–Unlikely U.S. carbon legislation will be introduced this year: Morgan Stanley –EU carbon futures rise to close Wednesday at a record above 43 euros a ton –U.S. catch-up effort seen world-war like
ANALYSIS SUMMARY, REACTION
By Mathew Carr
March 17-18, 2021 — LONDON: The fact that various countries are tackling the climate crisis at completely different speeds may stoke trade tension, according to analysts at Morgan Stanley.
The introduction of a carbon border adjustment by the EU could encourage a range of responses from Europe’s trading partners, said the bank’s analysts including Jessica Alsford in London.
“The end goal is to incentivise a global approach to pricing carbon, and one possible outcome could be cooperation with complimentary climate policies introduced by key countries, such as the U.S. and China,” she said in a research note.
“However, time horizons may not be compatible and, with Europe progressing at speed, there is the potential for trade tensions to occur in the short term.”
Morgan Stanley’s base case is that the European Commission will put forward a carbon border adjustment proposal this year for implementation in 2023.
Depending on the evolution of the carbon price, the commission estimates that the carbon border adjustment could bring additional resources ranging from €5bn to €14bn.
In the U..S., the bank’s public policy strategists expect the Biden Administration to drive a step change in climate policy, but say it’s unlikely that carbon legislation will be implemented this year, according to the note.
The U.S. may catch up fast, said Tim Williamson, who was an Obama renewable energy official, commenting on LinkedIn.
It’s very likely the U.S. pandemic recovery legislation will be introduced this year, including “Sense of Congress” statements about a low-carbon economy and U.S. achieving net zero emissions by 2050, Williamson said.
“Cross-border adjustment taxes were never envisaged to start in EU-27 in 2021. This leaves plenty of time for high emissions countries to react with policies to avert cross border adjustments hitting their bottom line on high-embodied carbon exports to EU. My sense is, border adjustments are coming before 2025,” he said.
Here is a Morgan Stanley chart detailing some of the varied prices around the world, complicating trade in energy-intensive goods:
While carbon prices globally vary materially, all prices in the table above are below that required to incentivize a net zero pathway, the bank said.
“In an academic study co-authored in 2020 by Noah Kaufman, who is currently serving in the Biden-Harris Administration, the necessary price of carbon for achieving net zero by 2050 is estimated to be $50/metric ton by 2025, increasing to $100/ton by 2030.
“The EU emissions trading system is the closest to achieving this, trading at around $45/tonne currently. Elsewhere, the IMF has estimated that $75/tonne is necessary to meet the Paris Agreement target of limiting global warming to 2˚C over pre-industrial levels.”
EU carbon futures rose 3.4% to close at a record 43.03 euros a ton on Wednesday — about $51.50
The region is forging ahead with its decarbonization plans, with support for green hydrogen using carbon contracts for difference (CCfD) auctions. Portugal is leading the way by making plans to hold an auction in the second half of 2021, according to Carbon Pulse.
The challenge for the U.S. and beyond is world-war like, said Doug Houseman, principal consultant at 1898 & Co., a Burns & McDonnell division.
“In the U.S. (not globally) if we are to fully electrify transportation and buildings – we need 1 million 2.5 MW wind turbines (the world today makes about 12,000 of that size turbine or larger) – over 8 years (to meet the 2030 goals) – so if we buy 100% of the global production we have 10% of what we need each year. The wind industry needs to ramp up by 30x minimum. We need 320 acres an hour 24/365 of solar panels and every hour they need to be placed on 640 acres (1 square mile an hour). Just for the U.S. – and in 8 years when we are done we need to demobilize about 80% of the production facilities. This is similar in scale to what the U.S. did during World War II with the scale of the industrial machine that needs to be created,” Houseman said on LinkedIn.
See this cool animation setting out the challenge, even before trade tensions:
–US emissions-cutting plan crucial as big 20 consider each others’ 2030 carbon limits through October, ahead of UN climate talks in November –Will President Biden speed the pace of cuts vs Obama ambition?
By Mathew Carr
March 9, 2021 — LONDON: The U.S. is still seeking to widen the responsibility for cleaning up the climate crisis mess, which it’s most responsible for.
In a TV interview with Newsnight in London, visiting U.S. special climate envoy John Kerry ducked a question about whether the world’s biggest economy would lead in emission cuts.
Kerry is instead seeking to enlist other big countries into the global effort, even those with much lower per capita emissions and less responsibility for the world’s most risky situation.
