Mar 10, 2009

How to Distribute $646 Billion in Carbon Market Revenues?

By JAMES KANTER
RainforestReutersShould revenues from any potential carbon market in the United States be used to help preserve endangered ecosystems elsewhere?

Under a cap-and-trade system, polluters buy permits, usually from government authorities, to compensate for their emissions. Such a system would raise hundreds of billions of dollars in an economy the size of the United States.

So, what should governments do with that money?

President Barack Obama said in his recent budget proposal that any revenues raised in the United States (estimated at $646 billion between 2012 to 2019) should be used for alternative energy development — and tax breaks for some citizens.

That last bit makes sense, given that companies facing little competition, like big utilities, can easily pass on the costs of buying the permits, which could lead to sharp price increases on everyday goods — and on electricity in particular. Warren Buffett warned about this consequence last night.

Mr. Buffett’s point is reinforced by the experience in Europe, where some of the most coal-intensive utilities raised prices and earned windfall profits — even when the permits were issued free.

But when it comes to contemplating what to do with the money from a cap-and-trade system, there are broader equity issues to consider – like how much to help poorer, neighboring countries adapt to the effects of climate change created by emissions from the rich world.

David Cleary, the director of conservation planning for South America atThe Nature Conservancy, has suggested using some carbon market revenuesto support initiatives south of the American border.

First, Mr. Cleary says the United States should follow the example of the Germans, who channel a small proportion of cap-and-trade revenues to development projects abroad.

Second, he says that American companies should be able to meet some of their requirements to hold permits by generating credits from projects, based in South America, that seek to offset greenhouse gases.

“South of the border, there are millions of hectares of threatened grasslands and tropical forests, and millions of people — farmers, indigenous peoples, communities of every kind — living in and around degraded ecosystems they’d love to be restoring. It shouldn’t be beyond the bounds of human ingenuity to put this particular two-and-two together and bolt a hemispheric dimension onto a U.S. cap-and-trade system for carbon emissions.”

Mar 1, 2009

Obama’s Backing Raises Hopes for Climate Pact


March 1, 2009

By ELISABETH ROSENTHAL

Until recently, the idea that the world’s most powerful nations might come together to tackle global warming seemed an environmentalist’s pipe dream.

The Kyoto Protocol, signed in 1997, was widely viewed as badly flawed. Many countries that signed the accord lagged far behind their targets in curbing carbon dioxide emissions. The United States refused even to ratify it. And the treaty gave a pass to major emitters in the developing world like China and India.

But within weeks of taking office, President Obama has radically shifted the global equation, placing the United States at the forefront of the international climate effort and raising hopes that an effective international accord might be possible. Mr. Obama’s chief climate negotiator, Todd Stern, said last week that the United States would be involved in the negotiation of a new treaty — to be signed in Copenhagen in December — “in a robust way.”

That treaty, officials and climate experts involved in the negotiations say, will significantly differ from the agreement of a decade ago, reaching beyond reducing greenhouse gas emissions and including financial mechanisms and making good on longstanding promises to provide money and technical assistance to help developing countries cope with climate change.

The perception that the United States is now serious has set off a flurry of diplomacy around the globe. “The lesson of Kyoto is that if the U.S. isn’t taking it seriously there is no reason for anyone else to,” said Bill McKibben, who runs the environmental organization www.350.org.

This week the United Nation’s top climate official, Yvo de Boer, will make the rounds in Washington to discuss climate issues. The United Nations secretary general, Ban Ki-moon, is organizing a high-level meeting on climate and energy. Teams from Britain and Denmark have visited the White House to discuss climate issues. In China, Secretary of State Hillary Rodham Clinton made climate a central focus of her visit and proposed a partnership between the United States and China. And a special envoy from China is coming soon.

But a global treaty still faces serious challenges in Washington and abroad, and the negotiations will be a test of how far the United States and other nations are prepared to go to address climate change at a moment when economies around the world are unspooling. The global recession itself is expected to result in a reduction of greenhouse gas emissions, as manufacturing and other polluting industries shrink, lessening the pressure on countries to take action.

“The No. 1 thing will be for everyone to see that the U.S. is on an urgent and transformational path to a low carbon economy — that would have a galvanizing effect,” said John Ashton, the British foreign secretary’s special representative for climate change.

The Obama administration has said that it will push through federal legislation this year to curb carbon dioxide emissions in the United States — a promise that Mr. Obama reiterated Tuesday in his speech to Congress.

The Kyoto Protocol has been a touchstone of the environmental movement. Thirty-seven developed countries, including Japan, Australia and nations in the European Union, ratified the accord, agreeing to reduce or limit the growth of carbon dioxide emissions by specified amounts. President George W. Bush, pressed by the Senate, rejected the accord, because countries like China were not also subject to mandatory emission levels. China and India also refused to ratify the protocol.

