Thursday, November 27, 2008
Wednesday, November 26, 2008
United Nations Must Address Deforestation at Poland Meeting, U.S. Science Group says
Countries gathering in Poznan, Poland, next month to negotiate a follow-up treaty to the Kyoto Protocol should develop a plan to curb global warming by stopping the destruction of the world's tropical forests, say experts at the Union of Concerned Scientists (UCS), a leading U.S. science-based nongovernmental organization. The international community agreed to dramatically reduce deforestation as part of a larger plan to combat global warming at the December 2007 United Nations meeting in Bali, the group pointed out, and the Poland meeting should provide a good opportunity to forge an agreement.
"When it comes to finding ways to address global warming, maintaining tropical forests is a no-brainer," said Dr. Doug Boucher, director of the Tropical Forest and Climate Initiative at UCS. "We can cut a significant percentage of the world's global warming emissions by simply protecting tropical forests."
Boucher, an ecologist, will release a report in Poznan showing that preserving tropical forests is one of the most effective and inexpensive ways to reduce global warming pollution. (Boucher's report, "Out of the Woods: A Realistic Role for Tropical Forests in Curbing Global Warming," will be available on December 6 at: www.ucsusa.org/REDD.)
About 20 percent of the world's annual global warming pollution comes from deforestation—roughly equivalent to the total annual emissions of either the United States or China, and more than the total yearly emissions from every car, truck, plane, ship and train on Earth. When trees are cut down, they begin emitting the carbon dioxide they have stored over their lifetimes. To preserve the forests, farmers, ranchers and others who earn a living from activities that require tree clearing must be compensated for leaving forests intact.
"The people who live in the Amazon and other tropical forests have few economic opportunities other than farming and raising cattle, both of which require cutting down the forest," said Boucher. "That's why they must be compensated for the income they sacrifice by not using the land for farming or ranching."
According to the UCS report, it would cost $5 billion a year to protect nearly 20 percent of the tropical forests threatened by deforestation. Meanwhile, $20 billion a year would protect half of the forests and $50 billion a year would protect two-thirds.
Paying to keep tropical forests standing would cost a third less than the price of carbon under the European Union's cap-and-trade program, UCS found. The EU program sets a cap on global warming pollution, which will be ratcheted down over time. Companies must reduce their emissions to comply with the cap. Those that cannot reduce their pollution must buy allowances from companies that can. Ton for ton, it most often would be cheaper to reduce emissions from deforestation than buy allowances on the market.
The UCS report recommends three potential ways to generate money for preserving tropical forests:
DIRECT CARBON MARKET APPROACH: This method would let polluters that cannot meet their cap provide funding to maintain tropical forest areas. The tons of carbon dioxide eliminated by preventing deforestation would be applied against the polluters' caps. This method would generate tens of billions of dollars per year for forest preservation and reduce the cost of compliance. The downside is that it would not achieve additional emissions reductions in the polluters' own countries.
MARKET-LINKED APPROACH: Under this financing method, countries with cap-and-trade programs would use the funding generated by the programs to compensate countries and tribes that reduce their deforestation rates. The money would come from a government's initial sale of cap-and-trade allowances. UCS estimates that countries could dedicate tens of billions of dollars a year to forest preservation using this method.
VOLUNTARY APPROACH: A third financing method would ask countries, corporations, foundations and individuals to donate money to reduce deforestation. UCS estimates that hundreds of millions of dollars per year could be raised voluntarily.
"The United States can and should lead the way by supporting a comprehensive plan that combats global warming by reducing deforestation," said Boucher. "It's one of the best and most affordable tools we have."
“Outstanding” greenhouse reduction from SMRC's Perth waste facility
The ratings were compiled by Carbon Offset Watch, a collaborative effort between consumer advocacy group Choice, environmental NGO the Total Environment Centre, and the Institute for Sustainable Futures.
Of 57 organisations contacted, 20 responded with sufficient information and were included in the assessment. The majority (12) were rated “good,” while three were considered “adequate”. Unsurprisingly, none of the groups rated in the voluntary survey fell into the “not recommended” category.
The top rating for SMRC comes on top of last year’s Greenhouse Challenge Plus Award for outstanding achievement in greenhouse gas abatement by government and essential services, and according to business development manager Tim Youe, it could have a significant impact on the value of its credits.
“People definitely differentiate between projects…if there’s multiple environmental benefits, along with a genuine carbon reduction supported by an independent report [then people are prepared to pay more],” he says, although it’s “hard to say” exactly how much of a premium they will fork out.
“I think we can almost double our price compared to what a broker selling a generic product would get,” he says.
In the past two years, the SMRC’s Regional Resource Recovery Centre (RRRC), which turns organic waste into high-quality compost, has become WA’s biggest greenhouse gas abatement project, prevented 146,681 tonnes of carbon entering the atmosphere.
The fully-integrated waste processing facility diverts household rubbish away from landfill for more than 350,000 residents. The net difference in emissions between waste going to landfill and composting the material gives the SMRC carbon offsets than can be sold.
The SMRC is now developing a new website to begin making a retail offering of its carbon pollution reduction credits. But the big question for the group is how will the Federal Government’s white paper on emission trading – due before year’s end – will affect the state of play across the voluntary offset market.
SMRC has joined other providers in calling on Canberra to recognise the value “of retaining an active and viable voluntary carbon market that supports Australian project-based emission reductions” and for it to clarify what will happen to existing schemes – including the Greenhouse Friendly product certification program - beyond 2009.
While hopeful the voluntary market won’t be killed off by the changes, SMRC acknowledges there is not yet any real answer as to future Australian possibilities, and “we’re looking at if we can expand into the [global] voluntary carbon standard”.
What the government decides in December will have a massive impact on the group: “it could completely obliterate our Greenhouse Friendly project and in round terms that’s a million dollars a year gone,” says Youe.
What wouldn’t be obliterated, however, is the $100 million RRRC at Canning Vale, or the debt SMRC racked up to build it.
“We’ll still run the project, but it will mean an increase [cost] to our member councils and ultimately to the ratepayers of the region, and for no benefit in terms of any more [greenhouse] abatement.”
“We see that as a bit of a perverse outcome,” Youe says.
Blitz poser
IN THE far north of Indonesia’s Sumatra island lies a vast stretch of forest brimming with orang utans and rare Sumatran tigers and elephants. In a quirk of fate, a decades-long insurgency in Aceh province prevented illegal loggers from stripping the place bare.
Apart from its wildlife and timber, though, the forest is rich in another resource; the carbon locked up in the soil and very trees coveted by loggers – legal and illegal.
Keen to earn money from the forest, called the Ulu Masen ecosystem, the government of Aceh province joined a leading conservation group and the financial market to save it. In return, the province is set to earn millions of dollars through the sale of carbon credits to investors, with a portion of the cash flowing to local communities to encourage them to halt illegal logging and pay for alternative livelihoods. Money from the initial sale of credits for this project is expected to flow in the coming months.
“I strongly believe there should be a market for carbon credits and forests. It’s about the only mechanism that could provide local incentives,” said Frank Momberg, project director for international NGO Fauna and Flora International, the group at the heart of the Ulu Masen forest conservation project.
The model is being studied and repeated across Indonesia and other tropical developing nations as the world turns to saving the remaining rainforests in the battle against climate change.
The United Nations-based scheme, called Reduced Emissions from Deforestation and Degradation, or REDD, could be worth tens of billions of dollars a year for developing nations, with rich nations buying forest credits to meet mandated emissions curbs. With so much money potentially at stake, banks and carbon trading firms are ramping up their interest.
Vested interests: In the battle against climate change, rich nations are paying Indonesia to keep its forests intact.
Local issue, global problem
But much has to be sorted out, such as how to ensure the forests aren’t cut down, how to accurately measure the amount of carbon saved over time, the best method to trade REDD credits and how to ensure local communities get a fair share of the money. Satellite monitoring as well as developing national carbon accounting systems will be key, and so too will be avoiding “leakage” in which preventing deforestation in one area causes logging to occur in another.
Some conservation groups also fear rich nations will merely buy up vast amounts of REDD credits to meet their emissions targets while doing little to clean up their own industries.
Europe also fears a flood of cheap REDD credits could overwhelm its existing emissions trading scheme, depressing offset prices.
“For us the main point, from a trading stand-point, where REDD projects are difficult is on their permanence,” said Trevor Sikorski, director of commodities research for Barclays Capital in London.
“If it’s about deforestation but then that deforestation goes ahead in three years then that carbon would still be released into the air So it’s all about the reversibility of forests as carbon sinks and that’s the real core issue that has to be addressed,” he said.
Forests soak up vast amounts of carbon dioxide, acting like a set of lungs for the planet. But clearing and burning them is contributing to about 20% of all mankind’s carbon emissions that are warming the planet.
