Profiting From Pollution: the G8 and climate change
30/05/2007
- Opinión
Tackling climate change is likely to be at the top of the agenda at this month’s G8 summit in Heiligendamm , Germany
The hegemony of the G8 in international forums such as the United Nations Framework Convention of Climate Change means that global climate policy is being chosen for its compatibility with the existing economic system rather than its effectiveness in reducing emissions.
Carbon trading is central to this approach. It turns the earth’s carbon-cycling capacity into property to be bought or sold in a global market.This use of market forces to address environmental problems takes two forms. First, governments allocate permits to big industrial polluters who then trade these ‘rights to pollute’. Second, surplus carbon credits are generated from carbon offset projects that claim to reduce or avoid emissions in other locations, usually in Southern countries.These credits may be purchased to top up any shortfall in permits. Under the Kyoto Protocol, such offset projects are carried out in the South through the Clean Development Mechanism (CDM), or in Northern countries through Joint Implementation (JI).
The market is growing enormously.A World Bank report valued it at US$21.5 billion for the first three quarters of 2006, up 94 per cent on its value of $11.1 billion in 2005.
Gleneagles onwards
Despite the hype, the 2005 G8 summit in Scotland produced little in the way of concrete action in dealing with climate change.The final communiqué made limp resolutions to ‘promote’ better practice on climate change, with no mention at all of reducing the rate of extraction and consumption of fossil fuels. Blair was widely praised, however, for bringing the heads of state of Brazil, China, India, Mexico and South Africa to the negotiating table, and it was with these countries that the G8 plus 5 Climate Dialogue was launched.The dialogue brings senior legislators together with international business leaders, civil society representatives and opinion leaders to discuss a post 2012 climate change agreement, with the aim of agreeing a consensus statement at the G8 2008 Japan summit.
The dialogue has a heavy bias towards trading schemes as the best way of dealing with climate change, with one of its four working groups dedicated specifically to developing market mechanisms. Furthermore, the G8 plus 5 summit has mandated the World Bank to facilitate the creation of a framework for climate change management, clean energy and sustainable development.This is in spite of the fact that the World Bank is part of the climate problem rather than the solution: since the UN climate convention was signed at Rio earth summit in 1992, the Bank Information Centre calculates that the World Bank has single-handedly financed over $25 billion in fossil fuel based projects. In response to the G8 mandate, the World Bank produced a report called Clean Energy and Development:Towards an Investment Framework, an updated version of which was presented at the G8 plus 5 meeting inMexico
The report promoted carbon trading as the main means of financing the development of clean technology.
The Bank’s promotion of emissions trading through the G8 plus 5 creates a clear conflict of interest in that it is also the largest public broker of carbon purchases, with over $1 billion in its carbon credit portfolio. It generates a great deal of revenue for itself through receiving a percentage commission on all the carbon credits it purchases to administer through its Prototype Carbon Fund.Through its influence in political processes like the G8 plus 5, it has actively lobbied to make the CDM a more attractive proposition for investors and less effective in terms of actually reducing emissions.
The G8 plus 5 met again in February2007 in Washington , at a meeting spearheaded by five US
It is not yet clear what targets there are for dealing with climate change at the 2007 G8 summit in Germany, but the majority of governments, industry and international financial institutions are keen to see the groundwork laid for an international emissions trading framework to extend beyond the 2012 Kyoto commitment period that will include the other greenhouse gases and other emissions-producing sectors, such as the airline industry.
Carbon trading won’t work
The G8 and free-market environmentalists have been at the forefront of championing a rosy narrative of ‘win-win’ scenarios in which the quest to maximise corporate profits can go hand in hand with addressing the climate crisis. But this is largely an act of faith, as there is no evidence that climate change can be tackled while maintaining an economic growth pattern based on the ever-increasing extraction and consumption of fossil fuels. Carbon trading encourages the industries most dependent on coal, oil and gas to delay shifting away from fossil fuels. There is little incentive for expensive plans for long-term structural change if you can get by in the short term by buying cheap permits-pollution rights from operations that can reduce their emissions.Yet for G8 countries seeking to demonstrate their commitment to climate action, these inherent problems of emissions trading are swept aside in favour of a system that sustains the economic dominance of the most powerful industrialised nations.
