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Category Archives: Climate change issues
Leadership is tricky when it comes to carbon
It is easy to see why political leaders are reluctant to let markets run things. Unconstrained buying and selling usually gets away from itself, careering towards the lowest denominator, the financial bottom line.
Even those of a conservative persuasion who often understand how markets work can be wary of the unfettered force of rapid growth. They know that growth increases the risk of collapse when commodities of the day become scarce as they inevitably do. Unleash these volatile forces at your peril.
So here we are in Australia about to embark on a new market mechanism, the carbon price. From 1 July 2012 the top 500 emitters of greenhouse gases will, at the end of each financial year, have to pay for permits to cover their emissions.
At first the government will sell permits at a fixed price of $24. Then, after three years, permits will be priced by supply and demand through an auction mechanism. And just to make sure the market doesn’t go haywire the government will control the permit supply and set a price floor and a ceiling for at least three years.
If the price bombs, liable emitters will have pay extra to true up to the floor price.
The carbon price mechanism also offers the option of creating credits from approved emission reduction activities under the Carbon Farming Initiative. Naturally it is not really carbon farming as the bulk of activity will be in landfill gas and tree planting. The problem here is where the money goes. In simple terms emitters buying credits spend their money in the market but they buy permits from government. Too many credits and the revenues fail to match the commitments government has made to ensure passage of the policy in the first place.
Why all the constraints?
The answer is that this is not really a market mechanism, even though it looks like one. It is actually a policy to reduce “pollution” by using financial cost to change behaviour. The market part is just a way to try and wield the policy instrument with an even hand.
The risk, of course, is that keeping all that market power in check takes away most of the benefit too.
It’s a bit like having a guard dog on a chain. The burglar hears the growls and barks but if he trusts the chain will hold, there is no danger and he can pass into the house to pilfer the silver. Soon enough the owner realizes the risk taken by leaving the dog on a leash.
So what should happen? Well some honesty first. Despite the rhetoric, a carbon price is not about the atmosphere or saving the planet from global warming. It is the first of many steps in the transition of the economy away from dependence on fossil fuels. A vital step it must be said, although not the only one.
Pricing carbon is a way to foreshadow the economic costs of transition, to get us used to the pain before it really starts to hurt, let’s say when oil is $200 a barrel. It also gets the transition started earlier than it might if it were left to unfettered market forces. Ironically, it also protects some of the assets that create the emissions by giving them a longer life. It is a choice of leadership that sees its role as smoothing the inevitable bumps in the economic road.
Obviously reducing emissions is also a smart hedge on the global warming issue.
Now we know what the whole business is about, maybe we can let the mechanism run.
The climate change action thing
Here’s a thing.
The latest AustraliaSCAN survey suggests that fewer and fewer Australians are in favour of environmentalism whilst more people are saying they are against it. Environmentalism is dead?
Meanwhile the Victorian government has shelved its target to cut GHG emissions by 20% by 2020, put restrictions on wind turbines and given up on a planned ceiling on emissions from new coal-fired power stations.
And further north the new Queensland premier wants to pull out of a $500 million solar thermal project.
Rumour has it that conservative state premiers are considering challenging the Federal carbon tax in the High Court.
So, despite the international brownie points that Australia earns from having legislated for an ETS, the reality is some serious disinterest.
Now let’s take a look at the US – the Kyoto averse country that has been the climate action pariah and one of the main reasons put forward inaction anywhere else.
What’s going on there is:
- EPA has announced proposal emissions limits on new power plants that would preclude coal-fired plants with carbon capture and storage.
- US Energy Department set target of 75% reduction by 2020 in the price of solar energy systems to give solar a chance of meeting 14% of energy needs
- US led the world with clean energy investment of US$56 billion
- California, the 8th largest economy in the world, is introducing an ETS
- tax credits of up to $7,500 for electric cars and by 2025 fuel efficiency in new cars will have to be doubled
A few years ago Australians walked across the Sydney harbour bridge for climate change action.
What happened?
Can REDD projects address wildlife poaching?
This question came in a forum on REDD, Reduced Emissions from Deforestation and Degradation, the somewhat controversial mechanism to tackle global warming. The idea is that because greenhouse gas emissions from clearing of land for agriculture makes up around a fifth of anthropogenic emissions, it makes sense to reduce clearing especially in tropical forests that are high on carbon and overall environmental value.
One typical pattern is that forests are first logged for commercial timber. This opens up the forest, makes access and further clearing easier. People move in to grow cash and subsistence crops.
REDD projects aim to substitute the financial returns from clearing with the sale of carbon credits that come about from the avoided emissions when forests are protected. In short local people receive payments for keeping their trees and their forest intact.
When it works there are less anthropogenic emissions, forests are protected, funds become available to help people create local economic development. Neat idea.
Since there are a few REDD projects that seem to be working pretty well in Africa, the question in the forum was about extending the concept to address wildlife poaching as well?
A successful REDD project would also protect wildlife because the financial incentive is to retain the integrity of the forest. Local communities are paid to be custodians of the resource.
