http://www.rggi.org/auctions/documents/Auction_Webinar_Presentation_July_24_2008.pdf

The company, Rhodia SA, manufactures hundreds of tons a day of adipic acid, an ingredient in nylon, at its factory here. But the real money is in what it doesn’t make. The payday, which could amount to more than $1 billion over seven years, comes from destroying nitrous oxide, or laughing gas, an unwanted byproduct and potent greenhouse gas. It’s Rhodia’s single most profitable business world-wide. […] The Rhodia factory in [South Korea] alone is slated to bring in more money, under the U.N.-administered program, than all the clean-air projects currently registered on the continent of Africa.

The post suggests there must be something wrong with a system that means factory owners can make more money from cleaning up pollution than their normal business. It does intuitively seem like a very expensive way to make a factory in a industrialised country do something that would be business as usual for a similar plant in Europe.

If the CDM is operating perfectly, it shouldn't be a problem. The value of CERs is determined by markets and, in climate change mitigation terms, reductions generated this way are just as good as any other. There are two key questions to think about:

1. Would the gases have been cleaned up anyway? The CDM would argue it makes a reasonable judgement of this issue. Many disagree and believe it's too difficult to work out. A quick thought I will consider more carefully later: could additionality as a binary concept (all emission reductions will be eligible for CERs if the project wouldn't happen without them) be replaced with a sliding scale in which a project is only eligible for a number of CERs that would push it above the line?
2. Is awarding CERs for this kind of activity encouraging more factories to open, just so they can clean up the pollution? The CDM has responded to this by saying that only old factories will be awarded CERs. The difficulty is the same - in theory it makes sense but it's just too difficult to establish whether pollution is new or old.

http://www.katoombagroup.org/~katoomba/event_details.php?id=20

The service is designed for offsetting unavoidable parts of our customers' carbon footprints. It's fundamentally different to existing carbon offsetting services in that we don't fund projects. We think it's a great idea because it can give a very high level of confidence in the emission reduction.

Do have a look round the site and if you have any comments, let me know by email (inbalance dot blog at gmail dot com) or in the comment section to this post.

This early release of materials provides information related to the auction schedule, the eligibility criteria for bidders, the auction format, and procedures for how potential bidders can become qualified to participate and indicate their intent to bid. Included in these materials is a detailed description of the information that will be included in the formal auction notice, scheduled to be released on July 24, the official start of the 60-day pre-auction process.

All materials are available through

http://www.rggi.org

Read the Regional Greenhouse Gas Initiative, Inc. (RGGI, Inc.) press release at http://www.rggi.org/ro.htm#press

The auction materials are available at

http://www.rggi.org/auctions

http://www.bayjournal.com/article.cfm?article=3376

CIG Project Description

Last week I complained because we did not get a USDA Conservation Innovation Grant. USDA NRCS developed a program for Rapid Watershed Assessments - simple methodologies to assess conservation priorities and relate those priorities to the cost of the improvements. It offers a wonderful framework to incorporate ecosystem service evaluation, look at externalized costs, and develop methods to measure conservation improvements enabling farmers to incorporate other revenue streams from nutrient management, forest management, etc.

I've inserted above our Project Summary and Project Description. I want to find a source of funding to do this work. I believe NRCS staff wants, and would benefit from, these tools.

Indeed, so pervasively institutionalised have the values of neoliberalism become that it almost seems a throwback to the 1990s even to write about it critically, at least in the New Zealand context that is most familiar to me. Here, as elsewhere, both the dominant political parties – Labour (nominally social democratic) and National (conservative) – support a neoliberal agenda, and all that it entails, in what amounts to a tacit ‘grand coalition’ in a number of policy areas.

In this article I look at the impact of neoliberalism on the environment through both the roll-back of the state and the roll-out of neoliberal policies, taking some examples from recent New Zealand experience.

The roll-back of the state 

McCarthy and Prudham describe the motivation for the ‘roll-back’ of the state as an "antagonism toward state ‘interference’ (ie regulation)". This antagonism is seen in "deep cuts to state fiscal and administrative resources and functions" that were previously "aimed at curbing socially and environmentally destructive effects of capitalist production" (p.276). The most familiar examples in terms of social policy are the cuts to welfare provision and benefits instigated around the western world in the 1980s and 1990s.

