As all of you are aware now, climate change and carbon management is now a major policy issue facing all countries. The unique aspect of carbon is that it is awfully complicated, pervading weather, energy, transport, goods and services, food and basically every activity in life. The aim of this podcast is to unlock the complexities, have stimulating debate on issues and give people the knowledge, the power to make decisions in their lives that are consistent with their ideals, whatever they may be.
But a bit of a background about me. I am Taiwanese born, grew up in Australia and currently working as a carbon analyst at an environmental consultancy in London. I have a keen interest in climate change and energy as a whole, as well as finance, politics, economics and healthy living. All of these strands are inter-related with the issue of carbon and hopefully through this podcast, we can make sense of the relationships. There is really no limit to what we can talk about on this show. It can be as technical or general as you wish. Whether you are interested in climate change, low carbon living, carbon trading or the clean tech industry, you’ve come to the right place.
I am in an unique situation of being able to provide the viewpoints from the bloc leading world action on climate change, as I am living and working in London. I will be doing the podcast half in English and half in Mandarin. My Mandarin is not the highest level so please be tolerant of that.
Kyoto risks dying as no new climate deal in sight
This is from an article that appeared in Reuters dated 18 February. It says that the Kyoto Protocol is in risk of collapse because as we all know in 2012, that’s the end of the first commitment period and the world has not agreed on a post 2012 agreement, as highlighted by the failed Copenhagen conference.
Even disregarding global talks, domestic actions have been difficult to pass through as evidenced by the twice rejected ETS bill in Australia and developments in the US where no ETS bill is likely to be passed until 2011. Obama has come out further to say that cap-and-trade may be de-coupled from a bill for clean energy, since the former is causing delay on much needed clarity on support for alternative energy. This week, Obama committed 8.3 billion US dollars to build the US’ first nuclear power plant for 3 decades. The clear strategy now is to prevent the public distaste for cap-and-trade from totally derailing the administration's climate policy.
Kyoto risks dying also because of the weaknesses of the Copenhagen Accord, the non-legally binding agreement that countries "noted" at the finale of the Copenhagen conference. So far, 55 countries have pledged their climate targets in accordance with the Accord. These countries represent 80% of emissions of the world. However, there is no obligation to fulfill the targets nor penalties for missing them. Crucially, there is not even a process for monitoring or verifying the emission reductions, something that China refused to accept.
The Accord has also been criticised for lacking in ambition, as the cuts promised do not put the world in a trajectory to avoid dangerous climate change.
So what if Kyoto dies? The simple answer is that what will remain are disparate, disconnected domestic schemes operating all over the world. The biggest one will remain the EU ETS, which has committed to 20% reduction from 1990 levels by 2020.
As interesting aspect is whether the offset infrastructure started by Kyoto Protocol, such as the CDM, will remain to support ETS in other parts of the world post 2012. Currently, the EU ETS is responsible for 80% of demand for CDM CERs.
I personally think there is no doubt Kyoto will be dead and there will not be a 2nd commitment phase. This is because it’s becoming increasingly clear that the emerging economies are now responsible for a sizeable portion of world emissions. They will refuse to take emission cuts, pure and simple. And if they won’t play, Europe will be the remaining bloc committed.
CDM executive approves 32 Chinese wind farms, blocks six
In the latest CDM Executive Board meeting, the Executive Board registered a whopping 32 GHG reducing wind projects in China, but rejected 6 for failing to meet the additionality criteria. These wind farms are set to cut GHG emissions by 11.3 million tonnes by 2012, it is claimed in the project documents. These emission reductions will be traded to offset pollution by companies who pollute beyond their caps in either the EU ETS, or participating countries in the Kyoto Protocol. No net decrease in world emissions will result.
In an astonishing turn of events, the EB embarrassingly admitted that it had erroerenously rejected 2 Chinese wind farm projects in its previous Board meeting
The EB often rejects projects for failing the additionality criteria. This is because under Kyoto's Clean Development Mechanism (CDM), companies can invest in clean energy projects in emerging economies, and in return receive offset credits, only if they can show the projects would not have gone ahead without the prospect of revenues from selling those credits.
In China’s case, the EB noticed a decrease in financial support from the Chinese government to wind project developers, suggesting that they had become increasingly profitable and commercially viable without subsidies. Hence, they would have gone ahead without CER revenues and therefore are not additional and can’t be registered.
These projects are said to have been able to avoid 3.8 million tonnes of co2 by 2012, equivalent in value to 44 million euros. They boasted investors such as U.S. investment bank Goldman Sachs
The EB also announced that to promote the uptake of CDM projects in developing countries, it will not require registration fees until the first CERs are issued. The EB will not require registration fees at all for least developed countries. In 2009, the UN made over 57 million dollars in CDM revenues.
Having studied the CDM in detail and listened to the EB's panel Q&A session in Copenhagen, it is clearly apparent that the EB is overloaded, overworked, and literally being gamed. How they are supposed to give technical decisions on complex technologies spanning sectors such as energy, waste, transport, forestry and land-use is beyond me. They are also NOT on site and have to rely on "evidence" on paperby project developers and "independent verifiers" who are paid by the project developers(!). One can easily forget too that they are also human and need to go home at the end of the day.
For all it's flaws, I'm still a fan of the CDM and love the general concept. I'd liken the CDM to Apple's itunes or iphone app store, where literally thousands of developers wanna get on it, get noticed and profit! However each application need to be quality screened at the end of the day by a man at desk, and I can understand how this can frustrate and infuriate developers, who yearn for an open platform to serve the market. In the case of Apple, what drives this vertical approach is Steve Job's obsession with Apple quality. It may actually make more money if it simply said yes yes to all developers. However, control of content is something that Apple holds dear. Unlike Apple, in the case of CDM, the vertical approach is a MUST because the reason why CDM exists is to benefit the environment, and not the developers, the UN, the consumers. This is why, even if the decisions may be perplexing or lacking in transparency, I in general support the EB. They are doing their best to assess additionality, avoiding being gamed, understand the technologies. They are doing this for the sake of environmental intergrity, which is why the CDM exists. Any mistakes or underperformance that results is a product of flaws or undercapacity of elements in the system, but not with the system itself. Apple, for instance, is so capacitated that there are now over 140, 000 apps for iphones, all having been checked by Apple staff. There is so much content that it beats hands down Google's open-sourced Android which has around 10,000 apps. If the EB was as well resourced as Apple, imagine the environmental benefits that could ensue if over 140, 000 CDM "additional" projects are registered. This is what we should be arguing about, not the individual injustices of each individual project.
And until someone can come up with a better idea of pumping 6.5 billion dollars of PRIVATE sector money into the environment in 5 years, than I want whole heartedly for the CDM to stay, despite all its flaws.
Carbon Markets Round-up
As of February 19, 2010, EU ETS EUAs are trading at 12.52 euros at the European futures exchange, and secondary CERs at 11.15 euros. These remain at depressed prices due to the economic downturn and the failed talks at Copenhagen. Looking ahead, analysts agree that the prices are set to level at similarly low levels.
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