Carbon Trading:Ownership, Accumulation,

Political Conflict

ATTACOrebro

10 March 2007

• The earth has the capacity to handle the equivalent of 5 cubic kilometres of graphite being released to the air each decade.

• But in fact the equivalent of 28 cubic kilometres of graphite are going into the air every decade.

  

Q. What role is carbon trading supposed to play in managing the overflow (= scarcity of dump space)?

A. It is supposed to find the cheapest way of using less of it (= the cheapest way of cutting emissions or achieving a numerical target imposed by state regulation).

Q. What is being bought and sold in the “carbon market”?

A. The earth’s carbon-cycling capacity= carbon “dumps” in oceans, air, vegetation, soil, etc.

Q. And how does the market make the use of this scarce good “more efficient”?

Carbon trading’s two aspects

Emissions trading (“cap and trade”)

Trading in carbon credits from “offsets” or special “carbon-saving” projects

Emissions Trading

Q. Governments say that this is “just an instrument”, “just a tool” to make climate action cheaper? True?

A. Not quite, because it means governments have to create

• Private property, which they then have to make

• Scarce, and do the• Arithmetic needed to make

exchange possible.

Industrial Sector

Annual gift of pollution rights (mtCO2)

+/- Average annual emissions1998-2003

% of ‘available’ world above-ground carbon dump

Approx. value @ €26/tCO2(early 2006, pre-crash)

Power 145.3 -6% 1.5-3.0 €2.180b

Iron/steel 23.3 +16% 02.-.05 350m

Refineries 19.8 +11% 02.-.04 297m

Offshore 19.1 +14% 02.-.04 287m

Cement 10.7 +18% .01-.02 161m

Chemicals 10.1 +12% .01-.02 152m

Other 23.7 +17% .02-.05 357m

TOTAL 252.0 +2% 2.6-5.1 €3.780b

Quasi-Privatization of Existing Global Carbon Dump by the UKProposed National Allocation under

the EU Emissions Trading Scheme, 2005

• The big six UK electricity generators are getting around US$1.2 billion per year in windfall profits from the EU ETS.

• Metals manufacturers threaten to stomp out of Germany over having to pay for the EU pollution allowances German utilities got from their government for free.

corporations encouraged to lobby for overallocations and to (mis)interpret “competitiveness” as requiring

overallocation

Offset

+

Q. Governments say that this is “just an instrument”, “just a tool” to make climate action cheaper? True?

• Closure orders were slapped on several of these plants for pollution violations in December 2006.

• Similar plants in Karnataka have already-registered CDM projects that are described by even an ex-member of the CDM Methodological Panel as blatantly business as usual.

CARBON POOLS (billion tonnes)

Atmosphere 720-760Oceans 38,400-40,000Rock >75,000,000Land biosphere

living biomass 600-1,000dead biomass 1,200

Fresh water 1-2Fossil fuels >4,130

coal 3,510oil 230gas 140other 250

Active Carbon Pool:

Carbon is always moving between the forests, atmosphere and oceans

The overall amount in all three carbon stores together does not increase

Fossil Carbon Pool:

Carbon is locked away and does naturally not come in contact with the atmosphere

Fossil carbon is stored permanently in coal, oil and gas UNLESS humans mine coal, extract oil & gas

Once released, it will not move back into the fossil carbon pool for millennia – the time it takes for fossil carbon to be created

Forests, Soil, other VegetationOceansFossil Fuels:

Oil Coal Gas

Active Carbon: Fossil Carbon:

Fallacy of Kyoto Protocol carbon accounting:

1t active carbon = 1t fossil carbon

Temporary Storage = Permanent Release

Oceans Forests, |Soil, other vegetation

Atmosphere

Where carbon is stored

Active Carbon Pool

Fossil Carbon Pool

Atmosphere

Oceans Forests, other Vegetation, Soil

Plantar carbon project, Minas Gerais

• Part of the World Bank Prototype Carbon Fund (PCF)

• Carbon credits will finance expansion of already vast eucalyptus plantations by another 23,100ha

• After approx. 7 years trees will be cut to make charcoal – produce pig iron – make steel – manufacture cars – allow more CO2 in the atmosphere

Charcoal

“The eucalyptus planted over here is meant for charcoal. It is a disaster for us. They say it provides jobs, but the maximum is 600 work places in a plantation of 35,000 hectares. And, when everything has been planted, one has to wait for six years. So, what work does it generate?”