“The 20 countries that are the equivalent of 81% of all emissions, those 20 countries have a particular responsibility to take the lead in reducing greenhouse gas emissions…All have to be part of this effort,” Kerry told BBC presenter Emily Maitlis.
But take a look at this UN Emissions Gap Report chart:
Kerry didn’t mention this context when explaining the situation: when taking the trade of energy intensive goods into account, rich nations are even more responsible for the climate crisis (a high portion of developing-nation GHG is linked to their production of goods consumed in the most wealthy countries).
Kerry met with U.K. Prime Minister Boris Johnson and Chancellor Rishi Sunak, who are helping oversee the UN climate talks in November in Glasgow, Scotland. Kerry is also meeting with the European Commission today and French government officials later.
Kerry said Tuesday from the EU commission he was seeking to “align” with Europe. “It’s important for us to align ourselves now, which is what we will discuss today. There are trillions of dollars or euros, or whatever the currency, that will be required.” The private sector will be crucial.
“Every single economic analysis makes it clear. It’s more expensive for our citizens not to respond and do what we need to do than it is to do it.”
Under the Paris Agreement in 2015, President Barack Obama committed the U.S. to reduce greenhouse gas emissions 26-28% by 2025, from 2005 levels.
So will the U.S. now lead on cutting emissions at an even faster pace?
“It’s imperative that the United States step up with a very realistic and achievable, measurable level of our reductions and we will. President Biden will make that announcement either on April 22nd at our (climate) summit or in the week preceding,” Kerry told Newsnight Monday.
Missing from this sentence was the word “ambitious,” or even a synonym of that.
“But there’s no question. The U.S. has been absent from this effort the last four years, at least as a federal government,” Kerry said.
Paris commitments so far imply a temperature rise of 3.7C above pre-industrial levels, he said.
“That’s catastrophic.” And since countries seem to be failing to live up to those commitments, the temperature increase is looking like it might rise even higher than 3.7C, Kerry said. He didn’t name the countries.
Given the U.S. is most responsible for climate change and has only 4% of the global population, it’s target update, known as a nationally determined contribution (NDC) to the Paris deal, is key.
Here is the state of play for emissions and NDCs in two linked charts, again, from the UN Gap Report.
The U.S. target is crucial also because it’s likely to demonstrate to poorer nations whether it’s learned to ration its own future use of the remaining global carbon budget, implied in the Paris target to keep temperatures from rising 1.5C.
Kerry suggested the U.K. plan to cut its emissions by 68% from 1990 in 2030 was ambitious. That’s also more than the EU plan for a 55% drop, so I’m guessing the U.S. is unlikely to go for emissions cuts suggested by some of its own environmental lobby groups.
See this (I’m not endorsing it as a credible option, but it’s pretty interesting outlier. It’s probably not what Kerry calls “realistic” or “achievable”):
That’s dramatic…because it would mean the U.S. removing as much as the double the volume from the atmosphere in 2030 (ie financing reductions at home and around the world, potentially) than it’s producing domestically today.
Such a scenario might even be possible if global carbon trading is structured with logic, ambition and UN-achieved credibility during the next few months.
At this point, the world can only dream of such a reality. But emissions removal technology and finance are getting a lot of attention from lawmakers and investors right now, and these markets could be set to take off.
Feb. 26-27, 2021 — LONDON: A former climate negotiator for India, one of the huge developing countries least to blame for the climate crisis, looked on as the U.S. Energy Information Administration apparently missed Joe Biden’s plan to cut emissions to net zero by the middle of the century.
See this chart from earlier this month, showing U.S. energy emissions doing very little over the next three decades:
Are big-consuming western countries and China, which are most to blame for global warming, really serious about protecting the climate? asked 72-year old Surya Sethi, former climate negotiator for the world’s second-most-populous nation. He says they are not.
“Nothing’s going to happen,” at United Nations climate talks in Glasgow in November, he said by phone.
The EIA said it expects U.S. emissions to rise in the later half of its projection because “of increasing economic growth that leads to growing industrial energy requirements. EIA projects energy use in transportation will increase as vehicle fuel efficiency plateaus in the mid-2020s and becomes outweighed by increases in vehicle travel demand.”
While many world leaders including U.S. President Joe Biden are willing to talk about net zero in the middle of the century, they are very slow to get on that pathway.
The real importance of “zero” in the climate debate is its relevance as the best measure of the level of seriousness of the developed world to tackle their overconsumption problem, Sethi said by phone. China, a key supplier of goods to the west, has been drawn into that system and is now a big part of the problem.
