m<strong>on</strong>ey(Lipow, op. cit.). In the UK, many investments inwaste minimisati<strong>on</strong>, water c<strong>on</strong>servati<strong>on</strong> <strong>and</strong> otherefficiency measures that began to yield positivereturns to industry in three years or less were notmade until government regulati<strong>on</strong> required them,<strong>and</strong> would have taken much l<strong>on</strong>ger for industry toget around to if the <strong>on</strong>ly incentive was taxati<strong>on</strong>. Seehttp://www.envirowise.gov.uk/page.aspx?o=168584.12 Lipow, op. cit. supra note 10.13 David Driesen, The Ec<strong>on</strong>omic Dynamics ofEnvir<strong>on</strong>mental Law, MIT Press, Cambridge, 2003,pp. 139–201.14 Fred Pearce, ‘Take Greenhouse Polluters to theCleaners’, New Scientist 2519, 1 October 2005, p. 42.15 Rayner, op. cit. supra note 4, Ev 136.16 Roda Verheyen, <strong>Climate</strong> <strong>Change</strong> Damage <strong>and</strong>Internati<strong>on</strong>al Law, Martinus Nijhoff, Leiden, 2005.17 See, e.g., New Ec<strong>on</strong>omics Foundati<strong>on</strong>, Collisi<strong>on</strong>Course: Free Trade’s Free Ride <strong>on</strong> the Global<strong>Climate</strong>, L<strong>on</strong>d<strong>on</strong>, 2000.18 See, e.g., Working Group <strong>on</strong> <strong>Climate</strong> <strong>Change</strong><strong>and</strong> Development, Africa – Up in Smoke?, NewEc<strong>on</strong>omics Foundati<strong>on</strong>, L<strong>on</strong>d<strong>on</strong>, 2005; LarryLohmann, ‘Democracy or Carbocracy? IntellectualCorrupti<strong>on</strong> <strong>and</strong> the Future of the <strong>Climate</strong> Debate’,Corner House Briefing Paper No. 24, October2001, http://www.thecornerhouse.org.uk; NeilAdger, ‘Social Vulnerability to <strong>Climate</strong> <strong>Change</strong> <strong>and</strong>Extremes in Coastal Vietnam’, World Development27, 2, 1999, pp. 249-69.19 Elizabeth Mal<strong>on</strong>e <strong>and</strong> Steve Rayner, ‘TenSuggesti<strong>on</strong>s for Policymakers’, in Mal<strong>on</strong>e <strong>and</strong>Rayner, eds, Human Choice <strong>and</strong> <strong>Climate</strong> <strong>Change</strong>,Battelle Press, Seattle, 1998, vol. 4, p. 114.20 Ruth Greenspan Bell, op. cit. supra note 1, p. 3.21 See, e.g., Robert A. Caro, The <strong>Power</strong> Broker: RobertMoses <strong>and</strong> the Fall of New York, Knopf, New York,1974.22 For ‘extraordinarily effective’ but often ‘forgotten’energy-saving regulati<strong>on</strong> by US states during the1970s <strong>and</strong> 1980s, see Lovins et al., op. cit. supranote 2, p. 216.23 On comm<strong>on</strong>s regimes, see, e.g., E. P. Thomps<strong>on</strong>,Customs in Comm<strong>on</strong>, Free Press, L<strong>on</strong>d<strong>on</strong> 1990; IvanIllich, Gender, Panthe<strong>on</strong>, New York, 1983; JamesAches<strong>on</strong> <strong>and</strong> B<strong>on</strong>nie McCay, The Questi<strong>on</strong> of theComm<strong>on</strong>s, University of Ariz<strong>on</strong>a Press, Tucs<strong>on</strong>,1990; Sim<strong>on</strong> Fairlie et al., Whose Comm<strong>on</strong> Future?Reclaiming the Comm<strong>on</strong>s, Earthscan, L<strong>on</strong>d<strong>on</strong>, 1993;Elinor Ostrom, Governing the Comm<strong>on</strong>s, CambridgeUniversity Press, Cambridge, 1990.24 Communities in Burma, Malaysia, Nicaragua,Colombia, Nigeria, Chad, Thail<strong>and</strong>, Bolivia <strong>and</strong>Ecuador have w<strong>on</strong> the revocati<strong>on</strong> of fossil fuelc<strong>on</strong>cessi<strong>on</strong>s in their territories. In doing so, they