Jorge, former Plantar worker: “When I started working at Plantar I was

OK. One day I fainted after lunch. I was already applying the insecticides,

fungicides. Then therewere headaches, weakness.

My superior told me, ‘I am firing you because

you do not know if you are sick or not.’ Six or seven

people died. Plantar said it was heart failure. Now I

don’t dare eat the fish from the streams here.”

Demonstration against deserto verde, Espirito Santo, Brazil, 2005.

How nearby indigenous people feel about commercial eucalyptus plantations in their territories.

What people in the Uganda forest department said

“We just have to admit that we know nothing about the trade in CO2, neither how it will function nor how much the foreign investor will profit from it.”

Unverifiability makes gaming easy

Example: 125 MW registered wind project in Karnataka

– Wind energy investments attract accelerated depreciation of 80% in the first year

• Effective tax shelter of 24% of the project cost (at corporate tax rate of 30%)

– Wind energy gets a 10 year income tax holiday– IRR in PDD: 7.3%– IRR without tax benefits calculated by independent observer:

11%– IRR with tax benefits: 22%

Source: Axel Michaelowa, Perspective GmbH

“The argument that producing pig iron from charcoal is less bad than producing it from coal is a sinister strategy . . . What about the emissions that still happen in the pig iron industry? What we really need are investments in clean energies that contribute to the cultural, social and economic well-being of local populations.”

Letter from 50 trade unions, local groups and academics, Minas Gerais, Brazil

“We used to produce coffee and pasta and cotton. Several different little factories in their suitable regions. Nowadays, there is only the eucalyptus. It has destroyed everything else. . . . Why do they come to plant in the land suited for agriculture instead of most suitable areas? Because it takes ten to 20 years and over here only seven. All the best pieces of land went to the eucalyptus plantations, pushing the small producers away and destroying the municipalities.”

“In India, people see their land taken away and destroyed both for big and ‘sustainable’ developments, for large dams and small hydros (Uttaranchal), new carbon sinks (ITC, Andhra Pradesh), environment-friendly wind mills (Maharashra, Satara), and liquid and gaseous filth from the ‘clean and green’ companies poison their soils, rivers and air. Beyond boundaries of their everyday lives and knowledge, climate games go on with baselines, BAUs, additionality and CER vintages. The Himalayan glaciers meanwhile continue to melt, cloudbursts and flash floods wipe away whole villages, prolonged droughts and extremes of temperature create havoc with agriculture, and cyclones devastate fisherfolk villages. The real and perceptible danger of climate change is offset by the illusion of the most absurd and impossible market human civilization has ever seen.”

Soumitra Ghosh, National Forum of Forest Peoples

and Forest Workers

Conflicts*N-S colonialism*within business community*between business and government

overallocations no scarcity price crash

*between trading proponents and environmentalists and the public

Join us!

• Exchange information• Help hasten return to

constructive solutions

For more information

http://www.thecornerhouse.org.ukhttp://www.sinkswatch.orghttp://www.carbontradewatch.orghttp://www.wrm.org.uy

Download Carbon Trading: A Critical Conversation on Climate Change, Privatisation and Power from http://www.dhf.uu.se.

Contact Larry Lohmann at larrylohmann@gn.apc.org.

Two kinds of climate action: Continue extraction but find new CO2 dumps.

Overuse? Cut extraction.

Entrench inequalities through Unequal use? privatization so big users can keep using most dump space. Find ways of using dump more equitably.