An analysis of updated Nationally Determined Contributions to the Paris climate deal published Friday by the UN Climate secretariat showed the increased ambition being offered by countries is tiny, cutting emissions by less than an extra 1% in 2030 vs 2010.
The Intergovernmental Panel on Climate Change (IPCC), by contrast, has indicated that emission reduction ranges to meet the 1.5°C temperature goal should be around -45% in 2030 compared to 2010.
Oxfam’s Global Climate Policy Lead, Nafkote Dabi, is another who’s far from happy with the situation and responded like this to the UN analysis:
“Today’s report findings are appalling. The combined climate plans submitted account to a dismal 1% emissions reduction, far below the 45% reduction needed to limit global warming below 1.5 degrees, and avoid disastrous impacts on vulnerable communities.
“While some countries who have contributed least to the climate crisis have increased their ambition, industrial and rich countries most to blame for global emissions, have miserably failed to step up to their responsibility.”
The Paris climate deal was struck in 2015 with much back slapping. Ambition was meant to be ramped up every five years. It’s simply not happening.
Countries are falling way short and Sethi is right. (The U.S. and China are planning to update their emissions mitigation and adaptation plans during the next few months.)
The lack of ambition comes despite the fact it’s almost three decades since the UN Framework Convention on Climate Change was formed in 1992, Sethi said. It’s way beyond the time when world leaders can pretend they don’t know what’s going on with climate risks.
“The needle will move only when 10,000 Americans die because of climate change,” Sethi said.
Rich-nation voters don’t seem to care so much about the 50,000 Indian farmers committing suicide, partly because of heart-breaking weather events, he said. “One billion Indians will perish” at current warming rates, he said (in what I hope is eye-popping exaggeration, but might not be over the 80 years left in the current century).
–G7 outcome highlights chance of climate deal, multilateralism, new system of planet-friendly trade via G20 by June
By Mathew Carr
Feb. 18-20, 2021 — LONDON:
OPINION: The world now needs carbon prices of about $100 a ton in 2030 to spur sufficient climate action to meet the 1.5C temperature increase goal in the Paris climate deal.
That is about double the level targeted just a couple of years ago by the Obama administration. The higher price is required because global emissions are still very high, even though nations have become more ambitious, with many adopting mid-century net-zero targets.
The required price could be even higher. Lawmakers realise they need to embrace widespread climate measures across the economy, so carbon prices now need only do part of the emissions-cutting work, and clean technology has advanced apace.
I’m heartened by the seven Republican senators who voted to impeach former president Donald Trump. It shows the Republicans are far from a lost cause.
Three more level heads than in the impeachment vote seems very possible indeed.
I reckon Biden-Harris can convince the ten because the U.S. now has a chance to catch up with, and even overtake, Europe by setting a logical policy framework for cost-effective emission cuts.
Europe’s climate policies have proved fairly effective, but they are still way too complicated and far from cost optimal. That stems from the nature of EU policymaking, nationalistic geopolitics and compartmentalized public debate.
The prospect of moving ahead of Europe will prove too tempting for at least 10 Republicans.
The prospect of the U.S. biting at its heels will make the EU even more ambitious.
The U.S. senators will be convinced not because they are becoming more progressive or leftist, but because U.S. companies don’t want to face a tax on Europe’s borders as they seek to boost exports post pandemic. Trillions are going to be spent on the climate transition during the next 10 years — that’s a considerable carrot.
The flipside stick is the EU plan for a so-called carbon border adjustment mechanism by 2023 on nations without climate policy that’s ambitious enough.
The G7 leaders meeting Feb. 19 — the day of the U.S.’s reentry into the Paris agreement — acknowledged the importance of a global trade regime that serves the planet.
“We will work together and with others to make 2021 a turning point for multilateralism and to shape a recovery that promotes the health and prosperity of our people and planet.”
Here is another key G7 passage: We will: champion open economies and societies; promote global economic resilience; harness the digital economy with data free flow with trust; cooperate on a modernised, freer and fairer rules-based multilateral trading system that reflects our values and delivers balanced growth with a reformed World Trade Organisation at its centre; and, strive to reach a consensus-based solution on international taxation by mid-2021 within the framework of the OECD. With the aim of supporting a fair and mutually beneficial global economic system for all people, we will engage with others, especially G20 countries including large economies such asChina.
So higher carbon prices could include taxes or markets.
The mention of China is crucial because unless the world’s biggest emitter and most populous nation is drawn into the climate and trade solution it’s difficult to see how the Paris limits can be met.
U.S., including climate envoy John Kerry, has engaged with India and Brazil in recent days.