The G8 nations and emissions trading
France , Germany , Italy & UK
Since the start of 2005,France , Germany , Italy and the UK Europe – this is the ‘cap’ part. If any installation goes over its limit, it must purchase the equivalent amount of permits on the market, and conversely, if an installation is under its limit, it can sell its shortfall on the market – this is the ‘trade’ part.
The first phase of the scheme has been a disaster. Under sustained corporate lobbying, almost all EU governments made huge overallocations of permits to industry in the first phase. In 2005, the first year of trading, the relevant industries acrossEurope emitted 66 million tonnes less than the cap that had been allocated. This meant that the cap was effectively meaningless as it had not forced any net emissions reductions. A preliminary analysis of the 2006 data shows that 93 per cent of the 10,000 installations covered by the ETS emitted less than their allotted quota.
These over-allocations have resulted in windfall profits for the biggest polluters who, in successfully exaggerating their need for emissions allowances, received enormous amounts of permits that they could then profitably sell on. The companies also made money by passing on the nominal ‘market costs’ of these free permits to consumers. The German environment minister has claimed that the four biggest European power producers – Eon, RWE, Vattenfall and EnBW – have profited from this to the tune of Ř6 billion and Ř8 billion. With the second phase of the EUETS due to start in 2008, the evidence suggests that lessons haven’t been learnt. A working paper released in November 2006 by German researchers said that of the 25 second-phase national allocation plans submitted for EU approval, 18 were too generous, and many of the new caps were set above 2005 emissions levels.
Japan
As the most energy-efficient country in the industrialised world,Japan is struggling to meet its Kyoto Japan Japan
Canada
Canada ’s conservative government has been making disgruntled noises about its Kyoto
Russia
The collapse ofRussia Russia Russia has been enthusiastic about its opportunities to profit from emissions trading, with one World Bank estimate suggesting that it could profit by $11 billion under Kyoto
USA
George Bush famously refused to ratify the Kyoto Protocol in 2001, so theUS US US corporations, including DuPont and General Electric, have joined with green groups to form the US Climate Action Partnership to urge Bush and Congress to create a carbon market for the US US power and industrial companies said that the US
- Kevin Smith is researcher at Carbon Trade Watch, co-author of Hoodwinked in the Hothouse: the G8, Climate Change and Free Market Environmentalism and contributor to G8 Club Governance
Source: Transnational Institute, http://www.tni.org/. (Originally published by Red Pepper, 26 May 2007).
The hegemony of the G8 in international forums such as the United Nations Framework Convention of Climate Change means that global climate policy is being chosen for its compatibility with the existing economic system rather than its effectiveness in reducing emissions.
Carbon trading is central to this approach. It turns the earth’s carbon-cycling capacity into property to be bought or sold in a global market.This use of market forces to address environmental problems takes two forms. First, governments allocate permits to big industrial polluters who then trade these ‘rights to pollute’. Second, surplus carbon credits are generated from carbon offset projects that claim to reduce or avoid emissions in other locations, usually in Southern countries.These credits may be purchased to top up any shortfall in permits. Under the Kyoto Protocol, such offset projects are carried out in the South through the Clean Development Mechanism (CDM), or in Northern countries through Joint Implementation (JI).
The market is growing enormously.A World Bank report valued it at US$21.5 billion for the first three quarters of 2006, up 94 per cent on its value of $11.1 billion in 2005.
Gleneagles onwards
Despite the hype, the 2005 G8 summit in Scotland produced little in the way of concrete action in dealing with climate change.The final communiqué made limp resolutions to ‘promote’ better practice on climate change, with no mention at all of reducing the rate of extraction and consumption of fossil fuels. Blair was widely praised, however, for bringing the heads of state of Brazil, China, India, Mexico and South Africa to the negotiating table, and it was with these countries that the G8 plus 5 Climate Dialogue was launched.The dialogue brings senior legislators together with international business leaders, civil society representatives and opinion leaders to discuss a post 2012 climate change agreement, with the aim of agreeing a consensus statement at the G8 2008 Japan summit.
