Halla Sansaar (हल्ला संसार)

Environment and Economy :: Money grows on trees

RAJESH SIGDEL   On Ekantipur,
NOV 28 -

According to the Kyoto Protocol’s Clean Development Mechanism (CDM), Nepal receives $500,000 a year from carbon trade. This money is an incentive received for contributing to the reduction of carbon dioxide emissions while playing a significant role in mitigating the serious anthropogenic effects of climate change, for which carbon dioxide is a major contributor.

What is carbon trade?

Emission trading is when revenue is provided by developed countries to underdeveloped and developing nations to reduce the amount of carbon dioxide in the atmosphere by growing forests and engaging in activities that limit the emission of more pollutants into the air. Carbon trade is the buying and selling of carbon credits between nations to reduce emissions of carbon dioxide. It also allows individual companies to sell unused credits to organisations that emit more carbon dioxide, ensuring that the companies, in aggregate, do not exceed the national cap. One carbon credit is equivalent to one metric tonne of carbon dioxide. Carbon credits are then assigned a monetary value, similar to the commodity market where prices are fixed according to supply and demand. Countries or companies that emit more carbon dioxide buy rights to burn carbon from countries/companies that reduce carbon in the atmosphere and whose credits are lower than the cap level.

Carbon trade emerged post-Kyoto Protocol in 1997. The Protocol binds the European Union (EU) and other industrialised countries to reduce their carbon dioxide emissions to five percent below 1990 levels between 2008 and 2012. The US in particular did not ratify the protocol and China and India are not obligated to reduce their emissions under the current Kyoto protocol.

China was the leading emitter of carbon dioxide in 2011 due to its use of coal-based energy, followed by the US and India. However, China does not top the list of countries for greenhouse gas emissions per capita. The US government has been pressurising the Chinese government to reduce emissions but China has not relented, stating that carbon reduction should be done on the basis of per capita and not per country. Its argument is that every human is equal, whether they are from the US or China.

Climate Care and Future Forest are two leading companies that sell carbon credits and provide environmental services. Carbon trade was widespread till 2007 but due to the global economic recession, the market started to decline. The World Bank is trying to keep the carbon trade alive but converting intangible resources into tangible assets is a difficult task.

Pros and cons

The beauty of carbon trade as outlined in the Kyoto Protocol is that it promotes sustainable development via the provision of financial incentives to least developed countries, which aids in the mutual development of all nations. At present, it is an inclusive method of mitigating carbon dioxide emissions, as completely halting the production of greenhouse gases is not possible.

However, some critics argue that carbon trade is not a real solution to climate change. It is simply an environmental service. Burning coal first and then paying money for the carbon clean up through forests or funding other companies to reduce emissions does not encourage the switch to clean energy like hydropower, solar energy or wind mills. One piece of goods news is that US President Barack Obama has said that he would evaluate the construction of the Keystone XL pipeline, which will carry oil from Canada to the Gulf Coast of Texas, on the basis of its carbon dioxide emissions.

Climate change and Nepal

Nepal’s Climate Change Policy 2011 states that the country is only responsible for 0.025 percent of carbon emission in the world. Despite this low share in emissions, it stands to be disproportionately affected by climate change. As such, millions of Nepalis are vulnerable to glacier lake outbursts, floods, droughts, intense rainfall and changing weather patterns. Experts have précised that Himalayan glaciers are melting at an accelerated pace due to the deposit of black carbon on the Tibetan plateau. The US government has also warned that faster melting has close links to the incomplete combustion of carbon from major Indian and Chinese cities. Given these facts, Nepal, which is most at risk, would do well to embark on a challenging trilateral diplomatic initiative with regard to threat posed to mountain lives.

Nepal ratified the Kyoto Protocol on September 16, 2005. Prior to the Copenhagen Convention in 2009, a Cabinet meeting held at Kalapatthar (the base of Mt Everest) declared climate change as a national agenda and adopted a 10-point declaration. The meeting was expected to send a message to the international community that the preservation of the earth from climate change is the responsibility of all. Nepal has also recognised carbon trade as a major policy to mitigate the impact of climate change.

The CDM has established a network to provide allowances to each country to make it easier for any company wanting to reduce their carbon footprint. In Nepal, the Ministry of Environment (MoE) provides the necessary no-obligation letter but overhead expenses while applying for funding are too high, discouraging many private organisations. However, organisations like Ace Development Bank and Wind Power Nepal have started buying carbon credits from Nepal’s numerous community forests, which is a commendable practice that will help promote the carbon market.

The third world is rich in forest resources and can benefit financially from carbon trade. However, as experts have pointed out, the real solution to climate change is not carbon trade but the reduction of consumption and a switch to clean energy. For the short term, carbon trade can be helpful in addressing climate change to a certain extent while encouraging developing and least developed countries to invest in clean energies and pursue clean development.

Tags: Economy , Environment