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Africa: Real Climate Action Options

AfricaFocus Bulletin
Dec 3, 2010 (101203)
(Reposted from sources cited below)

Editor's Note

"The current obsession with carbon trading as a primary tool for tackling climate change is high risk, irresponsible and dangerous. It is a distraction from more viable, more equitable, more effective solutions for tackling greenhouse gas emissions and providing adequate finance to developing countries for tackling climate change and adapting to its impacts." - Clearing the Air, Friends of the Earth England, Wales and Northern Ireland

With low expectations from global climate change talks now under way in Cancun, Mexico, it is clear that forward movement on an international agreement will depend on mobilization before next year's meeting in Durban, South Africa. Whether that happens or not, in practical terms, practical action on climate change will be determined largely by decisions at national level, and, failing that, by initiatives at sub-national levels as well. If the world is to stand a chance of averting disastrous levels of global warming, which will disproportionately affect Africa, then failure at global talks must stimulate rather than discourage action at other levels.

This AfricaFocus Bulletin contains excerpts from Clearing the Air: Moving on from Carbon Trading to Real Climate Solutions, a report from Friends of the Earth England, Wales and Northern Ireland. The report clearly lays out policies that have a real impact, in terms of mitigation and finance, most of which are not dependent on the prospects of internationally binding agreements.

Another AfricaFocus Bulletin sent out today (and available at http://www.africafocus.org/docs10/can1012a.php) contains a summary of key issues at Cancun, from Martin Khor of the South Centre.

For previous AfricaFocus Bulletins on climate change and the environment, visit http://www.africafocus.org/envexp.php

++++++++++++++++++++++end editor's note++++++++++++++++++++

Clearing the Air: Moving on from Carbon Trading to Real Climate Solutions

by Sarah-Jayne Clifton

Edited by Martin Cullen

Friends of the Earth England, Wales and Northern Ireland

The report outlines why carbon trading is not the solution to climate change and sets out some of the real solutions for cutting greenhouse gas emissions and delivering climate finance. It calls on national governments to urgently dedicate time and resources to develop and implement these and other more viable, equitable and effective solutions to the climate crisis.

This summary report is available online at:
http://www.foe.co.uk/resource/reports/clearing_air_summ.pdf
The references for this summary report are all available in a separate online document at:
http://www.foe.co.uk/clearing_references
The full report on which this summary is based is available at:
http://www.foe.co.uk/resource/reports/clearing_air.pdf

1. Executive summary

The current obsession with carbon trading as a primary tool for tackling climate change is high risk, irresponsible and dangerous. It is a distraction from more viable, more equitable, more effective solutions for tackling greenhouse gas emissions and providing adequate finance to developing countries for tackling climate change and adapting to its impacts. Carbon trading is unreliable, unproven and burdens developing countries with unfair responsibility for tackling climate change. The barriers to reforming carbon trading are insurmountable in practice within the time we have available to avoid catastrophic climate change. In addition, carbon market offsets are not a legitimate source of climate finance, and cannot guarantee a predictable flow of finance to developing countries. This type of finance rarely supports genuine lowcarbon development. The biggest financial beneficiary of carbon trading is the Northern carbontrading industry.

Real solutions for climate change mitigation

  • Energy: A global feed-in tariff programme with investment of US $100 billion per year over 15 years would bring down the costs of renewable technologies to a universally affordable level. This would enable renewable energy to become "the default choice of the world as a whole." Stronger regulations on energy efficiency combined with increased taxation on carbon and energy will also drive energy savings. ["feed-in tariffs" require energy distributors to purchase renewable energy at specific rates designed to make renewable sources competitive.]
  • Agriculture: The expansion of small-scale, sustainable agriculture has the potential to bring about a dramatic reduction in global greenhouse gas emissions though reduced fossil-fuel use in agriculture and carbon sequestration in plants and soils. It is also critical to tackle global demand for products associated with damaging intensive agriculture, including excessive consumption of meat and dairy products.
  • Forests: Tackling emissions from deforestation and forest degradation necessitates measures to tackle the core drivers, most notably demand for agrofuels, meat and forest products. Improvements in forest governance are also essential, including protection of the rights of forest-dwelling communities and Indigenous Peoples and the extension of community forest governance. Funding must also be provided to incentivise the shift away from development based on forest destruction.
  • Industry: To prevent polluting companies from using the threat of offshoring or so-called carbon leakage to avoid taking action, the starting point must be an agreement at the international level on the introduction of common standards on the use of best available technology. This will reduce carbon leakage or the threat of it, and will help drive innovation. This will in turn require a relaxation in intellectual property rights to ensure access to best available technologies.

Real solutions for climate finance

  • Financial Transaction Tax: A new, global tax on cross-border financial transactions could generate additional government revenue of US $400 billion, including US $100 billion for climate finance. The tax is geared towards the global finance industry and would not affect the financial transactions of ordinary consumers.
  • Tackling tax evasion: Clamping down on tax avoidance in developed countries could provide significant additional government revenue. Tax avoidance in Europe is estimated at 2-2.25 per cent of European Gross Domestic Product (GD P): EUR236-266 billion in 2009.
  • Redirecting fossil-fuel subsidies: Global subsidies for the production and consumption of fossil fuels are estimated at US $700 billion per year. Producer subsidies are mostly transfers from Northern governments to companies involved in fossil-fuel production and redirecting these would have minimal financial impacts on ordinary people in developed countries.
  • Special Drawing Rights (SDRs): New allocations of SDR s, a reserve asset created by the International Monetary Fund, could be issued at approximately US $100 billion per year without leading to inflation.
  • Carbon and energy taxation: An EUwide carbon tax and a graduated 'Starter Tax' in the United States could together bring in US $200 billion per year. Making only a quarter of this available for climate finance could provide more than US$50 billion per year. A levy on international aviation could bring in an additional US$10 billion per year.

A conservative estimate of the revenue-generating potential of these finance solutions indicates that they could provide new and additional climate finance for developing countries of at least US $420 billion per year.

2. Introduction

The starting point of this report is the conclusion of Friends of the Earth's previous report on carbon trading - that carbon trading hasn't worked, is seriously flawed, and the barriers to reform are insurmountable in practice within the time we have available to avoid catastrophic climate change. Furthermore, the current obsession with it as the primary tool for tackling climate change is high risk, irresponsible and dangerous. Today's attention on carbon trading is driven largely by the governments of developed countries, in order to offset their emissions-reduction responsibilities. Carbon traders and financial speculators are adding to the frenzy. This focus on carbon trading and its expansion is distracting us from the adoption of more viable, more equitable, more effective solutions for tackling greenhouse gas emissions and providing adequate climate finance to developing countries.

This report shows:

  • why carbon trading is not the solution to climate change
  • that many of the real solutions are already available.

There is no silver bullet that will cut carbon emissions quickly and provide the necessary international finance. Tackling climate change requires a package of tools and policies. There will be no easy alternative to weaning the global economy off its addiction to fossil fuels and the unsustainable industrial and agricultural activities which this addiction has facilitated. This report shows that many solutions are already available and have been developed, scrutinised and advanced for decades. All that is needed to make them a reality is the political willingness to use them. ...

...

Key principles for climate change mitigation

It is critical that the transition to a low-carbon economy, while driven by the need for environmental justice, does not in itself lead to further economic and social injustices. Policies and measures to tackle greenhouse gas emissions and support economic transition must:

  • Ensure jobs and decent work, including by minimising job losses, maximising opportunities for job creation, and protecting pay conditions and health and safety for workers.
  • Protect low-income groups, and guard against the creation of further economic and social injustice.
  • Respect and promote the rights of local communities and Indigenous Peoples, including rights to selfdetermination and self-government; the right to free, prior and informed consent; the right to management and customary use of natural resources; land rights; and rights of redress.
  • Ensure good governance, including participation of affected workers and communities in the development of policies and measures to tackle climate change, and transparency, accountability and democratic control over decision making.

Problems with carbon trading as a tool for cutting greenhouse gas emissions

Debates on carbon trading dominate discussions in the UN climate negotiations, with proposals on the extension of carbon-trading mechanisms globally and into new areas like forest protection put forward by a number of countries, most notably the European Union, the United States and Japan. Proponents of carbon trading argue that trading allows emissions cuts to be made in the most cost-effective way because the flexibility provided allows emissions reductions to be made where it is cheapest to do so. They also argue that carbon trading drives private-sector investment in tackling climate change in developing countries. However, there are multiple, very significant problems with using carbon trading to tackle greenhouse gas emissions and provide climate finance. These are examined below and in Section 5 on climate finance.

