TROUBLE IN THE CARBON TRADING GAME

Concern as carbon traders scoop billions
Fiona Harvey, January 17, 2007 (Financial Times of London via Yahoo News)

- Companies offsetting their greenhouse gas emissions by purchasing carbon credits on the international carbon markets have been warned to verify that their investments are going towards genuine projects to reduce emissions.
- An increasing number of companies…are choosing to become "carbon neutral", meaning they have no negative impact on the climate…by reducing a company's emissions through energy efficiency measures and the use of renewable energy, and then "offsetting" the remainder.
- Offsetting requires the company to measure its remaining emissions and invest in emissions reduction projects outside the company that cut an equivalent amount of carbon dioxide or other greenhouse gases. These projects range from tree-planting to building wind farms in developing countries.

- Companies can do this through third party offsetting specialists. However, environmental activists and the British government said companies must do more to ensure their offsetting partners were investing in projects that were yielding real improvements in emissions
- Concerns are mounting that factories in China and carbon traders are exploiting a loophole in international climate change regulations…to make billion-dollar profits from the greenhouse gas emissions trading markets.
- Chemical plants are reducing the amount of HFC gases that they release…and receiving "carbon credits" in return. A credit can fetch $5 to $15 on the international carbon market.

- The equipment to reduce HFC gases is relatively cheap to install, at $10m to $30m for a typical factory…Installation can then generate carbon credits…sold for billions…
- Friends of the Earth, the environmental pressure group… highlighted other potential problems such as a "lack of verification" from some offsetting schemes, and the danger that projects were being imposed on developing country communities with no consultation…"Tree-planting schemes are particularly problematic and should be ruled out of any offset scheme."

- …The international trade in greenhouse gas emissions is divided into…the regulatory market and the voluntary market. The regulatory market is the trade in emissions set up under the Kyoto protocol on climate change, and under the European Union’s emissions trading scheme…is the only mandatory emissions trading scheme in the world...is overseen by the United Nations, which uses a complex methodology to ensure that emissions reductions genuinely occur…But this process is slow and bureaucratic, and produces a limited number of "certified emissions reductions".
- …the voluntary market is largely unregulated but companies can find it much easier to purchase emissions reductions. However, there are some standards which companies can insist on, such as a Voluntary Carbon Standard produced by the International Emissions Trading Association and the Climate Group.