Here’s the Google Translation of the following embedded tweet from the Brazil Foreign Affairs Minister: Min. Ricardo Salles and I had a conference call today with Secretary John Kerry, US Special Representative for Climate Change. Dialogue and cooperation on environment and climate will be another aggregating element in the Brazil-USA partnership that we continue to build.
Kerry is cleverly not just cajoling big emerging countries to join the climate fight but touting the red-hot nature of the investment opportunities:
Because a G20 deal on trade and climate is in the frame of possible outcomes this year, self interest will prevail in the U.S. Senate.
If it doesn’t — if the U.S. fails to act ambitiously now (in the next 2 years), it’ll miss a rare chance and potentially be defeated by Europe and China (and others) in what’s firmly become a global climate-transition race.
(Updated Saturday with G7, Tweets, context, links)
NOTES: The Group of Seven (G7) is an intergovernmental organization consisting of Canada, France, Germany, Italy, Japan, the United Kingdom and the U.S. The heads of government of the member states, as well as the representatives of the EU, meet at G7 gatherings/video conferences.
Jan. 29, 2021 — LONDON: Special U.S. climate envoy John Kerry is on a roll.
Not only is he invoking “humility” in his country’s newly invigorated climate fight, he’s calling out former President Donald Trump’s stance as “reckless.”
Now, he’s gone even further.
“There’s no room for BS anymore — from anyone in the debate,” he told Amanda Little (I think oyster-mushroom steaks are great, fame), in a story published by Bloomberg News.
Call ME reckless, but I’m taking BS as bullshit, and I’m also taking it as a reference to Mr Trump (although there’s plenty of climate bullshit about). Forgive me if I’m wrong.
I’ll let you read the full article below, but here are a couple of other choice Kerry comments (emphasis added) from the report:
JK: Obviously I’ve been a longtime advocate of putting a price on carbon. That’s what Lindsey Graham and I were trying to do in the Senate in 2009 and 2010. I credit the activists who have pushed to say any pricing would have to be progressive so it doesn’t dump the costs on low-income workers and families. I also credit the voices from the private sector who are elevating climate as a priority in boardrooms, in general.
AL: Is carbon pricing politically feasible?
JK: I can’t tell you today what’s ultimately politically feasible. The debate has shifted before, and I think it may change this year in the right direction — or going forward from Glasgow [site of Nov. 1 United Nations Climate Change Conference]. There are Republicans, including former Secretary of States George Shultz and Jim Baker, who support carbon pricing, but I haven’t seen that translate to Congress yet.
AL: How hard will it be to repair the diplomatic damage on climate?
JK: Trump led an assault on science without understanding that when you mess with global ecosystems, you’re messing with forces that literally have the ability to do what nuclear weapons and cyber warfare can do, which is destroy nations. I’m approaching our allies with humility, as is President Biden, because we’re embarrassed and we’re angry about what happened these last four years.
Here’s the complete Bloomberg story (subscription may be required if you’ve used up your free article allocation):
Thirty eight states covering 80% of the U.S. population “kept going” on emission cuts despite Trump’s anti-climate-action stance, Kerry said. The nation needs to press on “with humility,” he said. “They are not going to believe us when we just say it, we have to do it,” he said after speaking with European leaders calling for more ambitious climate action.
See this report on Kerry’s earlier remarks from last week:
Kerry called on U.S. states to keep up their downward pressure on emissions. All nations need to set targets for 2025 and/or 2030 “so everyone can understand it’s not fake. It’s not a phony, empty promise. It really is getting real.”
The 2050 target for net zero is “a global target. We have to be there by 2050,” Kerry said.
–Rich-country green lobbyists are being enabled by western-based news media, countries … and even academics –Global business, emerging countries are being unfairly downplayed, causing the climate crisis to worsen
By Mathew Carr
Jan. 16-21, 2021 — LONDON: When Trafigura Group explained how it plans to meet its sparkling new 2023 emissions-reduction target, the Singapore commodities giant is at pains to highlight that it plans to use carbon credits only in a limited way.
To meet its limited-scope 30% emission-reduction plan in the next three years, “we’ll consider offsetting them through the purchase of carbon offsets, although this will be a small part of the way the targets are achieved,” said Richard Head, leader of the group’s health, safety, environment & communities unit.
It’s a shame, because Trafigura is one of the world’s biggest trading businesses and one of it’s mottos is: “We grow prosperity by advancing trade.”