The UN aims to incorporate REDD into the next phase of the Kyoto Protocol from 2013. The idea is to complement an existing Kyoto scheme, called the Clean Development Mechanism, that allows wealthy states to invest in clean energy projects in the developing world in return for CO2 offsets called CERs. These are presently trading around Euros16 (RM74) per tonne.
Huge market
“The dimensions are massive. If you compare with a CDM project of 60,000 tonnes a year, these projects are sometimes 200 times bigger, so if this comes through, it’s going to be a huge market,” said Renat Heuberger, managing partner of global carbon project developer and advisory firm South Pole Carbon.
Indonesia has rapidly become the centre of REDD trial schemes in Asia because it still has large areas of forest, despite rapid deforestation. Fauna and Flora International has teamed up with Australia’s Macquarie Group to develop three REDD projects in West Kalimantan and Papua.
Investment group New Forests, headquartered in Sydney, has signed a deal with the government of Papua to protect 200,000 ha of forest that could save up to 40 million tonnes of CO2 being emitted over the project’s lifetime.
The Australian government has pledged A$30mil (RM75mil) as part of a scheme to protect 50,000ha of forest in Kalimantan and rehabilitate at least 50,000ha of drained peat swamp.
The Ulu Masen scheme aims to save 3.4 million tonnes of CO2 being emitted each year, or 100 million tonnes over the project’s lifetime.
To market the credits, the government of Aceh last year teamed up with US bank Merrill Lynch and Australian firm Carbon Conservation to sell the offsets, called VERs, into the voluntary carbon credit market.
Carbon Conservation is acting as a broker and joined Flora and Fauna International to develop the project. The project hinges on regular monitoring of the forest from the air and on the ground and the conservation group is running a programme to recruit and train 1,000 forest rangers, some of them ex-rebels from Aceh’s former GAM separatist group.
Seeing redd
Community development was also key, said Momberg. This meant ploughing part of the proceeds directly back to the estimated 130,000 people who live around the forest to develop sustainable biofuel production, biomass power generation, mini-hydro power projects as well as promote growth of alternative cash crops.
Failure to do so would mean villagers returning to illegal logging. An estimated 2,000 to 3,000 villagers were involved in the lucrative trade around Ulu Masen, according to a 2006 report by World Bank-backed Aceh Forest and Environment Project.
“If you don’t involve the local communities in either an alternative business or something that is good for them to actually preserve that forest, there’s no long-term suitability of that project,” said Pep Canadell, executive officer of the Global Carbon Project. “It’s critical and I haven’t really seen a package of interesting possibilities,” said Canadell, a member of an Australian government advisory panel on REDD.
Some conservation groups, such as Friends of the Earth, fear placing a greater value on forests risks a jump in land rights abuses by governments and corporations in the rush for carbon credits, threatening the livelihoods of indigenous communities. More than a billion people worldwide depend of forests for their livelihoods, so REDD is a huge threat to them if not managed properly, the group says.
Flora’s Momberg said the key was to limit the direct involvement of national governments in funding schemes for local communities. REDD schemes should also meet stringent verification standards to ensure permanence, community involvement and protection of forests’ biodiversity.
“If everything is vested in the national government, that’s where you will find it very difficult to have that fair level of participation at the community level,” said Jeff Hayward, of US-based conservation group Rainforest Alliance.
“Fundamental to verification criteria is who owns the carbon, what rights do they have, how have they decided upon the use of those rights, how fairly are they being compensated, are they informed,” said Hayward, manager of the alliance’s climate initiative.
Momberg said interest in REDD investments has jumped since the UN formally backed the scheme last December. “I’m getting phone calls every month from investors into REDD. The appetite for REDD and voluntary carbon credits was non-existent two years ago.” – Reuters
Tuesday, November 25, 2008
PA Farm News
Reprinted with Permission by 25x25
LUTHERVILLE, MD — The election is over and Democratic candidate, Sen. Barack Obama (D-IL) has been declared the winner, while Democrats also have made significant gains in securing control of Congress. And while there may have been an element of uncertainty leading up to those election results November 4th, what has never been in doubt for much of the past year, regardless of electoral winners, is federal action aimed at reducing the magnitude of climate change. That agriculture and forestry will play a role in any strategy aimed at reducing the emissions that contribute to global warming is also a certainty.
Obama and his Republication opponent, Sen. John McCain (R-AZ), along with House and Senate leadership, both said they want to enact a plan to reduce the greenhouse gases - emissions that create a "greenhouse" effect and warm the Earth's temperatures. Both presidential candidates supported a plan adopted by the Senate Environment Committee in December, 2007 and considered by the full Senate this summer (it failed to garner the 60 votes needed to overcome a procedural challenge) that called for a 71-percent reduction from 2005 greenhouse gas emission levels by 2050 through the nationwide regulation of emissions with a cap-and-trade credit system. The proposal would allow companies that exceed their allowable emission limits to purchase credits from those entities that fall under their allowed limits. As president-elect, Obama has pledged to implement an economy-wide cap-and-trade program to reduce greenhouse gas emissions 80 percent by 2050.
The House Energy and Commerce Committee in October released a 461-page "discussion draft" of legislation that would impose mandatory reductions in emissions that contribute to climate change. The draft is the culmination of a year of hearings and a series of "white papers" issued by the committee on various aspects of global warming and comes in anticipation of next year's climate change debate to be taken up by the new Congress and an Obama administration. The House proposal differs some from the Senate version by setting lower emission limits in the earlier years of the program to allow, supporters say, for the development of new clean energy and carbon-capture technology. The impact on House climate change proposals next year as the result of the recent elevation of Rep. Henry Waxman (D-CA) to chairman of the House Energy Committee, succeeding Rep. John Dingell (D-MI), remains uncertain.
Adding to the momentum for action is a Supreme Court decision last year that found that greenhouse gases are pollutants under the Clean Air Act - a ruling that puts pressure on federal environmental regulators to take action.
Another driver behind the call for action on climate change was highlighted just this week when California Gov. Arnold Schwarzenegger signed a declaration with 11 other U.S. states and provinces or states in five other countries to help cut greenhouse gas emissions. Schwarzenegger told a climate summit in California attended by more than 700 delegates from 19 countries on Wednesday that fighting climate change shouldn't just go "nation by nation," but also must go "province by province." Regional leaders signing the declaration, including 12 U.S. governors and state or provincial representatives from Canada, Mexico, Brazil, Indonesia and India, promised to develop strategies for high-polluting industries in an effort to influence talks set for next year in Poland to renew the Kyoto Protocol, which aims to curb global climate change emissions.
Support for the role of agriculture and forestry in a reduced carbon economy, and a consensus on the accompanying advantages available to farmers, ranchers and forestland owners, is building. In anticipation of an evolution into the so-called "low carbon" economy and the benefits inherent to the transition, the National 25x'25 Steering Committee has convened a Carbon Work Group - a panel of agricultural, forestry, conservation and environmental experts - that is looking at ways agriculture and forestry sectors may contribute to the curtailment of climate change, as well as looking for and identifying the economic opportunities and challenges that are expected to come with the transition.
The Carbon Work Group is expected to complete its work soon and in early 2009, the Steering Committee plans to issue a report from the group's effort, Opportunities in a Reduced Carbon Economy: A Primer for Agriculture and Forestry.
Jean-Mari Peltier, the former president and CEO of the National Council of Farmer Cooperatives (NCFC), spoke for many in the industry when she affirmed at a 25x'25 Summit held in Omaha, NE, this year that forestry and agriculture can be part of the solution to addressing global climate change. "The agricultural industry has a real opportunity to make a positive impact on a reduced carbon economy, and benefit financially while doing this," said Peltier.
While most of the opportunities are best presented through soil sequestration of carbon and methane capture in animal agriculture operations, Peltier said the industry must ensure that all opportunities for U.S. producers be maximized, citing, for instance, the role that perennial crops such as fruit trees, grape vines and the like play in the carbon sequestration process.
There is also widespread agreement that no single legislative, regulatory or market-based initiative will fully address the changes needed to reduce carbon emissions. In addition to a cap-and-trade program, other policy alternatives expected to be considered include a carbon tax, additional biofuel volume mandates and carbon content limits on transportation fuels, increased vehicular mileage standards, more energy efficient building standards, renewable electricity objectives, and incentives aimed at improving technology, among others.
Of particular interest to the agriculture and forestry sectors is a cap-and-trade proposal, which, like a carbon tax, can be employed to control the emissions of greenhouse gases as needed. (Greenhouse gas emissions are often referred to as just "carbon emissions," though there are six greenhouse gases recommended for regulation by the Intergovernmental Panel on Climate Change, including carbon dioxide, or CO2.) Advocates say a cap and trade system allows relatively precise control of total emissions and also provides low-cost offsets from uncapped sectors, including agriculture and forestry, to produce new revenue streams and help reduce total program costs.
At issue is the administrative complexity involved with cap-and-trade programs, with market prices for allowances and equivalent offsets, or credits, varying as supply and demand shifts work through the system. While a tax on carbon does not directly control total emissions, it is seen by some as easier to administer than a cap-and-trade system. And while it can more readily fix stable market prices for carbon emissions, it could also be applied to the agriculture and forestry sectors, increasing the costs of operations.
Under proposed cap-and-trade legislation, such as the scheme envisioned by the Senate Environment Committee, emissions from the agriculture and forestry sectors are uncapped. Both sectors engage in significant biological sequestration of carbon dioxide, and there is potential for more. Agriculture can also contribute reductions of methane and nitrous oxide, two other types of emissions recommended for regulation by the IPCC. With both sectors recording emission reductions in the "plus" column, they can produce an income stream from the sale of those reductions as offsets, or credits, to entities that exceed their emission allowances.
Rich Krause, climate change specialist with the American Farm Bureau Federation, notes that all cap-and-trade proposals are not totally benign to agriculture and forestry. While the Senate proposal does not regulate agriculture emissions specifically, he says, it does define a regulated "facility" as one or more buildings or structures on the same site that emit more than 10,000 tons of carbon (or the equivalent) per year. "That definition could possibly bring some large operations under the regulatory umbrella."
But Krause says the good news under a cap-and-trade regime is the opportunities provided "for farmers, ranchers and foresters to implement voluntary greenhouse gas mitigation practices that could then be transformed into credits that excess greenhouse gas emitters could purchase on the market. This means that growers could get paid for using soil, manure and fertilizer management practices," he said.
Krause said the Senate proposal "does include a full range of agricultural practices, including soil sequestration, methane capture and destruction, and fertilizer management as allowable offset projects. The question is to what extent the economic benefits from these offset opportunities offset the increased costs to agriculture resulting from the bill."
"All sectors of the U.S. economy will need to reduce their greenhouse gas emissions," says Nathan Rudgers, a member of the National 25x'25 Steering Committee and chairman of the Carbon Work Group. "The opportunity to voluntarily participate in the offset markets as an uncapped sector being paid for reductions has distinct advantages. Agriculture and forestry stakeholders can capitalize on the opportunity by documenting their willingness and ability to produce emissions reductions. By providing offsets for other industries, they'll be increasing their own economic stability while providing additional benefits to the nation."
"Agriculture's ability to fulfill this promise is contingent on the price for carbon in the marketplace," adds Peltier, the former NCFC CEO. While the price of emission credits on markets such as the Chicago Climate Exchange (CCX) has fluctuated, Peltier insists that "new laws and regulations being discussed . . . could result in dramatic increases in the value of carbon, leading to greater potential benefit to agricultural producers."
That optimism is reflected by a study that shows the existing global market for "carbon trading" grew 36 percent between January and September of this year, from $67 billion to $84 billion, without government mandates. In fact, says New Energy Finance, a London-based company that tracks activity in energy markets, the market is expected to surpass $100 billion by the end of this year, despite the economic upheaval being experienced by other markets. The CCX currently has some 350 members, including more than 10 percent of the Fortune 100 and eight cities.
# And what does agriculture and forestry bring to the table when calculating the contributions farmers, ranchers and forestland owner can make to reducing emissions? Consider the following talking points issued by 25x'25 earlier this year on how crop production practices can impact climate change: Conservation tillage, which is a set of practices that provide minimal disturbance of the soil and leave at least 30 percent of the surface covered with crop residues. The most current national data gathered the Conservation Technology Information Center show that some form of crop residue management, which includes conservation tillage plus "reduced tillage," was practiced on 62.2 percent of total cropland. And the number is growing.
# Using conservation tillage and other residue management techniques can provide a constant buildup of soil organic carbon - more than 50 percent over 10 years that reduces greenhouse gas emissions by preventing carbon from transforming into carbon dioxide through decomposition.
# Researchers at Ohio State University say that the total carbon sequestration potential of U.S. cropland through improved management is as much as 208 million metric tons of carbon per year, or the equivalent of 763 million metric tons of carbon dioxide emissions, or nearly 14.5 percent of total U.S. greenhouse gas emissions.
# And because conservation tillage requires fewer passes over a crop field, less fossil fuel is burned, reducing another 4.4 million metric tons in carbon dioxide emissions.
# Another 300 million tons of carbon can be sequestered per year from U.S. forests.
# The total potential of carbon sequestration in U.S. soils, counting croplands, grazing lands and woodlands, is nearly 600 million metric tons of carbon, or the equivalent of more than 2,200 million metric tons of carbon dioxide emissions about 33 percent of total U.S. emissions.
# There are nontraditional feedstocks that offer even greater carbon sequestration while decreasing the use of fossil fuel. Switchgrass, for example, is a perennial native grass that doesn't require annual planting, and is harvested by taking annual cuttings. The plants require fewer inputs such as fertilizer and pesticides and have tremendous root systems that sequester carbon continuously.
Carbon Market Fundamentalism
Bharati Chaturvedi, director and co-founder of Chintan, a small non-governmental organization (NGO) servicing India’s waste-pickers, claims that more than 1 percent of Delhi’s population is engaged in waste-picking — a significant source of revenue for the poorest — and that they recycle 9 percent to 59 percent of all of the waste generated in the city. “These waste-pickers are providing a public service — for free,” Chaturvedi says.
But a waste incinerator now proposed in Timarpur, a suburb of Delhi, may change all that. Like other incinerators, this one will generate cancer-causing dioxins, mercury, and other heavy metals and persistent organic pollutants. What’s new and different about this particular waste incinerator: It will generate carbon credits under the Clean Development Mechanism (CDM).
The CDM was originally established under the Kyoto Protocol, the climate change treaty, to address the need to provide new aid to developing countries to acquire and implement new clean energy technologies and projects. Its intent was also to provide a vehicle for development. However, critics say, the CDM is rapidly devolving into a subsidy for some of the dirtiest industries in the Global South and an excuse for inaction in cutting the significant greenhouse gas emissions by developed countries. Dirty industries and banks are growing rich on the schemes: The World Bank, for example, is becoming a major broker of many of them, charging a 13 percent commission on all of the carbon trades it brokers.
The Timarpur incinerator may be the first in a series of incinerators to benefit from the global carbon market, despite India’s informal and effective recycling industry and generally hostile posture toward incinerators. Gopal Krishna, a public health researcher at Jawaharlal Nehru University, New Delhi, had succeeded in dissuading government officials from accepting other proposals from Australian and Danish incinerator companies in Delhi, based on public health concerns. “We had managed to stop half a dozen of these dubious projects in the past,” says Krishna. “But this time around, in the name of carbon credits, fraudulent claims are being made with impunity.”
In addition to Krishna’s public health arguments, there is another reason incinerators have never gotten off the ground in Delhi: “Delhi’s garbage doesn’t have enough burnable matter,” says Neil Tangri, Waste and Climate Change Campaign Director for the Global Alliance for Incinerator Alternatives (GAIA). “It tends to be too wet, containing too much ash and sand, and non-combustible inert materials.” In other words, not enough combustible products like plastic and paper, thanks in large part to the diligent waste-pickers.
But today, with an incinerator contract looming on the horizon, and with it the potential for millions of dollars in revenue from the global carbon market, the political dynamic has changed. These waste-pickers are being harassed by dump managers and actively denied access to the dry, high-calorie items the incinerator will devour.
“They are effectively denying a livelihood to the poorest of the poor in setting up this incinerator,” says Chaturvedi. “To take that miserable existence away, it’s criminal. And now we’re seeing skyrocketing food prices in India. What will these people do? Huge local skills in recycling are now being wiped out, skills essential for a sustainable society.”
An additional problem with the incinerator is what to do with the fly ash left over. “I’ve been all over India,” says Patricia Costner, science adviser to GAIA and the International POPS Elimination Network. “I know what happens to incinerator ash. Most of it ends up by the side of the road. There are no engineered landfills in India. Fly ash and bottom ash is required to be managed very carefully in most countries, but in India, they simply do not have the infrastructure to do that.”
Improper disposal of incinerator waste isn’t the only problem: “When waste pickers are denied access to the waste stream, they go through the ash looking for metal, the only substance to survive incineration intact,” says GAIA’s Tangri. “I’ve seen people thigh deep picking through incinerator ash for metals. You’re using the human body as a toxic absorber — you’re basically spoon-feeding it to these people.”
Despite doubts raised by the Indian government and Supreme Court as to the advisability of incinerators in India, one of the most avid proponents of these carbon credit schemes is India’s former minister of environment and forests, Rajesh Kumar Sethi. Sethi was recently elected chair of the executive board of the CDM, the supervisory body that determines which projects qualify for CDM credits. “It would be impossible for [Sethi] to question any project that has been incorrectly cleared by the Central Pollution Control Board, a board that comes directly under the ministry he used to direct,” says Krishna.
