Tue, Nov 21, 2006 - Page 9 News List

Carbon trading: is there a terrible cost?

Can carbon offsetting really work? This business fix to save the planet may see Western companies exploiting the developing world

By Terry Slavin  /  THE GUARDIAN , LONDON

It is being called "the green goldrush." Billions of dollars in investment money are piling into the booming EU carbon trading market, which is expected to more than double to 22 billion euros (US$28.2 billion) this year. And London, where 80 percent of the European trade is being conducted, is the new El Dorado. But is all this frenetic activity a business fix to save the planet or the destructive new face of international capitalism?

On the fringes of the talks on the future of the Kyoto Protocol taking place this week in Nairobi, Kenya, indigenous people and non-governmental groups have been telling delegates how investments in developing countries' "clean energy" projects -- which are now fueling world carbon markets -- are exacting a terrible price, with communities being robbed of their land and livelihoods damaged by projects such as hydroelectric dams and the creation of fast-growing tree plantations.

The projects, which are supposed to reduce greenhouse gases and contribute to sustainable development, are awarded certified emissions reductions (CERs), which can be used either by governments buying them to help meet Kyoto targets, or by companies surrendering them to help meet their allocations under the EU emissions trading scheme.

It is a new international market that is developing rapidly, but critics say it is encouraging destructive development and lining the pockets of the rich.

"We are not only victims of climate change, we are now victims of the carbon market," said Jocelyn Therese, a spokesperson for Coica, the coordinating body of indigenous organizations of the Amazon basin.

Moreover, the projects are doing little to help encourage sustainable development in poor countries, say critics as authoritative as the government's climate economist, Sir Nicholas Stern, whose report last week changed many people's understanding of the need to address climate change.

Required incentives

Deep within the Stern report on the economics of climate change is a stinging criticism of the UN's Kyoto Protocol Clean Development Mechanism (CDM), which allows countries and businesses in the rich north to trade in carbon "credits" with the south.

"The CDM in its current form is making only a small difference to investment in long-lived energy and transport infrastructure," Stern said.

"While a substantial international flow of funds is being generated through CDM, it falls significantly short of the scale and nature of incentives required to reduce future emissions in developing countries," he said.

One has only to look at where the money has gone up to now to see why. CDM projects are expected to secure 1.4 billion tonnes of carbon dioxide emission reductions by the end of 2012, with 400 projects approved by the CDM's executive board and 900 more in the pipeline. But according to the World Bank, only 10 percent of CDM projects by volume in the 15 months to March this year involved energy efficiency, fuel switch, biomass or other renewables projects -- areas that Stern says are critical to the long-term reduction of greenhouse gas emissions.

Almost 60 percent involved destroying the industrial gas HFC 23, a greenhouse gas nearly 12,000 times more destructive than carbon dioxide but which costs as little as US$0.75 per tonne of carbon dioxide equivalent to deliver -- and can be traded for as much as 10 times that.

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