It’s important for companies like Trafigua to have ways of cutting emissions, in order to justify their strategy of exploiting oil in Arctic Russia, for instance. The company is the go-to trader for oil-giant Rosneft, which is expanding in Siberia via a venture, potentially with the help of China and India, according to the Financial Times.
Across the corporate landscape, businesses are worried they’ll be criticised as companies pretending to be green.
Trafigura didn’t say specifically why it’s limiting use of offsets and carbon trading, but my reporting shows companies face reputational damage because of unfair, muddled criticism. So, their entirely rational response is to hesitate to invest in vitally needed green projects.
They hang onto their money and the climate crisis gets steadily worse. Or even worse, they spend it on arctic oil.
Hesitating means capital isn’t flowing where it needs to flow — GHG-reductions are not increasing fast enough.
The stakes couldn’t be higher.
For companies, being seen as green and clean has gone from something nice to something compulsory.
Otherwise, millennial shoppers will go elsewhere, especially as the global pandemic highlights the fragility of life and the importance of health. There’s an increased risk investors will offload their shares, or insist on a new board of directors and CEO. Without a shift toward green, businesses might struggle to attract the best executive talent.
For the climate, the world has almost used up the remaining space in the atmosphere for heat-trapping gas. That’s stoking global warming even more — after the hottest decade ever recorded.
Carbon credits are crucial because they provide a risk-management tool for companies, giving them leeway to be much more ambitious with their targets and lobbying of politicians for action.
Fear of being tainted by accusations of greenwashing is rampant. A survey by CarrZee.org over the past two weeks of senior industry executives shows environment groups (and others) who claim they are fighting against greenwash are actually slowing climate action.
WWF, the World Wildlife Fund, and Carbon Market Watch are among the groups still erecting the barriers to companies trying to shift to net-zero emissions during the next few decades.
One of their biggest gripes currently is that corporates state they are on their way to net zero partly by cutting emissions in developing countries. One such instance is installing an innovative solar plant or new type of steelmaking.
The emerging nation getting the clean solar power or green steel also wants to claim it’s cutting emissions toward its pledge under the 2015 Paris climate deal. This Paris pact only started applying to signatories on January 1.
“It’s double counting,” said Brad Schallert, director, carbon market governance and aviation, at WWF U.S., speaking by phone.
Carbon Market Watch, another green group, said if the developing country accepts the clean investment that cuts emissions, it should tighten its Paris target by an equivalent amount.
This is known under the as-yet-unfinished UN negotiations for the Paris rulebook as a “corresponding adjustment.”
But the rules on how corresponding adjustments will work — under what circumstances they’ll be required or preferred — are not yet set, and they probably won’t be until November this year, at the earliest.
Since the voluntary-carbon-market reductions would enable the developing country (or any country for that matter) to meet its target, the host nation might decide it doesn’t need after all to adopt what may be a disruptive climate policy that it previously planned, Carbon Market Watch says.
The voluntary transaction will potentially replace new policies, rather than support extra reductions, it claims.
These arguments may be well intentioned, but they are ultimately damaging and misguided, say project developers, companies and standards bodies.
The volunatary carbon transactions are almost always genuine collaborations to help save the climate, they add.
Having more than one entity in a supply chain to create a clean product should not prevent each part of that chain from saying they were part of the winning, collaborative team that created that product, the project developers argue.
Environmental groups should instead focus on non-ambitious governments in whatever country those governments oversee, they say. If the lawmakers are the true problem, they should be the target of the environmental lobby groups’ attack.
Chastizing companies who are seeking to lead isn’t genuine climate protection.
Corporates don’t have targets under the Paris deal, until they are imposed by governments at least; most countries do have limits under that agreement and they’ve made them voluntarily.
If a country has weak climate policies or targets, it won’t be an attractive place for global companies to invest in …for emission-reduction projects or other projects, developers argue.
What is true is that each company will ultimately have to account for emissions in each nation it operates in — and if it’s not transparent, their shareholders will shy away.
“People are all bent out of shape” when a developed-nation company is claiming an offset from a project in Kenya, for example, said David Antonioli, chief executive officer of Verra, which manages standards for reducing GHG emissions.
“People are obsessing, to be perfectly frank, on this issue of accountancy purity. We are looking at the trees and not the forest. We don’t want to disincentivize” companies seeking to cut emissions, he said by phone. “There’s a lot of resistance” to offsetting. “It’s unfortunate it’s an ongoing debate.”
For a country like Kenya, the stakes are huge, as well.
