Hi Oliver and CRISIS crew,

I'm back with more comments on Oliver Tickell's Kyoto2.

Warning, it's not always pretty out there in Carbon Policy land...

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Comments from a Second Reading of Kyoto 2 : Part 3
by Jo Abbess
14th August 2008

page 48
--> "taking things seriously" : I think this sums it all up really : the fact is that at the moment the developed nations and the near-developed nations such as China have shown absolutely no evidence of reducing their Greenhouse Gas Emissions in total (although they have made some efforts on some individual chemicals).

-->   "It is hard to feel optimistic so long as the framework for future agreement is that of the failed Kyoto Protocol." And you think that a massive fund organised and administered by yet another global instititution, more than likely run in the USA, trying to cajole payments under a supposed Auction is going to be any advance on Kyoto ? Making money collection and re-distribution (often to the same players) the hinge, focus and pivot of Climate Change action does not satisfy the Bali Roadmap.

-->   You quote Deepak Rhugani on what will probably happen : "an exercise in more extensive emissions trading and offsetting". Well, yes, but the Bali Roadmap indicates more than that. If you continue to focus on the exchange of money, and others continue to obsess about money as well, we lose focus on the problem entity : Carbon. Carbon clearly cannot be handled by trading or offsetting, two vain goals. In fact, Carbon Trading should really be called "Money Trading" because it's lost its true objective. Carbon is not being controlled and exchanged, however, money is. In fact, it's a market in money predicated on the value of the prevalence of Carbon. Since the supply of Carbon is growing, the Carbon Trading is experiencing economic growth also.

-->   "There is some hope, however, in the emergence of a new willingness to move forward collectively and solve the problem of global warming". Yes, let's hope that the obsession with financing the future, essential changes does not detract from the actual business of Carbon cuts.

-->   "The challenge will be to get a new framework in place that can be effective, just and attract broad international support, and it will not be easy." Yes, it will not be easy to get the support of business in your proposed Auction of Carbon Permits. You are choosing the constituency with the most intransigence to target for funds. When you say "international support" you are hinting at the cooperation of party nations in the extant UNFCCC process, but your Auction proposal will only really impact the wealth-makers amongst the corporates. This is where the resistance will come from. Corporates want a framework, so they know what will be happening and expected of them, so they can plan, as is clear from recent multi-group press announcements and investor conferences, but they do not want to be the ones who are handed the invoice to pay for that framework. As for the question of justice : there is absolutely no guarantee that any funds made available by corporates (primarily tied economically to the Global North) would be properly used in a fair way in the global context. Yes, we put money in the kitty, but no, we think the money should not be spent outside USA/EU/Japan/Canada. The only fair allocation of Carbon Permits and the wealth that accrues from Carbon Rights, in the end, is a per capita system. One person, one Carbon Quota.

page 49
-->   "Phase 1 of the EUETS (2005-07), EUAs were over-allocated by national governments under pressure from their industries", and an Auction won't suffer from this kind of pressure ? Any monetary fund that is accrued from corporates will suppress the economy, and will put pressure on the top bankers and central national/federal banks to increase the money supply, which would cancel the value of the Auction.

page 50
-->  "Prices up ... Losers ... ahem ... consumers." Yes, obviously, in a system that is relying on the flow of money, the corporates will charge out as much of any tax or Auction costs to their end consumers. Note that this massive EU ETS system of allocations that could be traded for money produced a massive flow of money up to the profit-makers. The lesson is that one should avoid exchanging Carbon Permits for money as far as possible. Carbon Permits should remain restrictions on Carbon Emissions and act as restrictions on Carbon Emissions. It should be cheaper to adapt one's business practices/equipment to emit less Carbon than purchase Carbon Permits to go over your allocated Carbon Budget. Clearly, it hasn't been so far under EU ETS. It doesn't mean we should monetise the whole supply of Carbon Allocations. Rather, the reverse, in my view.

-->   "One possibility is that transport emissions may be regulated 'upstream' at the level of the fuel supplier". I can imagine the arguments about that. Actually this is a very dangerous suggestion, as it would put responsibility onto the traders of fuel which cannot easily switch sources or their suppliers. This would be clearly anti-trade and would be squashed. The proper course of action is to make those who burn fuel acquire the rights to do so, or pay for a surplus on their allocation.