‘Roll-back’ is also seen in a deliberate fragmentation of regulatory systems: a shift to "neocorporatist regulatory frameworks involving non-binding standards and rules" (p.276) controlled by unelected interested parties such as industry associations and leading ultimately to the essentially neoliberal idea of ‘corporate social responsibility’. McCarthy and Prudham also explain how this fragmentation is further created through the "devolution of regulatory responsibilities to local levels of government without proportional transfers of power or capacity" along with the shift of other regulatory responsibilities ‘upwards’ to "international institutions with little to no transparency or accountability" (p.276).

This particular mode of neoliberalism has a very strong resonance in New Zealand. One aspect of fragmentation by devolution can be seen in environmental regulation, which is largely put into effect by 17 regional and district councils. Some regional councils, for example, the Auckland Regional Council (ARC), have a large population (1.3 million people in the ARC’s case) and the sizeable income that goes with it. As a consequence, the ARC is able to support a significant team of people working in environmental monitoring, regulation and control. The district councils are minute in comparison, typified by the Marlborough District Council which serves 40,000 people and therefore has a fraction of the resources and capacity to handle the same environmental responsibilities as the ARC.

The tiny size of such councils is completely out of proportion to the scale of the problems they are supposed to manage (see this story from the Marlborough Express for an example). One might say that the small, relatively poorly-resourced councils are set up to fail on environmental issues – and some of them certainly are failing badly. Green co-leader Russel Norman has catalogued the dreadful state of New Zealand’s lowland rivers and reported on the unfenced streams and rivers being freely polluted by cattle.

Alongside this devolution of responsibility, we see power and control being shifted upwards and entirely out of local hands. One good example of this is Food Standards Australia New Zealand, a unified agency operating the food regulatory system in both countries. In this agency, New Zealand is accorded the same status and voting rights as an Australian state. The ministerial council of FSANZ is chaired by the Australian Federal Minister, which means New Zealand’s interests are represented by just one vote out of nine.

Loss of local control is also manifest in the great sovereignty sell-off known as the ‘free trade agreement’ (FTA). New Zealand has been a big fan of these deals for some time and, in April 2008, signed an FTA with China. New Zealand Trade Minister Phil Goff described the agreement as "historic" and "hugely important strategically." While there was some political criticism, the media followed the government’s lead, with the New Zealand Listener hardly able to restrain itself as it gushed about the business opportunities now available in China as a "once in a generation road to riches" for Kiwis.

The environmental sting in these FTAs is found in the protection from ‘expropriation’ afforded to transnational corporations. Under the FTA, any environmental regulations or resource use consent requirements which affect such a corporation must be ‘reasonable’ – but not as determined by the people of New Zealand or their elected representatives. The reasonableness (or otherwise) is decided by a panel of three arbitrators, one of whom is appointed by the corporation concerned. Any regulations or requirements deemed ‘unreasonable’ would be an ‘expropriation’ under the FTA rules (in other words, what is seen from a neoliberal standpoint as an illegal imposition on private property rights known as ‘regulatory taking’). Compensation is payable for any such ‘expropriation’.

This is not just a fear of what might happen. James McCarthy has described how Metalclad Corporation was refused municipal permits for the expansion of a waste disposal facility it had purchased in Guadalcazar, Mexico. The company sought arbitration under the investment protection rules of the North American FTA (NAFTA) and was awarded US$16.7 million on the basis of the arbitration tribunal’s own interpretations of domestic Mexican law.

It’s interesting to note that the investment protection provisions of the China-New Zealand FTA (Chapter 11 – Investment) look very much like those in the notorious and ill-fated MAI (IV – Investment Protection). While the MAI attracted huge opposition from anti-globalisation activists, unions, indigenous peoples and greens around the world in the late 1990s, now the bilateral FTAs accumulate around the world with hardly a street protest, and the piecemeal MAI arrives by stealth.

The roll-out of neoliberalism

The ‘roll-back’ of the state that I’ve described so far is accompanied by the ‘roll-out’ of neoliberalism – the familiar "near worship of … the ‘self regulating market’ … as the mechanism for allocating all goods and services." This dogma leads to "privatization via putatively market-based schemes" along with a "deeply contradictory endorsement of excludable, private property rights and commodification created and defended by the state" (p.276). Neoliberal ideas about environmental policy are found, for example, in ‘ecosystem markets’ and also in the carbon market, which I focus on here.

