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Carbon trading fraud

Print edition : Jan 12, 2007 T+T-

Indian policy-makers are loath to accept greenhouse emission cuts but promote market-driven non-solutions to global warming such as carbon trading.

TWO sets of images published in Indian newspapers in December should make us all sit up. The first depicts projections made by scientists at the U.S. National Centre of Atmospheric Research in Boulder, Colorado, of a likely further decline in the ice cover of the Arctic Ocean caused by global warming. This will turn the ocean mostly into open water as early as 2040 - with devastating effects on the earth's climate, plant and animal life, and human affairs.

The second set consists of two photographs of the Pindari Glacier in the Kumaon Hills, one taken in October 1936 by forester and legendary wildlife photographer F.W. Champion and the other taken 70 years later by his grandson. These show a frightening receding of glacial ice, and just a trickle in place of a rich perennial flow, amidst denuded mountains.

This graphically confirms what other studies have shown: major Himalayan glaciers are melting at an alarming rate, spelling calamity for many Asian countries, including India and China. Seven of Asia's greatest rivers originate in the Himalayas, including the Ganga, the Brahmaputra, the Mekong and the Yangtse. Rapid melting of Himalayan ice-caps will create floods and droughts and menace Asian agriculture - and hundreds of millions of livelihoods - in ways inconceivable earlier.

Clearly, global warming is not some distant phenomenon. It is already upon us in tangible ways. This realisation should shake us out of our complacency and trigger serious corrective action. And yet, Indian policy-makers have doggedly refused mitigation measures such as radical energy conservation, curbing runaway growth of private transport, mandatory shifts to renewable energy, and deep cuts in greenhouse gas (GHG) emissions.

Right since the 1992 United Nations Conference on Environment and Development at Rio de Janeiro and through the 1997 Kyoto Protocol, India has refused any binding cuts in its emissions on the grounds that global warming is largely caused by fossil fuel burning in industrialised countries and although India's GHG emissions are rapidly rising it is a "developing" country whose per capita emissions are still only a fraction of those of the North.

This refusal was in evidence at the U.N.-sponsored Nairobi climate conference in November. It was also highlighted more recently during a visit to New Delhi by former World Bank chief economist Nicholas Stern, the author of a 700-page report on climate change commissioned by the British government, which warns of a "natural calamity on the scale of world wars and the Great Depression".

On December 4, Stern presented a summary of his report to the Planning Commission. Although the Commission had no consensual position on the issue based on its own deliberations, it responded by presenting two papers by economists Jyoti Parikh and Chandra Kiran B. Krishnamurthy. These essentially argue that India should not agree to binding emission cuts because these will adversely affect gross domestic product (GDP) growth.

Apart from the fact that it is based on a questionable model - which unconvincingly assumes greatly improved energy efficiencies, but cannot be discussed here for lack of space - the basic trouble with this argument is that it is desperately parochial and can be made by anyone.

Indeed, President George Bush Senior advanced that very reasoning when he declared at Rio that he was not there to trade "American lifestyles". However, halting and reversing global warming is such a universal imperative that all major GHG emitters must drastically reduce their emissions.

India, like China and Brazil, is already among the world's top 10 polluters. Its GHG emissions have been rising more rapidly than the world average. Between 1992 and 2002, global emissions increased by 15 per cent. But India's emissions grew by 57 per cent, even faster than China's 33 per cent. India's carbon dioxide emissions are projected to increase almost two-and-a-half times by 2030. Carbon dioxide emissions from vehicles alone could rise 5.8 times for India compared with 3.4 times for China.

Besides, the Indian economy is remarkably carbon-inefficient, India ranking 85th among a total of 141 nations. India is far more inefficient than other developing countries such as Bangladesh, Brazil, the Philippines and Indonesia; indeed, it compares poorly even with industrialised countries such as Germany, Britain, the Netherlands, France, Italy, Spain, Japan, Denmark and Sweden.

