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CLIMATE CHANGE: Beware of Carbon Trading Trap Warn Activists

Claudia Ciobanu* - IPS/TerraViva

COPENHAGEN, Dec 8 2009 (IPS) - As the climate change summit in the Danish capital moves into a second day, environmental groups warn that by pushing carbon offsetting and trade, governments of developed countries are bypassing their responsibility to significantly reduce domestic emissions and provide aid to developing countries.

Activists think that even if the best possible deal is achieved at the end of the two-week talks, aimed at drafting a new agreement on how to limit global warming, the outcome will not bring climate justice.

The Copenhagen talks may result in an amended Kyoto Treaty, setting up more drastic emission reduction targets for developing countries and additional targets for non-signatories to Kyoto – most notably the United States.

There could be also action plans for major developing nations as well as concrete measures to help developing countries adapt to climate change.

But activists worry that no matter how ambitious the final deal is some of the mechanisms promoted during the Copenhagen talks would remain faulty.

One of the problematic areas is represented by the financing mechanisms envisaged to assist developing countries green their economies and deal with the negative impacts of climate change.

According to the United Nations’ Department of Economic and Social Affairs, developing countries would need 500-600 billion US dollars annually for measures of mitigation and adaptation. And that money should come from developed countries, which have a historical responsibility to the rest of the world for being the major contributors to climate change.

However, Friends of the Earth (FoE) argue that, rather than face up to this responsibility, “developed countries are attempting to count private financial flows – through offsetting – as meeting their own emissions reduction commitments, despite emissions cuts and additional public funding (for aid to the developing countries) being distinct obligations.”

According to the Clean Development Mechanism established in the Kyoto Treaty, industrialised countries committed to reduce their greenhouse gas (GhG) emissions can invest in projects that reduce emissions in developing countries as a means to compensate for cuts not made at home.

The environmental group emphasises that most of the money for developing countries will not come in the form of public funds but from the monetising carbon credits accumulated through offsetting.

Offsets are achieved by a government or corporation when investing in renewable energy or other type of projects which will reduce carbon emissions. These can be then sold in the carbon market, a practice encouraged by the Kyoto Protocol as one of the principal means to stimulate emission cuts.

At present, 100 million US dollars in carbon credits exist in the global fund for adaptation in the developing countries – a small fraction of the total amount needed.

According to Kevin Smith from Climate Justice Action, in some cases the offsets actually help companies perpetuate their polluting practices. “In Britain, new polluting infrastructure has been built with money obtained through the European Union Emission Trading Scheme,” the activist told IPS.

For instance, a petrochemical company in India could reduce emissions in one of its plants by simply responding to normal business imperatives. Then, it sells the offsets to a Western company and, with the income, build another polluting plant. “This scheme can, in some cases, lead to more pollution,’’ says Smith. ‘’It is a way to ensure the flows of money go to corporate entities”.

“There is really no proof that those cuts would not have happened anyway and the offsets are not a reward for business as usual,” Francesca Gater from FoE Europe told IPS. The Kyoto Protocol envisages the verification of whether the cuts are indeed stimulated by the carbon credits system, but activists argue this is nearly impossible to check.

“The carbon markets cannot really be trusted to reduce emissions,” Smith says. “They will lead to financial corruption of the type that has caused the recent global economic crisis and they are just a means to create new markets for capital.”

A need to regulate carbon markets has already been acknowledged by most countries. However, according to FoE, “most developed countries are positioning the World Bank to assume a controlling role for climate finance. This is despite the World Bank’s poor environmental and social track.” A more transparent and accountable body should be given this task, argues the group.

Gater says FoE wants to see all developed states (including the U.S.) committing to emissions cuts of 40 percent by 2020 against 1990 levels as well as a new financial mechanism under the authority of the United Nations Framework Convention on Climate Change to adequately finance adaptation and mitigation in developing countries from the public funds of developed states.

“If all the political energy dedicated to the creation of complicated carbon trade mechanisms were used to address real issues, such as ending the reliance on fossil fuels and achieving equity between the global North and South, we would have hope,” said Smith.

(*This story was written for the IPS TerraViva online newspaper published daily for the CoP 15 in Copenhagen