In current debates on the ways to address global warming, it seems to be assumed that a market system is the only possible mechanism available to regulate CO2 and other greenhouse gas emissions. To appreciate the fallacy in this thinking, it is worth noting how the idea of tradeable permits came to be the conventional wisdom of emissions reduction. In Carbon trading: A critical conversation (at p. 51), Larry Lohmann describes how, during the Kyoto meetings in 1997, the Brasilian delegation proposed a system whereby fines imposed on countries exceeding their emission cap would be used to fund ‘clean energy’ developments in the South. This proposal was accepted in principle by the ‘G-77 plus China’ group of developing nations. However, after a few days of intensive negotiations, ‘fines’ had become ‘prices’ and a ‘judicial system’ had become a ‘market’, in line with what the US wanted. The dominance of US power, the desire of other nations to keep the US on board, and the pressure applied by corporations drove the agenda in this direction throughout.

As most readers will realise, all this is deeply ironic because the US has never ratified the Kyoto Protocol, having formally withdrawn from it in 2001. Nevertheless, the attachment to the idea of an emission permit/trading system remains, promoted (by governments, political parties, policy wonks, international agencies and even many NGOs too) as the best way to tackle climate change – regardless of the accumulating evidence to the contrary.

Conclusion: challenge the conventional wisdom of neoliberalism

Naomi Klein has written with terrifying clarity about the Shock Doctrine origins of neoliberalism. It may well be true that we still live with the shock waves generated by the neoliberal blitzkrieg of the past two decades. It is certainly true that neoliberal thinking has become the conventional political wisdom in that short time, its pervasive assumptions internalised and now unquestioned even in some supposedly radical circles. But we can and must recover from this shock, and challenge the neoliberal worldview that dominates governments and institutions.

Let us reject the commodification of nature and the fetishisation of competitive markets. These are not the solutions to the ecological crisis that we face.

Sources

James McCarthy (2004) Privatizing conditions of production: trade agreements as neoliberal environmental governance. Geoforum, 35, 327-341.

James McCarthy & Scott Prudham (2004) Neoliberal nature and the nature of neoliberalism. Geoforum, 35, 275-283.

(Carbon Trade Exchange) www.carbontradexchange.com - Barclays Bank PLC announced today the launch of the iPath^® Global Carbon Exchange Traded Note (ETN) on the NYSE Arca stock exchange. It is the first iPath^® ETN to offer investors exposure to the global price of carbon. Barclays, a leading intermediary in the environmental markets, is launching this investment vehicle to meet the needs of investors’ growing appetite for exposure to Greenhouse Gas prices.

For more information please click here >>

IDEACarbon yesterday launched the Carbon Ratings Agency to help investors separate investment grade and sub-prime projects. It will award instruments backed by pre-issue projects with grades from AAA to D. AAA means that it is highly likely a project will deliver its promised emission reductions and be awarded carbon reduction credits (primarily CERs, but also voluntary offsets).

Carbon Rating Agency may make allocation of capital in carbon markets more efficient and reduce volatility in CER prices (an event like the Ecosecurities crash causes sudden supply concerns). The important thing to remember is that it will not address environmental concerns – particularly around additionality – within the CDM and other offset quality regimes. It assesses the risk of a projects successfully getting through the regimes.

And on what basis should investors trust the ratings? CERs are not a tested product and no-one really knows where the CDM is going long term. Plus – look where our AAA-rated mortgage backed securities ended up.

We don't need a War on Carbon. We need a new prosperity that can be shared by all while still respecting a multitude of ecological limits - not just atmospheric gas concentrations, but topsoil depth, water supplies, toxic chemical concentrations, and the health of ecosystems, including the diversity of life they depend upon.

We can build a future in which technology, design, smart incentives, and wise policies make it possible to deliver a high quality of life at lower ecological cost. But that brighter, greener future is attainable only if we embrace the problems we face in all their complexity.

I've been encouraged by the growth of the carbon market...and the potential of those markets to remediate greenhouse gases. But I also realize from our own research and development that we are better off to solve our environmental problems in an integrated and adaptive manner...not being too 'simple' in markets designed to solve complex problems. Both in scale and extent, we had tended to be overly general. It has also been difficult to bring capital to complex solutions because, by their sheer complexity, they hold significant risk.

