Climate change, Kyoto, and carbon trading
The 2007 federal election is the first in which the threat of climate change has become a major political issue—and the Howard government, the Labor Party, and the Greens have responded by making great play of their environmental credentials. Opinion polls indicate that ordinary people of all ages and backgrounds are deeply concerned about the global warming crisis. Awareness has grown in recent times through the release of a series of scientific studies on the subject, the screening of popular documentaries such as Al Gore’s An Inconvenient Truth, and the increased occurrence of drought, bushfires, and storms.
While many people have a general understanding of what climate change is, there has been a deliberate suppression, by the political and media establishment, of the agendas underlying the various solutions being advanced by the major parties. Very few people even know what the most commonly used terms—Kyoto, carbon trading, carbon offsetting etc.—actually mean, let alone how these mechanisms work in practice.
What exactly is the Kyoto Protocol? Does Labor’s support for it signify a more progressive alternative to the Howard government’s approach? How does carbon trading work and does it reduce emissions? Why do the major parties advocate different long-term emission reduction targets? Do the Greens’ policies represent the most environmentally sound solution to the global warming crisis?
When one carefully examines these issues, it becomes clear, firstly, that the policy differences between all the establishment parties are minimal, and secondly, that they reflect the rival interests of different sections of the corporate elite. The privately owned coal, oil, electricity, nuclear, and renewable energy industries each has its own agenda, while the “climate change industry”—involving international carbon trading and offsetting—is now a multi-billion dollar market. These competing interests find expression in the different pro-market schemes promoted by Labor, Liberal, and Greens.
Kyoto and the European carbon trading market
The Kyoto Protocol is bound up with definite material interests. While ratifying the agreement would not oblige the Australian government to take any action to reduce carbon emissions, it would open up highly lucrative international opportunities for big business. This is because Kyoto has led to the establishment of a multi-billion dollar carbon trading and carbon “offsetting” industry based in Europe.
Kevin Rudd and Peter Garrett want the protocol signed so that Australian companies can gain access to this market. Their position has nothing whatsoever to do with protecting the environment. Labor’s key argument is that the Howard government has looked after the interests of one section of big business, the fossil fuel industry, at the expense of the broader interests of the Australian ruling elite as a whole.
A number of scientific studies have demonstrated that carbon trading and “offsetting” do nothing to reduce emissions to safe levels. Rather, they are deliberately designed to complement and extend the workings of the capitalist market, the very mechanism responsible for the climate change crisis.
Entire divisions of some of Europe’s leading banking and financial institutions are devoted to investment and speculation in carbon credits. Carbon brokers, carbon trading exchanges, and carbon futures are on the rise. Subsidiary industries have also flourished. Accountants are needed to audit carbon inventories, while lawyers have to be on hand to resolve carbon contracts and other complex legal issues relating to the unusual trade in a commodity that does not physically exist.
Because the ETS only permits those countries that have ratified Kyoto to participate, Australian companies and financial operators have been largely locked out of this bonanza—leading to enormous losses in potential revenue. A study commissioned by the Australian Conservation Foundation and released last month estimated that Australian business was losing investment opportunities arising out of the protocol worth $3.8 billion annually.
Carbon “offsetting” and the CDM
Some of the foregone profits relate to the so-called Clean Development Mechanism (CDM), another central component of the Kyoto Protocol. The CDM works by generating new ETS carbon credits through the promotion of projects in less developed countries that supposedly help reduce carbon emissions. Most of the projects are located in China, Brazil, and India. For many European industries unable to keep emissions under their allotted “cap”, the cheapest way to secure additional credits is by funding CDM operations. The CDM, valued at $5.4 billion, generates about one-fifth of all ETS carbon credits.
While there are enormous profits generated through the scheme, there is no evidence that it effectively reduces carbon emissions. The CDM is plagued by corruption, with one UN source recently telling the British Guardian that at least 20 percent of all carbon credits generated through the CDM were based on non-existent or fabricated emission reductions. Many other projects that reportedly lower emissions—by installing new technologies in Chinese or Indian factories for example—would have been launched anyway, irrespective of the money pumped in through the CDM. Moreover, the scheme often creates incentives for additional pollution. An article published by Newsweek in March, for example, reported on India’s Gujarat Fluorochemical, which made $42 million through the CDM in the last quarter of 2006—triple its total company earnings compared with the same period in 2005. The additional revenue helped fund a new plant that produces teflon and caustic soda, both polluting substances.
Pacific Hydro Finds a Loophole
Once again, Australian companies are barred from investing in CDM projects—because only countries whose governments have ratified Kyoto are eligible.
Some Australian firms, however, have exploited a loophole permitting joint ventures. Pacific Hydro has invested more than $300 million in hydro-electricity projects in Fiji and Chile and sells the CDM-generated carbon credits to British electricity companies on the European market. “We’ve had to joint venture at the local level in each of those countries [Fiji and Chile] to ensure that we can paint ourselves and the joint venture as a truly non-Australian company,” Pacific Hydro’s general manager Rob Grant told the ABC last year. But the company’s growth had been stymied because the government had not ratified Kyoto. “We certainly haven’t been hoisting the Australian flag, let’s put it that way,” he said.
The inability of Australian corporations to fully access the CDM has hampered the development of the voluntary “carbon offsetting” industry. New corporations are offering industries and individuals the chance to “offset” their emissions by investing in projects that supposedly reduce emissions elsewhere. Such projects typically involve tree planting or subsidised renewable energy schemes. Major companies such as Rupert Murdoch’s News Corporation and investment bank Goldman Sachs have announced that their operations will soon be “carbon neutral”. Many wealthy individuals, keen to parade their “green” credentials, are also handing over large sums of money to offsetting companies in order to be able to boast of a “carbon neutral lifestyle”.
Carbon offsetting is a complete fraud, and it has been appropriately likened to the medieval Church’s sale of “indulgences” to sinners. It promotes the illusion that it is perfectly fine for corporate polluters to continue their current levels of carbon emissions, so long as they “offset” their emissions through the carbon offset industry. This conveniently eliminates any need to carry out the major restructuring of the global economy required to resolve the climate change crisis.
Wednesday, November 7, 2007
Climate change, Kyoto, and carbon trading