12 August 2010

Climate Justice after Bolivia

This new book has just been released:

Space for Movement?
Reflections from Bolivia on climate justice, social movements and the state

Built around a series of interviews, it takes a critical look at the World People’s Conference on Climate Change and the Rights of Mother Earth (CMPCC) in Bolivia that took place last April. More than that, though, it reflects on how climate justice activists can negotiate the relationship between social movements and the state.

Click here to download Space for Movement? for free

New articles on carbon trading

A bit of cross-promotion here... a series of new articles on carbon trading, from the Carbon trade Watch newsletter

Carbon market “growth” is mainly fraudulent, World Bank report shows

The global carbon market grew in 2009. Far from signalling a success, this reflects a massive increase in fraud, the dumping of surplus emissions permits by industry, and a rise in financial speculation.



Creating new from the old: how the REDD+ Partnership plans to create a REDD market, plus!
The REDD+ Partnership intends to facilitate controversial forest payment schemes in advance of any UN climate agreement on an international framework to tackling deforestation.



Industrial gases in CDM: fixing a hole?
The majority of Clean Development Mechanism (CDM) offset credits issued to date are bogus, according to new research on industrial gas destruction projects.



The UN Boys Club tasked with redefining climate finance
Climate finance is a central element to any future international framework for tackling climate change, but a closed-door UN panel could redefine the terms of the debate away from the responsibilities of industrialised countries and encourage the further expansion of carbon markets.



More on Plantar as the struggle continues
The Plantar project was one of the first to be supported by the World Bank Prototype Carbon Fund (PCF). Some aspects of the project have since entered the Clean Development Mechanism, but the battle continues to keep more of this plantation scheme out of the CDM.



New Zealand's new carbon market: a taxpayer subsidy for plantations and energy companies
New Zealand has a new carbon market, the first national scheme to be launched outside Europe. It looks set to award profits to forest plantation owners, help power companies avoid emissions reductions, and pass the costs of tackling climate change from big business to individual consumers.


27 May 2010

World Bank State and Trends of the Carbon Market 2010: an alternative view

The 2010 edition of the World Bank's annual State and Trends of the Carbon Market just came out. It's a useful (if obscure at times) source of info, if you filter through the obvious biases. Here's an attempt to do just that:

* The WB carbon market watchers are worried about the future of the UN's Clean Development Mechanism: demand for CDM credits fell, the development of new projects ground to a near halt, financiers were shipping out of CDM, and the future of demand for CDM offsets after 2012 is unclear.

* "The European Union Emissions Trading System (EU ETS) remained the engine of the carbon market. A total of US$119 billion (€89 billion) worth of allowances and derivatives changed hands." The increased volume of trade in the EU ETS is explained by (I) VAT manipulation, some of which was fraudulent; (ii) a fire sale of surplus permits to raise short term cash, (iii) an increase in speculation

* On "volume of trade" there's actually a massive fudge in the WB's way of dealing with the VAT loopholes - in particular, the purchases of EURs as a way to "legitimately" generate short term financial gain (as opposed to the illegal, carousel fraud stuff). The WB notes a 450% increase in "spot market trades" in early 2009, which is closely related to this (although partly also explained by the dumping of surplus permits by industries in the EU looking for quick cash). So the headline to the WB press release: "Global Carbon Market Grows to $144 billion Despite Financial and Economic Turmoil" overlooks some rather awkward questions about a spike in trade that a result of manipulation (and, in some cases, outright fraud), on the one hand, and an increased volume of trade caused by companies dumping carbon permits, causing the price to collapse (!)

* The EU remains far and away the largest source of demand for Kyoto offsets (mainly CDM). If there's no Kyoto commitment post-2012 or new deal, the EU ETS will restricted purchases to offsets developed in LDCs, and to countries with bilateral deals with the EU (watch this space).

* The vast majority of CDM and JI credits issued now are being bought for purposes of financial speculation or to be “banked” by industrial users (so that they won't need to make changes in their emissions in the post-2012 period). Very few players need these credits in relation to current "compliance" requirements: either for companies to meet EU ETS targets, or countries to meet their Kyoto targets. The exceptions are a few large power producers in the EU (mostly in UK and Germany) who are "short" in ETS. Amongst governments, Spain and Italy account look set to account for almost half of the government purchases of Kyoto offsets (mostly CERs) by 2012.

* The WB estimate for the phase 2 surplus of permits in ETS is 970 million tons CO2. As of 2009, the total ETS emissions reduction for the period 2013-2020 projected by the EU was 2,642Mt CO2e. ie. almost 40 per cent of the claimed reduction would be met by permits banked from phase 2, on these figures.

( This is quite similar to what the UK NGO Sandbag concluded: they talked of up to 700 million surplus permits, plus up to 900 million offsets available in theory... and predicted 950 million tonnes as a likely figure to be carred over). This figure is additional to the 50% limit on CER use - so basically the EU can get away with making very few domestic reductions through to 2020. The picture looks even worse, incidentally, if you factor in secular trends towards industrial outsourcing, emissions that are already outsourced, international aviation and shipping, etc.