ways forward 353argue, they’ve helped to keep some 3.655 billi<strong>on</strong>t<strong>on</strong>nes of carb<strong>on</strong> in the ground (Oilwatch, Positi<strong>on</strong>Paper: Fossil Fuels <strong>and</strong> <strong>Climate</strong> <strong>Change</strong>, The Hague,November 2000).25 See http://www.grupoadela.org.26 Kenny Anth<strong>on</strong>y, Prime Minister of St. Lucia,presentati<strong>on</strong> at the Sixth C<strong>on</strong>ference of the Partiesof the Framework C<strong>on</strong>venti<strong>on</strong> <strong>on</strong> <strong>Climate</strong> <strong>Change</strong>(UNFCCC), The Hague, 16 November 2000.27 Swedish Society for Nature C<strong>on</strong>servati<strong>on</strong>, TheChallenging Communities, Stockholm, 2000.28 John Vidal, ‘Sweden Plans to be World’s First Oil-FreeEc<strong>on</strong>omy’, The Guardian, 8 February 2006.29 D. Knight, ‘US Unrivalled as Top Carb<strong>on</strong> Polluter’,Third World Network, July 2001, citing research bythe World Resources Institute.30 Roddy Scheer, ‘China C<strong>on</strong>sidering IncreasingRenewables Commitment by 50 Per Cent’, EMagazine, 12 September 2005; Victor Mallet, ‘China’sChance to Save our Overheated Planet’, FinancialTimes, 6 July 2006.31 Fred Pearce, ‘Cities Lead Way to a Greener Planet’,New Scientist 2502, 4 June 2005; Dan Worth,‘Accelerating toward <strong>Climate</strong> Neutrality with theUS Government Stuck in Neutral’, SustainableDevelopment Law <strong>and</strong> Policy 5, 2, Spring 2005, pp.4–8; Eli S<strong>and</strong>ers, ‘Rebuffing Bush, 132 Mayors EmbraceKyoto Rules’, New York Times, 14 May 2005.32 Miguel Bustillo, ‘A Shift to Green’, New York Times,12 June 2005; Canadian Broadcasting Corporati<strong>on</strong>News, ‘Business Leaders Call for <strong>Climate</strong> <strong>Change</strong>Acti<strong>on</strong>’, 17 November 2005.33 Point Carb<strong>on</strong>, ‘Sweden Aims to Ban Fossil FuelSubsidies’, 19 June 2006; ‘Swedish ParliamentaryCommittee Calls for EU Ban <strong>on</strong> Fossil Fuel’, 2June 2006, http://www.pointcarb<strong>on</strong>.com. For moreinformati<strong>on</strong> <strong>on</strong> subsidies, see http://www.earthtrack.net/earthtrack <strong>and</strong> http://www.priceofoil.org. See alsoDoug Koplow <strong>and</strong> John Dernbach, ‘Federal Fossil FuelSubsidies <strong>and</strong> Greenhouse Gas Emissi<strong>on</strong>s: A Studyof Increasing Transparency for Fiscal Policy’, AnnualReview of Energy <strong>and</strong> the Envir<strong>on</strong>ment 26, 2001, pp.361-89; Doug Koplow <strong>and</strong> Aar<strong>on</strong> Martin, Fueling GlobalWarming: Federal Subsidies to Oil in the United States,Greenpeace, Washingt<strong>on</strong>, 1998 <strong>and</strong> Norman Myerset al., Perverse Subsidies: Tax Dollars UndercuttingOur Ec<strong>on</strong>omies <strong>and</strong> Envir<strong>on</strong>ments Alike, Internati<strong>on</strong>alInstitute for Sustainable Development, Winnipeg, 1998.34 OECD Ec<strong>on</strong>omic Outlook, The Ec<strong>on</strong>omics of <strong>Climate</strong><strong>Change</strong>, Brussels, June 1998, p. 