-->   "The EC's proposals for EUETS Phase 3 are for 100 per cent auctioning of EUAs to utilities, but with allowances still handed out free of charge to a small number of exempted energy-intensive industries...In all about 60 per cent of allowances would be auctioned." Thus, Phase 3 EU ETS should satisfy you, mostly. It's heading in the 100% Auction direction. Where will the funds go ? I'm not rightly sure.

page 51
-->   "A cap will be set on the volume of EUAs that may be substituted by CERs and ERUs generated under the Kyoto Protocol's CDM and JI, and will exclude forestry-based credits altogether, forcing the majority of emissions reductions to be achieved within Europe." These are exactly the sort of modifications that are needed to prevent the Carbon market becoming too soft.

-->   "The EU has also encouraged member states to use the receipts from the auction of EUAs to invest in renewable energy...the UK for a start has said it has no intention of doing so. [Reuters 23 JAN 2008 'EU plans Carbon Trading overhaul']". There you are, you see. If you follow the money you see that the Auction is considered to be a way of financing cushioning for those corporate point emitters that have been targetted by the Auction. It's only fair to business after all. All the Auction does is recycle money. Without clear, legal specifics about how Auction funds are to be used, there will always be leakage away from the principle Carbon-busting aim.

-->   "A reformed and globalized EUETS may offer one route towards an effective global climate mechanism." Yes, in some respects, but it would need to include mandatory spend on renewables and efficiency, and get the necessary sign-up from all the constituencies, and get the funds spent in an equitable fashion...a long and painful road of negotiations with not guarantee of a just outcome. In my view you have to start with a basis of equity, equal Carbon Rights for each person, and work from there, not just trying to squeeze the corporates for funding for the necessary transitions. The EUETS is clever because it targets large point emitters, who are clearly at fault, and have no argument to fight being controlled, but to make it truly global it would need to target all point emitters, namely, all people. And the only way it could go global is if all people were treated fairly.

-->   "And we need to dispense with the archaic system whereby EUAs are allocated by the Commission to member states". Could not disagree more. Otherwise, for example, coal-rich areas would benefit as the coal industries are tied more or less to one country. And as for the administration of an Auction, if you don't use the discrete unit of the nation state, how else would you manage it ? Don't point me at a bank or a global institution. They have all failed us in their own special ways.

-->   "We need 100 per cent auctioning well before 2020." But this would put a whole lot of pressure on consumer Energy costs very quickly.

--> "The entire process of national allocations is unnecessary, inefficient and undermines the principle of a single European carbon market." Nonsense ! Actually, the process of national allocations asserts the validity of a unified Carbon market by making all players equal. It has also been a highly efficient way of getting buy-in to the whole idea of quotas. You wouldn't want a private corporate administering the allocations, as it would lack democratic control. You certainly wouldn't want to leave corporates to self-censor their Carbon Emissions, either, as voluntarism has been shown to fail spectacularly. You do need a body with a higher, overarching moral authority to engage actors in playing the Carbon reduction game. The EU is such a body, and the nation states are the operators of the game. Very neat solution.

-->   "the perpetuation of national allocations comes to represent nothing more than an income stream for governments". Income streams for governments, the principal authorities for most people, are necessary to do M&A - mitigation and adaptation (not mergers and acquisitions). There is nothing wrong in putting money through governments as long as there are clear rules for its use, and a public trust in the governments to use the money correctly, and see the accounting.

-->   "income stream for governments, incentivizing them to clamour for greater allocations" : that phase has passed.

-->   "governments...clamour for greater allocations...collectively undermine moves towards tightening overall caps" : not necessarily. It can have the opposite effect, as business sees the writing on the wall and starts de-Carbonising. A clamour does not mean a consequent handout.

page 52
-->   Montreal Protocol "direct regulation" was effective. How was the Multilateral Fund set up ? And on what basis ? And did the direct regulation act as a factor in the fund's success ? Why are we so scared of direct regulation on Carbon ? Because it's everywhere ?

page 54
-->   "This relatively easy and rapid success of the Montreal Protocol in tackling greenhouse gas emissions stands in stark contrast to the slow, meagre and expensive gains achieved under the Kyoto Protocol." This is mostly because the chemistry and industry that needed to be changed under Montreal were limited, and only a small part of the economies. By contrast, Carbon is everywhere. You cannot seriously expect the same method used on a small percentage of the world economy to be successful at the global scale. You are not comparing like with like. An Auction for Kyoto will fail in ways you do not appear to have analysed.