* If Bulgaria, the Czech Republic, Lithuania, Latvia, Hungary, and Romania win their ongoing legal cases against the European Commission on phase 2 allocations, this "could add another 164 million tons per year to the market" (ie. increasing the overall surplus)

* The WB also (unintentionally?) identifies a further quirk in the way that the EU will allocate. Although a 50% limit on the use of offsets is the overall figure, there will be far more generous allowances on offset use amongst those who might actually need to buy permits to meet their targets - ie. coal power producers in the UK and Germany, and plant operators in Spain and Italy (see p.63). It is hard to square this circle in a situation where all possible offsets are taken up, but since information in the market is far from "perfect" this is never going to be the case. So it seems the assumption is that the major purchasers can rely on offsets, but this over-reliance will be offset by the companies in the scheme that are over-allocated not buying offsets... so that the overall use of international offsets remains below the 50% claimed threshold

* Lack of confidence in the CDM led to a rise in AAU transactions. These are “hot air” permits, often backed by questionable and unregulated Green Investment Schemes. The main purchases were by Japan from the Czech Republic and Ukraine. (NB. this does not reflect the AAU transfer within the EU, which redistributes from East to West, helping the Western European countries to meet Kyoto targets)

* Carbon leakage isn't happening, despite what EU industry lobbyists claim: " a study that examined import and export data for goods whose production now incurs a carbon cost (i.e., cement and steel) found no leakage. By and large, net import trends prior to 2005 continued unchanged during 2005–07. This is not surprising since the cost of carbon has been just one of many costs that determine industrial production and location; the carbon price alone has not been a determining factor." (The study is referenced as A. D. Ellerman, F. J. Convery, C. de Perthuis, 2010, Pricing Carbon: The European Union Emissions Trading Scheme,Cambridge University Press. This is a pro-ETS and rather flawed book, although their analysis of this point is quite right i think, and consistent with a number of other assessments). For more on carbon leakage, see p.46 to p.48 of Carbon Trading: how it works and why it fails

* Hedging and speculation are now the main uses of the carbon market, rather than "compliance" with caps: (p.16) "The market, which used to be dominated by banks and utilities, witnessed a growing presence of funds, energy-trading firms, and increasingly sophisticated utilities and industrials that used the options market for hedging (both volumes and prices) and profit-making transactions.

The bulk of activity now comes from volatility and other relative value trades rather than asset-backed trades (i.e., financial and technical trades now account for a greater portion of market activity than do trades for compliance purposes)."

* Post-2013 EU industrial benchmarking allocation rules will incentivise “efficient” biomass and CCS

* And finally... some light relief - corruption is now a sign of a successfully "maturing" and "mainstreamed" market, it seems:

"The EU ETS was also marked by controversy during 2009. ... evidence surfaced of “carousel” Value-added Tax (VAT) fraud in countries like France and the United Kingdom and a phishing attempt was made on Germany’s national EUA registry. More recently, the “recycling” of surrendered CERs added to the challenges faced by the European ETS.

Ironically, however, these controversies provide evidence that the emissions market is maturing
and becoming mainstreamed within the European economy. Entities don’t seek out loopholes in
insignificant markets, fraudsters do not focus on small businesses... "

04 February 2010

EU Emissions Trading lobbying in 2010: a quick guide

The following is a geeky digest on what's going on with the EU Emissions Trading Scheme, including what some of the main corporate lobbying efforts are

* Industries are currently lobbying on benchmarking rules
See eg. http://www.eurofer.org/

On past form, the "new entrants" terms are ones to watch - such as the chemicals industry

* Banks are worried about possible effects of Obama proposals on “proprietary trading”, esp. if spread to EU .
(Proprietary trading is where banks make bets with their own money, rather than investing other peoples' - explained here

* EU energy sector lobbies against exclusion of carbon “futures” auctioning

* Ongoing work on proposals to include shipping in ETS, which the EU proposes to do in the absence of a global agreement by the end of 2011

* Industrialists´ lobby wants global carbon market as part of EU-Long Term strategy:

“ERT's vision for a competitive Europe in 2025,” 2 Feb 2010: “Move towards a low-carbon economy: Encourage the continuing development of a global carbon market by taking steps towards linking the EU Emissions Trading System (ETS) with other developed country systems (notably the USA), ensuring broad access to project mechanism reductions and market surveillance conducted at an EU level. ”

This is related to EU's debate on 2020 strategy - which includes many references (in submissions from EU industry lobbies) on carbon market linking and "leakage"

* EU ETS phase 3 rules that will be set this year: absolute allocations (that each country will receive), auction rules, new entrants rules (and reporting), benchmarking

By March 2010: Commission regulation on Auctioning due

By 30 June 2010: Publication of absolute ETS allowances for 2013

By December 2010: Commission to publish estimated amount of allowances to be auctioned

* The rules for allocation of auction revenues from 300 million permits to CCS (and unspecified loose change to "innovative renewables") are now decided and will be handled by the European Investment Bank: