Top Scoops

Book Reviews | Gordon Campbell | Scoop News | Wellington Scoop | Community Scoop | Search

 

Coming Soon - The Carbon Economy

Coming Soon - The Carbon Economy


By Kelpie Wilson
t r u t h o u t | Report
http://www.truthout.org/docs_2006/030408A.shtml

By refusing to sign on to the Kyoto climate treaty, Americans have insulated ourselves from the complexities of the carbon market the European Union has been trading in for the last three years. But that state of ignorance, while not exactly blissful, is about to end.

On February 26 and 27, the international carbon trading financial community descended on San Francisco to present Carbon Forum America, the first American carbon trading conference to include a full trade show featuring 80 companies that manage carbon credit assets and trades, negotiate contracts, validate projects, and perform various other market services.

Why California and why now? California is the US leader on climate policy and now is the time the tea leaves are spelling out a coming certainty for investors. The first serious US climate change measure, the Lieberman-Warner bill, has passed out of a Senate committee. All three front-running presidential candidates have acknowledged a cap-and-trade system for carbon emissions is inevitable. US regional programs like the Western Climate Initiative are picking up steam, and 32 states have now adopted hard emissions targets.

The conference sponsor, the International Emissions Trading Association, is banking on the idea US investors will embrace a worldwide carbon trading market that reached $60 billion in 2007 and could mushroom to $300 billion or more very soon.

But what exactly is a carbon market? At a press briefing, IETA president and CEO Henry Derwent acknowledged the concept was a difficult one to explain. "Carbon is an externality, not a commodity. People say, 'What on earth do I need that for? It's not a pork belly.'"

Derwent said investors should look at carbon trading as a form of derivative like a hedge fund. He defended the idea of traders making a profit from carbon trading. "They should be taking a margin for a service. If they do their job well they will provide the world with energy with a lower risk of climate change."

Environmental critics of a cap-and-trade system worry carbon traders, like other derivatives traders, will get carried away and game the system to produce excessive profits for themselves. But the biggest issue as the US contemplates its first national climate bill is the how to allocate the emissions under the cap.

The European Union Emissions Trading System established under the Kyoto protocol gave away emissions allocations to polluting industries in a grandfathering scheme. This depressed the price of carbon and got the market off to a slow start in 2005.

The Lieberman-Warner bill would repeat this strategy in the US by giving away over half of the pollution allowances - worth billions of dollars - to big industries like coal-burning electric utilities. By contrast, both Clinton and Obama advocate auctioning 100 percent of the allowances.

One hundred percent auctioning is a litmus test for much of the environmental community, which sees the revenues as a crucial source of funds to pay for research and development of renewable energy and to support low-income people who will be hurt by higher prices. In fact, a cap-and-trade system with 100 percent auctioning of allowances is functionally not very different from a carbon tax.

At a Carbon Forum plenary session on potential federal greenhouse gas regulation, representatives of some big corporations weighed in on the auctions debate and other issues.

Ralph Moran, West Coast Climate Change director for British Petroleum, said his company supports some amount of auctioning, but it will dramatically increase the cost of doing business. He warned there was no guarantee government would use the revenues from auctions wisely.

Rich Rosenzwieg, Chief Operations Officer of Natsource, a carbon trading firm, continued the theme of mistrust in government. He said we should start small with auctions because "the public won't support giving government billions of dollars in revenue." He said the revenue stream would end up in a "roach motel" where the money goes in but may not come back out to the taxpayer. Rosenzwieg also stressed the need for flexibility and said we should not expect to "solve the problem in ten years."

Katharine Brass, director of General Electric's Ecomagination program, spoke about a looming gap in US electricity production due to the recent cancellation of many new coal-fired generators. That capacity was needed to meet projected demand, she said, and it will take ten years to bring on new coal plants with carbon capture and storage, even if we could start now. But last month, the Bush administration canceled FutureGen, the only pilot program to develop the untested technology.

California Lt. Gov. John Garamendi closed the conference with a stirring address. In an obvious reference to the Bush administration's refusal to allow California to regulate greenhouse gas emissions under the Clean Air Act, Garamendi detailed all of the ways in which global warming is now impacting and will impact California in the future. While drought and warming are reducing mountain snow pack and drying up the Colorado River, sea level rise will soon push salt water into the Central Delta.

