Centerpiece

Climate-policy changes awaited from Obama

Peru

Barack Obama’s election as president of the United States has sparked optimism that U.S. climate policy will change dramatically, engaging the world and making developing regions such as Latin America part of the solution.

Obama has called for a cap and trade system to reduce emissions to 80% below 1990 levels by 2050. He also has pledged that the United States will “re-engage” in international climate negotiations, stipulating that those talks must also include high-emission developing countries, such as China and Brazil.

He “sees this as an opportunity to rebuild American credibility in the international sphere, but also sees that approaching global warming requires solutions, and engaging more constructively in that process helps deliver a much better solution,” says Jake Schmidt, international climate policy director for the Natural Resources Defense Council (NRDC), a leading U.S. green group based in Washington, D.C.

Reviews of Obama’s emphasis on cap-and-trade vary, however, with some experts questioning whether market mechanisms are the best way to reduce emissions, others insisting they are virtually the only way and still others viewing them as one ingredient among many.

“While carbon trading is already becoming part of the response to climate change, it is not a silver bullet,” says Jacob Scherr, director of the NRDC’s international program. “It’s part of silver buckshot—it has to be [one] of many, many measures.”

Carbon-market schemes aim to allow industrialized countries to offset their own greenhouse gas emissions in part by investing in emission-reducing projects in developing countries.

The largest and best-known means is the Kyoto Protocol’s Clean Development Mechanism (CDM), but other carbon exchanges have been developed in the United States, Canada and Europe, some of them begun by green groups.

With a cap-and-trade system like the one in Obama’s platform, major U.S. polluters would have to reduce emissions below a certain threshold. Obama has not spelled out his plan in detail. But Thomas Black-Arbeláez, executive director of the Andean Center for Economics in the Environment, a think tank in Bogotá, Colombia, hopes companies in the U.S. energy, manufacturing and transport sectors would be allowed to “import” credits from developing countries, where emissions-reduction costs are lower. That, he says, would help keep them from losing their competitive edge as they cut emissions.

Worldwide sales of so-called certified emission reductions (CERs), equal to one ton of carbon each, totaled $18 billion in 2007 under the CDM, according to the UN Environment Program. There are currently more than 3,500 CDM projects in the development pipeline, including nearly 740 in Latin America.

The CDM system was based on offset trading designed to curb sulfur dioxide emissions, which has been relatively successful in the United States. Critics, however, say the model used to reduce one pollutant from a limited sector is too simple to handle multiple greenhouse gases from a vast array of sources.

The market mechanism, they say, puts too much money into traders’ pockets, making it more costly than simply taxing carbon emissions, and is prone to fraud in the calculation of a project’s potential emissions reductions. Above all, they argue, allowing greenhouse gas emitters to invest in projects in developing countries without significantly reducing their own emissions does little to slow the rate of worldwide climate change.

Even some of the CDM’s boosters see flaws in the process. Among them is Mary Gómez, director of the Latin America carbon program for the Andean Development Corporation, a development agency linked to the Andean Community, which has about 30 projects at various stages in the CDM pipeline. Gómez says the system is hampered by the sluggishness of an approval process that can take up to two years. If measures are not taken to expedite approval, she says, “the system will collapse.”

But Black-Arbeláez doesn’t forecast aggressive streamlining anytime soon. He notes the lengthy approval process is the result of auditing controls established under pressure from environmental advocates intent on ensuring that emissions reductions are genuine.

Uncertainty about the trading system’s future also is a hindrance. No one is sure what will emerge from post-Kyoto negotiations, and much will hinge on the stance taken by the new U.S. administration, Gómez says.

Carbon-offset prices also have disappointed. Early estimates called for prices of $85 a ton, but prices have run at $10 to $30 a ton.

Eduardo Calvo, a Peruvian scientist who is vice chairman of the mitigation commission of the Intergovernmental Panel on Climate Change (IPCC), acknowledges that the CDM has helped shift emissions-control technology to developing countries, but says it has allowed industrialized nations to grab the low-hanging fruit by investing in offsets rather than forcing emission reductions in key sectors such as transportation.

“If we don’t aim for reduction in the most important places, we’re just buying time,” Calvo says.