1. Carbon trading is unreliable and unproven

Carbon trading is largely unproven as a tool for driving reductions in greenhouse gas emissions. The European Union Emissions Trading System (EU ETS ), the world's largest emissions trading scheme, has failed to drive emissions reductions at the pace necessary for Europe to contribute its fair share. In the UK, the highly respected Committee on Climate Change confirmed in 2009 that it lacked confidence in the ability of the EU ETS to deliver the required low-carbon investments in the energy sectors covered by the scheme through the 2020s. It recommended that "a range of options [such as regulation and taxes] for intervention in carbon and electricity markets should be seriously considered."14

2. Carbon trading burdens developing countries with the responsibility for tackling climate change

Although theoretically carbon trading doesn't have to involve offsetting, all existing and planned carbon trading schemes in developed countries are based on substantial offsetting of emissions reductions. This is also the case for all proposals for the expansion of carbon trading currently in the international climate negotiations in the UNFCCC. Offsetting shifts the burden of climate mitigation from developed to developing countries. Offsetting undermines the equitable sharing of the remaining global carbon budget - the volume of greenhouse gas emissions that can still be emitted globally while keeping overall emissions in the atmosphere below levels considered to present an unacceptable risk of catastrophic climate change. Forthcoming research by Friends of the Earth illustrates how little space there is left in the atmosphere to be traded.

3. Carbon trading could make tackling climate change more expensive overall

Carbon trading removes incentives for polluters to make adjustments which are more expensive, by allowing them to buy pollution permits or offset credits from others in the carbon market. The overall effect of this perverse incentive structure is that the hardest, most expensive economic adjustments are put off. Countries covered by carbon trading schemes continue to develop along high-carbon pathways until they have no choice but to take the most expensive mitigation actions. This has the knock-on effect of wasting time we can ill afford if a transition to low-carbon economies is to take place before climate tipping points are reached.

4. Carbon trading is a tax on consumers to pay polluters to pollute

The structure and regulatory context of existing carbon trading schemes allows industries covered by them to dodge the additional costs that failure to reduce pollution is supposed to engender, by passing these on to consumers. Uwe Leprich from Saarbrcken University in Germany has tracked electricity prices since the establishment of the EU ETS in 2005. His research demonstrates that even though energy companies initially received the majority of their pollution permits under the scheme for free, the companies included the full price of the permits in electricity prices. This led to increases in wholesale electricity prices of 30 per cent in Germany and France, 50 per cent in Scandinavia, and over 80 per cent in the UK.16

5. Carbon trading incentivises increased pollution for profit

Research on the Clean Development Mechanism (CDM) - the official offsetting scheme sanctioned by the Kyoto Protocol - has exposed major market scandals. Widespread gaming and abuse of the system have been carried out by polluting industries in developing countries, seeking to qualify for offset credits under the scheme. Most recently, CD M-Watch has exposed gaming and abuse of the CD M by the producers of HFC -23, a potent greenhouse gas which is a by-product of the refrigerant gas HCFC -22. The offsetting watchdog has argued that the HFC -23 destruction projects under the CD M offsetting mechanism are actually having the opposite of the intended effect: they are contributing to increasing global greenhouse gas emissions.

Can carbon trading be Reformed?

Numerous loopholes need to be closed in order to reduce the threat posed by existing carbon trading schemes to our chances of avoiding dangerous climate change. Addressing these would require setting caps on emissions in line with science and justice; removing all offsetting from trading schemes; prohibiting speculative trading; auctioning all pollution permits; global regulation to prevent a 'race to the bottom' - where countries are forced to lower their regulatory standards to match the lowest standards globally; disaggregation of industrial sectors covered by the schemes to allow for trading only within sectors; and supplementary interventions to drive innovation.

It is questionable whether the resulting mechanisms could be distinguished from other regulation such as standard setting, except that they would be far more complex than other regulatory instruments which could achieve the same purpose, and thus more time consuming, expensive and difficult to implement.

Critically, ongoing calls for reform of the EU ETS to address some of the worst loopholes have led to very few improvements. This failure is attributable to the power and excessive influence over government decision-making of the considerable vested interests - polluting industries, financial actors and others - that have grown up around the scheme.

The likelihood of wholesale reform of carbon trading in the time we have available to achieve a peak and decline in global carbon emissions thus looks entirely unrealistic.

Solutions for climate change mitigation

This section explores priority policies and measures to bring about emissions reductions in the energy, agricultural, forest governance and industrial sectors of national economies. The exact package of solutions required will vary from country to country. There will be significant differences in the types of policies needed in developed and developing countries.

Energy

Investment in renewable energy Energy supply is responsible for around one quarter of global greenhouse gas emissions.17 Only a fraction of the world's population benefit from current global energy use, with a significant proportion of people still without access to energy to meet even their basic needs. Globally around 1.63 billion people lack access to electricity and 2.4 billion people cook with firewood, with many suffering the health effects that result from exposure to wood smoke.

Delivering the cuts in emissions from global energy use needed requires a dramatic switch from unsustainable fossil-fuel based economies. This can be achieved through a reduction in unnecessary energy consumption, and increased use of renewable energy sources to meet basic energy needs.