198, http://www.oecd.org/dataoecd/58/50/29173911.pdf. The figure does notcount transiti<strong>on</strong> costs.35 See http://www.oilwatch.org/doc/declaraci<strong>on</strong>/decla2005_m<strong>on</strong>treal-ing.pdf.36 ‘Massive US Support for Renewable Energy’, STATCommunicati<strong>on</strong>s, 9 March 2006, http://www.statpub.com. Public support for acti<strong>on</strong> <strong>on</strong> global warming isalso very high in other countries whose governmentshold a backward positi<strong>on</strong>, such as Australia. SeePeter Christoff, ‘Policy Autism or Double-EdgedDismissiveness? Australia’s <strong>Climate</strong> Policy underthe Howard Government’, Global <strong>Change</strong>, Peace<strong>and</strong> Security 17, 1, 2005, pp. 29-44. In the UK, theScience <strong>and</strong> Technology Committee of the Houseof Lords found ‘deplorable’ the government’s lack ofcommitment to supporting renewable energy <strong>and</strong>recommended large increases: ‘We could find no <strong>on</strong>eat the executive level whose resp<strong>on</strong>sibility it was toensure c<strong>on</strong>tinuity of supply. We were told simply thatmarket forces would solve the problem. We are notc<strong>on</strong>vinced…’ (House of Lords Science <strong>and</strong> TechnologyCommittee, ‘Renewable Energy: Practicalities’, 4thReport of Sessi<strong>on</strong> 2003-04, Volume 1, The Stati<strong>on</strong>eryOffice, L<strong>on</strong>d<strong>on</strong>, 2004, p. 8).37 Paul Brown, ‘Government’s <strong>Climate</strong> <strong>Change</strong> Policy isFailing’, The Guardian, 16 May 2005.38 Stefania Bianchi, ‘Ethnic Communities ChallengeLevel of Greenhouse Gases’, Inter Press Service, 20June 2005, http://www.gas<strong>and</strong>oil.com/goc/company/cna52977.htm.39 ‘Global <strong>Climate</strong> <strong>Change</strong> to Spawn Future Lawsuits’,Rednova News, 29 May 2005, http://www.rednova.com/news/science.40 Juliette Niehuss, ‘Inuit Circumpolar C<strong>on</strong>ference v.Bush Administrati<strong>on</strong>: Why the Arctic Peoples Claimthe United States’ Role in <strong>Climate</strong> <strong>Change</strong> has Violatedtheir Fundamental Human Rights <strong>and</strong> Threatens theirvery Existence’, Sustainable Development Law <strong>and</strong>Policy 5, 2, Spring 2005, pp. 66–67.41 See http://www.msnbc.msn.com/id/13554243/from/ET/.42 See, for example, Steve Radley, ‘Energy <strong>Climate</strong><strong>Change</strong>s for the Worse’, The Guardian, 1 August2005: ‘L<strong>on</strong>ger-term, there must be questi<strong>on</strong>s asto whether emissi<strong>on</strong>s trading makes the [climatechange] levy redundant’. See also ‘Advisors Wary<strong>on</strong> EU Aviati<strong>on</strong> <strong>Climate</strong> Trading’, Envir<strong>on</strong>ment Daily1879, 17 May 2005: ‘The “real danger”, according to[an EC advisory] forum, is that adding aviati<strong>on</strong> tothe [EU] trading scheme from 2008 “would be seenas a sufficient commitment by the industry... so thatother policy measures would no l<strong>on</strong>ger be pursued.”’The EU statistical agency Eurostat suggests thatenvir<strong>on</strong>mental taxati<strong>on</strong> may have peaked in Europedue to an increasing fashi<strong>on</strong> for instruments such asthe EU Emissi<strong>on</strong>s Trading Scheme. See Envir<strong>on</strong>mentDaily 1975, 4 January 2005.
