Saturday, June 2, 2007

What are Carbon Offsets and Carbon Credits?

This is a complicated topic for me, perhaps because I don't understand financial markets very well. But it is a subject that keeps coming up, so I thought I would try to get a handle on it.

"Carbon credits" put a price on the carbon emitted by a business. Countries set quots for different businesses, and if they are under, they can sell the carbon credits; if they are over, they can purchase more credits. The idea is that buying and selling carbon will drive the price up and make it financially attractive for a company to cut carbon emissions.

How does the county decide what the quotas are? The countries that signed the Kyoto protocol take the amount from that. The countries that didn't, I don't know where they derive their quotas from. Or maybe they don't have quotas yet, but some American companies are taking part in the exchange program. Is it voluntary? There are two places to buy and sell the credits: Chicago Climate Exchange and European Climate Exchange. It appears that they operate like stock markets.

This will be the major topic of the upcoming G8 Summit, which will take place in Heiligendamm, Germany next week. The German Chancellor, Angela Merkel, sent a list of proposals with the goal of fighting climate change to the participating countries. This proposal has not yet been published for the general public to read, but I found this in the Kuwait Times: The Germans have laid out ambitious targets in a draft G8 communique that was sent to partners last month. In a copy seen by Reuters, Berlin is pushing for a G8 commitment to limit global warming to two degrees Celsius this century and cut world greenhouse gas emissions by 50 percent below 1990 levels by 2050. The Germans want the G8 to endorse carbon trading as a means of curbing climate change and are pressing partners for pledges on energy efficiency - an area where they hope Washington may have room to compromise. Merkel wants the June 6-8 summit to lay the groundwork for an extension and strengthening of the Kyoto Protocol ahead of a key United Nations conference in Bali, Indonesia in December. "It is absolutely necessary that in at least one of these areas a quantitative goal is agreed by the G8 states," said Hans-Joachim Schellnhuber, head of the Potsdam Institute for Climate Impact Research and an adviser to Merkel.

The summit made more high profile news here in the United States this week, when President Bush offered a counter-proposal. The initial headlines were promising. Has Mr. Bush had a change of heart regarding the climate? Is he ready to admit that something needs to be done to prevent irreversible damage to the earth? This is from today's London's Financial Times: His proposal marked a reversal of the US policy of refusing to discuss emissions cuts and rejecting a global framework such as Kyoto. But the plans are starkly different from the proposal tabled by Germany for next week’s G8 summit, which would require leaders to agree to prevent global temperatures rising by more than 2 degrees Celsius and require stringent emissions cuts. Attitudes within Europe hardened on Friday as some politicians and activists accused Mr Bush of trying to wreck next week’s summit, and UN negotiations on climate change, set to take place this December. José Manuel Barroso, the European Commission president, told the Financial Times Mr Bush should be “more ambitious” and said the UN must “remain the basis for setting – and achieving – binding, measurable and enforceable targets”. Sigmar Gabriel, the German environment minister, said Mr Bush’s speech could mark a “change in the US position or a manoeuvre aimed at causing confusion”. A comment by Mr Bush to German media that Ms Merkel “will be pleased” with his proposals, which run counter to her own, was seen as provocative. There were signs on Friday night that Mr Bush’s proposals would split the G8, which some sceptics argue is his intention. Stephen Harper, Canada’s prime minister, welcomed the plans, as did Tony Blair, Britain’s outgoing prime minister, and Shinzo Abe, Japan’s prime minister.

It will be interesting to see how this plays out during the summit next week.

Meanwhile, in addition to businesses, there are some individuals who want to reduce their carbon emissions without changing their lifestyle in any way. They can do this by purhcansing "carbon offsets." These are companies, such as DrivingGreen, Climate Care, and The Carbon Neutral Company. The company does one of 4 things: it plants trees, it invests in renewable energy research or conservation efforts, it purhcases carbon credits and takes them off the market, or it says it does one of these things, but it really does nothing. There is very little accountability. Fortunately, a 2006 publication; A Consumer's Guide to Retail Carbon Offset Providers provides a list of the best companies and things to think about before investing in them.

The following website will help you calculate your own carbon emissions: http://www.climatecrisis.net/takeaction/carboncalculator/

2 comments:

Anonymous said...

With regard to Bush's sudden conversion to environmental activism, I think one word also explains a lot: legacy. As it currently stands, Bush will be remembered in history primarily for the disastrous Iraq war and its consequences. And, like many presidents before him, Bush has a weak spot of vanity when it comes to considering his standing in the history books. With polls showing an overwhelming disconnect between public opinion and the Administration's official "unproven theory" global-warming line, the Bush regime sees an opportunity to make lemonade from lemons as they about-face. If he can successfully don the sheeps-clothing of environmental activism and claim it for his own, Bush might be able to count on it as legacy-fodder for balance against his long list of failures. (His earlier "Mars initiative" was much the same thing: both a short-term distraction from the war, and a long-term bid for positive legacy.) The truth is that Bush and his Administration cronies have no real personal committment to environmental issues. Their big-business and oil ties actually drive them to stall such initiatives for as long as possible. To that end, speculation that the contrarian nature of his new environmental proposal, which runs counter to European plans, is meant to throw a wrench in the works is also quite plausible. All around it's a pretty devious strategy: if the American public buys into it and believes it's a heart-felt change of outlook, he wins an image victory at home. It also goes down in the history books as a checkmark in the previously barren "plus" column. Worldwide, it slows down real progress toward change by dividing efforts when all parties need to be working together, keeping the status quo in place that much longer. Win win win. No doubt it's also meant to shore up the Republican party platform in the '08 elections: GOP candidates can counter claims that their party has been insensitive or obstructionist to environmental issues by pointing to this proposal. Finally, the sparse details of Bush's new climate-change plan point to an old, underlying purpose: avoid anything that threatens US economic power and interests. The proposed plan will apparently depend primarily on voluntarily set goals. Since when did big business permit the US government to commit to goals that required it to seriously change? Expect any "voluntary" goals from Bush's U.S. to be toothless, and to work as much as possible to shift the burden onto developing threats to US economic advantage (such as China and India.)

Denise said...

Well said, Dirt!