Patrick McCully, executive director of the California-based nonprofit group International Rivers, is blunter in his criticism of offsets: “We need to reduce emissions really fast and really dramatically, and we’re not going to do that if we reduce emissions, say, in Peru, but allow emissions to stay the same in Europe.”

Calvo and other experts acknowledge that the CDM has prompted some innovation, such as methane capture from landfills. But even that is a relative gain, according to Jorge Zegarra, general manager of Petramas, the Peruvian company that owns the Huaycoloro landfill on the eastern edge of Lima, which receives 3,000 metric tons of waste a day.

After studying methane-capture projects in other countries, Zegarra had one designed for Huaycoloro, which was approved in March 2007. Consultants calculated that the project would generate 200,000 CERs, he says, but in fact the reduction has been about half that amount.

The rate of methane production in a landfill depends on such factors as temperature and humidity, as well as how well the landfill was built initially. In some cases, Zegarra says, testing shows that most of the methane has already escaped from a landfill because of poor design, making carbon credits moot.

The original plan called for a second phase to generate electricity from the methane, but Zegarra is not sure it will be cost-effective. The methane is currently burned off.

Says McCully: “Landfill projects as a whole have badly under-performed. There are generally a lot less emission reductions than were projected.”

Nevertheless, McCully adds, “because methane is such a potent greenhouse gas, you get a lot more credits for destroying a ton of methane than a ton of CO2. So that makes landfill projects viable.”

Methane projects make up about 18% of the total number of CDM offsets.

More questionable, in McCully’s view, are hydroelectric projects, which make up 17% and are the most common energy projects. One of the major problems is guaranteeing “additionality,” that the project would not have been economically feasible—and, thus, the emissions reductions would not have taken place—without the CDM investment incentive.

Developing countries with the most CDM projects in the pipeline—China, with about 34%, India with 28% and Brazil with 9%—are also fast-growing, energy-hungry economies. Even in Peru—where about half the CERs in the relatively modest portfolio of 15 million tons of carbon per year come from hydroelectric projects, the economy is growing by more than 7% annually and energy demand outpaces supply—some observers say it is difficult to believe that new hydroelectric plants would not be built without CDM support.

Julia Justo of the National Environment Fund (Fonam) argues that the hydroelectric plants reduce the demand for natural gas. But government officials continue to promote gas from Peru’s southern Camisea gas fields and are planning to expand the pipeline system, which currently is too small to meet demand.

“None or very few of [CDM] hydropower projects are actually additional, especially the bigger ones,” McCully says. The CDM funds, he adds, just make them more attractive.

Black-Arbeláez disagrees.

“Ninety-nine percent of those projects are fully additional,” he says. “They represent real emissions reductions.” With UN auditors, national inspectors and local stakeholder input required for verification, he says, “there has not been a more rigidly reviewed and audited program in environment in the history of the planet.”

Hydroelectric projects have come under closer scrutiny amid concern about greenhouse-gas emissions from decaying organic matter in dam reservoirs. Some researchers who have studied big hydropower plants in Brazil assert such emissions can amount to more than those that would come from a fossil-fuel plant producing the same amount of electricity.

Critics such as McCully acknowledge, however, that some allowances are now being made for greenhouse emissions from reservoirs. Still, McCully would like to see the carbon-offset system scrapped. Instead, he recommends “strong” mandatory targets for high-emission countries, and promotion of clean technology in Latin America.

Says McCully: “[The CDM system] is not supporting the new approaches to energy we need if we’re going to de-carbonize our economies at the rate at which we need to do it.”

But Black-Arbeláez argues carbon markets are the best way to generate the funds needed as incentives for Latin American countries to reduce emissions and implement such alternatives as solar, wind and geothermal.

Among the many unanswered questions for Latin America and other developing regions is whether the system that supplants the Kyoto Protocol, which expires in 2012, will include credits for avoided deforestation.

Developing countries, particularly those with tropical forests, lobbied for such a provision at last year’s international climate conference in Bali. But there are obstacles, including calculation of the amount of carbon sequestered, ensuring adequate protection of the forests and monitoring.

Scherr hopes new U.S. policies will nudge tropical countries to tighten enforcement and reduce illegal logging. Nevertheless, he adds: “There are real concerns about the speed at which you could create markets for forest carbon, especially in tropical countries,” with some people estimating that it would take “at least a decade to create credits for avoided deforestation that would be credible.”