-->   "This strongly suggests there is a role for direct regulation, also backed by a 'Multilateral Fund' or similar instrument, in a future climate protocol." The issue you seem to be consistently ducking is that a fund should be raised and distributed equitably in order to stand a chance of success. Who or what does the money come from ? And who does it go to ? Is this protectable ? 

-->   On the efficiency of money as a mechanism : it's probably more efficient to demand a mitigation of Carbon Emissions through regulation rather than pooling a collection of something with the fluxing value of money which is then Carbon-tradable. You keep mentioning the changable value of Carbon, but you are measuring by the standard of the value of money. In fact, the value of money is always changing, whereas the negative value of Carbon is pretty much constant.

-->  "The biofuel disaster" : I would have included a little more on ongoing questioning of policy targets on this.

-->   "the cost to the taxpayer is enormous ... mainly in reduced tax rates" : you seem to be twisting it a little here. There is not much difference in money terms in paying extra for something in your tax bills, or paying extra for something in the invisible, intangible government accounting system. However, the government paying for something can alleviate the amount that the citizens have to stump up, as the government can re-direct funds from other uses so that citizens do not need to feel the pain. The same argument could be used to validate the national level of administration of EU Carbon Emissions Allocations. The cost to the end-consumer can be absorbed in budget stream adjustments at the authority level, instead of the citizen/consumer having to pay more for utilities/fuel in their bills. The "cost to the taxpayer" in this quote is a misnomer.

--> "biofuels are a very expensive way of reducing carbon emissions" : yes, it would be cheaper to stop driving so much. And processing biofuels is high Carbon, which partly explains the cost burden, as Carbon equates to Energy which equates to cash.

page 55
-->   On Paul Crutzen's analysis : if the corn had not been grown for fuel but food, bacterial decomposition from nitrates etc would still have happened. Food crops use as much fertiliser as fuel crops.

-->   "Biodiesel has also become a major driver of deforestation in South-East Asia, especially in Indonesia..." not without strong support from the international trade and banking bodies, who persuaded Malaysia and Indonesia that palm oil growing was in their economic interests, and that trade profits were guaranteed...

page 56
-->   There are many factors : the Amazonian rainforest could have been cleared to grow soya feed for cattle instead of fuel crops, which is a continuing trend, if the economics are right. It's not just fuel crops that have permitted continued forest and grassland clearance.

-->   You omit to mention another very important factor in the global food crisis : Climate Change is decimating harvests. And further, weighted trade practices (including farming subsidies and the pressures on the poor to grow export crops) is skewing the availability of food at the right price to people in several regions now. Biofuels are a hazard, but not the only hazard to food security.

page 57
-->   "it now appears that much of the palm [oil] originally planted for biofuels is now being diverted into food" - or rather REverted, redirected into the food supply because of losses elsewhere. If the price is right, the fuel crops will be turned over to the food supply. This shows that biofuels have been underpriced.

--> "the EU's application of sustainability criteria will have little effect, if any, in reducing rainforest loss in Indonesia and other palm oil producing countries." Of course, if the people in Indonesia are finding that they have losses from their food supply, they will start to remove rainforest to grow food crops. It's not all about EU policy, and it's not all about biofuels.

-->   "the car manufacturers...worked hard to shift the emphasis on to the fuel their cars burnt". Quite so. It's all in the "we must protect our way of life" argument.

-->   "an ADM analysis". The good giants do have much too much power.

-->   Your summary of the UK green taxes and levies is robust and makes for dismal reading. It would be pointless to try and explain the complex evolution and justification of all this to Daily Express readers. They only look at headline prices on car fuel and energy bills.

page 60
-->   "no consistent 'carbon price' emerges" - but it's not a money value that we need, but an actual Carbon value, a value in getting cuts in Carbon Emissions. What has been the Carbon-cutting impact of all these measures ?

page 61
--> "it is essential to develop a new long-term policy framework to ensure that policies introduced today do not undermine our ability to reduce emissions in the future." Exactly, which is why I would not advocate Kyoto2, which is a money-based Auction concept. This would lock us into yet another decade of attempting to use money as a means to control Carbon.

