Carbon Trading's Inconvenient Truth

Patrick McCully
Tuesday, May 26, 2009

Originally published in the San Francisco Chronicle

In the face of unwavering Republican opposition, Californian Rep. Henry Waxman last week successfully guided a mammoth energy and climate bill through the House Energy and Commerce Committee that he chairs. This should be a thrilling moment for environmentalists. Nineteen years after the U.N.'s panel of scientists first reached consensus on the threat posed by global warming, the United States, for long the world's biggest polluter, is finally poised to take action. But unfortunately, the feeling among many climate-change campaigners is more of dashed hopes than delight. The good news, however, also comes from California in the form of AB1404. If Washington would follow the lead of this bill, it could close a gaping loophole in the proposed federal legislation.

Mainly to get the votes of coal-state Democrats, the federal bill, co-authored by Waxman and Ed Markey, D-Mass., includes hundreds of billions of dollars in giveaways to the coal industry and sets targets for renewable energy that are weaker than one could expect without the bill. The most serious is a medium-term cut in pollution that is only 4 percent below 1990 levels by 2020 - horribly weak compared with the 25 to 40 percent that scientists say we must achieve to have a decent chance of avoiding climate chaos.

Even this scarily inadequate target is illusory because the supposed pollution "cap" in the bill would be blown to pieces by allowing polluters to buy cheap "carbon offsets" or "carbon credits" instead of reducing their emissions.

The bill's offsets component (and similar "cap-and-trade" schemes being designed for California, and the Western United States) is modeled after the world's largest carbon credit system, the Kyoto Protocol's Clean Development Mechanism. The Kyoto mechanism has allowed polluters in Europe and Japan to avoid cutting their own emissions by buying offsets from project developers elsewhere, mainly in China and India. Many of the Waxman-Markey credits are likely to come from this or whatever global offsetting scheme replaces it after Kyoto expires in 2012. After a decade of closely monitoring the mechanism, I have found it to be at best expensive and ineffective in combatting climate change, and at worst, to have aided increased carbon emissions.

Projects that earn credits must document that they would not be feasible without the income from selling the credits. Further, to quantify how many credits a project is allowed to sell, evaluators must determine how much greenhouse gas would have been emitted if the project were not built. One English journalist described offset credits as "an imaginary commodity created by deducting what you hope happens from what you guess would have happened."

This dependence on guesswork makes it easy for developers and consultants to scam the CDM. As a result, all sorts of projects with dubious claims to climate-friendly attributes have been approved. David Victor, director of Stanford's Energy and Sustainable Development Program, believes that up to two-thirds of these offsets do not represent genuine emission cuts.

The Waxman-Markey bill would allow the use of up to 2 billion offsets each year, up to three-quarters of them from international sources. The use of these offsets would allow U.S. polluters to boost emissions by nearly two-fifths by 2012 and would not force cutbacks below today's levels until 2027.

Assembly members Kevin de León, D-Los Angeles, Manuel Pérez, D-Coachella and Wilmer Amina Carter (D-Rialto) have introduced bill AB1404 in the state Assembly, which would limit the use of offsets within California's climate action plan to 10 percent of reductions from market mechanisms, would prioritize offsets that provide environmental and health benefits within the state, and would prohibit use of offsets from the Kyoto mechanism.

AB1404 can help speed the urgently needed transformation to a prosperous, clean and climate-friendly economy - and send a message to Washington that dealing with climate change requires emissions cuts, not accounting tricks.

Patrick McCully is the executive director of International Rivers, a Berkeley-based human rights and environmental advocacy group.

This article appeared on page A - 13 of the San Francisco Chronicle