Last month, the east African nation renewed its climate pledge for the Paris deal, seeking about $54 billion of “international support” for emission limits and adaptation through 2030. Kenya is largely blameless for the climate crisis, yet it’s facing big costs to adapt to the warming world.
The stance of western-based lobby groups, and news outlets that enable the misinformation is worsening its plight.
Some industrial groups want to be able to install the innovative solar plants in such developing countries. For instance, where $100 may cut 20 tons of carbon dioxide and reduce the need for a new coal station. In rich countries, the same money will only remove two or three tons because the easiest and cheapest ways to remove greenhouse gas has already been done.
That is, if companies spend $100 to cut just a couple of tons of co2 in a rich country, then that’s at least 17 tons of emissions that could have been cut in an emerging nation. That’s bad because the pace of emissions cuts is crucial and we are not doing it fast enough.
It means this bucket is filling up much faster than it needs to:
I’m not saying the environmental groups are more to blame for the climate crisis than politicians, or the media, or business itself. Those are other stories to tell.
The bottom line for this story is discouraging cost-effective emissions reductions is a very serious mistake indeed — and it’s not taken seriously enough by the green lobby.
“Some NGOs are right now unknowingly blocking climate action,” said Renat Heuberger, CEO of South Pole, which develops GHG-cutting projects. “For too long, emission reduction projects have not communicated clearly enough about the power and necessity of voluntary climate action. We’ve let the NGOs sing their song and create the narrative.”
Research by South Pole shows companies are not offsetting instead of cutting their own emissions— they are doing both, he said.
Carbon Market Watch denies NGOs are to blame. “When you are embarking on carbon offsetting, there are lots of checks and balances that need to be in place in order to ensure it makes sense from a climate perspective,” said Sam Van den plas, policy director, by phone.
“Accusing us of blocking climate action is really over the top,” he said by email after an earlier version of this story was published.
The problem faced by the lobbies, by policymakers, by the media and by companies is the overlapping, unfinished emissions accounting systems — several for companies, insurers and banks and at least one for countries.
“You have some folks who say ‘no, the accounting systems are different’; there’s actually the corporate accounting system, the greenhouse gas protocols that most companies will use to compile their emissions inventories, and then there’s the national accounts for emissions that are reported to the UN Framework Convention on Climate Change and the two systems don’t talk to each other,” said WWF’s Schallert.
This rings true.
The immediate solution is probably to not require the corresponding adjustment, according to Mark Carney, former governor of the Bank of England and Bank of Canada. Such adjustments become optional, at least for a few years/decades.
A business offsetting emissions at an Indonesian forest project, for instance, would ideally get to put the emission-reduction into its annual report as it seeks to hit its net-zero target, Carney says. (He now has a role as a United Nations climate envoy and is helping lead a charge to scale up the voluntary carbon market.)
The emissions cut would probably best remain Indonesia’s for Paris accounting purposes, Carney said last month. That country (Indonesia) would benefit from a country accounting point of view, he said.
It could also then strive to set a more-ambitious carbon limit (a lower one).
The $320 million-a-year global voluntary carbon market needs to be in the order of $100 billion a year to speed up the climate transition, Carney said.
Ideally, something like this could happen as soon as this year.
Carney, then, is among a growing number of people saying offsetting need only be transitory. But it’s very useful during the transition to net zero because it sends the right market signals and allows companies to use fossil-fuel assets until near the end of their useful lives, boosting the economic efficiency of the transition.
Picture this: The buying company gets bragging rights and can rightfully claim it’s on track to its net-zero target. But the country gets accounting rights.
Companies need to be careful about what they say publicly about their progress. But making that progress is not double counting.
To be fair, environmental lobby groups recognise there’s a problem.
Last month, the Environmental Defense Fund and French utility group Engie SA, said offsetting can credibly work “when done right”.
Carbon Market Watch’s Van den plas is willing to concede he “struggles with” striking the right balance between the climate and the right incentives for business.
Even WWF, who still favours corresponding adjustments, seems to be wavering, slightly — and might allow companies a so-far-undefined transition period.
“It’s very murky. The reason why we’ve been talking about this for five years in the voluntary carbon market community is that ultimately [we’re] trying to determine what the ultimate outcome is…in terms of higher ambition from countries, from companies, to set the right incentives,” WWF’s Schallert said.
“It’s not entirely clear in all cases that an immediate shift towards corresponding adjustments for all carbon neutrality targets will work. In fact, I don’t know if there would be a country out there – very few – that would be able to give you a corresponding adjustment for your carbon credits. So this is why there is this notion of a transition toward that direction.”
