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I’ve been saying for a long time now that the institutions do not yet exist for properly contending with climate change as a political problem. All of that seems to be resoundingly confirmed by the further dissolution of the UNFCCC climate talks, all the more so from the Bonn meetings this week, which Hedegaard has accused some countries of backing off the already very weak Durban agreement.

Here is her statement:

Statement by EU Commissioner for Climate Action Connie Hedegaard on the conclusion of the climate change talks in Bonn

Parties to the UNFCCC met in Bonn over the last two weeks for its mid-year climate change talks. Commissioner Hedegaard made the following statement as the session concluded:

”The European Union is almost the only player taking a second commitment period under the Kyoto Protocol and so keeping it alive. Because we believe climate change needs to be addressed in a legally-binding international framework, we are willing to do this, even when other major economies are at present only willing to enter into voluntary commitments.

But – and it is a big but – we need other major economies and significant emitters to play ball. The world cannot afford that a few want to backtrack from what was agreed in Durban only five months ago. Durban was – and is – a delicately balanced package where all elements must be delivered at the same pace. It is not a pick and choose menu.

It is very worrisome that attempts to backtrack have been so obvious and time-consuming in the Bonn talks over the last two weeks. Regrettably, only procedure, no substance was discussed.

This week, the International Energy Agency (IEA) has reported that global emissions have reached their highest ever level. At the same time, in Bonn, some of the world’s largest emitters have wasted too much energy in trying to move backwards rather than in securing progress. This is not just irresponsible. It is untenable for a UNFCCC process that wants to remain relevant – the only process the world has that everybody says they support.

It is good that a significant group of developed as well as developing countries that share a wish to secure and deliver ambition in the end broke the deadlock in Bonn. But it is frankly too little and it is getting very late. Given the urgency of the problem, it is disturbing to watch climate negotiations moving at a pace that is clearly not going to deliver the necessary results in Doha. This is clearly in nobody’s interest”

Xinhua reports today that the Chinese government has banned Chinese airlines from participating in the EU carbon markets, which is required by European law. It sets the stage for a showdown over climate rules increasingly interpreted in terms of international trade.

Some critics of carbon markets have expressed a certain degree of satisfaction in seeing the EU’s market agenda thwarted. It is true the market approach is increasingly unconvincing.

But it strikes me that the obvious point to make here is not the critique of market mechanisms. Rather, will global climate policy will be held hostage to trade in the spirit of the WTO’s Doha round – which is to say, in the spirit of failure? There are of course lots of reasons why major industrial polluters would like to forestall something serious as long as possible. This is evidence of some of the worst tendencies concerning climate policy fragmentation. The worst possible outcome for global climate policy is that it be managed in the way international trade negotiations have been managed. Climate justice activists should rather be increasingly forceful in arguing for a novel political ontology of the atmosphere.

The EU’s purpose in establishing this rule seems to be to maintain some leverage in international climate negotiations, since it has already given away everything and the spoils go to those who hold out.

As far as carbon markets go, I see two things happening. Within the EU ETS, the airline rule is being used to set up EU-wide registries (currently these are managed by individual member sates), so one could argue the rule is helping consolidate carbon markets against individual member states’ sometimes recalcitrance to toe the EU agenda. But I think globally we will see Pacific Rim carbon markets set up as ‘equivalent measures’ that will allow, say, Chinese airlines to opt out of EU rules because they buy offsets on the Shanghai exchange. China is pursuing a more serious domestic carbon market agenda, and other countries are definitely keeping that option open / developing ‘voluntary’ systems. Another possibility would be an industry-specific (instead of geography-specific) sectoral approach that airlines could opt into to comply with EU law. I think the EU would see their approach as a success (if only a partial one) if it encouraged other countries to set up regulatory mechanisms, however weak in practice, and it would be willing to accept something far shoddier than the ETS as ‘equivalent.’ But that’s just my sense.

Again, I feel that the issues surrounding carbon markets here are a sideshow to a far more serious issue that CJ folks should be hammering home in increasingly sophisticated ways – I mean the overarching illegitimacy of the current negotiations.

Finally the EU has taken action on the HFC credits, which are miserably low quality offsets from destroying industrial gases for pennies on the Euro.

