Carbon Credit: A Passport to Pollute Our Planet

Posted on September 09, 2009
Posted By: Ramanathan Menon
 
Most of us favor protecting the environment. We want green grass to grow, clean water to drink, and blue skies to gaze. We want our factories to find ways to get rid of their waste instead of dumping it in the air we breathe or poisoning our drinking water resources.

When we eat off a plate, we do not buy new plates to exchange our food-stained ones. We do not buy new clothes every time we soil our laundry. Yet, we buy 'carbon credits' for clean air when we put carbon dioxide into our existing air.

"Earth provides enough to satisfy every man's need, but not every man's greed"

The "Carbon credit" is a lame excuse or a tiny amount of bribe one has to pay for polluting our planet. What one buys is 'air'. One person who has clean air sells it to someone with dirty air. Alternatively, the person with dirty air agrees to pay for having trees planted somewhere. This erases the offender's "carbon footprint" without the offender actually doing anything. That is what bugs many of us. The offender goes on with doing his offending, but gets a nice, shiny eco-badge from somebody. Is the money that changes hands under the 'carbon credit' is really going to save our planet?

No, if we are going to be serious about cleaning the environment, then it has to be through more than "carbon credit". The thing is we have been researching ways to help the environment for decades. Why have not we come up with something by now? In addition, why was it global cooling or global warming that were the villains barely 20 years ago? If the scientists were not right about the global climate then, why should we believe that they are right about it now?

According to eminent scientists, the total energy reaching Earth from the Sun varies by only 0.1 percent across the solar cycle and scientists now think these ups and downs cause natural weather and climate variations other than the subtle effects from the larger pattern of human-caused global warming. Building on previous work, the NCAR (National Center for Atmospheric Research) in Boulder, Colorado, researchers used computer models of global climate and more than a century of ocean temperature to answer longstanding questions about the connection between solar activity and global climate.

They found that, as the sun's output reaches a peak, the small amount of extra sunshine over several years causes a slight increase in local atmospheric heating, especially across parts of the tropical and subtropical Pacific where Sun-blocking clouds are normally scarce. That small amount of extra heat leads to more evaporation, producing extra water vapor. In turn, the moisture is carried by trade winds to the normally rainy areas of the western tropical Pacific, fueling heavier rains.

Carbon is composed of three different isotopes 14C, 13C and 12C of which 12C is the most common and 14C (used for dating purposes) is only about 1 in 1 trillion atoms. 13C is about 1% of the total.

Over the last few decades, isotope geochemists have worked together with tree rings experts to construct a time series of atmospheric 14C variations over the last 10,000 years. This work is motivated by a variety of questions, most having to do with increasing the accuracy of the radiocarbon dating method. A byproduct of this work is that we also have a very nice record of atmospheric 13C variations through time, and what we find is that at no time in the last 10,000 years are the 13C/12C ratios in the atmosphere as low as they are today. Furthermore, the 13C/12C ratios begin to decline dramatically just as the CO2 starts to increase - around 1850 AD. This is no surprise because fossil fuels have lower 13C/12C ratios than the atmosphere.

"Don't blow it, because good planets are hard to find"

The world's first internet-based auction of UN-approved carbon credits was successfully completed on October 2, 2008 (October 2 is Mahatma Gandhi's Birthday), with four anonymous buyers agreeing to acquire 255,592 certified emission reductions (CERs) at a price of €19.05 (£14.93) per ton. Under the terms of the auction, the parties entered into a binding contract as soon as the auction closed and the CERs, which come from two biomass projects in Chile operated by forestry company Arauco. James Emanuel, commercial director at CantorCO2e, the company operating the auction service, said that the auction had exceeded expectations.

Now-a-days, carbon credits are advertised as a way for polluters to offset the greenhouse gases they produce. Just write a check, and someone else will reduce his emissions, so you can keep driving your diesel-truck or operating your coal-burning power plant without guilt.

Emerging out of thin air, carbon credits, already surpassed solar and wind, as the largest clean-tech industry. Carbon credits were worth a staggering $63 billion in 2007 and $59 billion in the first half of 2008 alone.

During a product life cycle, energy is required to extract, transport and refine the raw materials, for manufacturing and to distribute the final product and treat the waste at the end of a its useful life.

As fossil energy carriers play the major role for energy supply, any of the above steps is associated with the generation and emission of greenhouse gases (GHG), such as carbon dioxide, methane, nitrous oxide, etc., contributing in turn to the global warming effect, which is measured as the product's carbon footprint.