Carbon Trading 101
Little understood by all but a few insiders, carbon trading was established under the Kyoto Protocol and involves two types of credits. There are “offsets” and “allowances.” Allowances are the limited number of government-allocated credits that are either auctioned or given away to certain industries within a developed country that has signed on to the Kyoto Protocol. One allowance equals one ton of carbon dioxide. Polluters that emit more than they are allowed must buy enough carbon credits within their country or from other designated developed countries (grouped as “Annex B” countries in the Kyoto Protocol) to match their allocated greenhouse gas emission levels. Thus, Company A may have exceeded its permitted carbon allowances by 100 tons, and so buys from Company B, which has managed to reduce its emissions by 100 tons carbon. The theory is: The overall cap is the same regardless of the trade, and the invisible hand of the market allows emissions reductions to occur with greater flexibility, less “command and control” and produces a “win-win” scenario for everyone involved.
The Clean Development Mechanism also permits carbon allowances to be traded between Annex B countries and developing countries — countries that are signatory to the Kyoto Protocol but don’t yet have limits on their greenhouse gas emissions. The problem here is that trading under the CDM is thus occurring between a set of countries that have an overall cap on their emissions, Annex B countries, and a set of countries that have no caps on their emissions, developing countries. In order to avoid bogus emissions credits being sold by developing countries to Annex B countries, the UNFCCC decided that carbon credits would be issued under the CDM only if they were “additional” — or “not business as usual.” This concept of additionality, which requires the proof of a counter-factual, has been all but impossible to verify.
The CDM is a subset of an overall category of carbon trading, “offsets,” which critics claim do not constitute actual emissions reductions. There are two primary markets for carbon offsets: the voluntary market and the so-called “compliance” market of the CDM. The voluntary carbon offset market — much like the “compliance” one — offers up for sale the replacement of a climate “bad” with a climate “good.” So, for example, if I am going to fly across the country, I will “offset” the carbon emissions from the flight by investing in a tree planting program. Greenhouse gas emissions may rise from my transcontinental flight; however, I can feel better knowing that I’ve “offset” my flight by investing in a tree farm that will absorb a quantity of carbon roughly equivalent to my flight. These voluntary offsets tend to be poorly regulated and therefore cheaper than compliance-based offsets, which have more rigorous — but still insufficient, to many — regulatory requirements.
Even the “Certified Emissions Reductions” sold under the CDM seem a far cry from actual “emissions reductions.” In fact, according to David Victor of Stanford University, as many as two thirds of the credits being produced by the CDM from projects in developing countries are not resulting in any emissions reductions. Victor and Michael Wara, a law professor at Stanford, found in an April 2008 paper that virtually all of the hydropower, natural gas and wind projects in China are applying for CDM credits. Yet, clearly, China could not make the argument that none of these projects would have gone forward without CDM credits — a key criterion for support under the CDM.
A separate study published by International Rivers argues that nearly three quarters of all registered CDM projects were complete at the time of approval, suggesting that the requirement that project developers could not have gone forward without the “additional” source of CDM funds is being routinely waived.
Even compliance-based offsets, such as those sold under the CDM, are proving highly problematic. With the price of offsets remaining quite low, the most common form of offsets involves large dams, the destruction of industrial pollutants and the combustion of landfill methane — the “low-hanging fruit” in a carbon market where the price of carbon has hovered at very low levels.
Policy Goals Achieved? Not Really
The same deregulatory fervor that is playing out in the bankruptcy of Wall Street banks, credit card companies and derivatives traders brought the theory of carbon trading: Open up the free markets — in this case, the newly minted market in carbon — eliminate regulatory interventions such as carbon taxes or precise standards for polluters, and the market will seek out the most efficient means of achieving the same emissions reductions goals.
“None of us is clever enough to work out what is the best way to tackle climate change,” states Matthew Whittell of Climate Exchange, a company that owns the European Climate Exchange and the Chicago Climate Exchange. “But, if we have a global carbon price, the market sorts it out.”
However, early evidence suggests that what is being sorted out is just how much more consumers will pay for an increase in greenhouse gas emissions. The European Union Emissions Trading Scheme (EU ETS), has thus far resulted in a rise in greenhouse gas emissions while profits have skyrocketed for utilities and energy traders. In a powerpoint presentation entitled, “Citigroup Analysis of the Impact of the EU Carbon Market on European Utilities,” Citigroup’s Head of European Utility Research Peter Atherton summarizes the EU ETS this way: “All generation-based utilities: winners. Coal and nuclear generators: Biggest winners. Hedge funds and energy traders: even bigger winners. Losers?? Herm … consumers!”
He goes on to note: “Have policy goals been achieved? Prices up. Emissions up. Profits up. … So, not really.”
Emissions have risen under the EU ETS because companies essentially fudged their numbers at the outset, claiming they would emit more than they expected to, so they would have an excess of permits to sell. Others were equally crafty, and the price of carbon plummeted.
A similar fiasco is unfolding in the newly minted Regional Greenhouse Gas Initiative (RGGI) an emissions trading scheme for U.S. northeastern states launched in September 2008. The RGGI initiative involves nine states aiming to provide a domestic pilot “cap and trade” market for carbon. Early results from the RGGI initiative, like the EU ETS, show evidence of over-allocation of permits to pollute and a concomitant drop in the price of carbon, as demand for carbon trades proved virtually non-existent.
Recently, the Chicago Climate Exchange (CCX), which claims to be “North America’s only and the world’s first global marketplace for integrating voluntary legally binding emissions reductions with emissions trading and offsets for all six greenhouse gases,” saw its shares drop in value by almost 80 percent from a high of $7.50 in June to a low of $1.50 on October 23, 2008. Bankrupt Lehman Brothers was among those “distressed sellers” of CCX shares that drove down the price of carbon on the U.S. markets to one of its lowest levels since carbon markets were launched in 2003. The price dropped further after a Wall Street Journal article questioned whether carbon credits trading on the CCX represent emission cuts that would not have otherwise have happened.
“We Need Direct Action”
Larry Lohmann of the UK-based think tank The Corner House, and author of the book, Carbon Trading, argues that advocates of carbon trading overlook two critical things: first, the poor are often paying the price for the vast profits of carbon traders, while seeing few benefits; and, second, the most direct solution to climate chaos is not part of the equation — namely, reorganizing society so that fossil fuels can be left in the ground while the planet’s remaining forests are preserved and even enlarged.
As carbon markets gain steam internationally, forest carbon credits are now opening up as a new arena for investment: A country’s entire forests are now up for sale as offsets for continued pollution by wealthy countries. And once again, it is the World Bank that is leading the way. Under its new “Forest Investment Fund” and “Forest Carbon Partnership Facility,” the Bank is preparing to show the world how to “scale up” forests as offsets — selling carbon from individual tracts of forests, or even an entire country’s forest reserves — as “offsets” for Northern countries to purchase, in lieu of reducing their own emissions at home.
Yet, in violation of the UN Declaration on the Rights of Indigenous Peoples, indigenous peoples who inhabit and have preserved these forests for generations, are often the last to be consulted on these schemes. For many of them, land rights, rather than cash for carbon credits, are a higher priority in the struggle for autonomy and the right to control their ancestral lands.
“Using market-based systems to privatize our land, forests and now to commodify the atmosphere is not a sustainable solution,” says Tom Goldtooth, executive director of the Indigenous Environmental Network.
Despite the early evidence of flaws in carbon markets, few environmental organizations are willing to be critical of this approach. All current legislative proposals being advanced on Capitol Hill to address climate change include some form of “cap and trade,” another name for carbon trading.
President-elect Barack Obama supports the idea of a “cap and auction” market-based approach to solve the climate crisis. Yet what few politicians mention, is that if the various market mechanisms for addressing climate change — the so-called “cap and trade” approach, where most pollution permits are given away to polluters, or the “cap and auction” approach, where pollution permits are auctioned — move forward nationally, they will eventually open up to the global market in carbon offsets, including the highly problematic CDM.
Representatives Jay Inslee, D-Washington, Ed Markey, D-Massachusetts, and Henry Waxman, D-California, are among the few Members of Congress to advance principles and legislation that recognize the problematic nature of “carbon offsets,” such as those being advanced by the World Bank and some environmental organizations. “We have to be very critical of any mechanisms involving offsets,” Inslee says. “We have to assure in the real world — not the abstract world — that you get something for your money. We do not have that right now. Until we do, I don’t think the offsets should be something you get credit for.”
S. David Freeman, former energy advisor to Presidents Carter, Nixon and Kennedy, and former director of the Tennessee Valley Authority, goes one step further: “If we’re on death row, as Al Gore and others say we are, then we need to take direct action, and I think the most important form of direct action is deciding from this day forward it’s all going to be renewable. Why don’t we outlaw new coal and nuclear plants?