Of course the carbon market investors have been upset to see them go. Here’s what Bloomberg had to say about it, including a comment from me:

CO2 Investors say Ban on Certain Offsets Raises Risk
2011-01-24 16:18:12.475 GMT

By Catherine Airlie
Jan. 24 (Bloomberg) — The European Union’s vote to ban
certain types of United Nations offsets raises investment risks
and the cost of borrowing money, the Carbon Markets and
Investors Association said.
“It cannot be emphasized enough that stable regulation is
central to the ability to raise money for the fight against
climate change,” CMIA said in an e-mailed statement today. The
EU’s ban on some offsets goes against that, they said. “Doing
otherwise will reduce the pool of capital that is available, by
increasing the risk, and also the cost of capital.”
The EU’s 27 national governments agreed to ban as of May
2013 the use of UN-sponsored offsets linked to
hydrofluorocarbon-23 and some nitrous oxide credits. EU Climate
Commissioner Connie Hedegaard welcomed the member states’
decision on industrial gas offsets, saying the credits that are
to be banned created a perverse incentive for investors.
Environmental groups including CDM Watch support the
restrictions. Investors in HFC-23 projects, including Italy’s
Enel SpA, had called on the commission and member states to
limit the scope of the ban and delay its entry into force.
“If investors want a durable, long-term, stable carbon
market they need to champion the regulations that will best
address climate change,” Jerome Whitington, a climate
specialist at Dartmouth College in Hanover, New Hampshire, said
by e-mail. “Their protest over the change in rules now seems
disingenuous at best, and the short-term interests of investors
should remain low priority for policy makers.”

The news this week, just prior to the COP-16 UN conference on climate change in Mexico, is that the EU is openly considering a ban on carbon offsets from industrial gasses, including both HFCs and N2O. HFCs are a by-product of refrigerant production, while nitrous oxide comes from adipic acid production – and both are very cheap and very profitable to destroy. Both have been criticized for a) encouraging industrial production for the purpose of creating the byproducts, which are very lucrative to destroy under the UN carbon market system, and b) unduly lowering the price of carbon credits, making the markets less effective at stimulating cleaner investment. Beyond those criticisms, the ban could have a very important impact on equity considerations of a climate deal.

From the NY Times:

Several members of a United Nations panel that oversees the international offsetting scheme agreed that the hydrofluorocarbon 23 scheme should be revised. Europe’s executive commission said the hydrofluorocarbon credits from industrial projects were overvalued in Europe by a factor of 78, discouraging the flow of money to more credible projects in the least developed countries.

“The rates of return of these projects are excessive,” it said in a statement. “The E.U. considers that cheap emission reductions, such as those from industrial gas projects, should not be done through the carbon market, but instead should be the responsibility of developing countries as part of their appropriate own action to keep global warming below 2 degrees Celsius.”

Basically it’s really good news if they’re thinking of how to integrate a ban on HFCs into a way for developing countries to cheaply meet emissions commitments. As with forestry offsets, part of the risk is that developing countries in effect give away all the cheap emissions reductions – the so-called low hanging fruit – to whoever has moved first into the market. While those private investors reap windfall profits, national governments in developing countries are increasingly called upon to commit to future reductions as part of the global agreement, but are finding that the cheap and easy-to-achieve reductions have already been taken. (Reductions can’t count for both purposes.) By banning market-based investment in these industrial gas projects, it could free up private capital for more substantial investments, raise the price of carbon and hence encourage greener technologies in the West, and lastly allow developing countries to reap the benefits of national investment in emissions reduction commitments. All good!

The one risk: what if these projects fall by the wayside and the gasses are not destroyed properly? It would be a travesty if the cheapest emissions reductions on  the planet were not made because they fell through the cracks between the global climate institutions. Already the Montreal Protocol on ozone-harming refrigerants has declined to regulate HFCs as an unwarranted extension of its original mandate.

The Congressional Research Service has published the following report:

An Overview of Greenhouse Gas (GHG) Control Policies in Various Countries (Nov 30, 2009)

It doesn’t appear to be getting much circulation  so I wanted to put it up here. It came to me by way of  The Project on Government Secrecy at the Federation of American Scientists, which has the report posted on their website.

It compares enforceable GHG regulations in the EU and following countries:

United Kingdom
Russian Federation
United States

Should be interesting, or at least helpful at some point.