Life Cycle Assessment according to ISO 14044 (also covered in the BSI PAS2050) is the state-of-the art methodology to determine your product carbon footprint. Facilitating such a "cradle-to-grave" carbon footprint analysis of your product will disclose your real carbon footprint, reveal reduction potentials and discover negative trade-offs, i.e. the shifting of environmental burdens from one stage of the life cycle to another.

It is impossible to rely on company-specific data only to conduct an LCA and comply with the high requirements of the international standards. Thus, high-quality databases are essential to quantify the carbon footprint.

Kyoto Protocol

The Kyoto Protocol is a legally binding agreement that arose out of the UNFCCC (United Nations Framework Convention on Climate Change) to tackle climate change through a reduction of green house gas emissions. Countries (those listed in Annex I) are legally bound to reduce man-made green house gases emissions by approximately 5.2%. Individual countries have their own reduction targets outlined in Annex B of the Kyoto Protocol.

The European Union (EU) saw its Emission Trading System achieve an overall carbon dioxide (CO2) emissions reduction of 3% in the year 2008 compared to 2007 levels. This was a result of installations reducing their own emissions, buying emissions within the EU Emissions Trading Scheme and buying emissions through the Clean Development Mechanism (CDM). The total amount of confirmed emissions from Emissions Trading System installations in the EU-27* in 2008 was 2.052 billion tons of CO2, 3% lower than the 2.118 billion tons recorded for 2007 in the same countries.

In 2008, companies in the EU used 81.7 million generated through the Clean Development Mechanism (CDM), out of which 31% of these credits came from India i.e. approximately 25 million tons. Indian companies have been using the CDM effectively for reducing more emissions than would have been the case without CDM. For 2008, the 25 million credits from Indian CDM projects had an estimated value of around INR 24.8 billion provided by the EU at present EU carbon prices.

CDM allows industrialized countries to meet their emission reduction targets by paying for green house gas emission reduction in developing countries. For example, (Figures are hypothetical), a company in Brazil switches from coal power to biomass. The CDM board certifies that by doing this the company has reduced Carbon dioxide emissions by 100,000 tons per year. It is issued with 100,000 CER's (Certified Emission Reductions). Under the Kyoto Protocol, the United Kingdom has to reduce its green house gas emissions by 1 million tons of carbon dioxide each year. If it purchases the 100,000 CER's from the Brazilian company, this target reduces from 1 million tons/year to 900,000 tons per year making the goal easier to achieve.

Europe has been dominating the carbon market since its creation. EU's Emissions Trading Scheme (EU ETS) was responsible for 70% of the trading in the first half of this year, totaling $47 billion. This dollar amount is likely to increase as the cost of carbon credits soars and with the inclusion of aviation emissions in 2012.

An investor alliance of 385 banks, insurances and pension funds in Germany represents the Carbon Disclosure Project (CDP) with an investment capital of 57 trillion US Dollar.

Obviously, an industry of this amount of rapid growth opens many business opportunities. Companies are needed to provide verified emissions offsets, energy efficiency audits, greenhouse gas emission audits, and to design carbon software. This industry has gained considerable interest from venture capitalists.

Although it is great to see action being taken to reduce greenhouse gas emissions, carbon credits can be a way for an organization to throw money at a problem instead of taking action to reduce their own carbon footprint of their operations. The effectiveness of carbon markets has been questioned, yet this industry does not seem to be going anywhere any time soon.

Another obvious problem: who regulates what a carbon credit is? In addition, what about nations that put out excessive levels of other well-known greenhouse gases such as methane? The goal of the Kyoto protocol should have been reversing the trend of putting out excessive greenhouse gas. Instead, it became a back door method for dispensing foreign aid to third world countries under the guise of carbon neutrality.

An influx of aid of that sort would be a steady source of corruption because the countries receiving the aid know that the donor countries need to dispense it. There are few guarantees that the aid would actually accomplish anything.

In theory the carbon-credit trading scheme is a thoroughly modern and intelligent approach to reducing world pollution. Rich First World companies are financially encouraged to help poorer Third World companies clean up their manufacturing processes. They do this by accepting 'carbon caps', or limits, which if exceeded can be replenished by purchasing carbon credits -- via specialist traders -- from manufacturers in the developing world.

In practice, however, there are loopholes that seriously threaten the schemes' credibility. The most significant are these: they take into account only greenhouse gases, money made through trading credits can be used to expand a business so increasing pollution and, perhaps most questionably, auditors of the scheme are paid for by the companies.

