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Combating climate change on credit

Nations around the world have signed up for a CO2 'cap-and-trade' system, but questions abound over its effectiveness.
Last Modified: 29 Nov 2012 14:21
A logger illegally cuts trees in a tropical rain forest in Sumatra, Indonesia [Getty Images]

Jakarta, Indonesia - You're buying an airplane ticket online. Scroll to the bottom of the website, and there's an option to "buy carbon credits" to "offset" the climate change-inducing emissions you are about to produce during your flight.

It sounds like an attractive, market-based way to appease your environmental conscience - and quite affordably, too. But what are you actually buying? And how much - if any - difference can it really make in the fight against global warming?

In effect, you're paying someone else to exercise carbon emission restraint. It may be a tech factory reducing their pollution, or a Third World forester leaving a jungle tract unlogged.

"Carbon trading should not be a substitute for emissions reduction. [After all] should we rely on the capitalist system to solve problems it created in the first place?"

- Melissa Leach, University of Sussex

But many questions surround the viability and potential negative consequences of carbon trading.

Can the carbon market attain enough credits to help halt global climate change? How, with its diversity of climate mitigation efforts, can carbon contracts be kept feasible enough for the markets to grow? And are there costs to biodiversity and indigenous people living in or near forests?

Under the 1997 Kyoto Protocol, 193 countries committed to reduce their annual rate of greenhouse gas emissions by four per cent compared to 1990 levels. One of their suggested methods for implementing the goal was a "cap-and-trade" market.

The premise of the scheme was to put a value or price tag on carbon held in trees in developing countries, then get people and governments in the developed world to pay for "carbon offsets", or forests left standing.

Conservationists have challenged the effectiveness of basing these rewards on sheer tree tallies, or on the tonnage of carbon sequestered. Diverse carbon-absorbing forests can all too easily be wiped out and replaced with mono-cropped oil-palm or rubber tree plantations, they say.

Doha negotiations

After the Kyoto Protocol expires next month, the future prospects of the cap-and-trade market will hinge on the renewal terms to be negotiated at this year's climate summit in Doha, Qatar.

Thirty-eight countries have committed to ratifying a new version of the Protocol, but it is unclear what the terms of the new document will be, or whether major developing countries such as China and India will commit to binding limits.

 Inside Story - Climate change stalemate

While the United States - one of the world's biggest greenhouse gas emitters - has failed to endorse the Protocol, some US entities already buy and sell carbon credits under "voluntary trade" arrangements.

California recently auctioned off some 60 million carbon dioxide emission permits worth an estimated $600m, becoming the world's second-largest carbon trading market.

The biggest is the 30-member European Union, with China, Japan, South Korea and Australia also leading the charge.

The United Nations is working out a more sector-specific trading initiative aimed at tropical rainforests, promoting conservation and sustainable forest management efforts as a means to enhance carbon sequestration. Named Reducing Emissions from Deforestation and Forest Degradation (REDD), the scheme originally focused on slowing logging and land degradation.

The point of all these market-based schemes is to make emissions costly enough for businesses to rethink their production processes.

"People pollute without knowing that pollution is a cost," says Agus Sari, an Indonesian official involved in creating a government framework for a potential carbon-trading market.

So far, however, the global carbon market has failed to deliver high enough prices to attract attention. Currently, a tonne of carbon dioxide on the European market costs only $10.39. In non-EU markets, it can drop as low as $1.12. And even if companies surpass their cap limit, the penalties are not crippling enough to warrant strict compliance.

Critical conservationists

As Indonesia-based conservationist Pete Wood puts it, carbon credit buyers need assurance that their investment can last.

"If I'm going to pay for these trees ... what is the guarantee that they will still be there [long enough to mitigate emissions]?" asks Wood.

Successor governments could revoke forest concessions, illegal loggers could fell the trees, or tribal cultivators could burn them as swidden.

If successful, carbon markets might cut emissions from land degradation and deforestation - processes that represent 17 percent of worldwide greenhouse gas emissions. Indonesia and Brazil are responsible for three-fourths of this figure.

Follow our in-depth coverage of Doha COP18 negotiations

Sari said 80 percent of Indonesia's emissions are caused by forestry. The World Resources Institute found that land degradation, deforestation and conversion of land to agriculture accounted for a similar proportion of national emissions in Myanmar, Malaysia and the Democratic Republic of Congo.

That's why Indonesia's national strategy focuses on consulting people living near forests on policy decisions to incorporate their needs in order to prevent forest degradation, Sari said.

Sari added he hoped REDD would take off as it could also become "a reforming force on the issues of land tenure and corruption".

However, efforts underway in Brazil serve as a cautionary tale. At last month's UN Convention on Biodiversity meeting in Hyderabad, Brazilian delegate Vania Viana said large agribusiness interests are replacing rainforests with mono-cropped tree farms in the name of carbon credits.

To avoid such abuses, the UN is considering safeguards for the scheme. After all, "trees are not just carbon sticks", notes Axel Paulsch, a German scientist who has advised on the biodiversity discussions since the convention's inception in 1997.

Free-market solution?

Qatar's Abdullah bin Hamad al-Attiyah at COP18 [EPA]

Others are sceptical of carbon trading's effectiveness in fighting global warming.

"Carbon trading is only one possible route to combating climate change," said Professor Melissa Leach, from the University of Sussex.

"Carbon trading should not be a substitute for emissions reduction. [After all] should we rely on the capitalist system to solve problems it created in the first place?" Leach said.

But Indonesia's Sari insists that carbon markets will bring extra funding to governments' battle against climate change, pointing to the $500bn the UN estimated was necessary for mitigation and adaptation programmes globally.

At the 2009 Copenhagen climate summit, developed countries pledged $100bn a year from 2020 onward to help developing countries cut emissions and adapt to climate change.

"The private sector has that money, but they are not charitable so we need to create something that is exciting, that the private sector would want to do," he said.

Leach was more cautious about engaging businesses to fight climate change, and instead suggested increased taxation with the money earmarked for climate change mitigation.

"It's excellent if we can harness private sector money, but we should also generate more public funds through new financing mechanisms like the Robin Hood Tax," said Leach, highlighting the idea to raise taxes on rich corporations and individuals for the public good.

As for how governments should use that money, Leach said they should think beyond election cycles and commit to global goals to drastically reduce emissions and prevent climate change disaster.

A version of this story ran in Al Jazeera's Digital Magazine.

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