The truth about Kyoto

Huge profits for some, but very little carbon saved. That's the conclusion of Nick Davies in this article from today's issue of the Guardian:

On the eve of a G8 summit focused on climate change, Nick Davies reveals major flaws in the global system designed to reduce emissions

Saturday June 2, 2007
The Guardian

In autumn 2005, three journalists working for the environmental group the Centre for Science and Environment decided to investigate some of the Indian projects which were trying to break into the lucrative new business of carbon trading.

They started looking at four schemes in Andhra Pradesh which were trying to convert biomass - dead plants, animal dung - into fuel. They studied the formal reports which the schemes had commissioned from a UK company, Ernst and Young, to satisfy the demanding requirements of the UN's Clean Development Mechanism. And they noticed a very odd thing.

Each of the four Ernst and Young reports had had to consult people near the proposed schemes to ensure that there was no risk to the local economy or environment. One report quoted three different community leaders, each expressing enthusiastic approval for the project and concluded: "Poor farmers are getting reasonable monitory gains for harvesting the available biomass and supplying it to project activity."

What was odd that with two of the other schemes, each many miles from the other, Ernst and Young quoted three sources who had the same job descriptions, the same opinions, summarised in precisely the same words which even included the same spelling mistakes (Secretry, monitory). In the fourth case, the wording was slightly different, but the opinions were the same, and it too concluded that "poor farmers are getting reasonable monitory gains etc."

The three journalists wrote up their conclusions in the group's magazine, Down to Earth, and made it clear that they were accusing Ernst and Young of simply cutting and pasting the same material into four supposedly separate and independent reports. Ernst and Young said there was nothing wrong: the local people in all four places happened to have said very similar things in response to a standard set of questions. But the environmental journalists were concerned enough to write to the executive board of the Clean Development Mechanism, offering further information. The CDM board never even acknowledged their letter.

The CDM is one of two global markets which have been set up in the wake of the Kyoto climate summit in 1997. Both finally started work in January 2005. Although both were launched with the claim that they would reduce greenhouse gases in the atmosphere, evidence collected by the Guardian suggests that thus far, both markets have earned fortunes for speculators and for some of the companies which produce most greenhouse gases and yet, through a combination of teething troubles and multiple forms of malpractice and possibly fraud, they have delivered little or no benefit for the environment.

While the CDM is run under the umbrella of the UN, the second market is overseen by the European commission. Before launching, it churned through a mass of figures and produced a maximum number of tonnes of carbon dioxide which could be produced by each nation in the scheme; each nation then handed its big corporations and organisations a set number of permits - EU allocations - defining the number of tonnes of carbon dioxide they could produce between January 2005 and December 2007. But they got their sums wrong.

The carbon market's leading analysts, Point Carbon, recently calculated that this scheme handed out 170m too many EUAs. In the early days, nobody realised quite how badly the commission had miscalculated, and so the price of the EUAs was quite high, at up to €30 a tonne. But individual companies, particularly energy companies, rapidly saw they had millions of tonnes of EUAs that they didn't need, and so they sold their surplus, making huge profits. A 2005 report by IPA Energy Consulting found that the six UK electricity generators stood to earn some £800m in each of the three years of the scheme.

A separate report by Open Europe, in July 2006, found that UK oil companies were also poised to make a lot of free money: £10.2m for Esso; £17.9m for BP; and £20.7m for Shell. And behind this profiteering, the environmental reality was that these major producers of carbon emissions were under no pressure from the scheme to cut emissions.

At the other end of this EU market, smaller organisations like UK hospitals and 18 universities, who had been given far fewer EUAs, were forced to go out and buy them - while the price was still high. So, for example, the University of Manchester spent £92,500 on EUAs. Now that the truth about the glut has been revealed, the university would be doing well if it managed to get £1,000 for the lot of them.

While this EU market has failed to make any serious impact on climate change, the UN's Clean Development Mechanism has done little better. In contrast to the EU system, which sells permits to produce supposedly limited quantities of greenhouse gases, the CDM sets up projects which are supposed to reduce the quantity of greenhouse gases and then sells carbon credits which allow buyers to emit more gases.

Ten years after the idea was launched at Kyoto; six years after the guidelines were drawn up at Marrakech; a year and a half after it finally went to work: the CDM thus far has issued only 50m tonnes of certified emissions reductions to offset global warming: Britain produces more emissions than that in a single month.

There are doubts about the validity of some of these CERs, on two separate grounds. First, some of them appear to breach the CDM's requirements for sustainable development - 53% of the existing CERs come from just six monster projects, in India, China and South Korea, all of which engage in the most controversial form of carbon reduction. They manufacture refrigerant which produces as a side effect a gas called HFC-23. Although carbon dioxide is the most common greenhouse gas, HFC-23 is 11,700 times more likely than carbon dioxide to encourage global warming. Refrigerant companies find it relatively cheap to instal an incinerator to burn the HFC-23 and, once that is converted into certified reductions of emission, each tonne saved can be sold as 11,700 carbon credits. These companies are now earning millions of euros from these credits - more than from selling their refrigerant products.

The environmental problem is two-fold, first that HFC factories tend to pour out other pollutants which don't happen to be greenhouse gases but which are unpleasant or dangerous for local communities; and second, that the potential profits from burning HFC-23 are so great that companies are being encouraged to expand production of refrigerants so they can produce more HFC-23 to incinerate, thus increasing the net amount of pollution.

Emphasis and links added. This looks like more proof that Kyoto is totally ineffective and that European style carbon trading is a scam designed to make some people very, very rich.

There's more. And I'm tempted to post it all. But follow the link and read it from the source.