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  • Global Warming Policies and the Perverse Incentives They Create

    Money is a powerful incentive. When it comes to global warming, governments all over the world have created policies that intend to reduce greenhouse gas emissions but have led to fraud, scams, black markets, and increased emissions. Mark Schapiro of Reuters reports on the unintended consequences of European companies offsetting their carbon dioxide emissions by paying the Chinese to destroy a much more potent contributor to warming:

    In order to offset their own greenhouse gases, companies and utilities in Europe that are subject to the emission limits of the Kyoto Protocol have been paying vastly inflated prices to Chinese companies to destroy hfc 23, and in the process have been providing the Chinese government with hundreds of millions of dollars in tax revenue to compete against Europe’s own “green” industries. European concern about this practice was a major source of contention during last week’s climate negotiations in Cancun, as the U.N. attempted to defend the integrity of the multi-billion-dollar global carbon offset market.

    And in an odd twist, the incentives offered through the U.N.’s Clean Development
    Mechanism (CDM) also appear to be stimulating production of an ozone-depleting refrigerant gas that has been landing in the U.S. black market. Investigations by the U.S. Environmental Protection Agency (EPA) and U.S. Customs and Border Protection have led to the conviction of several smugglers who have illegally imported the ozone-depleting refrigerant, hcfc 22, into the U.S. for sale to trucking companies, supermarkets, automotive supply shops, and other large-scale users of refrigerant gases. The illegal refrigerant is significantly cheaper than non-ozone-depleting refrigerants permitted in the U.S., a price discrepancy triggered partially by the large overpayments to Chinese firms that have led to an ample supply of hcfc 22 on the international black market.

    That black market completes a global circuit unique to the era of climate change: From China’s industrial zones, the credits for the greenhouse gases—bought and sold as commodities on the global carbon markets—flow to European companies that need them to continue polluting at home, while the underlying ozone-depleting gas responsible for creating those credits flows to American companies seeking discounted refrigerants.

    If you need any more indication that these policies are more about seeking profit than protecting the environment, China’s Deputy Director of its Clean Development Mechanism fund threatened to release the hfc gases into the atmosphere if United Nations removed the gas as an acceptable credit. Shapiro also details how the credit program is increasing the production of other potent greenhouse gas emissions:

    The offset credits paid to Chinese and Indian companies to eliminate the former, according to CDM Watch, have actually stimulated increased production of the latter—the ozone-depleting refrigerant hcfc 22, which is itself a potent greenhouse gas. CDM Watch has compiled records showing that companies in China and India have significantly increased production of hcfc 22 in order to receive funds to incinerate the byproduct gas, hfc 23.

    This becomes an even bigger deal when governments implement policies that promote carbon-free, uncompetitive sources of energy. In the United Kingdom, for instance, David Cameron is reversing Margaret Thatcher’s privatized energy market in favor of a more state-controlled system with the possibility of a price floor on carbon dioxide. The plan would prematurely shut down older power plants in favor of a massive government spending project to increase the use of nuclear, wind, solar, and biofuels to meet carbon reduction targets. It’s an undertaking that cannot be done without government guarantees, says the regulator Ofgem. Ernst and Young projects the transition will cost $316 billion—a cost that will show up in consumers’ energy bills and later through higher taxes to cover the government’s investment.

    And all this cost is for what? There won’t be any noticeable difference in emissions, and companies can pretend to go green and pretend to adhere to rules while others collect serious cash. Yet politicians in the U.S. are pulling wool over their own eyes when it comes to the facts, fraud, and inefficiencies of green policies in other parts of the world.

    Posted in Energy [slideshow_deploy]

    3 Responses to Global Warming Policies and the Perverse Incentives They Create

    1. Susan Robinson Calif says:

      One of the most perverse cap and trade rule issues just came from California. In CA billionaire owned timber barons intent on clearcutting CA forests trumped over 50 environmental and conservation groups and clearcutting of CA forests and converstion to tree plantations won out in the Cap and Trade rules. Politics behind the doors allowed critical calculations like soil carbon to be omitted so that clearcutting the forests (that releases more CO2 including soil carbon CO2) would be allowed. See here the press release from Center Biological Diversity about what "went down."

