Wednesday, December 16, 2009

Cap-and-Trade Model Appears Liable to Fraud

The cap-and-trade model has become under increasing pressure as it has surfaced, once again, that the model is open to fraud. It appears that the European Union's Emission Trading Scheme has been defrauded billions of dollars.

The fraud issue appears to be related to monies actually within the scheme, but to VAT payable on the transactions. Companies / traders were buying / selling across the various EU borders to avoid VAT, particularly in Denmark where VAT stands at 25% (compared to the EU average of 21%). The trades were occurring for the sole purpose of reclaiming VAT which invariably boosted ETS activity. It is known as carousel fraud and has happened in lots of different industries over the years across the EU. The ETS is the latest.

The carbon tax option is starting to look better and better...

Tuesday, December 15, 2009

Embarrassment for Canada: Hoax at Copenhagen

The Yes Men have once again struck a hoax and this time their victim was the Canadian Government. At yesterday's Copenhagen summit, a number of fake press releases were circulated which stated that Canada will make drastic GHG emissions cut.

Greenpeace accuses Canada for derailing the negotiations, playing-off richer and poorer countries, and hiring lobbyists in Washington to support the tar sands.

Canadians do not have a cultural attachment to the tar sands as compared to forestry and the seal hunt. We have tremendous natural resources and yet our government continues to derail international negotiations.

Mikhail Gorbachev and former Canadian PM Kim Campbell, along with other prominent individuals, to urge the Canadian government to take the lead on climate change.

Canada's position is being exposed and this will make the Canadian government more vulnerable. Over 74 percent of Canadians want action on climate change. There will be a political cost if Canada does not act now.

In the meantime, uncertainty continues to prevail for many industrial and manufacturing sectors in Canada as clear targets have not yet been established.

Monday, December 14, 2009

The Story of Cap and Trade

Two years ago, Annie Leonard released The Story of Stuff, an educational on-line video about rampant consumerism. Now she has done it again. Her latest release, The Story of Cap and Trade, will surely raise some questions as it criticizes how cap and trade functions.

She begins with a refreshing demonstration of enthusiasm for the upcoming conference in Copenhagen, expressing that the fact that world leaders are getting together to talk about climate solutions is a huge triumph and potentially an important step in right direction. But she harshly warns that cap and trade should not be the only solution considered. Cap and trade has been strongly promoted by many well-intention people, but its designers comprise a surprising amount of Enron and Goldman Sachs representatives who have essentially created a carbon stock market. While this may sound disconcerting, it can also be argued that because cap and trade is supported by those who actually have wealth and power, it stands a better chance of being pushed through.

Ideally, this market will be capped such that each country gets a certain number of pollution permits. Each year such permits will become fewer and so more expensive. Those who do not need them will sell to those who do and therefore total emissions will remain under the cap. According to Leonard, “the devil is in the details.”

Detail number one is that initial permits will be free in what is more accurately a “cap and giveaway” system. The more an individual company has historically polluted, the more permits they will receive. Europe has tried this, and according to Leonard it resulted in unstable permit prices, higher gas prices, increased emissions, and the polluters made money. This can be disputed from all angles but for more information on the EU ETS, check out their site.

Rather than creating a system in which polluters profit, Leonard advocates that funds instead be used to promote a clean energy economy, provide dividends for citizens to afford energy while transitioning to new fuel sources, and to compensate for ecological debt, which mainly occurs as first world countries benefit at the expense of environmental degradation in the third world. While these solutions certainly sound good, they are a bit too vague to provide a clear view of realistic alternatives to investing in cap and trade.

The second “devilish” detail is in the concept of offsetting. It is very difficult to guarantee that offsets are truly serving their vital function. For example, Indonesian indigenous forests have been cut down and replaced with palm oil trees, and somehow this destruction has been valued as a false offset. Additionally, some companies can receive credit for offsetting simply by not expanding as much as they claimed they had planned to. Expanding less certainly does not actually offset any carbon emissions.

