Carbon trading is not enough to tackle climate change

Shell’s chief executive, Peter Voser, was quoted as calling on governments to introduce a carbon tax or a minimum price for CO₂ because “the ETS [emissions trading scheme] was failing to deliver sufficient incentives to kickstart expensive technologies such as carbon capture and storage”. This lack of incentive comes about because if industry surpasses expectations by cutting emissions far below the cap set within the ETS, or if the cap is unambitious, the price of carbon will be low and return on low-carbon investment reduced. This is exactly what has happened during this recession, where an economically induced reduction of emissions has caused the price of carbon to plummet.

Emissions caps have an advantage over a carbon tax as they should guarantee emission levels are reduced at a specified rate. But, without a minimum price for CO_2, they provide very little incentive to industry as a whole. Policies should encourage industry to reduce emissions as much as possible, not just to the level of the cap – which, if achieved, would still leave a good chance of dangerous climate change.

Vincent de Rivaz, chief executive of EDF Energy, “warned of the dangers of a ‘sub-prime’ crisis inside the ETS if complex financial instruments were created by market participants”. There could indeed be a crisis, not because of the complexity of the financial instruments, but rather because of the quality of the underlying carbon credits. The EU common agricultural policy (CAP) gives us a great example of how large regional policies can be abused.

The article also states that John Browne, “a former boss of BP and an early ETS promoter, has also expressed reservations about such schemes, saying it was ‘wrong’ to place all your faith in them”. He is entirely correct. Globally, where the greatest strides have been made in climate and energy policy, carbon markets have not played a role. Instead, government intervention and planning (such as in the Danish and now Chinese energy sector), guaranteed return on investment (such as through “feed in tariffs” for renewables in Germany and elsewhere), and heavy regulation of the energy sector (as in California’s energy efficiency improvements) have been key. My experience with UK industry was that any substantive decarbonisation was as a result of high energy costs and more direct policies such as the Renewables Obligation.

Copenhagen will undoubtedly envisage a role for emissions trading. However, its shortcomings must be addressed and its limitations acknowledged through a commitment from all countries to a broad range of other policy measures.

The media is again full of speculation on whether there will be a double dissolution. That is possible, but it all depends on what happens next week in the Senate.

Let me go back to the beginning by quoting the first paragraph of Section 57 of the Constitution under which a dissolution of both the House and the Senate is permitted. I have highlighted the relevant passages.

S57: If the House of Representatives passes any proposed law, and the Senate rejects, or fails to pass , or passes it with amendments to which the House of Representatives will not agree, and if after an interval of three months the House of Representatives, in the same or the next session, again passes the proposed law with or without any amendments which have been made, suggested, or agreed to by the Senate, and the Senate rejects or fails to pass it, or passes it with amendments to which the House of Representatives will not agree, the Governor-General may dissolve the Senate and the House of Representatives simultaneously. But such dissolution shall not take place within six months before the date of the expiry of the House of Representatives by effluxion of time.

What can we say about the current state of the CPRS legislation? The three month test has clearly been passed. If the legislation is defeated, then a trigger has been created. If the legislation is amended, and the government in control of the House of Representatives rejects the amendments, then a trigger for a double dissolution has been created.

But what is meant by fails to pass?

Continue reading “Double Dissolutions and the Meaning of ‘Fails to Pass’.” »

RBS: where the public money has gone

Ecologist

1st December, 2009

Treasury accused of writing a ‘blank cheque’ with taxpayers’ money for bank to make environmentally-damaging investments

The full extent of unsustainable investments made by the Royal Bank of Scotland (RBS) were revealed this week in a report published by a coalition of organisations.

Since being bailed out by the taxpayer in October 2008, RBS has financed a host of environmentally-damaging projects, including open cast mining in Bangladesh, tar sands exploration in Canada and a heavily criticised mining company in India.

The coalition of groups, including Platform and the World Development Movement said the investments paid for by the taxpayer put the UK to ‘shame’.

‘We’re paying for some of the most damaging mining and fossil fuel projects around the world,’ said Julian Oram, head of policy at the World Development Movement.

Sustainable investments

The report, ‘Royal Bank of Sustainability‘, has called on the body set up to manage the public investments in RBS, UK Financial Investments (UKFI), to re-focus the bank towards sustainable investments both within the UK and the rest of the world.

RBS should also sign up to the Carbon Disclosure Project (CDP), says the report, enabling UKFI to assess the climate risk of every investment the bank makes.

‘RBS could be a global leader in low carbon financing,’ said People & Planet director Ian Leggett.

‘But to build that business two things need to happen. First, social and environmental criteria have to be a key part of RBS’s investment decisions.

‘Second, RBS needs to stop funding unconventional and controversial fossil projects immediately,’ he said.

An RBS spokesperson said they fully supported the transition towards a low carbon economy but continued to lend to all sectors of business.

‘Over recent years we have been a leading arranger of finance to the renewable energy sector and take our responsibility to play our part in this seriously.

‘As a leading corporate and commercial bank, RBS has customers in almost all sectors of business. We only provide finance to projects which meet the environmental and social standards specified by the Equator Principles.’

Unsustainable investments made by RBS in the past year include:

Bangladesh – open cast coal mine

RBS subsidiary, ABN Amro Bank NV has a 4.75% share of GCM Resources, the UK company pushing for an open cast mine in Bangladesh. There has been fervent local opposition as it would displace approximately 40, 000 people and impact on access to clean water for approximately 100, 000 people.

Wales – open cast coal mine

RBS has taken part in loaning £115m to Hargreaves Services, the coal operator. Hargreaves has plans to extract 7m tonnes of coal by developing one of the largest open cast coal mines in the country at Tower Colliery, near the coal-mine-cum-protest-site Ffos-y-fran in Merthyr Tydfil, south Wales.

This type of mining has been likened to a financial hit-and-run, bringing a few jobs for a couple of years and potentially leaving widespread asthma and other public health and environmental effects in the community for years to come.

India – Vedanta mining

RBS was the lead financial adviser to Sterlite, which is 60% owned by Vedanta, in a recent takeover bid. The bank and its ABN Amro subsidiary gave letters of credit worth $100m (£60m) to Sterlite, which is India’s biggest copper producer.[i] Vedanta is very controversial and has an appalling record on human rights.

Canada – tar sands

Research from the Rainforest Action Network indicates that since Oct. 13, 2008 – when HM Treasury announced its recapitalisation of the Royal Bank of Scotland Group – RBS has extended at least $2.7 billion in debt/equity issuance underwritings to companies that own and/or are actively building tar sands extraction infrastructure and/or tar sands oil pipelines in Alberta, Canada.

Uganda/ Democratic Republic of Congo – oil exploration

In March 2009, RBS was part of a consortium of 14 banks that lent $1,890 million to the Irish company Tullow Oil – providing in the region of $100 million itself. The bank had already helped raise £402 million by placing shares for Tullow in January 2009.

In early 2009, the company announced a major discovery of 400-1000 million barrels by Lake Albert in Uganda, just on the border with the Democratic Republic of Congo (DRC).

Tullow also holds oil exploration rights across the border in North Kivu in the DRC, which continues to be torn by strife after more than a decade of resource-driven civil war.

The border area has seen some of the fiercest fighting take place as rival armies and militias have struggled for control. An additional 30,000 refugees were displaced in North Kivu during two weeks of fighting in March, adding to the existing 1.4 million internally displaced people in the region.

Useful links
Full report

Why do climate deniers hold sway in Australia

Aussie scientists were among the first to warn about global warming. Back in 1988, they printed off posters showing the fin-shaped roof of the Sydney Opera House poking out of a blue sea.

But Australia also has a history of climate denial. Twelve years ago at the Kyoto climate negotiations, other rich nations promised cuts in carbon emissions. But Australia won permission to increase its emissions by 8%. And even that wasn’t good enough for the prime minister John Howard, who eventually pulled out of the Kyoto protocol with George W Bush.

Recently, the Labour prime minister Kevin Rudd rejoined Kyoto. But the sceptics are unrepentant. The Aussie geologist Ian Plimer is the latest international pin-up among climate sceptics.

Why do the deniers hold such sway? For one thing, Australians have the highest per capita carbon emissions of any major developed country thanks to its sprawling suburbs and heavy coal use. According to figures submitted by Canberra to the UN, Australia’s emissions from burning fossil fuel have risen by 30% from 1990 to 2007 – more even than the US.

Also, Australia is by some way the world’s largest exporter of coal, the world’s dirtiest fuel. They are the boys with the black stuff. Giant ports like Gladstone and Newcastle export ship out enough coal each year to put more than half a billion tonnes of carbon dioxide into the air. When the Chinese coal mines can’t keep up with domestic demand, they phone Digger.

Australia’s industrialists have lobbied loudly against any limits on their carbon emissions. Last year, the Business Council of Australia called Rudd’s cap-and-trade climate plan a “company killer”, and declared war on the policy. Now they have seen off the leader of the opposition Liberal Party, Malcolm Turnbull, because he backed the Rudd plan.