Still, rules for forest-based credits are being drafted, and Black-Arbeláez believes they could be ready within two or three years.

“I would hope that the United States would allow not only the importation of validated, verified emissions reductions credits from energy projects, but also that they would allow the importation of forestry credits,” he says. “If that happens, we’re going to see a lot of activity in protecting standing forests and promoting reforestation.”

Like early emissions-trading schemes, a plan for avoided-deforestation credits will require adjustment, Black-Arbeláez and others say. “We’re probably going to put in a system that’s going to be imperfect,” Black-Arbeláez forecasts, “but it’s going to be better than simply letting the forest go up in smoke.”

Whatever form U.S. and world climate policies take post-Kyoto, developing regions will likely be called on to boost greenhouse-gas reduction efforts. Most eyes are on giants China and India, but Osvaldo Canziani of Argentina, former co-president of the IPCC, believes Latin America will warrant attention, too, as its energy demand grows.

What is needed, Canziani says, is a “consensus that we all must reduce the use of energy, not just developed countries, but also developing countries.”

Refrain in region’s advice for Obama: move quickly to fight global warming

“On a global level, the most important issue is climate change. Obama must not wait until [the U.S.] can join the Kyoto Protocol because there is not time. We should expect him to honor his positions and commit the United States to a radical emissions-reduction goal for the year 2050. In this way, the United States would join the international community for the benefit of all.” — Raúl Estrada Oyuela, former Argentine Foreign Ministry official who presided over the world conference that produced the Kyoto Protocol

“The U.S. needs to stop consuming so much oil. They need to re-think how much energy they consume and what kinds, especially in the context of global warming.” — Patricia Molina, executive director of La Paz-based green group Bolivian Forum on Environment and Development

“It is hoped that strengthened leadership of the United States will translate into an ambitious target to reduce emissions in the country that emits the most greenhouse gases in the world. It is also hoped there will be financial and political support for the establishment of a world fund against climate change like the one proposed by President Felipe Calderón.” — Fernando Morales, spokesman for the Mexican Environment and Natural Resources Secretariat (Semarnat)

“The United States and China are the greatest emitters of greenhouse gases, so the U.S. agreeing to reduce greenhouse emissions in any post-Kyoto accord and complying with that pledge would reduce global warming. Because of global warming, [drier weather and] spontaneous forest fires are increasing in the Amazon. If this trend continues, it could one day turn large parts of the Amazon into African-like savannah.” —Bazileu Alves Margarido, former president of Ibama, enforcement arm of Brazil’s Environment Ministry

“The environmental sectors of the world have been missing the leadership of the United States for eight years. We need President Obama to lead the effort to arrive at real solutions post-Kyoto. We need Obama to think about the rest of the Americans, those in the center and south of this great continent that is our common ground.”

- Barbara Fraser

Contacts
Thomas Black-Arbeláez
Andean Center for Economics in the Environment (Caema)
Bogotá, Colombia
Tel: +(571) 341-3477
Email: thomas.black.a@gmail.com
Eduardo Calvo
IPCC Mitigation Commission
Lima, Peru
Tel: +(511) 9-9321-6315
Email: e13calvo@gmail.com
Osvaldo Canziani
Former Co-president
International Panel on Climate Change (IPCC)
Buenos Aires, Argentina
Tel: +(54 11) 4831-8862
Email: ocanz@ciudad.com.ar
Mary Gómez
Andean Development Corporation
Caracas, Venezuela
Tel: +(58 212) 209-2473
Email: mtorres@caf.com
Julia Justo Soto
Fonam
Lima, Peru
Tel: +(511) 449-6200
Email: jjusto@fonamperu.org
Jacob Scherr
International Program Director
Natural Resources Defense Council
Washington, D.C., United States
Tel: (202) 289-6868
Email: jscherr@nrdc.org
Jake Schmidt
Natural Resources Defense Council
Washington, D.C., United States
Tel: (202) 289-6868
Email: jschmidt@nrdc.org
Jorge Zegarra
Petramas
Lima, Peru
Tel: +(511) 271-6337
Email: jzegarra@petramas.com