Environmental lobby groups have been climate-action blockers for years, because their push for perfection has prevented the merely good.
And they are still at it. Check out this apparently credible essay published just a few days ago.
To be fair, I should say up front I’ve got a lot of time for the folks at The Conversation, Trove Research and UCL.
But here, their argument seems to be spectacularly wrong.
Professors Mark Maslin and Simon Lewis of UCL argue that because the existing carbon markets are potentially 7 billion tons oversupplied, that supply should be curtailed in some way, or even killed.
They say that the potentially 7 billion tons is somehow tainted.
But, the simple fact is, it isn’t tainted.
These emission credits were created when the windfarms were new tech. Yet, the professors claim the credits are “outdated”.
No wonder oil major Total SA was reluctant to engage with their flawed thinking:
Emission credits being bought by Total were “additional” at the time they were created. That’s what counts. When they were bought seems pretty irrelevant to me.
(Click “The Conversation” link above if you’re not familiar with the slightly arcane notion of additionality.)
Yes, time has moved on and additionality’s definition has changed with that. That’s the nature of carbon markets. That’s the whole point of carbon trading. It allows countries and companies to smooth transition risks, not only across geographies but across timeframes.This is another notion that western environmental lobby groups seem to misunderstand.
As technology evolves, new technology becomes additional and old tech loses its additionality — ie the right to be financed by carbon credits.
If the carbon credits were additional when created, they are good to be used whenever. Otherwise, the contract that was struck when the credit was created is being broken. If countries break promises under Kyoto, investors won’t want to invest under Paris.
The professors seem to downplay this or not understand it.
I’m not complaining about their overarching analysis. This chart is very useful in explaining how the curent UN carbon system is comprehensively oversupplied:
I agree seven billion tons of spare emission reductions would be pretty big.
But it’s only big until you consider the size of the climate challenge the world faces during the next 10 years. Hint: it’s absolutely huge:
The uncontested chart shows the world needs to cut emissions by at least 29 billion tons in 10 years. That’s an average of 2.9 billion tons each year.
So, the 7 billion tons of oversupply could be taken care of by tightening Paris targets by less than 1 billion tons a year.
That’s a tightening of about 2% a year — does not sound so intimidating, right? That small change in the targets would reward the early movers in the climate fight instead of punishing them.
So — what UCL and Trove shouldn’t be advocating is to kill the spare supply — they should be advocating for rich countries that have caused the climate crisis to tighten their emission reduction targets during the next 10 years by at least 7 billion tons to suck up that oversupply.
That would be a much more rational lobbying strategy.
To put it another way, business does not like it when they put money into an emissions-cutting venture on the promise they will get valuable co2 credits — and then prices fall so low the money was wasted. If lawmakers now go and cancel the credits entirely, a lot of investors will be very angry indeed.
It makes absolutely no sense to punish those companies (largely in emerging countries) who put real money into emission reduction projects the past 20 years to create that 7 billion tons of spare credits. It’s those very companies in emerging countries that are the key to solving the climate crisis during the next 30 years.
I’m not arguing against the professors’ push to set up an “independent international body to oversee and carefully regulate the market.”
What’s key is to make that body work properly. The Green Climate Fund in Korea is already doing some work like this. It’s controlled by a board of emerging and developed country representatives.
I would argue the regulator probably needs to be overseen by the 7 billion people on earth who have not created the climate crisis.
Another simple truth is that it’s only 1 billion people of the 8 billion in the world who are largely to blame for causing this crisis. Indeed, it’s probably only a few million people who have mainly benefitted financially from the extraction of fossil fuels.
That’s where environmental lobby groups need to focus their attention, surely…
…Which makes me look at who supported the UCL/Trove research. See this:
We can see that linkages include western environmental lobby groups including WWF and the Greenpeace Fund.
There are a bunch of other linkages there, including the U.K. government and the EU, two regions most to blame for the climate crisis. Indeed, it’s a pretty decent representation of the 1 billion that are most responsible for the crisis.
Where is the represenation for their solution from the China, India, Brazil, India, Russia, Africa, other developing country realms?
Guy Turner, CEO of Trove Research, stands by the notion that some of the older credits probably need to be written off because they were not environmentally credible enough when approved. No one may want to buy them, for instance, he said.
There are certainly ways the carbon markets can be improved, said Yvo de boer, former executive secretary of the UNFCCC.
There are some “crappy credits” being put into the markets, “so I think the environmentalists are right to be critical. The buyers of credits are right to be very careful…so they don’t buy something that explodes in their face.”
