Doing the GGG.

Chinese theatre

Doing the Global Greenhouse Gas deal seems to be becoming a new global trade thanks to Kyoto, carbon trading, off-setting and carbon credits. At the end of last year the largest deal yet was brokered by the World Bank. European and Asian companies and others will pay two Chinese chemical companies $1.02 billion to reduce output of HFC23, a heat-trapping gas 11,700 times stronger than carbon dioxide.

The deal will reduce emissions by about 19 million tonnes of carbon dioxide equivalent annually, according to the World Bank. About 75% of the money to purchase the reductions came from private capital, it said. Additional participants included entities in World Bank managed funds including the Danish Carbon Fund, the Italian Carbon Fund, Deutsche Bank, Mitsui & Co and two entities of Natsource LLC, which calls itself the world’s largest greenhouse gas asset manager.

Clicking on the above link to Natsource you will see that it serves to sell carbon credits on behalf of a number of large American companies. It appears that the Chinese deal is about the World Bank saying to those Natsource companies, ‘Well done on reducing your sources of pollution. We’ll buy those carbon credits you’ve earned and use them towards cancelling some chemical emissions in China’.

If China was under the Kyoto agreement then it could be purchasing those carbon credits directly from a company such as Natsource and therefore paying for the right to pollute. Of course this pollution payment should eventually encourage that Chinese chemical company to clean up its act rather than waste money on pollution payments. That’s meant to be the idea!

With countries like China out of the Kyoto equation we get deals like this one brokered by the World Bank. The ‘west’ pays China to clean up its act instead. In the meantime the Chinese economy races toward becoming the number one global powerhouse. The west is subsidising China’s success!

OK. Game over. Scrap the Kyoto Agreement. Bring in the World Bank’s Global Environment Facility (GEF) to run the show. Let the GEF bring all countries into a Global Carbon Trading index. Continue with the CDM but, let’s stop the farce of subsidising global economic growth behind closed doors.

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8 Responses to Doing the GGG.

  1. Dave On Fire says:

    China doesn’t participate in Kyoto agreement for two reasons. Like the U.S., it feels powerful enough to ignore peer pressure from the E.U. etc. Like other developing countries, it would also be getting a profoundly raw deal out of the Kyoto mechanism.

    The emissions targets assigned to countries under the Kyoto agreement are percentages of their 1991 emissions. As such, if it were applied to the whole world, it would give rich countries a licence to eternally out-pollute poor countries. That’s why it was only ever supposed to apply as an emergency stop-gap measure for the richest, most polluting countries.

    As pollution from the developing world – and China in particular – increases, so does our need for a system that goes beyond the Kyoto agreement. Getting that system into place will take gargantuan diplomatic and organisational effort, and it will take time. There is still a gap for Kyoto to stop, and it would be very rash to “scrap” it.

    Instead, we should concentrate on a long-term solution and – in the short-term – apply the Kyoto agreement and find ways to extend it so that it can also reduce pollution in the developing world too. And that’s exactly what this initiative does. The precedent it sets gives Chinese companies an incentive to reduce pollution in the hopes of getting what you call “subsidies”.

    The World Bank etc are effectively buying carbon credits from the Chinese companies, and thus bringing them into the carbon market. And that’s good. If I understand your objection it’s that this represents a one-way flow of money from the west into China, but that’s not the case.

    A western firm will only buy carbon credits generated in this initiative if doing so proves to be cheaper than cutting its own pollution. It therefore saves money, so both sides are winning.

    An emissions market is an inadequate measure, but it’s not a subsidy. It ensures that wherever it is relatively cheap to reduce pollution, it will be done. This will mainly be in the developing world, where industries have grown in the absence of clean air laws and other measures, so the money is likely to flow mainly from developed world to developing. But that makes a nice change, doesn’t it?

  2. matt says:

    From what I understand, the American companies via Natsource are the ones that have earned the carbon credits because they have lowered their emissions. It’s not the Chinese who are dealing the credits. The World Bank has bought the credits from Natsource on behalf of the Chinese chemical comapnies. That’s how it looks to me but, I could be wrong! Have a look at the Natsource link I’ve provided and look at the company examples they have there.

  3. Dave On Fire says:

    American companies have generated/earned credits, which NatSource has bought from them and will sell to companies that have difficulty cutting their own emissions.

    The Chinese companies are now doing the same. They will cut emissions and earn credits, which NatSource will buy (with the help of the World Bank) and then sell on to other companies.

    If you understood it as the World Bank buying credits from NatSource (or from American companies via NatSource) and donating them to the Chinese companies to balance the latter’s emissions books then that would indeed be an absurd subsidy.

  4. Dave On Fire says:

    That last paragraph wasn’t meant to sound as patronising as it does :S

  5. matt says:

    This is all highly complex on the surface but, like most things the idea behind it is probably quite simple …. money!

    Read through this article til the end (as the end bit is crucial);,,1870358,00.html

    ‘China has been allowed to avoid carbon limits. Yesterday’s deal suggests China will get involved though – for cash.’

    That’s the bit I don’t like. It appears to me therefore that in my original example the same thing is happening. In my example Natsource has sold their carbon credits to the World Bank, who in turn broker a deal with the other European organisations to buy those credits off the World Bank. It looks as though they do this by buying the chemical emissions scrubbing technology to be installed at the Chinese chemical plants.

    So, if I have it correct, there are lots of unneccessary middle men and those European companies get out of cutting their own pollution AND the Chinese chemical companies don’t even have to pay for their pollution technology. Therefore the latter have no real incentive to do anything themselves in the future about their pollution either. Crazy!

  6. Dave On Fire says:

    if I have it correct, there are lots of unneccessary middle men and those European companies get out of [cutting their own pollution] AND the Chinese chemical companies don’t even have to pay for their pollution technology.

    Yeah… (well depends on your definition of “unnecessary”), but that’s what emissions markets are for. Some companies (in this case, Western ones) pay ohers (in this case, Chinese) to cut emissions on their behalf. What’s wrong with that? The Chinese do have an incentive to cut pollution, if it earns them European money!

    Aside from all the usual criticisms one could make of any carbon trading scheme (i.e. that it’s ultimately woefully inadequate) surely this is all good. Companies are paying to cut pollution. That they are European companies paying to cut Chinese pollution is irrelevant, no?

  7. matt says:

    It is as you say a stop gap to the better solution which is that the whole world be subject to carbon emissions trading schemes that help to reward those that reduce their emissions and punish those that don’t. China must be brought into this by direct involvement rather than the complex schemes charted above.

  8. keithsc says:

    I do see it as a positive development. Yes the Kyoto agreement desperately needs to become more inclusive but maybe such steps as this are what is going to point the way forward. And it is going to reduce the emissions by 19 million tonnes of carbon dioxide equivalent – which will be a fantastic achievement.

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