Renewable energy is still far from being cost competitive with fossil fuels, not least because of the substantial state subsidies to the fossil-fuel industry. The 'Green Energy Revolution' Strategy from the United Nations Department for Economic and Social Affairs (UN -DESA ) asserts that globally, investment in renewable energy needs to meet the dual needs of tackling climate change and expanding energy access to those who need it. Of all of the policy mechanisms with the aim of increasing investment in renewable energy deployed so far, the most dramatic expansion of renewable energy capacity was witnessed under the feed-in tariff programmes enacted in countries such as Germany and Spain. Overall, around 90 per cent of the expansion of wind power in Europe since 1995 has occurred in countries that apply feed-in tariffs to power suppliers.

Feed-in tariffs oblige electricity grids to purchase renewable energy as it becomes available and to offer the providers of renewable energy a guaranteed price, the 'tariff' or rate paid for the electricity. Prices are set at levels that ensure renewable energy producers can recover their investments and make a reasonable profit. Prices are also regularly reviewed to prevent over-rewarding, including taking into account reductions in the costs of technology and deployment.

Feed-in tariffs are institutionally light and their ease of implementation in Germany and Spain suggest it would be relatively simple to roll them out across other developed countries. However, in developing countries the ease with which feed-in tariffs could be implemented is severely restricted by the limited government revenue available to subsidise the tariffs until the price of renewable technology is low enough so that subsidies are no longer necessary. The solution to this problem proposed by UN -DESA is international support for a global feed-in tariff programme. It estimates that additional investment of US $100 billion per year over 15 years would bring down the costs of renewable technologies to a level that is universally affordable so that renewable energy becomes "the default choice for the world as a whole."

Energy efficiency

An indication of the global potential of energy-efficiency measures has been provided by the International Energy Agency (IEA ). It has put forward 25 recommendations for action on energy efficiency by governments and estimates that if these were implemented globally they could save 8,200 Mt (million tonnes) CO 2 per year by 2030. This is equivalent to half of the EU 's annual emissions.21 Stimulating energy savings and increasing energy efficiency requires direct government target setting, monitoring, enforcement and evaluation of energy-efficiency measures, supported by public investment to overcome financial barriers to the meeting of targets.

According to the IEA , buildings account for about 40 per cent of energy used in most countries. Tackling this energy use requires new building codes, innovative construction methods, and building-certification schemes. Electrical appliances and equipment represent one of the fastest-growing energy demands in most countries. IEA recommendations include action on mandatory energy performance requirements or labels; lowpower modes including standby power for electronic and networked equipment; energy savings from effective lighting technology; and energy-performance test standards and measurement protocols. Finally, with around 60 per cent of oil consumed in transport globally, this sector must be a key target for energysavings measures. Such measures include mandatory fuel-efficiency standards for light-duty vehicles and fuel economy of heavy-duty vehicles.

Carbon and energy taxes

In developed countries where affordable energy is more readily accessible and excessive energy consumption is a significant problem, taxation of carbon and energy has an important role to play. If well targeted, and with an escalator - a mechanism which allows the tax to start low and then be increased incrementally - taxation, in combination with other measures, can help reduce excessive energy consumption, incentivise energy efficiency and drive emissions reductions.

The UK, Demark, Finland, Ireland, the Netherlands, Sweden, and Norway all have carbon taxes. Sweden's escalating carbon tax was introduced at a rate of EUR28 per tonne but is now over EUR100 per tonne. The country's Ministry of Finance estimates that Sweden's emissions would be 20 per cent higher without the tax.23

The UNFCCC could play a major role in helping to share learning and best practices among developed countries on the use of taxation to tackle greenhouse gas emissions, providing a space for the development of more effective taxation policies which parties to the UNFCCC could implement nationally.

Taxation has a number of advantages over carbon trading, including a more stable and predictable price impact; greater ease of control by governments; and greater simplicity and ease of implementation. Ensuring that largescale industrial polluters who are targeted by any taxation instrument actually pay will necessitate great care in the design stage. It may require regulations to ensure that the extra costs are not passed on to consumers or measures to reimburse consumers who lose out. In addition, if carbon taxes are directed at households they must be accompanied by measures to mitigate any regressive impacts and to protect vulnerable households.

Agriculture

[see on-line version at
http://www.foe.co.uk/resource/reports/clearing_air_summ.pdf]

Forests

[see on-line version at
http://www.foe.co.uk/resource/reports/clearing_air_summ.pdf ]

Industrial processes

[see on-line version at
http://www.foe.co.uk/resource/reports/clearing_air_summ.pdf]


AfricaFocus Bulletin is an independent electronic publication providing reposted commentary and analysis on African issues, with a particular focus on U.S. and international policies. AfricaFocus Bulletin is edited by William Minter.

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