354 development dialogue september 2006 – carb<strong>on</strong> trading43 See Ecoequity, ‘Cutting through the Smoke<strong>on</strong> Trading’, http://ecoequity.typepad.com/ecoequity/2005/12/cutting_through.html#comments.See also Nina Eliasoph, ‘“Everyday Racism” in aCulture of Political Avoidance: Civil Society, Speech<strong>and</strong> Taboo’, Social Problems 46, 4, November 1999,pp. 479–502.44 Noam Chomsky interviewed by David Barsamian inImperial Ambiti<strong>on</strong>s. <str<strong>on</strong>g>C<strong>on</strong>versati<strong>on</strong></str<strong>on</strong>g>s <strong>on</strong> the Post-9/11World, Metropolitan Books, New York, 2005, p. 39.45 Jeffrey S. Dukes, ‘Burning Buried Sunshine: HumanC<strong>on</strong>sumpti<strong>on</strong> of Ancient Solar Energy’, Climatic<strong>Change</strong> 61, 2003, pp. 31–44.46 Stephen Pacala <strong>and</strong> Robert Socolow, ‘Stabilizati<strong>on</strong>Wedges: Solving the <strong>Climate</strong> Problem for the Next50 Years with Current Technologies’, Science, 13August 2004, 968–72; Robert Socolow et al., ‘Solvingthe <strong>Climate</strong> Problem: Technologies Available to CurbCO 2 Emissi<strong>on</strong>s’, Envir<strong>on</strong>ment 46, 10, 2004, pp. 8–19.See also Mae Wan Ho et al., op. cit. supra note 2.47 Lovins, op. cit. supra note 2.48 Lipow, op. cit. supra note 10.49 Friends of the Earth, ‘Bright Future: Friends of theEarth’s Electricity Sector Model for 2030’, L<strong>on</strong>d<strong>on</strong>,March 2006, p. 3.50 Roger Levett, ‘Infrastructure: Preventi<strong>on</strong> isBetter than Palliati<strong>on</strong>’, presentati<strong>on</strong> to the TCPACommissi<strong>on</strong> <strong>on</strong> Engl<strong>and</strong>’s Future, 18 March 2005,http://www.tcpa.org.uk/reg_futures/roger_levettengl<strong>and</strong>s_future.pdf.Starting from the assumpti<strong>on</strong>that a 60 per cent emissi<strong>on</strong>s cut is necessary by2050, the Tyndall Centre’s Decarb<strong>on</strong>ising the UK:Energy for a <strong>Climate</strong>-C<strong>on</strong>scious Future also exploresvarious ‘technically <strong>and</strong> ec<strong>on</strong>omically viable’ lowcarb<strong>on</strong>scenarios, stressing, as do many otheranalysts, that lower energy c<strong>on</strong>sumpti<strong>on</strong> means moreresilience, more security <strong>and</strong> less need for wastefullarge infrastructure (http://www.tyndall.ac.uk/media/news/tyndall_decarb<strong>on</strong>ising_the_uk.pdf). Britain’sRoyal Commissi<strong>on</strong> found that elementary energyefficiency measures such as high quality insulati<strong>on</strong>of new buildings could cut energy use in the servicesector by 18 per cent within a few years, <strong>and</strong> thatproper insulati<strong>on</strong>, good design <strong>and</strong> using combinedheat <strong>and</strong> power plants to provide local hot water <strong>and</strong>electricity could together slash energy use in homesby between 25 <strong>and</strong> 34 per cent in a few years (www.rcep.org.uk). The Institute for Science in Society(Mae Wan Ho et al., op. cit. supra note 2) meanwhilestresses the benefits in reduced food miles <strong>and</strong> fossilfuel use from a more self-reliant, organic agriculture– which must be promoted for other reas<strong>on</strong>s as well.51 Lipow, op. cit. supra note 10.52 ‘Super-adobe’ is a refinement <strong>on</strong> rammed-earthc<strong>on</strong>structi<strong>on</strong> in which wet soil under pressure(mixed with a little cement) is pumped into bags thatare coiled together <strong>and</strong> bound with barbed wire.The technique is low-impact <strong>and</strong> results in sturdy,earthquake-proof buildings. See California Instituteof Earth Art <strong>and</strong> Architecture, CalEarth Forum, July2005, http://www.calearth.org/.53 China reported large reducti<strong>on</strong>s in emissi<strong>on</strong>sin the late 1990s, attributed partly to technicalimprovements in boiler technology. But recentanalysis suggests that these ‘reducti<strong>on</strong>s’ may bemainly due to bureaucratic changes in who was doingthe reporting. Pre-1996 emissi<strong>on</strong>s figures may havebeen inflated by coal mine officials eager to showthey had met producti<strong>on</strong> targets, which were laterdisc<strong>on</strong>tinued. See Knight, op. cit. supra note 29; FredPearce, ‘Kyoto Promises are Nothing but Hot Air’,New Scientist 