I have a confession to make: when I first heard about carbon credits, and even before I fully understood what they were, I was intuitively opposed to them. “That’s not very scientific” I hear you cry. No, it is not, but it just so happens that when carbon credits were first touted as a solution to reducing greenhouse gas emissions, the then US President, George Herbert Walker Bush, publicly declared himself an avid believer in the scheme.
Now, President Bush, and for that matter his son, the incumbent, are both oil men, who have made fortunes in one of the world’s most energy inefficient countries. Therefore, frankly, I was suspicious, and subsequent research has shown that my suspicions were well founded.
This is not to say that carbon credits do not have a role to play in reducing global warming, but they should be used only when and where appropriate, and in tandem with other pollution-reducing tactics, notably carbon taxes.
Few people understand fully what carbon credits are, but as they will become operational in this country in 2008, now is probably an appropriate time to offer some explanations.
All of us, especially those living in the industrialised west, contribute to atmospheric pollution in the form of greenhouse gas emissions (GHGs). The aim of carbon credits is to impose a fixed quantity of emissions on polluters, be they individuals, corporations or entire nation states. This is called a cap. As the Global Policy Forum explains, if the cap is, for argument’s sake, 10,000 tons of carbon, this can be expressed in the form of permits, each permit comprising 1 ton (US measure) of carbon. Thus our notional cap would be 10,000 permits of 1 ton each. These permits are also called quotas, allowances or GHG units.
So far so good. Much along the lines adopted by the Kyoto Protocol, we now have a cap, a fixed amount of emissions permissible by law, and this amount cannot be exceeded. The problem arises when companies and countries participating in the system accept that, to comply with the rules, they must be in possession of a number of permits equal to, or greater than their actual emissions level. Why? Because carbon credits are tradeable. They can be bought and sold like shares on the stock market. This is called emissions trading.
Let us take an example. Both the Russian Federation and the Ukraine are major supporters of emissions trading. Kyoto allowed these countries to retain their 1990 pollution levels until the year 2012. However, because the economies of these countries have collapsed, and many inefficient power plants have been shut down, their emissions are already 30 per cent below the levels of 1990. Thus – and here I quote the Global Policy Forum verbatim – “if they were allowed trading permits (based on their emissions target), they would be able to immediately flood the market and receive major cash inflows”.
Now, perhaps, the reader may be getting an insight into why G.H.W. Bush was such an enthusiast, and, for that matter, why I was so instinctively suspicious. Atmospheric pollution as a tradeable commodity – what a great idea!
The USA effectively lobbied the Kyoto conference and successfully persuaded it to include carbon credits in its policy platform. This is an extreme irony, given that the USA did not in the end sign up to the protocol. This leaves us with a scenario in which countries such as Russia and the Ukraine can sell their leftover carbon credits to places such as the USA and Japan, leaving them free to increase their atmospheric pollution, because they have, at grassroots, purchased the right to do so on the free market. Even individuals can do this, as witnessed by this advertisement from the US based non-profit organisation, Carbonfund: “Want to make your entire family Zero Carbon? Just multiply the number of people in your household by $99 (or $8.25/mo). A family of four is responsible for about 92 tons of CO2 annually, over 200,000 pounds. Offset your family today…$396/yr or $33.00/mo”.
This is merely an illustration of what can be done. It is not intended as a criticism of Carbonfund, which channels its income into renewable energy, climate-friendly projects.
Now let us pause for a moment and ask ourselves where these tradeable carbon credits are going to come from? Australia is not Russia or the Ukraine, therefore if this country wishes to acquire them, there must be a more user-friendly way than to allow our economy to melt down and close half our inefficient power stations. There is, and it is called carbon sequestration. In another age, less hidebound by glossy-sounding terminology, it would have been called tree-planting.
Trees absorb carbon dioxide, the major GHG. A fast growing eucalypt plantation could contain up to 50 % carbon, yielding an absorption rate of 10 tonnes per hectare. Thus 100,000 hectares of such trees has the carrying capacity to amortise a million tonnes of atmospheric carbon annually.
Carbon sequestration seems an admirable proposition – all know that planting more trees improves the quality of our air, and if we can do this, and make money at the same time, why not? I agree, up to a point, but there must be checks and balances. One of these centres on the nature and location of the trees planted.
Researchers from North Carolina’s Duke University recently undertook an extensive study into carbon sequestration, the results of which were published in the Friday, 23rd December, 2005 issue of the journal, Science.
Whilst agreeing that sequestration was commercially viable, they raised some doubts with respect to its possible negative environmental impact. In particular, they noted that trees, particularly in the early growing stages, use up much more water than a comparably sized plantation of cropland. This could increase pressure on nearby rivers and streams. Further, in order to store carbon from carbon dioxide in their tissues, they also remove soil nutrients such as potassium, calcium and nitrogen, leaving behind sodium, and thereby increasing soil salinity. This is especially true of the most popular plantation trees, fast growing conifers and eucalypts.
Whilst I agree in general, there is a caveat here, in particular with regard to Australia. After all, has our soil salinity not increased precisely because we have removed old growth, mainly eucalypt, forest, and replaced the trees with crops? Therefore, if we turn the coin on its head, and re-plant trees, why should salinity continue to increase? The answer is for exactly the reasons the Duke University scientists pointed out, but we must remember that this increase only manifests itself in major proportions whilst the trees are still young, and growing extremely quickly. After all, trees grow in both directions. Whilst the trunks and branches soar skywards, the root system digs deeper. Over time, this process will see the water table begin to drop, and the salinity should decrease, as our present soil salinity crisis is largely due to an unacceptable rise in that water table, through deforestation.
