Carbon Trading

ENVIRONMENT B. Harikumar

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deas are like dreams. Unbelievably romantic. And, such one is carbon trading – an idea that lays its foundation on ‘tena thyektena bhunjeeta’ (earn by giving). Born in the 1997 World Earth Summit held at Kyoto, Japan, this dreamchild can make miracles on society if practised rightly. The convention, participated by 160 countries of the world, was to negotiate binding limitations on greenhouse gases for the developed nations pursuant to the objective of the Framework Convention on Climate Change of 1992. The outcome was the Kyoto Protocol, in which the developed nations agreed to limit their greenhouse gas emissions, relative to the levels emitted in 1990 or pay a price to those that do. At this point comes the carbon trading. The idea was to make developed countries pay for their wild ways with emissions while at the same time monetarily rewarding countries with good behaviour in this regard. Since developing countries can start with clean technologies, they will be rewarded by those stuck with ‘dirty’ ones. This system poises to become a big machine for partially transferring wealth from wealthy, industrialised countries to poor, undeveloped countries. Say a company in India can prove it has prevented the emission of x-tonnes of carbon, it can sell this much amount of points (or carbon credits) to a company in say, the US which has been emitting carbons. The World Bank has built itself a role in this market as a referee, broker and macro-manager of international fund flows. The scheme has been entitled Clean Development Mechanism, or more commonly, Carbon Trading. This allows industries in developed countries to off-set their emissions of carbon dioxide by investing in reforestation and clean energy projects in developing countries such as large-scale tree plantations as a lucrative alternative to reducing emissions. Planting 100,000 hectares of new forest can remove one million tones of carbon per year from the atmosphere. As trees grow, they absorb carbon dioxide from the air. They use this to make sugar, starch and complex molecules like cellulose and lignin, forming wood, branches, roots, leaves and bark.

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Carbon Trading About 50 per cent of a tree’s dry weight is carbon. If a forest is planted on land, which has already been cleared, the growth of the trees dramatically increases the total carbon stored on the land. The amount of carbon captured by trees is estimated from the volume of the trees, calculated from the heights and diametres. The tree volume is then converted to tonnes of dry wood. The weight of dry wood is then divided into the weight of carbon and other elements such as hydrogen and oxygen. For example, a fast-growing eucalypt plantation averaging a stem growth rate of 20 cubic metres of wood per hectare may yield 500kg of dry wood per cubic metre, that is 10 tonnes per hectare and

contain 50 per cent carbon, that is 5 tonnes per hectare of carbon in one year. Such carbon projects could potentially recover habitat on millions of hectares of heavily populated forest and farmlands. This would bring social, economic, and local environmental benefits to hundreds of thousands, and potentially millions, of poor rural people in the developing world. According to the researchers, there are 126 million hectares (311 million acres) of low-yielding crop and pastureland. Converting some of these areas to higheryielding agro forestry would sequester five to 50 tons of carbon per hectare per year. Rehabilitating dry forests in India could double sequestration from 27 to 55 tons of carbon yearly for every hectare of dry January 2005 z

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forest improved. For example, in the Handia Forest range of Madhya Pradesh, India, 95 very poor rural villages would jointly earn at least US$300,000 every year from carbon payments by restoring 10,000 hectares of degraded community forests, if their project succeeds. Healthy forests bring all kinds of other benefits too. They would help to protect endangered leopards and monkeys and improve local water supplies. At the same time, villagers, many of whom own no cropland would earn money from the sale of fuel wood, highvalue timber, and tendu leaves used for wrapping cigars. Many communitybased projects can sell carbon credits at the expected global market price of US$15 to $20 per ton of sequestered carbon. Few countries are close to making the Kyoto limits without buying credits. So there is considerable demand. Even as more countries get their emissions in order, the emissions allowed will gradually decline over time, making the remaining credits inevitably more expensive. Countries will therefore have an economic incentive to be carbon credit producers instead of consumers. It is definitely an incentive for developing countries to adopt cleaner technologies sooner, so as to continue being sellers and not buyers as they continue to grow. We’re now starting to see how these markets will play out. According to a report, a partnership between a Norwegian firm and a Brazilian landfill to trap and burn methane emitted by the landfill to the atmosphere. This will reduce the addition of methane, a greenhouse gas twenty one times more powerful than CO2. Norway would get the credit equivalent to 670,000 tons of CO2 and Brazil the cash, currently $10.98 per ton. While this is one of the first deals signed, it’s far from the only one around. Problems It should be pointed out that carbon trading is hugely contentious and many environmental and social justice activists oppose it due to its many inherent problems. Most emissions trading schemes have large loopholes which distort the whole system. These range from reliance on ‘credit-generating projects’ such as KERALA CALLING

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monoculture tree plantations, as well as lack of credible enforcement and verification systems to the use of financial instruments such as carbon hedge-funds, banking systems, derivatives, etc. Besides, the production of emissions such as greenhouse gases inevitably involves the production of toxic copollutants. These often include Volatile Organic Compounds (VOCs), Polycyclic Aromatic Hydrocarbons, Particulate Matter, benzene, arsenic, dioxins, mercury, cadmium, etc. All of these copollutants have huge public health consequences. Like way, trading only deals with a general reduction, while individual polluting sites and industries may in practice actually be able to increase their emissions. The reality is that most polluting industries are sited in areas of predominately low-income and communities of colour. Existing schemes have actually demonstrated that massive increases have happened in such communities, resulting in dramatic impacts on the people living there. It was the result of such schemes, which is one of the main factors behind the emergence of the environmental justice movement. Trading in emissions effectively creates a commodity literally out of thin air. As such, global pollution trading is a

world’s most notorious polluters as their key members. Trading is a distortion of what really needs to happen which is reductions at source across the board. No source should be allowed to increase its emissions due to the above reasons. The carbon market creates transferable rights to dump carbon in the environment and vegetation far in excess of the capacity of these systems to hold it. Billions of dollars worth of these rights are to be awarded free of charge to the biggest corporate emitters of greenhouse gases in the electric power, iron and steel, cement, paper and other sectors in industrialised nations who have caused the climate crisis and already exploited these systems most. Though there may be such anomalies, we can lay faith on the goodness of humankind. Private businesses and NGOs can act as intermediaries to combine the carbon offsets produced by communities and sell them jointly to buyers. For example, in Mexico, a local environmental organization helped to organize 400 small-scale farmers in 20 communities to sequester carbon by planting trees around their crop fields. With the NGO as the intermediary, the farmers sold carbon credits equal to 17,000 tons of carbon to the International

form of privatisation of the atmospheric commons (you can’t sell what you don’t own) and allows the market and corporate actors (many of whom are the world’s biggest polluters) to determine the pace and development of the ‘carbon market’. It is precisely for this reason which corporate lobby groups such as the WBCSD and IETA support it. It is said that these groups have played an enormously obstructive role in efforts to negotiate effective environmental agreements and both have some of the

Federation of Automobiles for between US$10 and $12 per ton of carbon. The CDM rules should make all communitybased forestry projects eligible for the lowcost “fast-track” approval process. This is too good an opportunity to let pass by – says experts. If business leaders are willing to take up this not so difficult initiative, companies around the world stand to save money while doing good things for people and the environment, a brave new world awaits us.

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