“In World War II, we told the car companies to stop making cars and to start making tanks and airplanes and we won the war in less time than we’ve been in Iraq. When we have a flu epidemic, the government goes out and buys vaccines. Yet, now, with the climate crisis, there seems to be a reluctance in this country to act collectively through its government.”
Tom Picken, the Head of International Climate for Friends of the Earth-UK, puts it this way: “It is absolutely clear that there is no ‘spare’ [carbon dioxide] ‘in the system’ and therefore no ‘spare’ [carbon dioxide] to trade. If there is no spare [carbon dioxide] to trade, then this poses a pretty fundamental challenge to the means available to achieve emissions reductions — that there cannot be any more offsetting of any form. To do so is downright dangerous, in my view, and seems to me to be based on neoliberal economic fundamentalism rather than being environmentally and socially informed.”
Kenya: Growing Money on Trees?
Changes in Kenya’s Forest Management
Kenya’s stunning landscapes make it a hugely popular tourism destination, but until now, Kenya’s forests have been under-utilised, under-appreciated and consequently under-valued. What was until recently known as the Forest Department suffered from low morale due to lack of direction and lack of funding which in turn has led to a lack of resources and poor infrastructure. This is set to change, however, due to two developments that have the potential to create considerable synergies: The creation of the new Kenya Forest Service (KFS) and the emerging carbon market.
The Government of Kenya has embarked on major reforms in the country’s forestry sector. As part of these reforms, the KFS was established to succeed the former Forest Department (FD) with effect from February 2007. KFS has an expanded mandate to manage the nation’s forest estate and provide high quality forestry related products and services. The new forest policy legislation has paved the way for doing forestry more responsibly through restructuring government and encouraging meaningful engagement with the private sector and community forest associations. The overall objective of the new reforms is increased contribution of forests to economic recovery and poverty alleviation on an environmentally and socially sustainable basis.
In line with this policy, one of the KFS first tasks was to begin the detailed mapping of all forest regions after which forest management plans (FMP) are to be drawn up for each area. This is being done forest by forest. Once the mapping and FMPs for each area are completed, the areas are being put out for tender for the development of high-end eco-tourism facilities in each area on long term leases (25 x 25 years).
On reflection, it is indeed surprising that there have always been limited eco-tourism facilities in the forests as they are among the most beautiful, bio-diverse and pristine wilderness areas in the country. Traditionally, high-end eco-tourism facilities have been limited to the national parks and reserves under the auspices of the KWS or the local councils. To date, tenders have been put out for forests in the Mount Kenya region and the Arabuko-Sokoke Forest at the North Coast. The results of the tenders were announced in early October 2008. The next areas expected to be tendered in early 2009 are the greater Aberdares area and the Maasai Mau Forest.
The aim of the tender exercise is not only to raise revenue for the KFS through rental agreements, but to preserve the forests from continued degradation and exploitation from forest adjacent dwellers (FAD) by unlocking the commercial value of the forests and providing the FADs with alternative sources of income and therefore decreasing their dependency on forest products.
The successful tenderers have placed these themes at the core of their proposals. The idea is that the construction of eco-tourism facilities in these areas will provide long term employment for the FADs through construction, the sale of local goods and services, employment through lodge staffing, guiding etc. as well as the establishment of community trust funds financed by a percentage of profits or bed nights. The combined effect of this will be to greatly lessen, if not completely stop, the continued degradation and deforestation of these areas.
Carbon Credit Markets for Forestry
The timing could not have been better given the emergence of the carbon trading market under the Kyoto Protocol: Countries that create carbon emissions buy certified emission reductions (CERs), i.e. issued credits that can be bought and sold on the official carbon trading market, from developing countries to offset their emissions. Carbon offsets can come from many sources, but are dominated by three types of projects:
* Forestry sequestration, i.e. the avoidance of deforestation or the planting of new forests (36%),
* Renewable energy, i.e. generating power with clean renewable sources, e.g. wind and solar (33%); and
* Industrial gases, i.e. containing and storing industrial gases created by industry so they are not released into the atmosphere (30%).
Deforestation in tropical countries is often driven by the economic reality that forests are worth more dead than alive. But the emerging markets for carbon credits could radically alter that equation. A study conducted by the World Agroforestry Centre found that ventures that prompted deforestation, such as clearance for agricultural purposes, charcoal burning, wood fuel etc. rarely generated more than USD5 for every ton of Co2 equivalent they released and frequently returned less than USD1. Meanwhile, European buyers are currently paying about USD35 for an offset tied to a one-ton reduction in Co2 emissions.
Even though the Kyoto Protocol stopped short of recognising forest protection as a source of CERs, a parallel voluntary market has sprung up. Voluntary offset trading stems from a variety of sources – people trying to offset their carbon footprints, businesses seeking to reduce their greenhouse gas emissions, or major events trying to be carbon neutral, such as the Olympics, the Super Bowl etc. To date, avoidance of deforestation is still confined to the voluntary market, which is still a small part of all carbon trading and buying, with a value of USD331m in 2007 as opposed to the Kyoto Protocol’s CDM and EU’s emission trading scheme worth USD64bn. But the voluntary markets grew more rapidly in the preceding year, tripling in value from USD91m in 2006, whereas the CER market only doubled in value. This trend is set to continue as the voluntary offset market is expanding at an astounding rate and, though still in its infancy, is one of the fastest growing markets on the planet. Any doubts about the importance of the voluntary carbon market should have been removed by Merrill Lynch’s announcement in early 2008 of a new carbon offset service to assist businesses to reduce emissions through voluntary offsets: Merrill Lynch’s managing director has valued the market at over USD70bn.
There are moves afoot to have reduction and prevention of deforestation included in the list of CERs to give them even greater value. An initiative to reduce emissions from deforestation (‘REDD’) was approved at the UN climate talks in Bali in December 2007. At that event, it was suggested that cutting global deforestation rates by even 10% could generate up to USD13.5bn in carbon credits.
At a recent meeting in Manhattan on forest conservation, economic development and climate, two Nobel laureates, Al Gore and Kenya’s Wangari Maathai, joined the push to include forest preservation in carbon-trading markets as a way to curb greenhouse gases and help poor rural communities. At the same meeting, the president of the US branch of the World Wildlife Fund (WWF) said ‘Unless the world has policies that recognise the value of standing trees and forests, we have failed. In Kyoto, WWF was pivotal in keeping forests out. We have changed our position.’
The Kyoto treaty expires in 2012 when a new treaty is expected to be signed in Stockholm. It is hoped that avoidance of deforestation will then be recognised as a clean development mechanism (CDM). It has been noted that developing countries are unlikely to sign on the new treaty unless there is a prospect of money flowing into their direction in to compensate for revenue that would be lost if deforestation slows.
Kenya, Forestry and Carbon Credits
Linking these developments to the KFS and Kenyan forests, it is easy to see how Kenya can benefit from the carbon market whilst ensuring that its natural resources are valued, and more equitable revenue opportunities are created. Kenya’s population is currently estimated at 32m, with an average national growth rate of 2.57% (2006 estimate). This growth has put tremendous pressure on the country’s natural resources, particularly land, water and forests. Land use practices have disregarded land potential and carrying capacities. Marginal areas have been encroached upon, accelerating loss of productivity, hence increasing desertification and loss of biodiversity. The search for productive land has further threatened environmental sustainability as forests, both indigenous and commercial, are cleared for agricultural purposes, timber and fuel wood. Amongst other values, endangered forest resources provide direct benefits in the form of fuel, food, pastures, construction materials and traditional cures to about 3.5 million people living adjacent to forests. In addition, the forests globally influence the microclimates.
Aerial surveys and assessments of important water towers Mount Kenya, Aberdares and Mau – show the continued threats to the forests that have had diverse negative impacts in the immediate and macro-environments, notably through increased soil erosion, as well as the destruction of Kenya’s catchments areas. This contributes to polluted water sources as well as a chronic country-wide water shortage, and in turn affects the energy sector through the country’s dependence on hydro-power. The costs of timber and other related products continue rising.
Environmental degradation undermines livelihoods and future opportunities among the country’s population, where 75% of the poor, or 56% of the overall population, live in rural areas. Rural poor depend on their natural resources to survive, and so there is a strong correlation between sound environmental management and poverty reduction. In addition, the tourism industry accounting for 10% of the GDP and a major foreign exchange earner largely depends on prudent management of the environment, including the wildlife and forests.
If through the protection of existing forests via the new tender initiatives KFS can corner even a small piece of the voluntary carbon market, the financial and environmental rewards could potentially be enormous. This money would sustain Kenya’s forests into the future. With sensible management, the flow on benefits would be untold for both the protection of the forests and the surrounding communities. Income generated could then be used to upgrade infrastructure, replant degraded areas, fund clean energy schemes within the forests e.g. hydro electric, solar power etc. that in turn would generate more credits. Funds could also be used to resettle illegal forest dwellers within areas such as Kakamega and the Maasai Mau forests and to provide them with sustainable employment on the reforestation and other initiatives.
So whether it was a happy co-incidence that the reforms of the Forest Department came at the same time as the opportunities for funding under carbon trading schemes or whether the Kenyan Government had something bigger in mind, this is clearly a turning point. If Kenya’s government and parastatals act to take advantage of the substantial funds available, Kenya’s forests can be saved, and wealth created for the custodians of those forests. The Director of the KFS, Mr. David Mbugua, said recently that the service was charged by both Kenya’s society and the international community with the task of protecting forests while at the same time ensuring they continue to provide socio-economic and environmental benefits for present and future generations. The international carbon market would indeed make it possible to grow money on trees.
Monday, November 24, 2008
Saturday, November 22, 2008
Solar Power's Explosive Growth - Who Will Emerge Next?
The entire PV industry has been experiencing tremendous growth, and that growth is expected to continue. In select regions that have the right combination of high electricity prices and good financial incentives, solar electricity already competes with conventional household electricity. As expected cost reductions continue, the size of these markets will continue to grow.
According to Solar Annual 2008, a new report by PHOTON Consulting, by 2012, solar power may constitute 35% of all electric capacity additions, and thereby move from the fringe of the electricity sector to the mainstream.
This subject and more will be discussed as part of the Searching for 'Second Solar'" Conference Series, a series of three conferences to be held in San Francisco on Dec. 2-4, 2008 by PHOTON Press, the world's largest publisher specializing in solar energy, and the Boston-based consulting branch PHOTON Consulting.
After Obama win, oil industry waiting and wary
Many consider McCain a fierce advocate for expanded oil and gas drilling.
Uncertain what new regulations might be placed on Wall Street and potential added taxes on oil-company profits, industry analysts say companies are taking and wait-and-see approach.
“I don’t think anyone’s surprised,” said Larry Wall, director of public affairs for the Louisiana Mid-Continent Oil and Gas Association, of Obama’s victory. In the last few weeks of the election, a McCain victory “was a longshot at best.”
As for what an Obama presidency will look like for the offshore oil industry, Wall said “it’s really too soon to tell.”
“I think some of the things the industry was looking at, now it has to look at very seriously,” said Ken Wells, president of the Offshore Marine Service Association. “We have a new president, a Democrat, and a Congress that’s more firmly Democratic. That’s going to have a lot of implications, some of them that industry will have to guard against.”
But the strength of Obama’s mandate also creates a chance for sweeping change on energy policy, for good or bad, he said.
“It’s not enough to just open up new areas; we’ve got to do it as part of a broader energy plan,” Wells said. “If the White House wants to cross the aisle and embrace both Republicans and a business community that’s been skeptical, then an energy policy is the perfect place to do it.”
Analysts say the greatest wildcard with Obama is whether and when he might permit opening up the eastern Gulf of Mexico, Atlantic and Pacific coasts to oil and gas exploration. Until a few months ago, he opposed all new drilling but has since backed limited drilling in certain areas as part of a broader energy plan.
“He supports restrictions on offshore drilling,” Wall said, “but we don’t know what those restrictions are or what they mean.”
Obama has expressed strong support for natural gas, on which Louisiana is well-situated to cash in.
“We sit on the largest deposits of natural gas in the hemisphere,” said Paris “Pye” Theriot, CEO of Louisiana Trade Consultants, a consulting and lobbying firm that advises small- and medium-size businesses.
“We’ve been promoting the use of natural gas. The more that he leans toward natural gas, that lends itself toward more exploration domestically.”
The Obama win will likely mean stricter carbon dioxide emission restrictions, meaning more business for companies that do environmental retrofits, said Joe Gibney, an analyst for Capital One Southcoast in New Orleans.
The McCain loss also means the loss of his plans to build new nuclear power plants, potentially to the detriment of the Baton Rouge-based Shaw Group.
But Wall Street’s meltdown and ensuing economic crisis, Wells said, may transcend all of that for the moment.
“That may be deeper than anything that may divide the party,” he said. “We really have to hope now they all work together to solve one of these mega-problems. We need a steady hand more than anything right now.”
“We can still stop a filibuster,” Briggs said. “We have the potential to stop any seriously bad legislation.”
He is convinced that the strong engine of energy demand will prevail long-term.
“You have to step back and look at this at 30,000 feet,” Briggs said. “In reality our country and the world needs energy. Louisiana is blessed with the resources and the infrastructure that no other state in the United States has. We will continue to see solid steady growth in our industry here.”
Monday, November 17, 2008
Quality Shake-Down in U.S. Pre-Compliance Carbon Registry Market Moves Closer
Carbon sequestration for forests: 'Easy goes it'
A new word has emerged in the forestry lexicon: sequester or sequestrate. In legal terms sequester means "to seize and hold (a debtor's property), until legal claims are satisfied."
In like terms with forest landowners, it means seizing atmospheric carbon, then storing it in trees, and potentially earning revenue for the service.
How does it work? It works through "carbon markets" that help to fund greenhouse gas offset projects. The Chicago Climate Exchange is one example, serving as a CO emission registry.
Manufacturing firms in the U.S. that are members of the CCX make a voluntary but legally binding commitment to lower their greenhouse gas emissions. Known as "cap and trade," CCX members have a CO emission quota.
If this quota is exceeded, they must offset the excess by purchasing carbon credits from sources that sequester carbon, such as forests.
Only forestlands that have been third-party certified are eligible to participate. This requires a forest stewardship plan and third-party verification. Several third-party forest certification systems in the U.S. have been recognized as credible, most commonly: Sustainable Forestry Initiative, Forest Stewardship Council and American Tree Farm.
Landowners must work with a qualified professional forester to conduct a "carbon" inventory that establishes the baseline carbon stocks.
The data is submitted to a registered carbon aggregator who, in turn, uses a model to artificially grow the forest into the future. The model predicts the carbon sequestration rate, a figure that varies by forest and largely a function of stocking, species and site index.
Periodic payments are made to landowners based on the predicted carbon sequestration.
Landowners are required to give an annual update if any changes have been made to the forest that would alter the carbon stock (e.g., harvesting, reforestation, catastrophic events, etc.). A carbon inventory at the conclusion of the contract quantifies the actual amount of sequestered carbon and allows for final settlement.
Fees are associated with inventory development, aggregation, verifications and transactions, and in some cases, fees may exceed the carbon revenue.
Some of these fees are deducted off the gross revenue from the sale of carbon-offset credits. Other fees, such as inventories and carbon modeling are normally due up front. The registered carbon aggregator typically charges a commission, serving as a broker of accumulated sequestered carbon for a pool of landowners. Thus the highest trading price mutually benefits all parties.
Only those landowners with a serious and lasting commitment to long-term sustainable forest management should consider this program. It is a contractual agreement with initial costs that presently may not be suited for all ownerships. Landowners should understand that with participation in the program, comes an obligation that forests will remain in certified status for 15 years.
Selling timber during the contract period will greatly affect carbon sequestration rates, potentially resulting in a penalty. This program is funded by private investors, not the government, and these investors are counting on participating landowners to deliver a product: sequestered carbon.
And like the stock market, prices paid for sequestered carbon fluctuate daily with no minimum guarantee.
The program is in its infancy. Presently there are very few certified forests in Tennessee eligible to participate, and even fewer aggregators capable of marketing carbon. Participants should seek full disclosure of all potential benefits and risks prior to enrolling.
Monday, November 10, 2008
Moving Beyond ‘Carbon Neutral’ to ‘Carbon Healthy’
While many companies today attract attention and acclaim when they announce they have achieved carbon neutrality, I’d argue that we are misleading ourselves when we define this as success. The question we need to ask ourselves is this: is carbon neutrality really the ultimate goal?
On the road to environmental sustainability, we need to rethink the “carbon neutrality” mantra and move beyond that to “carbon healthy.” I like to compare it to going on a diet - a carbon emissions diet.
Imagine that a lifetime of habits have led you to become overweight and unhealthy. It’s not enough to aim for neutrality - in this case simply maintaining your current weight - because in order to improve your life expectancy and quality of life, you need to actually reduce your weight and reverse the damage that’s accumulated over time. Similarly, it’s not enough for our planet to remain carbon neutral by buying carbon offsets - we need to reduce overall carbon emissions. We need to measure our current environmental footprint - our carbon health - and then take steps to improve it.
Carbon neutrality has become the rallying cry for the industry, and while companies are doing a great job of patting themselves on the back for offsetting carbon emissions and planting trees, let’s not forget the fundamental issue here: we continue to deplete our natural resources and increase carbon emissions and it’s astounding how little is really being done to fix that. Instead, “carbon healthy” - a state where an organization is doing everything they can to just not offset carbon emissions, but reduce them for the long term by decreasing energy consumption or replacing carbon emitting energy sources with green energy - needs to be the focus.
Perhaps one of the reasons many of us cleave to the idea of carbon neutrality is that it’s easier to buy credits and plant trees than it is to actually drive reductions by making changes within our businesses.
According to a recent Economist Intelligence Unit survey of over 1,200 executives, 55% of the world’s leading companies have set policies to reduce energy consumption, yet only half this number (27%) have upgraded IT systems to improve performance.
In the same survey, 52% of respondents rated “establishing meaningful benchmarks or key performance indicators to measure performance against” as a challenge or major challenge.
Further, 45% rated “developing tools to monitor sustainability performance” equally challenging. The result is that fewer than 20% reported having measurably reduced carbon emissions. If we have no way of tracking our calories in and calories out- it’s no wonder we’re struggling to stay neutral, nevermind getting all the way to healthy.
We need scales to tell us our weight and a system to track our intake and output. One area where we can start doing that now is with our real estate. Buildings account for 48% of carbon emissions, and with current technologies we can measure the exact carbon footprint of our buildings - how they’re doing on the environmental diet - and then monitor our progress so we can become carbon healthy.
Achieving true carbon health requires a comprehensive strategy, and buildings need to be a core component for any sizable organization. The fact that most companies today lack an infrastructure for measuring the exact energy output and carbon footprint for their buildings reflects a larger problem - you can’t reduce what you can’t measure or manage.
In fact, a recent TRIRIGA survey of more than 150 real estate and environmental professionals found that most organizations use inadequate technology such as Microsoft Excel - or have no system at all - to measure and manage the environmental impact of their real estate portfolio. This approach is insufficient to manage the massive volume of data required to measure and improve your carbon health.
A lack of tools hinders organizations’ ability to effectively measure and manage their environmental impact and provide transparent reporting to a variety of stakeholders (regulators, investors, shareholders, NGOs, etc). As a consequence, organizations are unable to successfully drive the reductions in emissions needed to make a lasting impact beyond carbon neutrality. If we commit - as we should - to the more ambitious goal of carbon health, we need to do a better job of setting ourselves up for success.
If you really wanted to lose weight, not simply stop gaining, you’d arm yourself with a good scale, a diet regimen, and some way of tracking your intake and activities that would reveal potential pitfalls in your plan or that you have achieved your goal weight. Succeeding in our carbon diet is no different: organizations must ensure success by implementing tools and systems to accurately measure carbon footprint, set carbon health goals, manage operations and progress against a carbon healthy regimen and identify opportunities for improvements to reduce - not just neutralize - carbon emissions.
Looking for Carbon in Renewable Energy
Renewable Energy Credits are designed to spur the development of renewable energy by selling the rights to its environmental benefits. Carbon credits often aim to do much the same thing. Can the two get along? The Ecosystem Marketplace examines the role of RECs in a carbon economy.
7 November 2008 | Back in the mid-1990s, Rob Harmon wanted to develop wind farms. Like other aspiring developers, he identified promising locations and then talked to local utilities about buying the power. He encountered a common response.
"They told me they'd pay me what they paid for commodity electricity," Harmon recalls.
The commodity price for electricity was often determined by coal plants. Unlike new wind farms, these plants had often paid off their capital costs years ago. They also didn't have to pay for much of the pollution they generated. Harmon simply couldn't build his farms for the price.
"But commodity electricity didn't capture the environmental values of renewable energy," he explains.
So Harmon responded by championing a new commodity: the Renewable Energy Certificate or REC. A REC represents the environmental attributes of one megawatt hour of electricity generated from a renewable resource.
In just over a decade, the REC has gone from a bright idea to a traded commodity. RECs are utilized by state regulators, purchased by Fortune 500 companies, and traded by hedge funds. Last month, the industry that has formed around the REC gathered in Denver, Colorado for its thirteenth annual conference.
Lori Byrd of the National Renewable Energy Laboratory (NREL) told the 413 attendees that the so-called green power market grew by 50% in 2007, fed almost equally by growth in the voluntary and compliance markets. The industry feted its new largest purchaser, Intel, which made a commitment that bested last year's top REC purchaser, PepsiCo. It celebrated the fact that 28 states plus the District of Columbia have regulations promoting renewable energy, many of which depend on RECs to function.
These are salad days for the REC, but now it's facing a challenge from an unlikely source: the carbon credit.
Green power attendees flocked to presentations with titles like "Value of RECs in the Carbon Market" and "Using Renewable as VERs." That's because few industries have more to gain – and more to lose – from the maturing of the carbon markets in the United States than the renewable energy marketing community.
RECs fill the carbon void…
RECs were designed to support renewable energy, but everyone agrees that their success has been fueled as a method of reducing carbon dioxide.
As the voluntary market for RECs developed, buyers expressed numerous reasons to purchase them. They wanted to support clean energy, reduce the country's dependence on fossil fuels, and reduce their carbon footprint. This last reason meant that RECs were viewed by some as a carbon offset.
To many in the industry, this was entirely appropriate.
"Renewable energy generation is a cost-effective, easily understood method of getting to the heart of the carbon emissions problem," wrote Harmon, now the chief innovation officer for non-profit REC marketer Bonneville Environmental Foundation (BEF), in a 13 page paper he handed out at the conference arguing why RECs are effective greenhouse gas offsets.
But most carbon market players disagree. One vocal critic has been Michael Gillenwater, a Princeton researcher and the head of the Greenhouse Gas Institute.
Gillenwater argues to anyone who will listen that using RECs as offsets creates a host of conceptual problems. All of them can all be traced to the fact that, at its core, a REC guarantees clean energy generation, not carbon reductions.
"It's sort of like claiming that an emissions allowance isn't just a tracking device, it embodies everything good with that power plant," says Gillenwater. "Imagine a [Certified Emissions Reduction] that doesn't just tell you emissions have been reduced, but also how many jobs have been created. You can take it to absurd levels pretty quickly."
A unified system?
For a number of years, many renewable energy marketers sold RECs as offsets for any type of carbon emissions. That left the two systems – RECs and carbon offsets – in fundamental conflict with each other.
At the Denver conference, players acknowledged the emergence of a new industry standard in green power that is more conducive to integration. It boils down to shift on when to use RECs and when to use carbon offsets.
Green-e, the green power industry's non-profit watchdog organization, now recommends that standard RECs should only be used to offset electricity usage in the United States. Other emissions should be offset with standard carbon offsets. (It even recently released a program that provides methodology to transfer some RECs into standard carbon offsets.)
"A vast majority of the clients are making green power claims," explains Gabe Petlin, the director of regulatory affairs for carbon offset and REC provider 3Degrees. "As long as we stop calling RECs a carbon offset, our business model fits right in."
Even Gillenwater acknowledges in this more limited form RECs could play a role in the carbon economy.
RECs in a Cap-and-Trade World
This integration of voluntary markets seems achievable, but it doesn't necessarily address the larger challenge that concerns REC participants: What happens to RECs when a cap-and-trade system for carbon is put in place?
At the conference, University of Colorado researcher Ghita Carroll presented a paper outlining the impact of various cap-and-trade scenarios on renewable energy development generally and RECs specifically. Her conclusion: different cap-and-trade regimes would have wildly different impacts on renewable energy development and the REC markets.
The Regional Greenhouse Gas Initiative (RGGI) in the northeast, for example, demonstrates the challenge – and the opportunity – for RECs under cap-and-trade. There, regulators adopted a system that auctioned off pollution allowances. Since renewable energy producers don't pollute, carbon policy makers argue, they benefit from this system simply by not having to purchase allowances. But the REC community points out that renewable producers lose the opportunity to sell RECs that claim to reduce carbon dioxide. In essence, such a policy kills the voluntary market for RECs.
That's why the largest REC marketers came together at last year's green power conference to form the Renewable Energy Marketers Association (REMA) to educate and advocate for including the renewable energy market in emerging cap-and-trade schemes.
REMA promptly sent off comments to all of the major carbon regulatory bodies in the United States, arguing that voluntary renewable energy purchasing should be incorporated into their efforts.
With RGGI, the young organization already notched a significant victory. Nine out of the ten participating states adopted language that allowed regulators to lower the capped emissions based on the amount of green power sales in that particular state. That action means that people purchasing RECs in RGGI states can point to carbon reductions from their actions.
Crossing the Chasm
This outreach effort is the exception, however. There's not a great deal of communication between the carbon and REC camps. REC critic Gillenwater has never attended a green power conference and few carbon players could be found in the Denver halls. Meanwhile, few REC players are conversant in the nuances of the carbon markets.
Jennifer Martin, a policy director with the Center for Resource Solutions, told the REC crown in Denver about her recent meeting with representatives of the Western Climate Initiative (WCI), the western regional cap-and-trade program in development, in which she attempted to act as an emissary for the renewable energy market.
"There was a lot of skepticism," Martin reported. She implored colleagues to engage the carbon world. "We can't just talk amongst ourselves."
In fact, there is plenty that the two sides can learn from each other. REC players would do well to appreciate the effort to create linkages that carbon trading systems are forging both domestically and internationally. On the other side, carbon players can learn from the green power market, which has attracted many more voluntary buyers in the United States than its carbon sibling. While the carbon market remains awash in voluntary standards, the renewable energy market has coalesced around one.
Rob Harmon expressed his desire to deepen the conversation between the two groups.
"My goal is to get more renewable energy," says Harmon. "I'll do what ever it takes to make that happen."
Carbon credit plan takes step forward
After years of scepticism and doubts over the benefits of the carbon sink project, Thailand is now ready to certify forest conservation projects which will allow investors to claim carbon credits under the Kyoto Protocol pact. Carbon sink projects certified by the Thailand Greenhouse Gas Management Organisation (TGO) will be eligible to claim carbon credits under the Kyoto accord to combat global warming.
TGO executive director Sirithan Pairojboriboon said his agency was ready to scrutinise proposed carbon sink projects after the United Nations had finalised the definition of forests eligible to claim carbon credits.
Carbon sinks, or reforestation and afforestation projects, are part of the Kyoto Protocol's Clean Development Mechanism (CDM), designed to help industrialised countries reach their targets for reducing greenhouse gas emissions by investing in forest conservation projects in developing countries in exchange for carbon credits.
''All kind of big trees as well as mangroves and bamboo can be counted for carbon credits. Any carbon sink project proposals are now welcomed,'' Mr Sirithan said, adding that forest conservation projects were another interesting option for the carbon credit traders.
However, the experts were considering if palm oil plantations are eligible to claim carbon credits, he added.
The CDM's carbon sink projects have been criticised by environmentalists for not being the right means to cut greenhouse gas emissions as it allows industrialised countries to meet emission reduction targets by investing in environmental conservation schemes in developing countries instead of cutting their own emissions.
Thai environmental experts also fear it would affect national sovereignty and allow foreign access to biological resources since the project allows foreign investors to manage forest land in the country.
However, Mr Sirithan insisted that protected forests and forest plantations managed by the Forest Industry Organisation would be excluded from the scheme.
He said only projects that involve the conservation of newly-created or degraded forest land would be certified as carbon sink projects.
''The project will help dramatically increase forest coverage in the country,'' he added.
So far, a total of 27 CDM projects have been endorsed by the TGO, most of which are alternative energy projects.
Banthoon Setsirote, senior researcher from the National Human Rights Commission's sub-panel on natural resources development policy, said as the future of carbon sink projects remained vague, concerned parties should pay more attention to the so-called voluntary carbon trading project.
One of the projects was a 625-rai teak plantation in Sakon Nakhon province, where local teak planters were obliged to keep the trees for 30 years.
Carbon credits obtained from the plantation will be sold to a carbon market in the United States, he said.
The voluntary carbon market, set up in 1989 by private operators who are willing to cut their greenhouse gas emissions, aims to help the industrial sector learn more about greenhouse gas emission reduction and protect the global environment.
Wednesday, November 5, 2008
Major Changes In Store For REC Markets
The latest issue of Carbon Market Analyst North America from Point Carbon addresses what it says is “the significant market confusion regarding the complex relationship between the renewable energy and carbon markets.”
“Renewable energy certificates (RECs) and carbon offset credits are not the same, nor are they interchangeable, but many environmentally-conscious buyers are becoming confused because of the way both types of credits are being marketed,” says Elizabeth Zelljadt, Analyst for Point Carbon. “They must be clearly understood by buyers and sellers to ensure market integrity, renewable energy production and carbon emission reductions.”
Most of the uncertainty comes from the overlap between these credits: since a unit of renewable energy displaces generation from fossil fuels, it can therefore also be called a greenhouse gas reduction. This raises issues of environmental integrity in the form of double-counting, when a REC is sold both as a REC and as a carbon offset. Unless the renewable energy and the carbon displacement are separate parts of a credit, this misrepresents its environmental value. Also, carbon market credits demand additionality, which would be negated in RECs that are created to meet state requirements.
With no current mandatory carbon tax and a mix of states with and without a Renewable Portfolio Standard (RPS), the United States currently has a disparate network of voluntary and mandatory renewable energy and carbon offset projects. From a buyer’s standpoint, they must consider whether REC-derived offsets represent real greenhouse gas reductions. Sellers must consider what type of offset will provide them with the best price.
This situation will likely change with the upcoming Presidential election. While both candidates support a cap-and-trade system, Obama’s platform includes implementation of a national RPS, which could harmonize the REC market across the country. McCain’s plan opposes a national RPS, so the REC market would remain fragmented and possibly increase in complexity as more states adopt the program.
Tuesday, November 4, 2008
Carbon pollution scheme way forward, QRC
The Queensland Resources Council has said that predictions of the export coal industry’s demise under a Carbon Pollution Reduction Scheme (CPRS) are misplaced.
Responding to the release of the Federal Treasury’s economic modelling of the scheme’s impacts, Chief Executive Michael Roche endorsed the finding that the future of coal was linked closely to the commercial application of carbon capture and storage technologies (CCS).
“It’s an important wake-up call for governments and industry that the Treasury is saying that without carbon capture and storage technologies, Australia’s coal production could fall below current levels,” Roche said.
“However, with the successful rollout of carbon capture and storage technologies in key sectors such as electricity generation, coal has a bright and growing future.”
According to Roche, one of the key observations in the Treasury report was that Australia’s significant coal resources could play an important role in an emissions-constrained world if carbon capture and storage technology proves commercial.
“The black coal industry’s commitment to these new technologies is reflected in its $1 billion cash injection over 10 years to support the demonstration of technologies to significantly reduce carbon dioxide emissions created during the production of electricity,” he said.
“In Queensland alone, the voluntary industry levy is supporting world class CCS projects such as the Callide Power Station Oxy-fuel program and the ZeroGen feasibility study.”
Roche said the Treasury modelling underscored the importance of Professor Ross Garnaut’s finding that putting a ‘market price’ on carbon through the CPRS would not be sufficient to ensure the rapid take-up of CCS technology.
Saturday, November 1, 2008
Paper producer gets set to sell carbon offsets
Cheng Loong Corp., one of Taiwan's largest paper manufacturers, announced Oct. 21 that it is the first company on the island validated to sell its carbon dioxide emission rights.
According to company president Tsai Tong-ho, Cheng Loong is now Voluntary-Carbon-Standard-certified and will sell its voluntary carbon offsets in New York's over-the-counter market. "This move is in keeping with our corporate goal of becoming a leading paper packaging firm by efficiently using resources and contributing to society," he said. "More Taiwanese companies should pay greater attention to carbon dioxide emissions."
The VCS initiative, released in 2007, is meant to set a minimum benchmark for the quality of carbon offsets and is designed to offer a basic set of guidelines, focused primarily on lowering transaction costs and carbon prices to consumers. The program was founded by the Climate Group, the International Association for Emission Trading, and the World Business Council for Sustainable Development.
While offsetting is a key component of the VCS program, the founding partners see it as only the third step in a strategy to reduce emissions. The first two are reducing emissions by cutting consumption, or improving efficiency, and then greening up electricity supply by using renewable energy.
Tsai explained that Cheng Loong, with the assistance of Environmental Resources Management Group Inc. (a global provider of environmental, health and safety, risk and social consulting services), qualified for VCS certification after meeting criteria for carbon emission reduction and fuel efficiency. He stated that the company carried out thermal recycling to cut carbon dioxide emissions at its sewage processing facility in northern Taiwan's Taoyuan County. This was achieved by investing in new technology and turning firedamp, or flammable gas, extracted from sewage into fuel for steam boilers.
An ERM spokesperson stated that companies in Asia could join the voluntary carbon offset market via either the Clean Development Mechanism or VCS. CDM is an agreement under the Kyoto Protocol allowing companies in countries already committed to the greenhouse gas reduction agreement to buy carbon dioxide emission rights, with trading to be supervised by the United Nations.
VCS provides an alternative for businesses of non-Kyoto Protocol signatories to voluntarily satisfy the agreement's regulations on carbon emission.
Cheng Loong estimated that 200,000 metric tons of carbon offsets could be accumulated within the period of its VCS certification on a market turnover of around US$1 million. According to a report by the British research institute Ecosystem Marketplace, the global trade volume of carbon offsets is expected to exceed 150 million metric tons in 2008, which is 10 times higher than 2006.
