“See the system”: Part 1, the earnest environmental
By: David A. Smith
In explaining the challenges of globalization, urbanization, or sustainability, Peter Senge, whom I encountered most recently at the Chicago symposium of the US’s Global Business Compact, likes to challenge his audience to see the system.
How many carbon credits does this generate?
See the whole system, not just our part of it.
You scratch my back, I’ll scratch yours
For urbanization, Senge observes that the green revolution, by making agriculture more technological and more efficient, had the intended consequence of driving down the cost of food (good for all of us!), making food into a global commodity whose prices can fluctuate (good for consumers, bad for producers), and driving down the real cost of good (take that, Paul Ehrlich!), which is great for us rich consumers and bad for poor rural farmers.
Ehrlich, back when he was writing the wildly wrong The Population Bomb
Hence, argues Senge, as part of our slum-improvement and city-enhancement strategy, we ought to look at the root cause of rational urban migration – pursuit of more income and a better life – and find ways to strengthen the rural economy and ecology.
About as dressed as he gets: Peter Senge
Seeing the system is integral to any discussion of development aid, which as I’ve posted often appears to be no more effective than filling a sieve, because the illicit flows out can easily match the charitable flows in.
Here in the US, preoccupied as we are with natural disasters – hurricanes, earthquakes, and tsunamis – and with climate change, we are part of an emerging global marketplace in carbon credits.
[Editorial note: Neither AHI nor I personally have any position on global warming, climate change, and whether these phenomena are human-caused. For my purposes, all those issues are irrelevant and a distraction. Urbanization is happening at breakneck speed; cities and people are moving to global-southern coasts and low-lying areas, and it doesn't matter whether catastrophes are more or less frequent, our fault or a natural cyclical occurrence. To us what mattes is simply this: billions of poor people are living in seismically, climatologically, and ecological fragile environments, so we care about the robustness of those cities, and the economics of carbon-offset trading are thus important to our work. – David A. Smith.]
At one end are earnest energy users like us, some of us willing to pay meaningful money to buy carbon offset credits so we can support our jet-set lifestyle with a clear conscience.
One carbon credit …
… one papal indulgence
The other end of the carbon-credit pipeline is far away, in India, where our ecological reaparations payments go. But as I discovered a few months back (when I presented to the South Asia Housing Finance (SAHF) Forum and to a World Bank international workshop on scaling up slum upgrading, leading to several posts about a day in the life of a slum, and India’s housing options), the reality of carbon-trading is far grottier, underhanded, and quite probably fraudulent, as those carbon offsets you may have chosen to buy could in fact be increasing total carbon emissions, though the financing of smokestack industries with lax if any enforcement and corruption galore.
That, at any rate, is the premise of an article I read in Outlook India, whose title spills the beans:
‘Carbon credit’ projects are doing more bad than good in India
Your carbon credits at work: Illegal dumping at the CDM-approved 412 MW Rampur hydel project in Himachal.
Climate change is the newest, fastest way to make money.
For corporate India, as also for much of the industrialised world, global warming is bringing in cash like never before, and throwing up novel opportunities to make more, all in the name of reducing emission of dirty greenhouse gases (GHG).
Already one knows one is not reading a US publication, with its air of articulate skepticism.
We’re here for the carbon offset credits
But even as it’s rush hour on the ‘climate’ train to riches, there are serious reservations being expressed about whether the current market-linked mechanism to battle climate change is really reducing GHG.
As we saw in the subprime fiasco, people have a tendency to believe the words even in the face of contrary evidence. What if our willingness to buy carbon-offset credits is actually increasing pollution?
Try doing it fast!
Think it’s impossible? Welcome to the world of the counterfactual hypothetical.
I buy diet pills to lose weight. When I return, six months later, I’m actually ten pounds heavier. I complain to the maker, “Hey, I gained weight!” “Yes,” he replies, unruffled, “but without my pills you’d have gained twenty pounds, so I saved you ten pounds.”
Are the industries of developing countries like ours getting away with short-term profits in the name of climate change while they continue to damage the environment and inflict more permanent damage on the people?
Why are carbon trading and Clean Development Mechanisms (CDM) fast becoming dirty words in the green activist’s lexicon?
There are seven words you can never say in development television …
Remember, readers, this is a beneficiary nation’s journalist about to eviscerate the carbon-offset system.
It all began some five years ago when the first project was registered with the United Nations Framework Convention on Climate Change (UNFCCC) under the CDM.
Everyone here bought carbon offsets for their plane flights
[In America, this known as the Kyoto protocol or Kyoto treaty; the US has not ratified it. – Ed.]
This was the result of an agreement at Kyoto, Japan, in 1997 (Kyoto Protocol) which was subsequently ratified by several countries. It enables developed countries to achieve emission reduction targets by paying for greenhouse gas emission reduction in developing countries.
One link in our system was the establishment of binding greenhouse-gas emission reduction targets.
Four links in the carbon-offset chain: from Chennai to Chicago
A second link – and one critical to the current system we are trying to see – was that a nation, instead of actually reducing its GHG emissions, could buy reductions in another country.
First World countries are expected to buy certified emission reduction (CER) aka carbon credits, or earn them by investing in green projects under the CDM process.
This is directly analogous to New York City’s air rights, its affordable-housing 421a obligations, or Mumbai’s transferable development rights (TDRs), with one enormous difference: in both New York and Mumbai, all buying, selling, and adjudication took place in a single jurisdiction, whereas Kyoto crosses nations, all of them sovereign, none of them willing to be bound by any of the others. In short, everyone is on the honor system.
Someone talking about honor again? Zzzz …
CERs are a ‘certificate’, like a stock, and are used to trade emission credits.
They are ‘permission to conduct business’, akin also to affordable-housing linkage payments. But again, linkage payments, like air rights and TDRs, are administered by a single central authority and valid only within that authority’s jurisdiction.
Emission reduction projects can range from growing bio-fuel crops to installing machinery at a chemical plant, from neutralising GHGs to building a hydel generator.
India ranks second, after China, in developing CDM projects and generating carbon credits.
India, I can testify from personal experience, has horrible urban air quality, all of it made by people or derived from people’s activities.
The Great Carbon Farce
Under the Kyoto Protocol, developed countries must reduce their greenhouse gas emissions. Since this affects growth, most buy credits. Here is how carbon trading works.
China, you may recall, is now the world’s largest emitter of carbon. How then is China receiving large payments for not emitting carbon?
No green fuels in sight
Clean Development Mechanism
The carbon trade to meet Kyoto Protocol targets is registered and monitored under the Clean Development Mechanism (CDM) of the United Nations Framework Convention on Climate Change. India has 478 registered CDM projects, accounting for 28.3% of the global credits.
New CDM projects are registered all the time; India and China are the two biggest registrants.
Each credit, equivalent to a reduction of one metric tonne of CO2, sells from anywhere between Rs 650-1,115. [$13 to $22 – Ed.] This has potential to generate annual revenue worth several hundred million dollars.
If your project is registered, and its projected reductions are quantified, then you can sell the resulting certificates for about a fifth the price of a barrel of oil.
Sounds good, right? Now comes the flimflam.
Guaranteed to cure whatever ails you!
[Continued tomorrow in Part 2.]