A collective will would be enough to significantly reduce poaching so long as three key things happen:
local engagement is real
sufficient financial returns from the sale of carbon credits go to the local communities and
there is some long-term certainty in those financial returns
These are the key success criteria for any REDD project and, if met, then local protection of all the natural resources should follow. At least this is my experience talking to landholders in rainforests of Asia.
People everywhere prefer to live where the environment is healthy, the air is clean, the trees are green, and the wildlife free to roam. Only we need to live. Our priority is for a good life for ourselves and our families that is free from strain, risk and uncertainty. Meet this priority and any amount of environmental protection is possible.
What we have to remember is that throughout human history the forests have been cleared to meet these basic needs. So we are asking a lot to forego the route to development taken just about everywhere.
There has to be enough money in the system to meet the needs over the long haul.
The real challenge is that financial returns on REDD projects are neither certain nor comparable with the usual alternatives. Exactly why is another, long story. But I am sure you can guess the message. If we want to save trees or wildlife we have to pay a reasonable market price.
New eBook – Environmental Issues for Real
Not satisfied with haranguing readers of this blog with environmental woes, I have branched out into the dynamic new world of ebook publishing.
Thanks to the amazing people at Smashwords my latest collection of essays on the environmental issues of the day is now available to download in all the usual formats.
Give it a whirl and maybe leave a review on the site. It would be great to hear what you think.
Many a true word
This routine by George Carlin is certain proof of the old adage that “many a true word is said in jest.”
Timescales
Thought I might share this passage from page 393 of Ian Plimer’s book Heaven and Earth.
On a scale of 500 years the planet is warming after the Little Ice Age 500 years ago.
On a scale of 5,000 years there have been many periods of warming and cooling.
On a scale of 5,000,000 years there have been numerous periods of intense cold and many short periods of warmth.
The average global temperature over the past 2.67 million years is less than the current global temperature. Why? Because we are living in the Pleistocene glaciation which has not yet run its full course.
This logic is sound.
Plimer’s cogent argument is that on geological timeframes the climate has been both hotter and significantly cooler than at present and that to really understand climate change, it is geological time that provides the best context and insight.
The earth is, after all, very old leaving plenty of time and opportunity for a range of climate conditions everywhere. It is hard to imagine that not so long ago in geological terms the current continents were in a very different configuration, that in an epoch mountains can form and erode away, and all the time sediments form and are consumed into the mantle of the earth at plate margins.
It is the rare the talent of the geologist to think on the time scales that matter to the formation of sediment, rocks and ore bodies.
What is interesting is to map global human population size onto the points in time that Pilmer quotes to illustrate his understanding of climate change.
For this purpose ‘human’ means both the species Homo sapiens that first appeared around 250,000 years ago and the genus Homo that the fossil record suggests has been present as various species since around 2.3 million years ago.
- 500 years ago after the Little Ice Age at 1500 AD there were 500 million humans. This is roughly the present day population of the United States and Indonesia combined, 7% of the current global total.
- 5,000 years ago there were just 5 million humans, or roughly the population of present day Finland and today there are over 100 countries with more people than Finland. At the advent of agriculture 10,000 years ago there were perhaps 1 million H. sapiens.
- Around 70,000 years ago there is genetic evidence that H. sapiens went through a population bottleneck when for some reason, perhaps the eruption of the supervolcano Toba in Indonesia, numbers went as low as 15,000 individuals.
- 5,000,000 years ago there were no recognizable humans.
Calculations suggest that there may have been 110 billion humans that have ever lived and a full 6% of them are alive today. Human population growth is an explosion in comparison to geological time.
So when discussion stalls on the causes of climate change or even on its existence, it is worth remembering that the real challenge for humans is to handle the resource needs of 7 billion souls alive today, the 6% of those that have ever lived, without destroying the resource use opportunity for the descendents of this 7 billion.
This is, of course, the standard definition of sustainable development.
It would be a shame if we forgot about sustainable development to focus on the latest fad that, if we think about it on the time scale of the geologists, we can do little about.
More on forest loss
A good friend of mine Alex Nimz who has been devoting his considerable intellect and energies into the development of REDD+ projects in Asia made an interesting observation on my Forest loss post.
Alex suggests that when the western economies converted their forests to agriculture, the products were distributed locally, and economic benefits from agriculture were also kept locally. In many countries were REDD+ is being trialled, the capacity for agriculture development is imported, would-be agriculture products are exported, and most of the economic benefits flow back overseas to the investors in the projects. Consequently from the perspective of a customary landowner of primary rainforest, the opportunity cost of REDD+ is quite low because clearing and development of agriculture does not represent a great economic opportunity locally. Instead the REDD+ opportunity allows them to participate in stewardship and other activities that match their existing capacities.
I agree with this analysis. If the locals take the agriculture development route in the modern world of international markets, not enough of the production stays to stimulate a local economy. Only for me this doubles the twist because I am not sure that locals perceive the opportunity cost as low.
Ask an African from the village if he wants a mobile phone, a BMW and sharp clothes and he says, yes please. In other words I suspect there is an innate human urge to have more, wherever you come from and at whatever level in the economic game you start.
