This is part I of a two-part series.
The hope for our collective survival in the face of a likely climate catastrophe has been vested in a combination of multilateral emissions rearrangements and national regulation. But the premise behind the core strategy—the 1997 Kyoto Protocol—must be debated. Assuming a degree of state subsidization and increasingly stringent caps on greenhouse gas (GHG) emissions, Kyoto posited that market-centric strategies such as emissions trading schemes and offsets can allocate costs and benefits appropriately so as to shift the burden of mitigation and carbon sequestration most efficiently. Current advocates of emissions trading still insist that this strategy will be effective once the largest new emitters in the Brazil-Russia-India-China-South Africa (BRICS) bloc are integrated in world carbon markets.
As climate crisis looms ever larger on the horizon, the demise of the Kyoto Protocol’s binding emissions-cuts commitments on wealthier countries will in the near future compel from them a renewed effort to promote market-incentivized reductions. In spite of widely-acknowledged market failure in the emissions trade, especially in Europe, several “emerging markets,” especially the BRICS, have begun the process of setting up or expanding their carbon trading and offset strategies now that (since 2012) they no longer qualify for Clean Development Mechanism (CDM) credits. The Kyoto Protocol had made provision for low-income countries to receive CDM funds for emissions reductions in specific projects, but the system was subject to repeated abuse.
Yet attempts to resurrect market strategies will become more visible as the next global-scale climate treaty takes shape in December 2015 at the Paris summit of the United Nations Framework Convention on Climate Change (UNFCCC). Most notably, that 21st Conference of the Parties (COP21) is anticipated to remove the critical “Common but Differentiated Responsibility” clause that traditionally separated national units of analysis by per capita wealth.
The COP21 appears to already have been forestalled in late 2014 by the climate agreement between Xi Jinping and Barack Obama, representing the two largest absolute GHG emitters. That deal ensures world catastrophe, for in it China only begins to reduce emissions in 2030 and the U.S. commitment (easily reversed by post-Obama presidents) is merely to reduce emissions by 15% from 1990 levels by 2025. The BRICS bloc’s role in forging inadequate global climate policy of this sort dates to the 2009 Copenhagen Accord at the COP15 when a side-deal between Obama and four of the five BRICS’ leaders derailed the much more ambitious UNFCCC.
The failure of the carbon markets to date, especially the 2008-14 price crash which at one point reached 90% from peak to trough, does not prevent another major effort by states to subsidize the bankers’ solution to climate crisis. The indicators of this strategy’s durability already include commodification of nearly everything that can be seen as a carbon sink, especially forests but also agricultural land and even the ocean’s capacity to sequester carbon dioxide (CO2) for photosynthesis via algae. The financialization of nature is proceeding rapidly, bringing with it all manner of contradictions.
Due to internecine competition-in-laxity between COP negotiators influenced by national fossil fuel industries, the UN summits appear unable to either cap or regulate GHG pollution at its source, or jump-start the emissions trade in which so much hope is placed. European and United Nations turnover plummeted from a peak of $140 billion in 2008 to $130 billion in 2011, $84 billion in 2012, and $53 billion in 2013 even as new carbon markets began popping up. But after dipping to below $50 billion in 2014, volume on the global market is predicted by industry experts to recover to $77 billion (worth 8 gigatonnes of CO2 equivalents) in 2015 thanks to higher European prices and increased U.S. coverage of emissions, extending to transport fuels and natural gas.
However, geographically extreme uneven development characterizes the markets in part because of the different regulatory regimes. Since 2013 there have been new markets introduced in California, Kazakhstan, Mexico, Quebec, Korea and China, while Australia’s 2012 scheme was discontinued in 2014 due to the conservative government’s opposition. The price per tonne of carbon also differs markedly, with early 2015 rates still at best only a third of the 2006 European Union peak: California around $12, Korea around $9, Europe around $7.3, China at $3-7 in different cities, the U.S. northeast Regional Greenhouse Gas Initiative’s voluntary scheme at $5, New Zealand at $4 and Kazakhstan at $2. The market for CDMs collapsed nearly entirely to US$0.20/tonne.
These low prices indicate several problems.
- First, extremely large system gluts continue: 2 billion tonnes in the EU, for example, in spite of a new “Market Stability Reserve” backstopping plan that aimed to draw out 800 million tonnes.
- Second, the new markets suffer from such unfamiliarity with trading in such an ethereal product, emissions, that volume has slowed to a tiny fraction of what had been anticipated (such as in China and Korea).
- Third, fraud continues to be identified in various carbon markets, as can be witnessed at the Carbon Market Watch This is, increasingly, a debilitating problem in the timber and forest-related schemes that were meant to sequester large volumes of carbon.
- Fourth, resistance continues to rise to carbon trading and offsets in Latin America, Africa and Asia, where movements against reducing emissions from deforestation and forest degradation (REDD) are linking up (as the REDD Monitor website documents).
As a result, the introduction of market incentives to make marginal changes to emissions is simply not working: the cost of switching from coal to renewable energy remains in the range of $50/tonne, in contrast to the prevailing price on carbon.
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