They are very interesting! Think "scale' as a major factor. From their Introduction:

The Regional Greenhouse Gas Initiative (RGGI) is a cap-and-trade system designed to limit the emissions of greenhouse gases (GHGs) from electricity generation in 10 northeastern states starting in 2009. Power plants seeking to meet their RGGI obligations have the option to offset a portion of their emissions (up to 3.3%) through projects that reduce emissions or sequester carbon in other sectors (such as the forestry sector).The Maine Forest Service and its partners, Environment Northeast (ENE), Manomet Center for Conservation Sciences, and the Maine Department of Environmental Protection, have been asked by the RGGI Staff Working Group to propose recommendations for possibly expanding forest carbon offset project types in RGGI. This document represents a brief summary of our recommendations at this time. As we have worked to develop these recommendations, it became apparent to us that projects under a cap-and-trade program cannot address all that is needed to capitalize on the full potential forests have to reduce atmospheric GHGs; therefore, we recommend a two-pronged strategy which goes beyond these recommendations for expanding the range of carbon offset projects which are eligible. The second prong is to support programs which help keep forests as forests and maintain current management because these efforts too benefit carbon storage even though they cannot meet RGGIs requirements for offsets.

Addressing an industry conference in New York on Wednesday, Bart Chilton, one of five commissioners on the US Commodity Futures Trading Commission, said if a cap on greenhouse gas emissions were to be set in 2009 at just below 6 billion tonnes of CO2 equivalent, and assuming a $35 allowance price, the cash market value for US carbon emissions would be $200 billion.

Point Carbon >>

Copenhagen Consensus Link

(Carbon Trade Exchange) www.carbontradexchange.com - CNX Gas announced today it has registered 8.4 million metric tons of emission offsets for trading on the CCX, a legally binding greenhouse gas reduction and trading exchange for emission sources and offset projects. CNX Gas’ offsets arose out of CNX Gas’ coalbed methane capture project in Buchanan County, Virginia, for the years 2003 through September 2007.   Additional offsets are expected to be generated in the future.

Click here for more information >>

An Indian company that has set up a biomass generator that runs on rice husks.

World Service: “The carbon credits, then, were they important for your decision to go ahead with the project?”

Interviewee: “Not really, basically. Six months after starting the project we applied for the CDM.”

WS: “So this is a project you would have done anyway, but now the numbers are a just a little bit more favourable?”

I: “Yes, the numbers are more favourable”

WS: “So you would have done it anyway”

I: “Yes”

WS: “So if the authorities at the CDM are silly enough to give you a million dollars extra for it, you’ll take the money?”

I: “Why not.”

Or a spokesman for SRF, an Indian company eligible for 3.8m CERs per year from HFC destruction,

Interviewee: “We were already sensitised to the greenhouse effect of HFC23 and the board gave us approval [to destroy the gas] irrespective of the ratification status of the Kyoto Protocol."

World Service: “This is something you might well have done anyway?”

I: “Yes, we would have done it anyway."

WS: “You would have done it anyway, even if the CDM scheme hadn’t been set up."

I: “That’s right."

It was a vast and daunting amount of information and opinion. John Holdren of the Woods Hole Research Center opened the meeting with an overview of the current science and economics. He's a wonderful data presenter...and the news was bleak (I'll put up his presentation when it becomes available). There were numerous insights both from his science and from other comments though the two days. For example, there are respected scientific analyst who see Lake Meade drying up before two decades....ironically I glance at the Soutwest Airline magazine on the flight to Providence and notice three enormous casino/resort development projects going up in Las Vegas...where have they been getting their environmental and economic advice?

Many of the significant early developers of carbon finance were present, and their thoughts were interesting...although the scale of the financing is troublingly large given the newness of the methodologies for credit creation, verification, and monitoring.

I spent a good bit of time collecting information on new efforts, pilots, and tool development....and tried to push folks along to provide more finance for those efforts.

As the presentations from the conference become available I'll have more to say.

Getting carbon credits issued by the UN’s clean development mechanism (CDM) executive board (EB) is taking longer, adding to concerns that supply of credits will be less-than-expected by the end of 2012.

The benchmark contract for December delivery of E.U. allowances hit €27.54 ($42.83) on Friday, according to Carbon Positive, a carbon offset management company. That price came on top of a 5 percent increase on Thursday. Traders attribute the rise to the skyrocketing price of oil, which jumped $10.75 on Friday and at one point reached $139 per barrel.

In the past fourth months, carbon contracts have risen 40 percent, according to Carbon Positive.

Offset prices plunged after the first phase of the E.U. emissions transmission scheme flooded the market, and dropped again in February after economic uncertainty led some to predict decreased future demand for energy.

A contracting supply of certified emission reductions is also boosting prices, as many projects eligible for emissions reductions investment were eliminated in China's Sichuan province earthquake on May 12. Audits have eliminated some other projects, declaring them to be of dubious environmental benefit (Leigh Phillips, Business Week, June 10).

http://www.eenews.net/climatewire/2008/06/12/8