2557, 22 June 2006, p. 10.54 See http://www.atelierten.com/ourwork/profiles/0513-federati<strong>on</strong>-square.pdf.55 See The <strong>Climate</strong> Group, Carb<strong>on</strong> Down, Profits Up,L<strong>on</strong>d<strong>on</strong>, 2005, http://www.theclimategroup.org/assets/CDPU_2005_v2.pdf.56 Lovins et al., op. cit. supra note 2, pp. 6, 170–72.57 Levett, op. cit. supra note 50.58 Timothy Mitchell, Rule of Experts, University ofCalifornia Press, 2002.59 Arthur MacEwen, Neoliberalism or Democracy?Ec<strong>on</strong>omic Strategy, Markets <strong>and</strong> Alternatives for the21st Century, Zed Books, L<strong>on</strong>d<strong>on</strong>, 1999.60 Levett, op. cit. supra note 50. For a different perspective,see David M. Driesen, ‘Is Emissi<strong>on</strong>s Trading an Ec<strong>on</strong>omicIncentive Program? Replacing the Comm<strong>and</strong> <strong>and</strong>C<strong>on</strong>trol/Ec<strong>on</strong>omic Incentive Dichotomy’, Washingt<strong>on</strong><strong>and</strong> Lee Law Review 55, 289, 1998.61 Ivan Illich, Energy <strong>and</strong> Equity, Mari<strong>on</strong> Boyers, L<strong>on</strong>d<strong>on</strong>,1974.62 M. E. Levine <strong>and</strong> J. L. Forrence, ‘RegulatoryCapture, Public Interest, <strong>and</strong> the Public Agenda:Toward a Synthesis’, Journal of Law, Ec<strong>on</strong>omics<strong>and</strong> Organizati<strong>on</strong> 6, 1990, pp. 167–198; Ralph Nader,Cutting Corporate Welfare, Seven Stories Press,New York, 2001; Dexter Whitfield, Public Services orCorporate Welfare: Rethinking the Nati<strong>on</strong> State in theGlobal Ec<strong>on</strong>omy, Pluto Press, L<strong>on</strong>d<strong>on</strong>, 2001.63 World Bank, ‘Clean Energy <strong>and</strong> Development:Towards an Investment Framework’, World Bank,Washingt<strong>on</strong>, 2006, http://siteresources.worldbank.org/DEVCOMMINT/Documentati<strong>on</strong>/20890696/DC2006-0002(E)-CleanEnergy.pdf, p. 91. For acritique see Peter Bosshard, ‘Business as Usualwill not Achieve <strong>Climate</strong> <strong>and</strong> Development Goals’,Internati<strong>on</strong>al Rivers Network, Berkeley, April 2006:
ways forward 355‘The US al<strong>on</strong>e accounts for nearly 25 per cent ofthe global carb<strong>on</strong> dioxide emissi<strong>on</strong>s. In comparis<strong>on</strong>,meeting the basic human needs for electricity of allthe 1.6 billi<strong>on</strong> people who presently have no accessto modern energy would <strong>on</strong>ly increase global carb<strong>on</strong>emissi<strong>on</strong>s by 2 per cent.’64 For a useful list of extracti<strong>on</strong> projects <strong>on</strong>ly, see JimVallette <strong>and</strong> Steve Kretzmann, The Energy Tug-of-War: Winners <strong>and</strong> Losers of World Bank Fossil FuelFinance, Institute for Policy Studies, Washingt<strong>on</strong>,2004, pp. 27-31.65 Daphne Wysham, ‘Fossil Fuels <strong>and</strong> Foreign Aid forEnergy Sector Projects’, Institute for Policy Studies,Washingt<strong>on</strong>, November 2003.66 Jules Pretty <strong>and</strong> Hugh Ward, ‘Social Capital <strong>and</strong>the Envir<strong>on</strong>ment’, World Development 29, 2001, pp.209–227, provide some perspective <strong>on</strong> the numbers ofthe people thwarted or left out. In the best traditi<strong>on</strong>sof academic bean-counting, Pretty <strong>and</strong> Ward estimatethat the number of new local groups protectingwatersheds, irrigati<strong>on</strong> systems <strong>and</strong> forests <strong>and</strong>working in microfinance, integrated pest management,<strong>and</strong> farmers research in 25 countries emerging in thedecade to 2001 al<strong>on</strong>e comes to around 408,000–478,000.67 Douglas Kysar points out that, <strong>on</strong> <strong>on</strong>e view, the UShas deliberately undermined various internati<strong>on</strong>alenvir<strong>on</strong>mental agreements as a prelude to pointingto their ‘inefficacy’ as a reas<strong>on</strong> for adopting ‘marketliberalism’. (‘Sustainable Development <strong>and</strong> PrivateGlobal Governance’, University of Texas Law Review83, 2005, pp. 2109-2166).68 Centre for Science <strong>and</strong> Envir<strong>on</strong>ment, CSE DossierFactsheet 6, New Delhi, 1998, p. 4.69 The income gap between the fifth of the world’speople in the richest countries <strong>and</strong> the fifth in thepoorest took 30 years