Carbon credits have become such a profitable commodity that market speculators -- hedge funds, banks and pension funds -- have enthusiastically bought into them. Traders buy and sell credits issued by both the UN and EU schemes. For trading purposes, one allowance or Certified Emission Reduction (CER) is equivalent to one ton of CO2 emissions. These credits can be sold privately or on the international market.

A tale of two countries, Canada & India

Canada:

An organic farm couple from the Yukon in Canada had been struggling to make ends meet, and keep their farm going, so they ventured into making it a co-operative with little success and new moneymaking plan had to be devised. And, thus, entered into the picture the sale of their "carbon credits".

Basically, they figured out how much their carbon sinks were worth per ton, and how much they could sell off in credits to mining and oil company concerns in the Yukon to offset their carbon emission footprints. The Green couple, noted that x amount of land had been designated for farming in the Yukon, and that other people who wanted to farm could join in on the carbon credit sales to fund themselves and thus the Yukon could become "carbon neutral" in short order. The money making scheme was even extended out to farmers in the southern part of Canada to help their bottom line and to make Canada carbon neutral.

First, the farms already exist, so they are already offsetting carbon deposits in the atmosphere, they do not all of a sudden magically do this after the person owning the farm figures out how much their carbon sinks are worth and sells the credits to carbon producers, and thus on paper make any given area "carbon neutral". The state of carbon neutrality would already exist; the only change made would be a paper shuffle, with money being paid for the carbon sinks, as opposed to their just "being there" already. Therefore, in reality, what would be going on is status quo, but a new cash cow would be created. If Canada can become "carbon neutral", by farmers figuring out the amount of carbon sinks they have per ton and then sell the credits to industry, then Canada is already carbon neutral.

Second, in the case of the Yukon, already naturally occurring carbon sinks, in the form of natural plant/tree growth, would be cleared to make farmland, which would make an immediate net loss of carbon sinks and the emission of more carbon, until the farm was under production. Then, after the farm became a producer, the farmers, could figure out the worth of their carbon sinks, and sell the credits. So in essence we would have a falsely created economy based upon carbon sinks that already would have been occurring with natural vegetation, only nobody had figured out their worth and put them on paper as an offset sink.

Of course, there would be more considerations to this, such as how long it would take said farm to make up for; the net carbon loss sinks that had been occurring naturally before they cleared the land, how much carbon was emitted during the clearing and cultivation processes, as well as figuring out if the natural vegetation was a bigger sink, than the farm itself would become. Because if there is a net loss of carbon sinks through turning the land in agricultural production, then the new farmers can hardly sell carbon credits on that which would have produced more carbon sinks naturally.

Now the case can be made that more farms in the Yukon need to occur in order for the lowering of carbon emissions from distance produce shipping and that they need subsidies in order to remain afloat, and thus the sale of the carbon credits can be seen as subsidies. And, the same can be said for farmers elsewhere too, that they need subsidies in order to exist and that carbon credit sales would give them the additional money they need.

India

The CDM pilot project, a part of the larger Haryana Community Forestry Project, co-funded by the European Commission, was the first small scale aforestation project in the world to get certified by the Clean Development Mechanism (CDM).

In this project an aforestation area of 370 hectares of sand dune land belonging to 227 farmers in eight villages of Sirsa district, Haryana, has been selected for a carbon-trading project within the Kyoto Protocol Clean Development Mechanism (CDM) under the United Nations Framework Convention on Climate Change (UNFCCC). A number of participatory appraisal exercises with stakeholder farmers were carried out, by-laws for a farmers' society to implement the project were framed and the society was registered. Validation of the proposed project activity by a company accredited by UNFCCC was carried out through site inspection in April 2008 and the proposed CDM project was approved by the UNFCCC CDM Executive Board on 23 March 2009.

The EU provides a market for a range of CDM credits, while EU countries may purchase CDM forestry credits limiting Climate Change to 2°C. The EU's objective is to ensure that global average temperature does not increase more than 2°C above pre-industrial levels. To avoid this, global emissions of greenhouse gases must peak before 2020 and then greatly decrease by 2050. The necessary cuts in global emissions can be achieved only if all countries contribute their fair share according to their responsibility and capacity. In addition, even if the temperature increase stays below 2°C there will still be a need for significant adaptation efforts by all countries.

Today in the EU, companies buy carbon credits at 22 Euros per ton of carbon dioxide. However, CER's arising out of CDM have been sold for a pittance -- for only 5-10 Euros.