-->   "The [Climate Change] Act aims to achieve a global stabilization of greenhouse gases at 550ppm CO2e by 2050, widely considered too high." This sentence made me laugh. Will the UK policy, all by itself, be able to keep global GHG concentrations at 550ppm CO2e ? Will action on Carbon in the UK, all by itself, achieve this target ? We'd have to shut our entire economy down overnight. I think you slipped up in your descriptive powers here. The UK can only act proportionately. The UK Government as democratically elected is the proper authority, at the proper level of administration, to set policy, payments and taxes.

-->   The Climate Change Act "contains no actual measures to achieve its objective." That's because UK policy is so much tied in with EU policy, and even international agreements. The Climate Change Bill is based on alignment with other countries and global agreements. It cannot be specific yet, as all the negotiations have not been done yet. Besides, people argue against being too technology-specific. What are we waiting for to be able to deliver actual measures for the Climate Committee to implement ? Carbon Trading clearly cannot provide all the cuts required. Would we get enough from an international Auction of Carbon Permits to Big Carbon to be able to implement any measures apart from austerity or Carbon Rationing ?

page 62
-->   "Designed by clever economists no doubt motivated by the very best of intentions..." unnecessarily disparaging. New policies carry unknown risks.

-->   "It represents a cost to electricity consumers of £50- 130/tCO2 saved, as against the EUETS price of E20 or so". You are not comparing like with like. The UK has a very inefficient energy system compared to Europe as a whole. The EUETS price was artificially deflated by the operation of a market where there were too many allocations issued, so no real Carbon savings. The cost per tonne of Carbon Dioxide saved offered by the Renewables Obligation might actually be more accurate. It might actually cost that much to cut emissions in this country.

-->   "willing new entrants are barred from the market" : this is exactly what would happen with an Auction, uncompetitive for two main reasons : those with Carbon wealth will win the Auction, and only those with Carbon wealth can enter the Auction.

-->   I see now why the cost of the Renewables Obligation is high per tonne of Carbon Dioxide saved, because the market cannot expand...I can finally see how the Renewables Obligation could pay people (with the resources to install wind power) to be anti-wind power : anti-anybody-else-but-themselves installing wind power. Thank you. I wondered why there was such a strong anti-wind influence amongst the wealthy. This must be one of the reasons.

-->   The Renewables Obligation : a certification / permit system gone wrong. Let it be a lesson. Don't let's advocate an Auction of Carbon Permits.

page 64
--> "energy efficiency investment...equivalent of the output of three large coal-fired power stations." Energy efficiency stops coal. It would in the UK as well.

page 65
-->  I would have included the thinking around the EU car efficiency standards being sufficient to tip car manufacture towards a rollout of electrical vehicles.

-->  People scorn Hilary Benn's compact lightbulb transfer efforts, but I support him.

page 66
-->  (Direct regulation - other examples) "These approaches have been and will continue to be an important aspect of reducing greenhouse gas emissions. They are of particular value where market failures exist, limiting the market signal of fuel and energy costs on purchasers of energy-consuming goods." Consumers are not offered low Carbon goods, so they buy high Carbon goods. As if price could change their behaviour ! They have no choice to change their behaviour ! If you imagine that voluntary behaviour change based on a Carbon price alone will amount to much you are deceived. You need to offer people low Carbon goods. You have to regulate the inputs, not merely price them.

-->   The Climate Neutral Network : I would have included some stuff on how in New Zealand they are facing a policy backlash in parliament.

--> Note that these are local recoveries of control over Carbon - so not subject to the Carbon-leaking forces of globalisation. They are not relying on marketisation of Carbon to achieve their Carbon Neutrality, although there could emerge a low Carbon economic zone, as you suggest, which would have to be protected by trade barriers. However, the most action will be by regulation internally to the entities taking part in the network.

page 67
-->   "members of the CNN [Climate Neutral Network] could develop into a broad carbon-neutral economic zone that could operate Kyoto2 (or a similar system) as a mechanism to deliver its aims and harmonize the activities of its members" I do hope not ! The emphasis should be on reducing Carbon by legislative means, not using a mutual fund to attempt to do so. Carbon always costs more to remove than the money available at the point where reduction is needed. And anyway, the Climate Neutral Network is a bunch of nations, cities and organisations in Civil Society - not corporations. Again, the people have to be in charge here, not the profit-making, profit-protection organisations.

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jo.
+44 77 17 22 13 96
http://www.changecollege.org.uk
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