for the ratio to double from30 to 1 in 1960 to 60 to 1 in 1990 <strong>and</strong> <strong>on</strong>ly seven yearsto jump to 74 to 1 in 1997. See http://www.wcc-coe.org/wcc/what/jpc/dossier.html. According to AndrewSimms of the New Ec<strong>on</strong>omics Foundati<strong>on</strong>, duringthe 1980s, USD 2.20 out of every USD 100 worth ofec<strong>on</strong>omic growth reached society’s poorest. In the1990s, this figure fell to USD 0.60.70 See http://www.indymedia.no/newswire/display/19605/index.php for the full text.71 R. W. Kates, ‘Cauti<strong>on</strong>ary Tales: Adaptati<strong>on</strong> <strong>and</strong> theGlobal Poor’, Climatic <strong>Change</strong> 45, 2000, pp. 5–17.Wolfgang Sachs adds that a ‘claim for equity <strong>on</strong> thebasis of c<strong>on</strong>venti<strong>on</strong>al development’ – a perennialinterest of ruling elites in the South as well as theNorth – ‘is simply not credible’, since developmentdoesn’t lead to equity (interview in <strong>Climate</strong> EquityObserver, 12 May 2001, www.ecoequity.org/ceo/ceo_3_4.htm).72 Michael Thomps<strong>on</strong> et al., Uncertainty <strong>on</strong> a HimalayanScale, Milt<strong>on</strong> Ash, L<strong>on</strong>d<strong>on</strong>, 1986, pp. 71, 87–88, 106.73 Ashis N<strong>and</strong>y, The Intimate Enemy: Loss <strong>and</strong> Recoveryof Self under Col<strong>on</strong>ialism, Oxford University Press,New Delhi, 1989.74 Stephen Gudeman <strong>and</strong> Alberto Rivera, <str<strong>on</strong>g>C<strong>on</strong>versati<strong>on</strong></str<strong>on</strong>g>sin Colombia: The Domestic Ec<strong>on</strong>omy in Life <strong>and</strong> Text,Cambridge University Press, Cambridge, 1990.75 James Lovelock, The Revenge of Gaia: Why the Earthis Fighting Back <strong>and</strong> How we can Still Save Humanity,Allen Lane, L<strong>on</strong>d<strong>on</strong>, 2006, pp. 155, 153. For more <strong>on</strong>envir<strong>on</strong>mentalists supporting nuclear power, see, e.g.,Felicity Barringer, ‘Old Foes Soften to New Reactors,New York Times, 15 May 2005 <strong>and</strong> Pew Centre <strong>on</strong>Global <strong>Climate</strong> <strong>Change</strong>, ‘Pew Centre <strong>on</strong> Global<strong>Climate</strong> <strong>Change</strong> Releases First ComprehensiveApproach to <strong>Climate</strong> <strong>Change</strong>’, press release,Washingt<strong>on</strong>, 8 February 2006.76 Brett<strong>on</strong> Woods Project, op. cit. supra note 5.77 ‘Top Scientist Offers Way out of Global Warming’,Times of India, 1 August 2006, http://timesofindia.indiatimes.com/articleshow/1833408.cms.
Appendix<strong>Climate</strong> Justice Now!The Durban Declarati<strong>on</strong><strong>on</strong> Carb<strong>on</strong> TradingAs representatives of people’s movements <strong>and</strong> independent organisati<strong>on</strong>s,we reject the claim that carb<strong>on</strong> trading will halt the climatecrisis. This crisis has been caused more than anything else by themining of fossil fuels <strong>and</strong> the release of their carb<strong>on</strong> to the oceans,air, soil <strong>and</strong> living things. This excessive burning of fossil fuels is nowjeopardising Earth’s ability to maintain a liveable climate.Governments, export credit agencies, corporati<strong>on</strong>s <strong>and</strong> internati<strong>on</strong>alfinancial instituti<strong>on</strong>s c<strong>on</strong>tinue to support <strong>and</strong> finance fossil fuel explorati<strong>on</strong>,extracti<strong>on</strong> <strong>and</strong> other activities that worsen global warming,such as forest degradati<strong>on</strong> <strong>and</strong> destructi<strong>on</strong> <strong>on</strong> a massive scale, whilededicating <strong>on</strong>ly token sums to renewable energy. It is particularly disturbingthat the World Bank has recently defied the recommendati<strong>on</strong>of its own Extractive Industries Review which calls for the phasingout of World Bank financing for coal, oil <strong>and</strong> gas extracti<strong>on</strong>.We denounce the further delays in ending fossil fuel extracti<strong>on</strong> thatare being caused by corporate, government <strong>and</strong> United Nati<strong>on</strong>s’ attemptsto c<strong>on</strong>struct a “carb<strong>on</strong> market”, including a market trading in“carb<strong>on</strong> sinks”.History has seen attempts to commodify