They will be pleased with themselves. But whatever happens in Copenhagen this month, Australia’s climate policy will still be in a mess. Either the world adopts tough emissions cuts – in which case demand for Australian coal will shrink and the country will face painful economic reforms to cut its soaring domestic emissions. Or the world fails to come up with tough emissions cuts – in which case, say its scientists, there is a real risk of the entire nation becoming uninhabitable.

Global emissions exceeding ‘carbon budget’, PwC study finds.

A fifth of that budget had been used up by 2008, they said, meaning the world is already 10% off the necessary trajectory to hit the target. The carbon “debt” in 2008 was equivalent to the joint emissions of the US and China.

John Hawksworth, PwC’s head of macroeconomics, said: “Despite the widening consensus around the need to decarbonise, few countries are doing enough to live within our estimates of their carbon budgets. “If the world stays on this [course] we will have used up the entire global carbon budget for the first half of this century by 2034, 16 years ahead of schedule.”

The report added that the G20 countries which account for over 80% of global emissions need to cut their carbon intensity – the amount of carbon dioxide emitted for each unit of GDP – by 35% by 2020, four times the rate achieved between 2000 and 2008.

Global emissions from the use of energy need to peak by 2015 and fall back to 2009 levels by the end of the next decade, the report said.

Leo Johnson, a PwC climate change partner, said previous inaction meant that much faster action was needed now: “If we had started on a low-carbon pathway in 2000, we would have needed to decarbonise at around 2% a year up to 2008. We managed only 0.8% in 2000-08. The result is we now need to decarbonise at a rate of 3.5% a year to get back on track by 2020 – four times more than we have managed at the global level since 2000.”

The report said that Britain, one of the first countries to set a legally binding carbon budget, has recorded the eighth best performance in the G20 in the period. The UK is behind France and Germany but ahead of Italy, and around 6-7% off the required trajectory to meet its carbon budget by 2050.

The EU as a whole, which claims leadership on the climate change agenda, is estimated to have been around 7% off target in 2008, having improved carbon intensity by 1.8% a year since 2000 compared to the 2.6% annually that would have been necessary to be on target.

Only Russia reduced its carbon intensity by more than the budgeted amount since 2000, thanks to very rapid increases in energy efficiency, although it started from a very low base.

EU could easily make 40 per cent cuts by 2020

Ecologist

1st December, 2009

Phasing out fossil fuels, encouraging faster take-up of renewables and making radical improvements in energy efficiency would double Europe’s emission cuts, says study

The EU could double its target for reducing greenhouse gas emissions by 2020 without resorting to building new nuclear power stations or unproven technologies like Carbon Capture and storage (CCS), according to research released by the Stockholm Environment Institute.

Current commitments will see the EU cut its emissions by 20 per cent by 2020. But the new study says Europe could cut domestic emissions by 40 per cent by 2020 and 90 per cent by 2050 on 1990 levels.

It could do this through ‘radical improvements’ in energy efficiency and a faster switch from fossil fuels to renewables. Wind power, says the study, could be generating 55 per cent of electricity for the continent by 2050.

‘Our analysis shows that deep cuts in emissions can be achieved in Europe at reasonable cost between now and 2050, even with rather conservative assumptions about technological improvement,’ said report author Dr Charles Heaps of Stockholm Environment Institute.

The study also envisages a shift towards public transport and a move away from air travel.

Car journeys could drop from 75 per cent to 43 per cent of all journeys by 2050 and 80 per cent of intra-European flights under 1,000km could switch to rail by the same date.

The study estimates the cost of such a 40 per cut emissions is likely to be between 1 and 3 per cent of EU GDP.

‘While this is not a trival sum by any means, it also is not a prohibitive cost. In fact, it can even be considered a small cost when viewed in the context of the dire crisis we are facing,’ says the study.

In the UK, the Department for Energy and Climate Change (DECC) said the EU had committed to a 20 per cent cut by 2020 but was willing to increase that to 30 per cent if other countries showed similar ambition at the Copenhagen climate negotiations.

However, the UK’s climate watchdog, the Climate Change Committee (CCC), recommended in September that the UK should make a 42 per cent cut by 2020.

Useful links
Stockholm Environment Institute study

1 December, 2009

Category: News

Carbon trading is not enough to tackle climate change

Antony Green “Possible Election Scenarios”

November 28, 2009

Double Dissolutions and the Meaning of ‘Fails to Pass’.