It is not clear why this price difference exists. Ishani Chattopadhyay, Director of Ecosecurities, India, a carbon credit trader that buys CER's from India for sale in Annex I countries says firstly that CER's and EU credits are different. The EU Credits give an automatic right to emit carbon dioxide because they are emissions allowances. CER's are subject to verification by the UNFCCC.

Second, there are country risks for operating in developing countries and dealing with small companies.

Third there is no "stock exchange" for CER's yet, since the first CER's have only just been issued for sale on October 20 2005. CER's are bought and sold in private deals where prices are not revealed, so a fair price is difficult to arrive at. Mukul Sanwal of the UNFCCC agrees that greater transparency would improve the price. He also stresses though that it is a failure of the market systems in India is also depressing the price. "This is the same old commodities problem again", says Sanwal referring to the situation where commodities like coffee are sold at subsistence levels in developing countries, yet earn huge windfalls for companies in the developed world. Developed countries are extracting the benefits of CDM or milking the developing nations in the name of 'Carbon Credit.'

"There is so much pollution in the air now, that if it were not for our lungs there would be no place to put it all"

Before concluding, I would like to add the comments of an anonymous lady from the USA:

"Please be patient with me, for, I am not very bright. Let me try and understand this 'carbon credit'. If I am a very rich company who makes big money by polluting and I will keep making big money by polluting even more and I am willing to pay out any type of carbon tax (offsetting) or whatever you want to call it, then how in the world are we helping the environment. Are we simply not giving a license to the polluters? Yes, I am aware that if all things were fair and we played nicely that the system just might work, but in a greedy society and in a world in which one has a China and an India who do not want to play fair then I do not see how offsetting anything will work. For every dollar that any corporation or country offsets they will more than double spit out in carbon emissions! Why? Because they will want to recover that money and then they will want to pass that on to consumers who in turn will pollute etc., etc., I am afraid that I am just too dumb to understand this genius idea. I know the mechanics, but I also know human nature and that has never failed me regardless of how bad things get."

"Sun O' Sun, though you are hot, without you, this Planet will rot".

 
 
Authored By:
Moothedath Ramanathan Menon has more than three decades of experience as a journalist and a writer on Energy and Environment subjects, interacting with energy sectors—both conventional as well as non-conventional—in India and abroad. In the 80s, he was the Bahrain Correspondent for ‘Middle East Electricity’ magazine published by Reeds, U.K. He worked as the Media Manager (India) for Washington, DC-based publication ‘Business Times’ which promotes India’s commercial interests in North
 

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Comments

September, 09 2009

Vidyardhi Nanduri says

ENVIRONMENT SENSEX-EARTH'S GLOW-SUN-LIFE SIGNIFICANCE VIDYARDHI NANDURI SAHANA VAVATU-SAHANAU BHUNAKTU is a derived Energy on the Earth region for all Beings.

NAHI-NAHI PASYATE DRUKKUM KARANE- The Invisible field Links are Sensitive and may not be apparent to the Eye-view.

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A special quest for the Human-Being in-depth is to create the Necessity-Demand-Curiosity-Sustain a Sensible Index and define Life Support.

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September, 10 2009

Salman Zafar says

The article exposes the great scam that is taking place in the name of 'Carbon credits'. There's little hope that the forthcoming Copenhagen meeting will put some sort of pollution control mechanism for the developed countries. How long will indsutrialized countries rely on poor countries to mitigate climate change?

September, 10 2009

Len Gould says

Thanks for his excellent contribution to the discussion. Your example of the farmer in Yukon, Canada is a perfect case displaying the fraud of credit trading. A simple flat tax on carbon fuelsat source is the only effective solution.

September, 10 2009

Harry Valentine says

There are many theories that attempt to explain the change in climate that has occurred over the past few decades. The El-Nino and El-Nina effect in the Pacific Ocean offers one explanation. Damage to the ozone layer caused by volcanic emissions and CFC's allows more solar heat to reach the earth surface is another explanation. Increased methane gas emissions into the atmosphere and increased humidity in the atmosphere at certain locations is another valid explanation. Changes in solar activity is also a valid explanation that can explain climate change.

There are several hundred scientists who reject the carbon-based cause of climate change given all the other explanations to climate change. The Kyoto protocol is a serious flawed policy that will ultimately encourage scams that involve the sale of carbon credits.

September, 10 2009

James Carson says

First, carbon dioxide is not "dirty". It is no less important to life on this planet as oxygen and water. It is a "pollutant" if and only if it contributes significantly to global warming. Contrary to the assertions of many, the science on that is far from settled.