l<strong>and</strong>, food, labour, forests,water, genes <strong>and</strong> ideas. Carb<strong>on</strong> trading follows in the footsteps of thishistory <strong>and</strong> turns the earth’s carb<strong>on</strong>-cycling capacity into property tobe bought or sold in a global market. Through this process of creatinga new commodity – carb<strong>on</strong> – the Earth’s ability <strong>and</strong> capacity to supporta climate c<strong>on</strong>ducive to life <strong>and</strong> human societies is now passinginto the same corporate h<strong>and</strong>s that are destroying the climate.People around the world need to be made aware of this commodificati<strong>on</strong><strong>and</strong> privatizati<strong>on</strong> <strong>and</strong> actively intervene to ensure the protecti<strong>on</strong>of the Earth’s climate.Carb<strong>on</strong> trading will not c<strong>on</strong>tribute to achieving this protecti<strong>on</strong> of theEarth’s climate. It is a false soluti<strong>on</strong> which entrenches <strong>and</strong> magnifiessocial inequalities in many ways:
appendix – the durban declarati<strong>on</strong> <strong>on</strong> carb<strong>on</strong> trading 357• The carb<strong>on</strong> market creates transferable rights to dump carb<strong>on</strong> inthe air, oceans, soil <strong>and</strong> vegetati<strong>on</strong> far in excess of the capacity ofthese systems to hold it. Billi<strong>on</strong>s of dollars worth of these rightsare to be awarded free of charge to the biggest corporate emittersof greenhouse gases in the electric power, ir<strong>on</strong> <strong>and</strong> steel, cement,pulp <strong>and</strong> paper, <strong>and</strong> other sectors in industrialised nati<strong>on</strong>s whohave caused the climate crisis <strong>and</strong> already exploit these systems themost. Costs of future reducti<strong>on</strong>s in fossil fuel use are likely to falldisproporti<strong>on</strong>ately <strong>on</strong> the public sector, communities, indigenouspeoples <strong>and</strong> individual taxpayers.• The Kyoto Protocol’s Clean Development Mechanism (CDM), aswell as many private sector trading schemes, encourage industrialisedcountries <strong>and</strong> their corporati<strong>on</strong>s to finance or create cheapcarb<strong>on</strong> dumps such as large-scale tree plantati<strong>on</strong>s in the South asa lucrative alternative to reducing emissi<strong>on</strong>s in the North. OtherCDM projects, such as hydrochlorofluorocarb<strong>on</strong>s (HCFC) reducti<strong>on</strong>schemes, focus <strong>on</strong> end-of pipe technologies <strong>and</strong> thus do nothingto reduce the impact of fossil fuel industries’ impacts <strong>on</strong> localcommunities. In additi<strong>on</strong>, these projects dwarf the tiny volume ofrenewable energy projects which c<strong>on</strong>stitute the CDM’s sustainabledevelopment window-dressing.• Impacts from fossil-fuel industries <strong>and</strong> other greenhouse-gasproducing industries such as displacement, polluti<strong>on</strong>, or climatechange, are already disproporti<strong>on</strong>ately felt by small isl<strong>and</strong> states,coastal peoples, indigenous peoples, local communities, fisherfolk,women, youth, poor people, elderly <strong>and</strong> marginalized communities.CDM projects intensify these impacts in several ways. First,they sancti<strong>on</strong> c<strong>on</strong>tinued explorati<strong>on</strong> for, <strong>and</strong> extracti<strong>on</strong> refining<strong>and</strong> burning of fossil fuels. Sec<strong>on</strong>d, by providing finance for privatesector projects such as industrial tree plantati<strong>on</strong>s, they appropriatel<strong>and</strong>, water <strong>and</strong> air already supporting the lives <strong>and</strong> livelihoodsof local communities for new carb<strong>on</strong> dumps for Northernindustries.• The refusal to phase out the use of coal, oil <strong>and</strong> gas, which is furtherentrenched by carb<strong>on</strong> trading, is also causing more <strong>and</strong> moremilitary c<strong>on</strong>fl icts around the world, magnifying social <strong>and</strong> envir<strong>on</strong>mentalinjustice. This in turn diverts vast resources to militarybudget which could otherwise be utilized to support ec<strong>on</strong>omiesbased <strong>on</strong> renewable energies an energy efficiency.