The dialogue has a heavy bias towards trading schemes as the best way of dealing with climate change, with one of its four working groups dedicated specifically to developing market mechanisms. Furthermore, the G8 plus 5 summit has mandated the World Bank to facilitate the creation of a framework for climate change management, clean energy and sustainable development.This is in spite of the fact that the World Bank is part of the climate problem rather than the solution: since the UN climate convention was signed at Rio earth summit in 1992, the Bank Information Centre calculates that the World Bank has single-handedly financed over $25 billion in fossil fuel based projects. In response to the G8 mandate, the World Bank produced a report called Clean Energy and Development:Towards an Investment Framework, an updated version of which was presented at the G8 plus 5 meeting in
The report promoted carbon trading as the main means of financing the development of clean technology.
The Bank’s promotion of emissions trading through the G8 plus 5 creates a clear conflict of interest in that it is also the largest public broker of carbon purchases, with over $1 billion in its carbon credit portfolio. It generates a great deal of revenue for itself through receiving a percentage commission on all the carbon credits it purchases to administer through its Prototype Carbon Fund.Through its influence in political processes like the G8 plus 5, it has actively lobbied to make the CDM a more attractive proposition for investors and less effective in terms of actually reducing emissions.
The G8 plus 5 met again in February
It is not yet clear what targets there are for dealing with climate change at the 2007 G8 summit in Germany, but the majority of governments, industry and international financial institutions are keen to see the groundwork laid for an international emissions trading framework to extend beyond the 2012 Kyoto commitment period that will include the other greenhouse gases and other emissions-producing sectors, such as the airline industry.
Carbon trading won’t work
The G8 and free-market environmentalists have been at the forefront of championing a rosy narrative of ‘win-win’ scenarios in which the quest to maximise corporate profits can go hand in hand with addressing the climate crisis. But this is largely an act of faith, as there is no evidence that climate change can be tackled while maintaining an economic growth pattern based on the ever-increasing extraction and consumption of fossil fuels. Carbon trading encourages the industries most dependent on coal, oil and gas to delay shifting away from fossil fuels. There is little incentive for expensive plans for long-term structural change if you can get by in the short term by buying cheap permits-pollution rights from operations that can reduce their emissions.Yet for G8 countries seeking to demonstrate their commitment to climate action, these inherent problems of emissions trading are swept aside in favour of a system that sustains the economic dominance of the most powerful industrialised nations.
The G8 nations and emissions trading
Since the start of 2005,
The first phase of the scheme has been a disaster. Under sustained corporate lobbying, almost all EU governments made huge overallocations of permits to industry in the first phase. In 2005, the first year of trading, the relevant industries across
These over-allocations have resulted in windfall profits for the biggest polluters who, in successfully exaggerating their need for emissions allowances, received enormous amounts of permits that they could then profitably sell on. The companies also made money by passing on the nominal ‘market costs’ of these free permits to consumers. The German environment minister has claimed that the four biggest European power producers – Eon, RWE, Vattenfall and EnBW – have profited from this to the tune of Ř6 billion and Ř8 billion. With the second phase of the EUETS due to start in 2008, the evidence suggests that lessons haven’t been learnt. A working paper released in November 2006 by German researchers said that of the 25 second-phase national allocation plans submitted for EU approval, 18 were too generous, and many of the new caps were set above 2005 emissions levels.
As the most energy-efficient country in the industrialised world,
The collapse of
George Bush famously refused to ratify the Kyoto Protocol in 2001, so the
- Kevin Smith is researcher at Carbon Trade Watch, co-author of Hoodwinked in the Hothouse: the G8, Climate Change and Free Market Environmentalism and contributor to G8 Club Governance
Source: Transnational Institute, http://www.tni.org/. (Originally published by Red Pepper, 26 May 2007).
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