Car­bon mar­ket re­mains a walk in the dark

The Weekend Australian - Travel - - News -

HE Man­hat­tan of­fices of Eco Se­cu­ri­ties were eerily empty last Thurs­day morn­ing. Over the rows of un­oc­cu­pied desks, two men could be seen peer­ing out of the 19th-floor win­dows — a sight that might have aroused con­cern con­sid­er­ing the com­pany has been in the head­lines re­cently for its plung­ing share price.

In his cor­ner of­fice Bruce Usher, the Lon­don-listed firm’s chief ex­ec­u­tive, was quick to ex­plain noth­ing un­to­ward was about to hap­pen. The staff mem­bers were look­ing for a hawk that had taken to perch­ing on the floor above. The rest of his crew were off for the day to take part in Green Week — an an­nual eco-aware­ness jam­boree — and were gath­er­ing bot­tles for re­cy­cling.

Usu­ally, Eco Se­cu­ri­ties staff are em­ployed at the van­guard of an­other so­lu­tion to the global eco­log­i­cal cri­sis — the com­pany is the largest trader of car­bon cred­its, a sys­tem es­tab­lished un­der the Ky­oto pro­to­col which aims to en­cour­age free-mar­ket so­lu­tions.

Global warm­ing is by def­i­ni­tion a global prob­lem, and Ky­oto es­tab­lished the Clean De­vel­op­ment Sys­tem (CDM), a mar­ket for trade­able cred­its that west­ern com­pa­nies can buy to meet their pol­lu­tion re­quire­ments. Th­ese are then used to fi­nance green schemes in the de­vel­op­ing world.

The world is mak­ing ever more hot air. Trade in green­house gases, worth about 40 bil­lion euros last year ($A77 bil­lion), is ex­pected to in­crease to 63 bil­lion euros next year ac­cord­ing to Point Car­bon, a mar­ket an­a­lyst. Most trad­ing is done in Lon­don.

But while the prin­ci­ple of the CDM has taken off, polic­ing the mar­ket has proved tricky and time con­sum­ing for the mar­ket’s un­der-re­sourced watch­dog, the United Na­tions. Mean­while, Eco Se­cu­ri­ties and the rest of the in­dus­try have been hit by an ev­er­shift­ing maze of in­ter­na­tional leg­is­la­tion and byzan­tine dis­cus­sions on the next stage of the world’s re­sponse to global warm­ing.

‘‘ There’s a lot of mis­un­der­stand­ing about what is hap­pen­ing and it’s very frus­trat­ing,’’ said Usher. De­spite this, he stresses that the CDM works and cal­cu­lates that by 2012 the scheme will have re­duced emis­sions of car­bon diox­ide by be­tween one and two bil­lion tonnes.

‘‘ The prob­lem is that we are emit­ting 20 bil­lion tonnes of car­bon diox­ide a year. So in the next five years we are go­ing to emit an­other 100 bil­lion tonnes. CDM works, but it’s just not enough,’’ he said.

Most of Usher’s prob­lems now cen­tre on the ap­proval of schemes. The UN ap­points lo­cal in­spec­tors, com­pa­nies known as des­ig­nated op­er­a­tion en­ti­ties, to sign off on the wor­thi­ness of green schemes.

But the au­di­tors are so over­loaded with schemes, that Usher said: ‘‘ You lit­er­ally can­not book their time. We are hav­ing to book des­ig­nated op­er­a­tion en­ti­ties a year in ad­vance. They are all over ca­pac­ity.

‘‘ There are about 2,000 projects — we have 400 — and there only a few of th­ese com­pa­nies. They sim­ply don’t have the abil­ity to deal with all th­ese projects quickly,’’ he said.

This wouldn’t be a big prob­lem if Eco Se­cu­ri­ties wasn’t fac­ing such tight dead­lines. The cred­its, like the Ky­oto pro­to­col it­self, ex­pire in 2012.

At present, those cred­its are val­ued to 2012 be­cause no­body knows what will hap­pen af­ter Ky­oto ex­pires. Cred­its are given only once a project is reg­is­tered, so a one-year de­lay is a 20 per cent re­duc­tion in the value of that credit. ‘‘ That is the big­gest chal­lenge we face,’’ said Usher.

Guy Turner, an­a­lyst at New Car­bon Fi­nance, says that in the long run vig­or­ous scru­tiny from the UN is a good thing.

‘‘ It used to be a bit of a black art get­ting a project through,’’ he said. ‘‘ Now it’s much clearer what has to be done. The con­cerns are about the time it is tak­ing, but the ac­tual re­jec­tion rate is very low. The last thing the UN wants is for this scheme to fail.’’

Usher said: ‘‘ The sys­tem needs to be adopted not for a few thou­sand projects but ul­ti­mately for mil­lions of projects. There is a will to do that and there are ways to do that.

‘‘ There is huge learn­ing go­ing on here. It’s very frus­trat­ing when the crit­i­cism of the mar­ket is so neg­a­tive.

‘‘ We all know that global warm­ing is some­thing that is go­ing to be around for the rest of our life­times and our chil­dren’s life­times. There is no way we are go­ing to come up with a per­fect sys­tem in five years. But you have to build on what you have.’’

But even if the ap­proval process is sorted out, real ques­tions sur­round what hap­pens af­ter the Ky­oto pro­to­col ex­pires.

Ne­go­ti­a­tions to re­place the treaty be­gan in Bali last De­cem­ber and are ex­pected to cul­mi­nate late next year. It’s a tight timetable and the key na­tions are di­vided. If the talks fail, the mar­ket’s fu­ture may be cur­tailed.

The world’s gov­ern­ments meet again in Poz­nan, Poland, in De­cem­ber. Amer­ica and Aus­tralia have been among the big­gest coun­tries to hold out against the treaty, but Aus­tralia has now signed up and in Amer­ica all three pres­i­den­tial can­di­dates are far greener than Ge­orge Bush. If Amer­ica fi­nally signs up to the idea of car­bon cred­its, com­pa­nies such as Eco Se­cu­ri­ties could sud­denly find their for­tunes ris­ing sharply.

Amer­ica al­ready has a do­mes­tic trad­ing sys­tem for sul­phur diox­ide (the main com­po­nent of acid rain) and an­a­lysts say it could be used as a model for a car­bon credit mar­ket.

But the un­cer­tainty over the CDM looks set to con­tinue even af­ter Poz­nan, says Turner. Ul­ti­mately, gov­ern­ments may even de­cide that the CDM is not the best way of curb­ing the world’s car­bon prob­lems, he says.

‘‘ The car­bon credit mar­ket’s prob­lem is that it af­fects the whole world, and is there­fore sub­ject to the very dif­fer­ent po­lit­i­cal and eco­nomic needs of all those dif­fer­ent coun­tries. It’s not for the faint-hearted.’’ The Sun­day Times

Newspapers in English

Newspapers from Australia

© PressReader. All rights reserved.