358 development dialogue september 2006 – carb<strong>on</strong> tradingIn additi<strong>on</strong> to these injustices, the internal weaknesses <strong>and</strong> c<strong>on</strong>tradicti<strong>on</strong>sof carb<strong>on</strong> trading are in fact likely to make global warmingworse rather than “mitigate” it. CDM projects, for instance, cannotbe verified to be “neutralizing” any given quantity of fossil fuel extracti<strong>on</strong><strong>and</strong> burning. Their claim to be able to do so is increasinglydangerous because it creates the illusi<strong>on</strong> that c<strong>on</strong>sumpti<strong>on</strong> <strong>and</strong> producti<strong>on</strong>patterns, particularly in the North, can be maintained withoutarming the climate.In additi<strong>on</strong>, because of the verificati<strong>on</strong> problem, as well as a lackof credible regulati<strong>on</strong>, no <strong>on</strong>e in the CDM market is likely to besure what they are buying. Without a viable commodity to trade, theCDM market <strong>and</strong> similar private sector trading schemes are a totalwaste of time when the world has a critical climate crisis to address.In an absurd c<strong>on</strong>tradicti<strong>on</strong> the World Bank facilitates these false, market-basedapproaches to climate change through its Prototype Carb<strong>on</strong>Fund, the BioCarb<strong>on</strong> Fund <strong>and</strong> the Community DevelopmentCarb<strong>on</strong> Fund at the same time it is promoting, <strong>on</strong> a far greater scale,the c<strong>on</strong>tinued explorati<strong>on</strong> for, <strong>and</strong> extracti<strong>on</strong> <strong>and</strong> burning of fossil fuels– many of which are to ensure increased emissi<strong>on</strong>s of the North.In c<strong>on</strong>clusi<strong>on</strong>, ‘giving carb<strong>on</strong> a price’ will not prove to be any moreeffective, democratic, or c<strong>on</strong>ducive to human welfare, than givinggenes, forests, biodiversity or clean rivers a price.We reaffi rm that drastic reducti<strong>on</strong>s in emissi<strong>on</strong>s from fossil fuel useare a pre-requisite if we are to avert the climate crisis. We affirm ourresp<strong>on</strong>sibility to coming generati<strong>on</strong>s to seek real soluti<strong>on</strong>s that are viable<strong>and</strong> truly sustainable <strong>and</strong> that do not sacrifice marginalized communities.We therefore commit ourselves to help build a global grassroots movementfor climate justice, mobilize communities around the world <strong>and</strong>pledge our solidarity with people opposing carb<strong>on</strong> trading <strong>on</strong> theground.Signed 10 October 2004Glenmore Centre, Durban, South Africa
appendix – the durban declarati<strong>on</strong> <strong>on</strong> carb<strong>on</strong> trading 359Durban meeting signatoriesCarb<strong>on</strong> Trade WatchIndigenous Envir<strong>on</strong>mental Network<strong>Climate</strong> & Development Initiatives, Ug<strong>and</strong>aCoecoceiba-Amigos de la Tierra, Costa RicaCORE Centre for Organisati<strong>on</strong> Research &Educati<strong>on</strong>, Manipur, IndiaDelhi Forum, IndiaEarthlife Africa (ELA) eThekwini Branch, SouthAfricaFERN, EUFASE-ES/Green Desert Network Brazil 2Global Justice Ecology Project, USAgroundwork, South AfricaNati<strong>on</strong>al Forum of Forest People And ForestWorkers(NFFPFW), IndiaPatrick B<strong>on</strong>d, Professor, University ofKwaZulu Natal School of DevelopmentStudies, South AfricaO le Siosiomaga Society, SamoaSouth Durban Community Alliance (SDCEA),South AfricaSustainable Energy & Ec<strong>on</strong>omy Network, USAThe Corner House, UKTimberwatch Coaliti<strong>on</strong>, South AfricaWorld Rainforest Movement, Uruguay<strong>and</strong>, at the time of printing this report, 289 other organisati<strong>on</strong>s <strong>and</strong>individuals.To sign <strong>on</strong> to this declarati<strong>on</strong> pleasesend an email to info@fern.org or visit www.sinkswatch.org
360 development dialogue september 2006 – carb<strong>on</strong> trading