And a forest converted to agriculture would always seem like a start.
Forest loss
There is a curious twist in the ongoing debate over the protection of tropical forest.
In the west we say that we are worried by the rate of deforestation that is equivalent to an area twice the size of Tasmania every year or an area the size of Sydney every two days. And we are becoming more concerned when we hear that this deforestation, the cutting and burning of carbon stores, makes up around 13% of global greenhouse gas emissions from human activity.
No matter that many of the trees end up providing us with furniture or paper and the cleared land grows cows for our wrapped up burgers.
In an attempt to slow the rates of both legal and illegal logging, the west is talking up various financial incentives to reduce the rates of deforestation in the tropics. There have been stewardship payments before but this time we are proposing making payments for the carbon that stays in the forest if trees are not cut, an avoided emission.
Several labels have been used to describe this incentive for forest protection. It started as RED, reduced emissions from deforestation. Then a second ‘D’ was added to capture situations when forests are degraded but not felled. And now a ‘+’ has been included to cover the social and economic implications of both deforestation and the incentive mechanism.
So we now have the inclusive REDD+.
The idea is simple enough. An estimate is made of the carbon emissions that would happen if a forest were cut down completely and/or degraded as a result of timber harvest. A detailed set of carbon accounting rules and information on the forest is used to determine the amount of avoided emissions that would accrue from keeping the forest intact. Once the amount of avoided emissions is verified carbon credits can be issued and sold on international carbon markets for areas where the forest is protected. Those with a need for carbon credits and pay the market price for each ton of carbon dioxide to whomever is responsible for keeping the forest intact.
At first glance it seems like a great deal. Local peoples get paid to keep their forests standing and greenhouse gas emitters get to pay to offset their negative effects on the atmosphere.
And where these payments flow and are equal to or greater than the value that would accrue from clearing and cultivating their land, it will seem like a good deal for everyone.
Carbon emitters in the west pay real dollars to resource owners in developing countries to keep the trees standing.
Recall, however, what happened in the industrialised countries where just about everywhere land was cleared of forest for agriculture. Less than 3% of Western Europe still has natural forest, down from over 80% before agriculture. In the US where there are large tracts of inaccessible land unsuitable for agriculture where forests are still intact, some 40% of the forests in southern and northern states were cut down during the 1800’s.
Agriculture in these places was hugely successful. Crops were grown and sold each and every year that created wealth and with it innovation, industry and more wealth. Then that wealth created finance that generated even more wealth with lifestyles to match.
So with REDD+ actually we are asking that for modest payments spread out over a few decades and spurning the opportunities of the repeat revenue from agriculture, owners of tropical forests will forego the route to opportunity and wealth that, so far, is the only one we know works.
I wonder how many of us who already live in affluence would take that deal?
Not many is my guess. And yet conservative management of tropical forest remains is a critically important task. It is just that we must find an alternative development pathway to mobile phones, plasma TVs, education and health care that is both equitable and reliable.
At some point we must understand that we cannot be so numerous and still try to solve problems on the cheap.
Preparation for change
There were times during the recent debate in the Australian parliament on the clean energy futures legislation when leader of the opposition Tony Abbot was sounding forth his hip pocket rhetoric to an empty lower house. The green leather on the government benches was unmoved.
“This is a toxic tax,” he kept saying, “that on the governments own figures will cost the average Australian a years salary by 2020.”
As the benches were unable to respond, his words echoed round the chamber and into the television cameras.
Why would anyone vote for losing 5% of his or her salary? There has to be a good reason. So what is it? Why should there be a surcharge on a gas that is plant food?
As John Mathews puts it in an online article
“The $25 billion charge on the major carbon polluters is really no more than a signal that they represent the old, brown economy, and will have to start to upgrade their activities if they wish to join the green future. The rest of the world, notably China, Japan, Germany, Spain are all putting huge investments into such a green future. It is long overdue that Australia joins them.”
There it is. The answer is that there will be a green future.
In fact it will not be called green, but normal. Future goods and services will be made possible from what are currently alternative fuels, resource conservation will be the norm, and production efficiency will be an industry mantra because consumers will demand it. The Marks & Spencer Plan A will be copied by everyone.
The chatter about the clean energy futures legislation is about the cost of the tax and the slugging of industry with an emissions obligation but the real guts of the policy is preparation for change that is as inevitable as the weather but not about the weather. It is preparation for an economy that runs without fossil fuels.
Again quoting Mathews,
“Everyone knows that what goes into the atmosphere over the next 20 years will be the result of investment decisions taken in Beijing and New Delhi, not in Canberra.”
But also the decisions made in the US, Europe, and yes Australia too, on the speed of the transition away from our fossil fuel dependency. Remember folks, this is really what it is all about.
So it was a great shame that those leather benches weren’t warmed by government MPs countering the toxic tax rhetoric with passionate explanation of how this legislation is a historic step on the road to changing the way things are done… to avoid being left behind.
Maybe they just didn’t believe it.
Alloporus 