Second, your assertion that the Kyoto Protocols are legally binding is erroneous. They are binding by those nations who have agreed to them through signature and ratification.

Third, your assertion that solar variability over the eleven year solar cycle is 0.1% is misleading. We only know about that variability in a systematic way for three cycles. That is nowhere near enough time to establish a true understanding of that variability. Proxy measures are inadequate to measure it.

Fourth, despite the recent activity you mentioned, European carbon markets have collapsed no less than three times already.

Finally, "carbon credits" strike me as modern "indulgences" virtually identical to those that were peddled by the Church in previous centuries.

September, 11 2009

Len Gould says

So then, everyone should agree that a carbon tax, which can be quickly and easily repealed if it is found unnecessary, is far smarter than a trading scheme which will be impossible to dismantle in future, right?

September, 11 2009

James Carson says

No, Len.... Until CO2 has been proven HARMFUL, I am opposed even to a tax.

September, 11 2009

Ferdinand E. Banks says

The choice isn't between something and nothing, because it is going to be something. The opinions of contributors to this or any other forum will not change that.

Accordingly, the something that it should be is a carbon tax that is income neutral - the sort of thing that Sarko wants in France. Of course, making it strictly income neutral is probably impossible, but the point is to make it expensive to emit 'carbon'. Is carbon really dangerous? Although I don't really know or care, I vote yes. I suppose that I will end up paying a couple of hundred dollars a year, but I can afford it and it won't offend me the way that paying money to Brussels or to support the Swedish commitment in Afghanistan.

September, 14 2009

Ramanathan Menon says

Dear Readers:

Here is an eye-opener to substantiate the contents of my article:

A greenhouse gas (GHG) emissions cap-and-trade system like the one serving as the centerpiece of climate-change legislation that is currently being debated in the U.S. Congress would generate high profits for Wall Street traders but also higher energy prices for consumers and would still provide minimal emissions reductions, according to a study by the U.S. Climate Task Force (CTF), a coalition of policy experts from business, academia, government, and the environmental community.

The “opaque, complex” cap-and-trade system in the climate-change bill approved by the House of Representatives last June “is more likely to foster creative accounting than clean energy innovation,” said Joseph Mason, professor of finance at Louisiana State University and author of the study. “The fundamental fact is that our ability to engineer markets—whether they are for central bank reserves or for sub-prime mortgages—has been jarringly put into perspective this year. Yet the cap-and-trade system lawmakers are currently considering would be susceptible to similar kinds of manipulation, corruption, and extreme price dynamics, setting the stage for another volatile boom-and-bust cycle.”

Adding to the voices of opposition to the House bill, CTF Chairman Robert Shapiro, a former economic policy advisor to President Bill Clinton, expressed his group’s preference for a direct tax on carbon. “Rather than create a new trillion-dollar market in volatile financial assets, our lawmakers should enact a simple, direct emissions policy that puts the global climate and interests of average people ahead of Wall Street. A direct, transparent carbon tax-shift would provide the critical incentives to develop new technologies and energy sources, necessary to save our planet. It also would avoid wasteful handouts to industry, attract less lobbying by entrenched interests, involve lower administrative costs, and deliver a stable price for carbon and its reduction.”

Senate action on the House climate-change bill is currently stalled as a result of the heated debate over healthcare reform, which emerged this summer as the top priority of the Obama Administration, and few people believe that the U.S. will have a climate-change bill ready before the meeting on a new international climate-change treaty in Copenhagen this December. “The Congress as an institution has difficulty doing a lot of things at the same time,” Stuart Eizenstat, lead U.S. negotiator on the Kyoto Protocol in 1997, told the New York Times on September 9. Climate change this year “is going to be a casualty. We will not have a bill signed by the president by Copenhagen.”

Ramanathan Menon (Author), India

September, 15 2009

Tom Tanton says

Dr. Banks, would your position change if you realized that rather than "a couple hundred dollars" was, more likely than not, a few thousands of dollars each and every year?

There are PLENTY of existing incentives to develop "clean technology" whatever that might mean---from cholesterol-inducing fat subsidies to outright mandates--but reliable and economic energy remains crucial to both developed and developing countries. When is the world going to remember THAT?

There is no FUNCTIONAL difference between a direct tax on carbon and the faux-market of emissions trading. Cap/Trade only hides the tax.