It simply will not do to contend that India's per capita emissions are about one-fourth the global average and so it is not obliged to cut GHGs. The per capita average hides enormous differences in consumption between India's rich and poor. It is the unbridled luxury consumption of its affluent classes that is driving the giddy rise in India's GHG emissions. The majority of Indians remain as frugal as ever in their use of resources.

This makes it imperative that India move towards accepting deep cuts in emissions, in particular those relating to private vehicles, the profligate use of energy and water by the rich, and the skyrocketing consumption of air-conditioners, washing machines, microwave ovens and plasma and liquid crystal display (LCD) television sets.

However, there is one part of the Stern report, its weakest, that Indian policy-makers wholeheartedly agree with. And that has to do with carbon trading as the principal instrument for mitigating global warming. This is a booming business. Last year, Indian companies made a neat Rs.1,500 crores by selling certified reduction emissions (CERs, each equivalent to one tonne of carbon dioxide). By 2012, India's earnings are estimated to jump to Rs.18,000 crores.

India accounts for the highest proportion of projects (29.2 per cent) of the global total (459) registered with the Clean Development Mechanism (CDM) Executive Board, far higher than Brazil's 18.3, Mexico's 15.7, and China's 7.6 per cent. (In annual CERs, however, India's share is 11.5 per cent, compared with China's 43.2 per cent). The single largest Indian deal, for Rs.1,000 crores, was bagged by Gujarat Fluorochemicals, which runs a refrigerant plant but is better known for its "Inox" multiplexes. No wonder much bigger companies like Reliance, Grasim Industries, Gujarat Ambuja and Tata Chemicals are considering investing in carbon trading.

Carbon trading is encouraged under the CDM established by the Kyoto Protocol, which permits corporations and governments of the North not to undertake mandatory emission cuts in their activities and instead to buy CERs from the South, earned through projects that are supposed to achieve equivalent reductions. In the past year alone, the European Union carbon trading market doubled its turnover to euro 22 billion.

Carbon trading has drawn serious criticism from environmentalists, who argue that it essentially allows the North to evade its duty to reduce emissions, while supporting questionable projects in the South, which may not lead to any emission reductions.

According to a World Bank estimate, just 10 per cent of CDM projects involve renewable energy, improved energy efficiency or a fuel switch. Many promote monoculture plantations.

Nearly 60 per cent of projects aim at destroying trifluoromethane (HFC-23), a potent GHG, in incinerators, which cost, according to one estimate, just $31 million to build and run for a year but generate an absurdly high $800 million worth of CERs. Some others put a premium on waste incineration over renewable energy such as wind or solar energy.

According to the Dutch National Institute for Public Health and the Environment, emissions trading will achieve only a 0.1 per cent reduction in greenhouse emissions, a mere fraction of the 5.2 per cent Kyoto target, itself totally inadequate.

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Thus, only Northern agencies are given "quotas", some far in excess of the appropriate share. The allotment of pollution "offsets" to the South is arbitrary too. Just four countries (India, China, Brazil and South Korea) claim four-fifths of global credits.

Pollution rights promote rent-seeking rather than purposive action to reduce emissions through material or energy saving and reducing fossil fuel dependence. Worse, they inhibit serious innovation and structural change while rewarding superficial, paltry "end-of-pipe" solutions. There are inherent difficulties and uncertainties in quantifying and measuring either global emissions or carbon offsets. This makes for arbitrary and skewed bargains, in which consultants play god.

Lohmann concludes on the basis of nine case studies, including one from India, that most offset projects in the South are typically predatory upon local communities and create conflicts through the exploitation of resources and licensing of polluting activities.

Carbon trading represents a serious diversion from the urgent task of reducing fossil fuel consumption by cutting subsidies; establishing systems of regulation, green taxation and legal action; providing public services; and promoting renewable energy the world over. Rather, it will prolong the globe's dependence on fossil fuel. It is both ineffectual and unjust.

The sooner India accepts this and moves towards genuinely reducing GHG emissions, the better.