TURNING CARBON INTO GOLD?

If there is to be a cap-and-trade system in the U.S., it must be one that will cut emissions significantly. The world is too far into the global climate change process for another moment to be wasted, especially this moment when for once the U.S. seems poised to act.

But is there a cap-and-trade system that will work?

Many in the U.S. say only a tax will do the job, though a tax is thought to be a political non-starter.

Oliver Tickell, veteran observer of all the phases and changes in the European fight to make its cap-and-trade system viable, says he knows what is needed. In advice to EU leaders meeting the last 2 weeks at Poznan, Poland, to work out cap-and-trade differences, Tickell says he believes the fight against climate change is still winnable but there is a persistent question about the battle plan.

To preserve forests and other raw lands as carbon sinks, he says it is necessary to make forests “…worth more alive than dead to governments and forest owners.” A program like the United Nations Reducing Emissions from Deforestions and Forest Degradation (UN-REDD) can reward governments and individuals with marketable emissions credits for preserving emissions sinks.

The drawback to REDD is that paying in emissions credits encourages power producers and manufacturers to buy credits instead of cutting emissions.

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Poor countries are bearing the costs of climate change while the industrial countries whose past emissions cause the problem profit from emissions markets. Clearly, emissions markets are not a completely satisfactory solution.

Tickell: “It sometimes seems that everyone is making fortunes out of the carbon market, except those who really need it to adapt to the far harsher conditions that climate change is creating.”

Reliance on coal is the present norm, especially in the developing world. Shifting to New Energy is the only viable option in a world faced with climate change. Yet that shift will be expensive. Who pays?

Energy Efficiency is the most accessible, cost-effective solution of all. The problem is the same as the problem preventing the shift to New Energy: Who pays for it?

The developed world could underwrite a regulatory scheme for the entire world that would more than return its costs in energy savings. Global regulation is also probably the only viable solution to control industrial pollutants such as the hydrofluorocarbons (HFCs) used as refrigerants and foam blowing agents. HFC production is increasing, they are much more destructive to the atmosphere than CO2 and they could be 1/3 of the cause of all climate change in a few decades so regulation is vital. Once again, though, there is that question: Who pays to enforce the regulation?

Tickell: “My own calculations indicate that [to take on climate change] it will cost the world about one trillion dollars each year… it is an amount that looks affordable when it is compared to what the world is spending to deal with the global financial crisis.”

How to raise the trillion dollars a year: A global auction of permits for all emissions.

Tickell: “With industrial global emissions accounting for about 33 gigatonnes, a $30-per-tonne carbon price would pay the whole bill.”

It is an interesting simplification of the cap-and-trade system that the EU already uses and that President-elect Obama says he is committed to introducing in the U.S. The EU is increasing the auctioned emissions in its system and the Obama plan calls for eventually auctioning 80% of its credits.

Tickell is confident his solution is the only viable one: “This general approach has to be the way forward, for the simple reason that there's nowhere else for the money to come from.”

He excludes government funding and non-governmental foundation spending as options but doesn’t even mention the possibility of a global tax. Some, however, think getting emerging and developing nations into a global trading plan, especially one with 100% auctioned credits, is even more unlikely and unworkable than getting them to levy an emissions tax.

On the other had, a global auction of emissions credits is tantamount to a universal carbon tax. In a way, Tickell's plan is a clever marketing ploy. If a carbon tax is politically a non-starter but it is the best option, and if a cap-and-trade system is politically achievable, then call the tax a global cap-and-trade system with a global mandatory auction of all credits.

Mr. Obama's election suggests a rapidly rising sentiment in the public about the dickering of the world's leaders over the method they will choose to impose emissions cuts. It appears the time for scheming and tinkering is nearly over. It is hardly melodramatic to recall Dylan's lines: "...Eden is burning. Either get ready for elimination or our hearts must have the courage for the changing of the guard..."

Tickell: “…here is one principle for delegates in Poznan to agree on - the carbon market must be turned into gold, not for carbon traders and financiers, but to finance the world's transition to a low carbon, equitable future.”

From Center For American Progress. (click thru to interactive map and check any state)

For more on the use of auctioned credits in a U.S. cap-and-trade plan, see Investing in a Green Economy; Using Cap-and-Trade Auction Revenue to Help American Familes and Spur Clean Energy Innovation from Center For American Progress

We need to turn carbon into gold
Oliver Tickell, 9 December 2008 (BBC News)

WHO
Oliver Tickell, author, Kyoto2 - how to manage the global greenhouse; European Union (EU); Intergovernmental Panel on Climate Change (IPCC)

WHAT
Tickell contends that the solutions for climate change are available but funding them will be expensive and the only way to do it is a global auction of emissions permits.

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WHEN
- The IPCC says world greenhouse gas emissions (GhGs) must be cut 80% by 2050 or there is no hope of keeping average temperature from rising less than 2 degrees centigrade and preventing the worst impacts of climate change.
- Many believe it too late to reach that goal.
- The EU Emissions Trading Scheme (ETS) began in 2005 and the members continue to work to make it effective and equitable.
- The present trend of commitment to coal locks coal reliance in place for ¾ of a century.
- HFC production is increasing 15% per year and could be 1/3 of the problem by 2040.

WHERE
- The Poznan, Poland, summit shows little progress.
- Forests, soils, peatlands, etc., in places like in Brazil and Indonesia must become major carbon sinks.
- The cost of climate change to poor countries is now at $100 billion per year. The cause is past emissions of industrial countries.
- The biggest trend of reliance on fossil fuels is in developing countries.
- The Montreal Protocol is thought by some to be an example of a successful cap-and-trade scheme because it effectively controlled the problem of acid rain in the 1990s.

WHY
- Key topics under debate in the EU: (1) Forests and soils, (2) Adaptation to (instead of mitigation of) climate change, (3) New Energy, (4) Energy Efficiency, (5) Industrial greenhouse gases, and (6) How to fund the program.
- Markets for palm oil, beef, soya beans, rubber and timber fund deforestation.
- REDD was created to fund non-deforetation by giving governments emissions credits they can sell on the EU ETS in return for sustaining the sinks.
- Cost of coping with climate change at present: The consequences of drought, flood risk, rising sea levels, increased insect-borne disease, etc.
- The EU’s "energy rating" system for many household appliances has been effective and could be extended all energy consuming goods, homes, buildings, factories and offices all over the world.
- Hydrofluorocarbons (HFCs), used as refrigerants and foam blowing agents, replaced ozone destroying CFCs.

It's a growing and lucrative system, but for who? (click thru to Reuters and all the cap-and-trade there is)

QUOTES
- Tickell, on reversing climate change: “One of the key stumbling blocks is how all the things that we need to tackle the climate change problem will be financed.”
- Tickell, on climate change devastations in the developing world: “Since the [$100 billion per year] damages [to poor countries form climate change] are a direct result of the historic emissions of rich countries, and the world's poorest people are the principal victims, this is nothing short of iniquitous…Meanwhile, more than $60bn-a-year is sloshing around the world's carbon markets…”
- Tickell, on the need fof New Energy: “In the long run, renewables make good economic sense because once they are built there is no need to buy the fuel to keep them running…But in the short term there is an extra cost to be paid and at the moment, there's no one to pick up the bill.”