September, 15 2009

Don Hirschberg says

I read a story on ASPO USA today reporting that “only” forty- some ships are lined up waiting to load coal at Newcastle Australia. I recently read a story (several actually) how desperate the shortage of coal is in India and their difficulty in buying enough abroad. They are opening new mines. Recently China, already by far the largest coal user, is going to increase their coal production by 30% in the next 5 or 6 years.

I find it surreal that discussions here of Kyoto II in December and methods of decreasing CO2 emissions carefully ignore such stories.

September, 16 2009

Peter Boisen says

Some examples from UN statistics on CO2 emissions per capita: http://unstats.un.org/unsd/environment/air_co2_emissions.htm Qatar 56.24, USA 19.70, Australia 19.00, Singapore 12.83, Russia 11.00, Germany 10.70, Japan 10.00, UK 9.20, France 6.70, Venezuela 6.31, Sweden 5.70, China 4.62, Brazil 1.86, and India 1.31 These numbers exclude CO2 emissions from the burning of biomass (considered to be part of a closed loop). The effects of change of land use are not considered.

Looking at the EU the proposed CO2 tax component in motor fuel taxation is 30 EUR/tonne. The CO2 tax rate for other fuel use is normally lower. But, if we should use the 30 EUR number for all CO2 emissions this means that the average Swede would pay not more than 171 EUR or about 250 USD annually.

September, 16 2009

Jasbir Bhatia says

Carbon tax or credits ultimately will be passed on to the consumers. Comapanies won't lose much while companies' goals are to increase profits, and stock prices. In theory the intent is to give these comapnies some time to clean up their act. Therefore the tax/or credits should be time limited before which they must reduce their own GHG emissions to meet the standards. Otherwise it seems to me that these taxes are like people with high risk of heart disease due to cholestrol buying some cholestrol credits, and expect to remain healthy or overall improve the health standard of a society. We should also remember that in all combustion based electricity generation processes, roughly speaking, nearly twice the amount of direct heat per kilowatt of generation has to be wasted in the atmosphere. Therefore I strongly support the renewable energy systems.

Jasbir Singh

Siemens Energy Orlando, Florida USA

September, 17 2009

A. Shyam says

Whether you admit science of 'Global Warming' or not, the fact is that there is need for better technologies and a much more urgent need to bring back the desired global vegetation cover. Incidentally, they happen to be the options posed under Kyoto. Had it not been for the current debate, humans may have missed the opportunity of exploring the alternate to 'Fossil Fuel'. Humans have this habit of dissecting analysis after the event instead of a pro-active measure. One may differ on the amount of sun energy reaching earth, but the fact remians very little of this energy has been exploited currently.

September, 18 2009

Don Hirschberg says

“Using energy consumption growth trends from 2002 to 2008, the study said China's energy usage could exceed 100 billion tons of standard coal in 2050, more than the Earth's capacity to sustain and far more than the 16.1 billion tons of standard coal the entire planet consumed in 2008.” From an AP story carried on ASPO-USA

That is, China is projected to be using perhaps 8 times as much coal per year in 2050 than used by everybody else on earth in 2008. 100/[16.1-3(?)] = 7.6

And as Peter pointed out the Chinese contribute only modest quantities of CO2 per capita.

The per capita CO2 emissions rate in India is much lower than China’s. By 2050 their population could well be greater than China’s. They need a prodigious increase in generating capacity.

It seems to me that the question is not what can be accomplished at Kyoto II in December but just how we can get to 2050.

September, 22 2009

James Carson says

I cannot let AK Shyam's comment go unchallenged. The fact is that the so-called green movement has hugely degraded 'global vegetation cover'. How is this possible? Bio-fuels. How many acres of rain forest have been lost to bio-fuel development?

Furthermore, the US has no problem with vegetation cover. None. Many believe that there is actually more than in pre-Columbian times because of the successful conversion of formerly treeless tracts of the great plains to forest. Prairie fires and buffalo migration no longer destroy seedlings.

The point about humans 'missing the opportunity' of exploring non-fossil alternatives is curious in light of the prolific use of NUCLEAR generated energy. The reason that we do not exploit much solar is because it is very VERY expensive.

Finally, I reject the notion that our choices are either carbon tax or carbon trading. Until the global warming debate has really concluded, there is no rational justification for either. Frankly, it looks to me like the skeptics are winning that debate. Even in the UK, never mind the US, the public is very skeptical of agw.

September, 22 2009

Tom Matthews says

I'm surprised that know one has mentioned the Environmental Protection Agency (EPA's) Clean Air Interstate Rule (CAIR). The SO2 and NOX cap and trade program was initated in 2005 and resulted in a significant drop in emissions within two years per the EPA's 2007 progress report.

http://www.epa.gov/airmarkt/progress/nbp07.html

Unlike a tax, the cap and trade program affords electric utilities the ability to value technologies like scrubbers or generation against the alternative market of purchasing credits. The federal allocation declines as older units are removed from the national fleet, thus the collective generation portfolio must become cleaner. The success of CAIR could easily translate to carbon cap and trade..

September, 23 2009

Len Gould says

Tom: "ability to value technologies like scrubbers or generation against the alternative market of purchasing credits. " -- Exactly why might utilities not be able to value such technologies against a fixed, stable flat at-source carbon tax? It should be much simpler, and less costly for them.

September, 23 2009

Len Gould says

(Of course I meand the valuation process overhead less costly. The cost of the tax itself, not being open to manipulation and scamming, might not be so less costly)

September, 23 2009

Tom Matthews says

Len:

Edith Claussen and Judith Greenwald of the Pew Center make the case better than I can as to why cap and trade is better than a tax-

"Under a cap-and-trade program, the government sets an overall emissions cap and issues tradable allowances that grant businesses the right to emit a set amount. Those who can reduce their emissions more cheaply are able to sell extra allowances to others who would otherwise have to pay more to comply. Because of this market-based approach, a cap-and-trade system helps assure that you can achieve your overall cap at the lowest possible cost."

See their for full op-ed piece at :

http://www.pewclimate.org/press_room/opinion_editorials/oped_miamih07122007

September, 24 2009

Len Gould says

Tom. I guess I'm more old-school than that. I tend to think that people who are throwing their garbage into the public commons should stop, even if it costs them more than "buying credit" from others who are already doing better than the law allows.

How long until the friedman neo-libs extend the concept of markets to common crime? Those who embezzle large amounts can purchase credits to avoid prosecution from those who embezzle nothing, with the "Cap" being set at the average? That would even work for murder I suppose.

September, 24 2009

Tom Matthews says

Len:

There are some practical realities to consider: Solar power is far more economical in the Southwestern states compared to the rest of the continental US. Wind is more economical in the plains states (and on particular seaboards) and hydro is more economical in the Northwest. Carbon legislation is about harvesting on these renewable resources. I don’t see how a tax program can serve an electric utility in Ohio the same as an electric utility Arizona. A cap and trade program would allow for the Ohio utility to share in the capital expense of a solar facility in Arizona. Under a tax program, marginal wind and solar facilities will be built across states like Ohio and Pennsylvania.

Note that Friedman would likely encourage the marketplace to decide the balance between low cost energy against clean energy rather than the government.

September, 26 2009

Ferdinand E. Banks says

Tom Tanton, I have had a chance to study - superficially - cap and trade in Europe. It doesn't work, and since there is going to be something to penalize carbon emitters, the alternative I choose is a carbon tax. But remember what I said: the tax will be returned to the people who pay it, only the tax will be designed to discourage the emitting of carbon.

What about the details of this tax. I don't have the slightest idea. If Milton Friedman were alive of course I might think about asking him, assuming that I wanted an answer that broke all records for stupidity.

When I say that I don't know the details, perhaps that is not quite right. It would be specified that the purpose of this tax is to reduce the emission of carbon. It would not go into a government pot with other taxes. Oh no.

September, 28 2009

Ferdinand E. Banks says

Peter Boisen, residents of Sweden shouldn't have to pay anything to clean up the environment, since they have one of the top 3 environments in the world. What has happened in that little Sweden has to pay because of the shortcomings of others. And listen, they love to pay. They love to be mades fools of, which is why they went into the EU, and send so much money to stone age countries

September, 28 2009

Edward Reid, Jr. says

Arguably, the objective of any carbon-emissions-driven AGW reduction effort is to reduce carbon emissions. Arguably also, the specific objective is to halt the growth of atmospheric carbon concentration, at a minimum, or to reduce it to some magic number such as "350" (ppm).

The first imperative in such a program would arguably be identifying the percentage reduction in current global annual emissions necessary to halt the growth of atmospheric carbon concentration. The second imperative, assuming the acceptance of an "impending catastrophe" scenario, would arguably be identifying the time period within which the the growth must be halted; or, alternatively, the maximum atmospheric concentration which could be tolerated while avoiding triggering the "impending catastrophe.

An absolute global cap on annual emissions, combined with a published schedule for the reduction of that cap to the required annual emissions rate (probably ~0) and penalties equal to ~10x the market clearing price for tradable allowances in any given year would accomplish the program objectives.

I would be fascinated to learn how a carbon tax would accomplish the same result with the same degree of certainty. I would be even more fascinated to learn how the tax rate necessary to accomplish the result would be calculated (assuming that calculating it accurately is even possible).

There is also a logical progression for the process: 1) halt the growth of global annual emissions; 2) reduce global annual emissions; and, 3) reduce atmospheric concentration, if necessary.

While it should not be necessary, I will point out that the entire discussion above is based on a global effort to accomplish a global goal. The global goal is beyond the capacity of any nation, or subset of nations, to accomplish. There is no role in such a program for self-righteous non-participants.

September, 29 2009

Ferdinand E. Banks says

Well Edward Reid, I think that we will have to wait for the big show - or the Big Sting - in Copenhagen this December to get some of the answers you want. Incidentally, in my morning paper (in Sweden) this morning, 7 or 8 big-wigs warned the Swedish people that now is the time to start planning for a warming Sweden. NOW, they said. In that list was the former head of the Swedish Energy Agency, who is a gentleman without the slightest knowledge of anything having to do with energy..

Let's just face the facts of life. Neither cap/trade nor a carbon tax by individual countries will amount to much where carbon control is concerned, but at least some of a carbon tax can be returned to the people who pay it, although in one form or another some arrangement should be made to increase the cost of emitting carbon - for what it is worth. Maybe we need an example here. If you pour Blue Label into your gas tank instead of some old gasoline, when the government's tax pot is divided up, you get a couple of bucks - or something like that. Working out the exact details should not be too difficult.

October, 13 2009

Ramanathan Menon says

Carbon credit business opportunities from India:

More and more use of coal will lead to less and less souls on the planet earth.....India has envisaged to add a capacity of approximately 78000MW to meet the growing power demand in the country during the 11th Five Year Plan out of which about 50570 MW is being planned through coal based thermal power projects only. An ambitious target of 36 MT was kept for 2008-2009 from captive coal blocks but actual production during that year was only 30 MT resulting in around 17% shortfall against the target. An ambitious target of 104 MT has been kept for 2011-12, the terminal year of the Xlth Five Year Plan and to achieve-this, it requires a growth rate of around 35-40% in captive block segment. Ramanathan Menon

October, 13 2009

Ramanathan Menon says

The shrinking carbon credit business:

The number of carbon funds worldwide has grown since last August from 80 to 88, and the assets managed under or committed to these funds have increased by 25% to $16.11 billion over that period, according to research conducted by Environmental Finance Publications (London, U.K.). Despite the overall growth in these funds, which consist of a mixture of government-capitalized procurement vehicles, carbon funds run by multilateral banks, and private-sector investment funds, eight funds have either been placed on hold or closed down over the past year. Moreover, growth in carbon fund assets has substantially lagged growth in trading volumes on the carbon market, Environmental Finance Publications reported. Almost all of the new carbon funds launched this year are private-sector vehicles, designed to deliver financial returns to investors or to provide carbon credits to “compliance buyers” such as major industrial emitters of greenhouse gases (GHG) subject to mandatory caps.

October, 22 2009

Ramanathan Menon says

"It has let slip that the UK wants to fix the price of carbon in order to incentivize the building of a fleet of new nuclear power stations.

The recession has had utilities revising investment plans and this highlights the limitations of liberalized markets to deliver low carbon power. Just this month E.ON UK shelved plans to build a 1600 MW coal fired plant with CCS citing short-term economic conditions, yet just a week earlier it had announced plans to build a 1600 MW CCGT plant.

So Westminster’s Office of Nuclear Development has now reportedly promised nuclear companies that the price of carbon under the EU emissions trading scheme – now about EUR13 ($19.4) per tonne – will not be allowed to fall below EUR30 per tonne, and ideally EUR40. This will be effected by imposing from 2015 a levy on consumers’ bills, estimated at an extra GBP44 ($70) on a GBP500 annual bill.

Time will tell whether it will have the desired effect. Long-term power purchase agreements, which would reduce risk and therefore the cost of capital, may still be required.

But assuming that the carbon floor price applies across the power industry, and is set high enough, then a carbon floor price is potentially revolutionary. A fixed carbon price - effectively a tax - offers stability and penalizes fossil fuel generation.

The right carrots and sticks would be in place to incentivize low carbon power. And, hopefully, it would then be for the market to decide the low carbon winners and losers, rather than via myriad government subsidies.

Power Engineering International, U.K. "

Ramanathan Menon

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