"The end result: the California water system as we know it today - terminated. Doesn't work. We are going to spend billions upon billions of dollars to redesign our water system," Garamendi said.

California is taking action, he said, and state legislation (AB32, The Global Warming Solutions Act) will enable California to establish a carbon cap-and-trade program in the next two or three years. His hope is the California program will drive the coming federal policy: "We are eleven months away from a new regime in Washington and when that happens we want them to follow the California lead and that means we are moving very rapidly forward on a whole set of policy issues."

Garamendi wants California to auction its emissions allowance permits to create a fund to deal with aspects of the problem not covered by markets, like energy research and development and environmental justice.

He also supports bringing in transportation, which accounts for 40 percent of California's greenhouse gas emissions. He said there have been lots of discussions of how to do that, but his view is, "If anyone figures out a way to have a cap-and-trade system that rewards individuals, then we will have a big winner because everyone will want to make an extra buck."

Getting individuals to engage by coming up with the right incentives would be "an awesome system," Garamendi said. "If any of you know of anywhere in the world where such a system is being tried, please let us know here in California."

If Garamendi's enthusiasm is any guide, the new carbon-based economy is coming very soon, at least to California, with the rest of the country following shortly.

Mette Peterson, one of the Carbon Forum organizers, said the conference attendance exceeded expectations with 1,400 participants. She said American businesses were there to learn about the market and get positioned for the future.

It looks like the smart money is gearing up to hedge against climate change.

*************

Kelpie Wilson is Truthout's environment editor. Trained as a mechanical engineer, she embarked on a career as a forest protection activist, then returned to engineering as a technical writer for the solar power industry. She is the author of "Primal Tears," an eco-thriller about a hybrid human-bonobo girl. Greg Bear, author of "Darwin's Radio," says: "'Primal Tears' is primal storytelling, thoughtful and passionate. Kelpie Wilson wonderfully expands our definitions of human and family. Read Leslie Thatcher's review of Kelpie Wilson's novel "Primal Tears."

© Scoop Media

 
 
 
Top Scoops Headlines

 


Julian Assange: A Thousand Days In Belmarsh
Julian Assange has now been in the maximum-security facilities of Belmarsh prison for over 1,000 days. On the occasion of his 1,000th day of imprisonment, campaigners, supporters and kindred spirits gathered to show their support, indignation and solidarity at this political detention most foul... More>>

Binoy Kampmark: The Mauling Of Novak Djokovic
Rarely can the treatment of a grand sporting figure by officialdom have caused such consternation. Novak Djokovic, the tennis World Number One, has always had a tendency to get under skin and constitution, creating a large following of admirers and detractors. But his current treatment by Australian authorities, and his subsequent detention as an unlawful arrival despite being granted a visa to participate in the Australian Open, had the hallmarks of oppression and incompetent vulgarity... More>>

Binoy Kampmark: Voices Of Concern: Aussies For Assange’s Return

With Julian Assange now fighting the next stage of efforts to extradite him to the United States to face 18 charges, 17 of which are based on the brutal, archaic Espionage Act, some Australian politicians have found their voice. It might be said that a few have even found their conscience... More>>



Forbidden Parties: Boris Johnson’s Law On Illegal Covid Gatherings

It was meant to be time to reflect. The eager arms of a new pandemic were enfolding a society with asphyxiating, lethal effect. Public health authorities advocated various measures: social distancing, limited contact between family and friends, limited mobility. No grand booze-ups. No large parties. No bonking, except within dispensations of intimacy and various “bubble” arrangements. Certainly, no orgies... More>>

Dunne Speaks: Question Time Is Anything But
The focus placed on the first couple of Question Time exchanges between the new leader of the National Party and the Prime Minister will have seemed excessive to many but the most seasoned Parliamentary observers. Most people, especially those outside the Wellington beltway, imagine Question Time is exactly what it sounds... More>>



Gasbagging In Glasgow: COP26 And Phasing Down Coal

Words can provide sharp traps, fettering language and caging definitions. They can also speak to freedom of action and permissiveness. At COP26, that permissiveness was all the more present in the haggling ahead of what would become the Glasgow Climate Pact... More>>