Yet … “there’s more advantage in ensuring a credible carbon market rather than trying to close the carbon market down, because the carbon market offers significant advantages in terms of cost optimization and can help you get to your net-zero target much more affordably than if you don’t have the market opportunities.”
The green lobbies once argued against catalytic converters for autos, because they were determined to limit driving rather than making driving more clean, de Boer said by phone.
Now, they are realising they need to bring business and consumers along in their climate advocacy.
Josh Margolis, senior commercial advisor, Emergent Forest Finance Accelerator and CarbonSim administrator, says the concerns of the environmental lobby groups can be dealt with in other ways. See his reaction on LinkedIn to this post:
Which takes me back to Trafigura. Its 2020 sustainability report makes for some interesting reading, because it taps into the argument that the world’s poorest are most vulnerable if the climate transition continues to drag its feet.
You might think that Trafigura is firmly part of the 1 billion realm. It has been subject of some environmental scandles. But not so fast — perhaps it’s learned some lessions.
The commodity trader says it’s not only seeking to engage with the environmental lobby groups, but because of its operations in emerging countries, it’s understanding the urgency of the climate situation — for instance it’s advocating for carbon prices as high as $300 a ton in the shipping industry to cut emissions from that industry and speed the climate shift.
Companies arguing for $300 a ton carbon prices don’t appear to me to be the ones holding up the climate fight. Trafigura would probably be willing to take on much stricter immediate emissions targets if it had the comfort of a carbon market to fall back on should prices get near those levels.
I will give Trafigura the almost-final word, which sits awkwardly with its Arctic expansion. See this snip from its report:
The world has barely made a dent in the climate fight in the past 30 years. Western environmental lobby groups, the media, and politicians generally, need to start giving big business (and their customers) more legitimacy in guiding what will work in the real world, otherwise we’ll get a fourth decade of delay.
(Smoothed Saturday afternoon to make more clear; adds de Boer on Sunday; corrects headquarters of Trafigura to Singapore — registered office is Geneva, Switzerland; updates Tuesday with Trove, updates with another Carbon Market Watch comment on Jan. 21, and Trafigura’s Arctic expansion details)
–The reduction in 2020 alone is more than Canada’s entire energy emissions in 2019
By Mathew Carr
Jan. 12, 2021 — (LONDON): The United States cut carbon dioxide emissions by the largest amount ever for a single nation last year, as the coronavirus pandemic forced a massive reduction in the transport of its people.
The U.S. emissions probably fell around 630 million tons of CO2, according to this Tweet from scientist Glen Peters, research director at @CICERO_klima:
I highlight the relevant part of the chart here with a large red arrow:
The reduction alone is more than the entire energy emissions of Canada in 2019, or 556 million tons, according to statistics from BP Plc.
The only comparable drop I could find using the BP dataset was in 1985, when emissions in the Commonwealth of Independent States dropped 714 million tons as the USSR split. That’s some interesting company for 2020 USA.
The estimated global decline in 2020 is also a record according to Peters: “A drop of 2.4 billion tons of CO₂ has not been seen before, but emissions have not been this high either.”
Emissions are still so high on a historical basis that concentrations of heat-trapping gas continue to rise, threatening global warming, storms, droughts — the worst impacts of climate change. A lower volume of emissions means less is absorbed by forests:
It will be interesting to see how outgoing President Donald Trump frames the U.S. decline if he ever speaks publicly about it.
(Updates with CIS/USSR, context on the size of the drop vs Canada; adds forest sink impact)
Dec. 31, 2020 — LONDON: Australia updated its “pledge” to the Paris climate agreement before a deadline today, yet failed to boost its ambition compared with its plan in 2016.
The nation plans to cut emissions 26%-28% vs 2005 levels by 2030, which provides a “budget,” or cap, of roughly 4.8 billion tons of carbon dioxide equivalent, according to its Nationally Determined Contribution:
Under previous governments, Australia began a national carbon trading system and sought to link with the EU emissions market, the world’s biggest. But that was abandoned as governments changed.
Setting a cap could be the first step in implementing a cap-and-trade system, which economists argue is the most cost efficient climate measure.
The U.K. and Australia are striking a trade deal, which will cover environment. The U.K. is establishing its own carbon market — Brexit means it’s leaving the EU emission trading system, the world’s biggest such program.
Like in the U.S., Australian states have so far done most of the heavy lifting on climate protection. Still, the nation, whose politicians are influenced by murky fossil-fuel interests, has been a global laggard, despite devastating bushfires.