      For Immediate Release, December 16, 2010

      Contact: Brian Nowicki, Center for Biological Diversity (+1) 916-201-6938

      California Air Board Endorses Forest Clearcutting for Climate Change

      Sacramento, CA—The California Air Resources Board (ARB) voted today to encourage forest clearcutting as a part of California’s greenhouse gas cap-and-trade program. The program—adopted as part of California’s effort to reduce statewide greenhouse gas emissions—would allow industrial polluters to purchase carbon “offset credits” instead of reducing their own greenhouse gas emissions. The decision today allows those offset credits to flow from forest carbon projects that include forest clearcutting.

      “Allowing forest clearcutting to qualify as a carbon offset credit threatens forest ecosystems and the integrity of the cap-and-trade program as a whole,” said Brian Nowicki, California Climate Policy Director for the Center for Biological Diversity. “The forest rules adopted yesterday not only perpetuate destructive forest clearcutting practices, but also create a tremendous risk of projects getting offset credits for forest growth that would have occurred anyway.”

      Dozens of representatives of forest conservation organizations and residents of rural communities in California’s forested areas attended the ARB hearing to testify in opposition to the inclusion of forest clearcutting in the rule. ARB board member Dorene D’Adamo proposed an amendment to protect against forests being converted to tree farms for the purpose of generating carbon credits, but ARB board chair Mary Nichols moved aggressively to quash the proposal and called for a vote to allow forest clearcutting to remain in the rule.

      “At best, this will subsidize, at California’s expense, the ongoing operations of some of the most damaging forest management currently in use,” said Nowicki. “At worst, this will incentivize the clearcutting of natural forests to be replaced by tree farms.”

      Other loopholes in the regulation adopted today will allow big timber companies to claim offset credits for forest growth and other management actions that likely would have occurred anyway, even in the absence of a forest offset program. These so-called “non-additional” credits do not represent actual emissions reductions, yet under the cap-and-trade rule they can be sold to industrial polluters, who then can escape responsibility for reducing their own emissions. The result will be an overall increase in greenhouse gas emissions.

      The ARB had outsourced the development of the forest offset protocol to the Climate Action Reserve, a non-governmental organization that registers carbon offset projects. The Climate Action Reserve developed rules that reflect the strong influence and preferences of the timber industry, particularly Sierra Pacific Industries, California’s largest private landowner and greatest practitioner of forest clearcutting.

      “Under Mary Nichols’ strong pressure last night, the ARB voted to make clearcutting the face of California’s efforts to fight global warming,” said Nowicki. “Industrial polluters, instead of making positive changes to improve their operations and reduce their greenhouse gas emissions, will be able to simply buy dubious offset credits from industrial tree farms. This is a serious blow to the state’s forests as well as its efforts to reduce greenhouse gas emissions.”

      The cap-and-trade regulations adopted today also allow industrial polluters to avoid responsibility for greenhouse gas emissions caused by burning forest “biomass”– including whole, live trees–for the generation of energy and other industrial uses. This not only would encourage the wholesale logging of California’s forests to provide fuel for industrial processes and electrical power generation, but also threatens to increase overall greenhouse gas emissions, as the actual greenhouse gas emissions from burning wood can be higher than from burning fossil fuels.

      Brian Nowicki

      California Climate Policy Director

      Center for Biological Diversity

      (916) 201-6938 bnowicki@biologicaldiversity.org

    2. Pingback: » Financial News Update – 12/21/10 NoisyRoom.net: The Progressive Hunter

    3. Bethany says:

      When people incredulously ask me why on earth people would make up global warming, this blog entry is the answer.

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