Trade with carbon emission quotas is considered by many to be an important step towards less greenhouse gas emissions. The Kyoto protocol obliges industrial countries to cut down on their carbon emissions, and facilitates funding of climate friendly development projects. Unfortunately, the system is threatened by weaknesses.
The emission trading scheme is a part of the Kyoto protocol, which has been ratified by most countries in the world. Quotas are distributed based on how much carbon each country can emit during a certain period and still achieve the cuts that are needed, which is decided in the protocol. Countries decide in which industrial sectors the cuts shall be made, and then large companies in those sectors are given quotas. Organizations and individuals may buy carbon quotas too, if they want to improve their own ecological footprint. The trade happens directly between actors, or via banks and brokers.
If countries cross the limit of how much carbon they can emit, they may buy more quotas or invest in climate projects. What we call emission trade is the direct purchase of climate quotas from actors who emit less than they could have done according to the protocol. Each climate quota represents a permit to emit one tonne of CO2. Another option is to invest in approved emission-reducing projects in developing countries, which is called the clean development mechanism. An example of this is found in Nigeria, where extensive use of wood in cooking has led to deforestation. Over a five year period, cooking stoves that demand 80 percent less wood than traditional methods will be distributed to the people. Companies may also finance approved projects in other industrialized countries, as an effort of joint implementation to reduce the emissions from the rich part of the world. Norway has participated in the World Bank’s Carbon Fund with projects in Eastern Europe. Projects have to be approved by a board, which belongs to the United Nations.
One of the system’s weaknesses is the fact that the price is set by the market. The amount of emissions varies over time, which leads to changing demand, and thus, changing prices. Companies may take advantage of this, and buy many quotas when the price is low. As a result, less financial resources go to the climate initiatives for which they were intended. It also creates instability for those who work on projects that base their income on this type of funding.
Another aspect of the quota trade is that it has been proved difficult to control exactly where the money ends up. Last year, it was revealed that Norwegian actors had bought quotas from companies that run businesses which are degrading both to the environment and to people’s health. Some are planting trees at one location, but cutting down rainforest elsewhere. Others contaminate Indian villages.
Believing that the emission trading scheme is extensive enough to take the world in another direction than towards catastrophic climate change, is exceptionally optimistic. However, the system is absolutely a step in the right direction. Still, it is important to be careful with where the money is spent, and to question the way we live. That responsibility does not go away just because we buy the right to emit some more CO2. A fundamental change in the way we relate to the planet and its resources is the only thing that can make a real change.
02 February 2013