At the tail end of his administration, Mr. Bush made tentative overtures toward China and other countries on climate matters. In 2007, he convened a meeting of countries that were major emitters of greenhouse gases. Later, in bilateral economic talks, China and the United States agreed that they would cooperate on clean technology development and some other climate issues.

But Kyoto was shaped largely by climate scientists and environment ministers, not the higher-level officials now laying the groundwork. And even many who participated in the earlier accord now say they see it as weak and naïve about political and economic realities. Of the countries that signed, more than half are not on track to meet their targets according to 2008 United Nations data, including Germany, Ireland and Canada.

“In Kyoto we made a lot of promises to each other, but we hadn’t done the domestic politics,” Mr. Ashton said, “and that is why Kyoto — though a valuable step forward — has ultimately been so fragile.”

The talks on the new treaty, said Rajendra K. Pachauri, chairman of the United Nation’s Intergovernmental Panel on Climate Change, “provides an opportunity to fill this gap that we’ve seen, and this time perform up to expectations.”

The 1997 protocol was a narrow accord about the emissions of carbon dioxide and other heat-trapping gasses linked to global warming. The new agreement will need to address how those reductions can be achieved in a way that takes account of their effects on energy supplies and economies — especially at a time of global recession.

Negotiating the treaty when countries are under extreme economic stress presents challenges, Mr. de Boer acknowledged. Politicians in Italy and Canada have complained that it will be difficult to clean up industries to meet their Kyoto goals because of the economic downturn. But others say a global industrial recession, in which emissions tend to drop anyway and countries are poised to spend billions to stimulate economies, is the time to craft a global effort to combat global warming.

With developing countries like China and India emerging as major carbon dioxide emitters in the past few years, experts said that if the new treaty was to be effective, every nation would have to accept emissions limits. “If one part of the world acts and the other does not, that doesn’t really generate a climate benefit,” said Mr. de Boer, who is responsible for organizing the December meetings.

Developed countries would most likely get binding numerical targets, as some did in Kyoto. Developing countries, which were exempt under Kyoto, would probably be given less stringent goals, though it is not clear if these will be longer-term numerical targets or some other mechanism that ties allowable emissions to economic growth.

Mr. Obama has said the United States will lead the effort, but over the next months, he will have to show what exactly that means. A good first step, environmentalists say, would be to commit to trying to limit warming to two degrees centigrade above pre-industrial temperatures, an ambitious goal that the European Union has adopted but that the Bush administration steadfastly avoided. It could also pledge to reduce emissions by 50 or 80 percent by 2050.

The Intergovernmental Panel on Climate Change has said that humans could largely adapt to two degrees of warming, but that a greater temperature increase could cause far more serious consequences, from a dangerous rise in sea levels to mass extinctions.

Climate experts added that the United States did not need to have in place national legislation to limit greenhouse gasses, a process that could take months, to negotiate in Copenhagen. “It’s not just about analyzing a piece of legislation,” Mr. Ashton said. “It’s about the feeling you get if you’re a leader sitting in Beijing. It’s like love; you know it when you feel it.”

A more complex issue is whether negotiators will retain the system of trading carbon credits that is central to the Kyoto Protocol, a kind of global commodities market for carbon.

That system allows developed countries that produce more than their allotted share of emissions to balance their emissions budget by investing in projects that curtail emissions elsewhere. Such projects might include the cleaning up of a coal power plant in China, planting trees in Africa or converting pig manure to electricity in the Netherlands. The same cap and trade concept is now used in Europe’s emissions.

But as the European Union and the countries that signed the Kyoto Protocol have tried such projects over the past few years, problems have emerged. Most notably, it is hard to determine the emissions-reducing value of carbon credit projects, making it easy to game the system. The new treaty, experts say, will also have to broaden Kyoto’s focus beyond industrial emissions to activities like airline travel, one of the fastest-growing sources of carbon emissions. In the end, it will also have to include financial mechanisms and technical assistance to help developing countries cope with climate change.

“This is not just about emissions but about creating a massive investment in a new global energy economy” that includes forests, oceans and the transfer of technology, said Angela Anderson, director of the Pew Environment Group’s Global Warming Campaign.

American negotiators were limited in Kyoto by a Senate resolution saying that the United States would not accept numerical caps unless China did as well. But Senator John Kerry, Democrat of Massachusetts, said, “There has been a sea change in the Senate,” and he added that he believed that there were enough votes — Democratic and Republican — to ratify a strong treaty.

What is unclear is whether politicians will be willing to commit to large enough changes to have a significant effect on global warming. “The Bush administration set the bar very low,” Mr. McKibben said.

Andrew C. Revkin contributed reporting.