On the face of it, then, it would appear that this country, at least, is well placed to become a major player in the game of carbon credits, because we have the available land, and eucalypts are native to Australia. The same is true of countries where conifers occur naturally, such as Canada. Nothing much will grow in the vicinity of pine needles, so it is best to restrict coniferous plantations to northern latitudes.
However, the proponents of carbon sequestration, thinking only of the economic benefits, are making some pretty dangerous suggestions, such as planting large tracts of forest on the Argentine pampas. This terrain is very fragile, and it is naturally treeless. If companies plant eucalypts and conifers (neither native to the area) in places such as this, they will be tampering with an extremely delicate ecosystem.
In other words, if carbon sequestration is to work, it should be in the form of planting trees in areas where the self-same trees once grew, and, as uneconomic as this may sound, such plantings should also include slower growing specimens, in order to maintain forest diversity.
One excellent example of this is the Maya Nut tree project, under which local, native Central American women are taught how to plant this tree. It is indigenous, contributes to carbon absorption, gives them a nutritious food source and a viable, sustainable cash crop. The project is presently enjoying great success in Honduras, Nicaragua and Guatemala.
In spite of the above, I still believe that carbon taxes are the most effective means to reduce global warming, and ideally they should be used in tandem with carbon credits.
Carbon taxes also impose a pollution ceiling on countries and corporations, and, again, this ceiling cannot be exceeded. But this time we are not dealing with a tradeable commodity. Instead, we are faced with a very simple equation: stay within your pollution limits and nothing will happen to you; reduce those limits and you may receive tax breaks, step over the line and the fines could bankrupt you.
Unlike carbon credits, which can apply to entire countries, carbon taxes are more likely to be levied at grassroots level, upon companies, in particular industrial giants, for it is these companies which are the most likely to transgress, on a case by case basis. It is then incumbent upon government to impose and collect the fines, and quite literally tell the companies to ‘clean up their act’. Properly handled, the system can and should work, as a truly heavy financial impost can seriously damage a corporation. (We saw this in the recent James Hardie asbestos compensation case, which, though unrelated, bears some similarities to a pollution tax.)
Again there is a caveat: legal safeguards must be in place to ensure that the fines are not directly or indirectly handed down to the consumer in the form of price increases.
Even individuals can pay carbon taxes, and painlessly, and if we want an example of this in action we need look no further than the tiny Central American republic of Costa Rica.
Whilst rainforests are being felled all over Central and South America, Costa Rica’s are being preserved via the simple expedient of a $5 per taxpayer levy. The locals are happy to pay, as their taxes do not have to fund an extensive defense budget. Costa Rica abolished its standing army some 60 years ago. In a similar scheme, called ‘debt for nature’ Costa Ricans and non-nationals can ‘purchase’ (without actually owning) rainforest acreage merely to leave it entirely untouched. This has been expanded into other rainforest-bearing countries.
Costa Rica, in fact, affords us with an excellent example of conservation in action. Although a major exporter of coffee and palm hearts, these plantations are restricted to areas which have already been set aside for the purpose over many years. No new rainforest is cleared to make way for further plantings, and, the country is also leading the way in farming native animals for food. Elsewhere in the region (principally due to a seemingly insatiable international appetite for hamburgers!) large areas of forest have been cleared to make way for cattle pasture. Not so in Costa Rica, where the farming of the indigenous Green Iguana, for meat, is now an expanding business, and one which is in no way impacting negatively on the environment.
If we now return to the question of carbon credits versus carbon taxes, it is clear that each can be applied practically and beneficially, but that carbon credits, in the form of sequestration via deliberate tree planting, should be restricted to those areas which can ecologically support such plantations. This is why the Costa Rican model is interesting and inspiring, because the greatest sequestrators of carbon are the tropical rainforests which already exist. Typically, these are located in debtor nations such as Brazil and Indonesia, and both these countries (and others in similar situations) are still indiscriminately logging their forests.
Therefore I believe that the carbon credit idea should be extended to include the preservation of existing forests, as happens in Costa Rica. Surely there is something both ridiculous and inconsistent in a world where the rainforests, the greatest absorbers of greenhouse gases, are being cut down, and other, more developed countries, are planting gum trees and radiata pines for profit! This is where organisations such as the International Monetary Fund, and World Bank, can step in, by allocating a value to rainforest acreage, and setting that off against the value of the cash crops which are being planted in rainforest-degraded areas.
If they do this, they – and the countries which stand to benefit from preserving their forests – will see that the value of the preserved forest far exceeds the cash crop returns (which are often one-off, anyway). The global financial institutions can then allocate truly meaningful carbon credits to countries which maintain their forests, in the form of direct reductions in those countries’ national debts. The IMF and World Bank have already written off the national debts of some of the poorest nations. I think they should continue to do this, conditional on those countries preserving their biological diversity intact.
If this does not happen, then the current system of carbon credits will do no more than trade in pollution, in the same way that it trades in oil or pork bellies, only serving to shift the problem from country to country as the need arises.
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