• Subsidy shifting• Public investment in structural

change• Taxation• Legal action• Support for existing initiatives

Copy of deserto verde demo4.JPG

c. 400 BC – State environmental management, China.c. 1300s – 2005: Community and inter-community irrigation management systems, upland SE Asia.c. 1850s – 2005: First national “environmental regulation” in the UK.

10,000 BC – 1970s: No pollution trading systems.

1960s: Academic economists in US & Canada come up with the idea.

1970s: US lead trading programmes begin.1990s: Acid Rain (SO2) Programme, Los

Angeles trading schemes.1997: Kyoto Protocol trading schemes

begin.2005: EU ETS comes into force.

OVERVIEW: Carbon trading Delays transition away from fossil fuels in the North

“tipping points” come closer in South as well. Impedes transition away from fossil fuels in South

livelihood problems including (again) climate problems. Provides new finance for corporate or state “bad citizens”

in local areas, destroying lives and livelihoods.

These are not mere “anecdotes” or “exceptions.” They are (by and large) not “aberrations” that can be

“fixed” but are built into the trading system. Carbon trading is not compatible with more constructive

approaches (i.e., it is not a mere “instrument” or “tool”). We have a choice – join us.

Trading delays transition away from fossil fuels in the North “tipping points” come closer in South as well.

Why? • ET creates and hands out property rights to the biggest

polluters in the North, increasing their power and the inertia of a fossil-intensive system.

• Neither ET nor CDM selects for immediate investment in long-term structural change in the North.

• Climatic benefits of CDM credits can never be verified, injecting climatically meaningless currency into a system already awash with a surplus of pollution permits.

• Measurement and enforcement is currently insufficient even for ET.

Trading impedes transition away from fossil fuels in the South livelihood problems including (again) climate problems.

Why?• Most CDM projects have zero or negative effects on a

transition from fossil energy: gas capture projects generate 72% of CDM credits, renewables 2% associated effects on life and livelihood.

• Genuinely constructive Southern movements and initiatives are not recognized in the carbon market. Property ownership in purported new carbon dumps is dependent on command of technical Northern expertise. Carbon credit generators are generally in conflict with local people.

CDM tends disproportionately to provide new finance for corporate or governmental “bad citizens” in local areas destroying lives and livelihoods.

Why?• Well-capitalized, highly-polluting firms are best able

to hire consultants, get official approval, generate large blocks of cheap credits, etc.

• Local-friendly renewable projects tend to be fiddly, small, expensive per credit generated, and unable to capture green finance.

• The trade is structured in order to annex land, air and community futures in the South.

“The carbon market doesn't care about sustainable development. All it cares about is the carbon price.”

Jack Cogen, Natsource

“[F]ew in the market can deal with communities.”

Rabobank official

• CDM, JI (and offsets generally) in trouble beyond fixable “design flaws”

incoherence measurementchange and innovationproperty rights

Reduction

Offset

+

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Offset accounting methodology “will create other Enrons and Arthur Andersens.”

Bruno Vanderborght, Holcim Cement

Many carbon project proponents “tell their financial backers that the projects are going to make lots of money” at the same time they claim to CDM officials “that they wouldn’t be financially viable” without carbon funds.

James Cameron, Climate Change Capital

Kyoto Protocol biotic offsets are ‘completely unverifiable’, making Kyoto a ‘cheat’s charter’.

International Institute for Applied Systems Analysis

“[I]t is not an exaggeration to brand the mechanisms of the Kyoto Protocol as ‘Made in the USA.’ . . . The sensitivity of the Protocol to the market was largely instigated by the negotiating positions of the USA.”

Michael Zammit Cutajar, former Executive Secretary, UNFCCC, 2004

“. . . the EU – now fully committed to emission trading – was insistent [at first] that trading should be supplementary to domestic action . . . seen as essential to the development of technologies that would open the way to a low-carbon future.” -- Zammit Cutajar

“The complete relinquishment of land and labor to the market mechanism would result in the demolition of society.”

Karl Polanyi (1944)