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ENVIRONMENT: U.S. Companies See Advantages in Carbon Emissions Market

Katherine Stapp* - Tierramérica

NEW YORK, Dec 6 2004 (IPS) - With 127 countries poised to take action on global warming, many companies in the United States – a world leader in greenhouse gas production – are moving to cut their own emissions, even in the absence of federal regulations.

The Kyoto Protocol, the 1997 international treaty that sets targets for the industrialised world to reduce emissions of carbon dioxide and other greenhouse gases considered responsible for global warming, will take effect Feb. 16.

With the recent approval by Russia’s legislature, the treaty achieved the number of adherents necessary to finally enter into force even without Washington’s participation.

The United States, the world leader in greenhouse gas emissions, initially signed the Kyoto Protocol but did not ratify it. Then President George W. Bush withdrew the U.S. signature, arguing that industrialised nations are unfairly singled out, and that the treaty would cost the United States upwards of five million jobs.

But many U.S.-based multinationals that do business in countries where greenhouse gases will soon be regulated have long seen a financial incentive in getting a head start on curbing emissions.

The chemical giant Dupont, for example, earns a third of its 26.9 billion dollars in annual sales in countries that have ratified the Kyoto Protocol. Over the last decade, Dupont has cut its greenhouse gas emissions by 65 percent, largely by targeting non-carbon greenhouse pollutants, like nitrous oxide.

“I believe it’s only a matter of time before we’ll face (U.S. federal) regulatory mandates to reduce our emissions. It’s a problem that needs a prudent response from industry, and there is evidence that more and more companies are taking this seriously,” said Tom Jacob, Dupont’s senior adviser for global affairs.

Dupont is one of dozens of companies participating in a pilot greenhouse gas emissions credit trading programme called the Chicago Climate Exchange. Emissions trading allows a business that pollutes less to sell emissions “credits” to a business that exceeds its target.

The Kyoto Protocol allows buying and selling of emissions credits as one of the treaty’s “clean development mechanisms”.

Several regulations governing these mechanisms will be debated during the 10th Conference of Parties to the Convention on Climate Change, taking place in Buenos Aires, Dec. 6-17.

Members of the Chicago Climate Exchange buy and sell six greenhouse gases, gain credits for carbon sequestration projects, and pledge to cut their emissions by a modest four percent by 2006.

Since trading began in December 2003, the average daily volume has been 7,396 metric tonnes of carbon dioxide, although some analysts note that this is relatively insignificant, given the total U.S. greenhouse gas emissions, estimated at 6.8 billion metric tonnes in 2002.

“I don’t really see a market for carbon in the United States right now,” said William Pizer, an economist at Resources for the Future, an environmental policy think-tank in Washington. “It’s hard to have a market without demand, and who’s going to buy allowances if there’s no incentive?”

“I do see companies increasingly aware of their liability and what would likely happen if a regulatory scheme comes into play,” he said. “The use of fossil fuels is so pervasive, everybody becomes a culprit. In the long run, emissions trading will have to be a part of the solution.”

Frustrated by inaction in Washington, many local politicians are taking the lead in regulating greenhouse gases. Nine states in the U.S. northeast and mid-Atlantic region plan to unveil a cap-and-trade scheme in April that would ultimately create an active carbon trading market.

“State and private activities go hand in hand,” said Barry Rabe, a professor of environmental policy at the University of Michigan and author of “Greenhouse and Statehouse: The Evolving State Government Role in Climate Change.”

“There’s a trend toward broader regional initiatives to regulate greenhouse gases, and many companies are seeing the advantage in taking early action,” Rabe said.

Some analysts predict that by 2010 global commodities trading will reach more than nine trillion dollars, driven by crude oil, natural gas, and carbon dioxide. Washington’s refusal to ratify the Kyoto Protocol could end up costing U.S. companies millions because they will be mostly cut out of the potentially lucrative emissions market.

“It’s pay now, or pay more later,” said Peter Fusaro, chairman of Global Change Associates, an international energy and environmental consulting firm. “Corporate America isn’t dumb – they have to be competitive.”

“The disconnect is in Washington, but it’s not that far-fetched that the feds could change their minds in the next four years and start regulating emissions,” Fusaro said. “Bush likes market-based solutions. The market is there. We have buyers and sellers.. The issue becomes: what’s it going to cost?”

(*Originally published Dec. 4 by Latin American newspapers that are part of the Tierramérica network. Tierramérica is a specialised news service produced by IPS with the backing of the United Nations Development Programme and the United Nations Environment Programme.)