Thirdly, Leonard portrays cap and trade as a dangerous distraction. She argues that people are eager to accept whatever is proposed and so are neglecting alternative solutions that exist. Leonard claims that it weakens our ability to effectively utilize strong laws like the Clean Air Act, which already lists carbon dioxide a pollutant that can be regulated by the EPA. Cap and trade does more to protect business as usual than it does to demand solid caps, strong laws, citizen action, or carbon fees – all of which offer truer solutions to climate change. Basically, its creators want to sacrifice nothing, get rich, and save the planet if possible. Leonard admits that cap and trade may serve as an important first step and it is certainly better than nothing, but she insists that we cannot solve the climate change problem with the same mindset that got us into this mess. She has indeed raised some valid concerns about cap and trade; however, Leonard fails to provide adequate arguments in favour of other solutions. She does not explain with any degree of detail how a carbon tax would work. Carbon taxing, like cap and trade, has several benefits but also its own set of faults and imperfections.

Please see the Western Climate Initiative's (WCI) section on cap and trade which can provide you with a introductory background on how cap and trade works.

Adapted from Strategic Sustainability Consulting -

Sunday, December 13, 2009

Berlusconi Gets Smacked

I know this has nothing (directly) to do with the environment, but seeing Berlusconi's bloodied face made me smile today. His latest political gaffes, including doodling women's underwear at the recent climate change talks, continues to embarrass Italians (including myself). One starts to wonder whether, given his track record, whether it was fabricated. One starts to also start to feel thankful for having a leader such as Harper...

Wednesday, December 9, 2009

Climategate and the Precautionary Principle

Thomas L. Friedman wrote a thought-provoking op-ed piece in The New York Times about the recent climategate shenanigans and smartly applied it to the precautionary principle. The precautionary principle, as used in the environmental sphere, should be considered alongside risk management, i.e.: if an action or policy might cause severe or irreversible harm to the public or environment, in the absence of a scientific consensus that harm would not ensure, the burden of proof falls on those who advocate taking the action. The precautionary principle has been invoked many times and continues to be applied, for example, in the European Union's ban on GMOs and hormones (from meat products).

The climategate "scandal" has fuelled climate deniers and has cast a shameful image on those climate scientists who have manipulated data. But this still is no reason to stop any action on climate change. As Friedman points out in his article, what would be the choices?

If we prepare for climate change by building a clean-power economy, but climate change turns out to be a hoax, what would be the result? Well, during a transition period, we would have higher energy prices. But gradually we would be driving battery-powered electric cars and powering more and more of our homes and factories with wind, solar, nuclear and second-generation biofuels. We would be much less dependent on oil dictators who have drawn a bull’s-eye on our backs; our trade deficit would improve; the dollar would strengthen; and the air we breathe would be cleaner. In short, as a country, we would be stronger, more innovative and more energy independent.

But if we don’t prepare, and climate change turns out to be real, life on this planet could become a living hell.

Tuesday, December 1, 2009

Climate Change Host Denmark Proposes Ambitious Targets

Reuters reported today that Denmark, the host country for the upcoming climate change summit in Copenhagen, is proposing that global greenhouse gas emissions should be cut by 50 percent below 1990 levels by 2050. A draft of the text states that to meet the 2050 target, industrialized nations will have to slash emissions by 80 percent over the next 40 years.

Danish Prime Minister Rasmussen stated that he hopes the 192 nations attended the climate summit will approve a five-to-eight page "politically binding" agreement that spells out emissions reduction commitments for each nations.

US President Obama will have the opportunity to speak at the conference where he will announce his country's climate change commitments: reducing carbon dioxide emissions by 17 percent below 2005 levels by 2020 and by 83 percent by 2050. Developing countries have criticized these targets as too low, particularly since the baseline is 2005, rather than 1990.

China has stated it will reduce its "carbon intensity" --emissions per unit of GDP --by 40 to 45 percent below 2005 levels by 2020. But even with these cuts, China's overall emissions are projected to double by 2030 given its accelerating growth.