Carbon-emission schemes are going up in smoke
The war on carbon dioxide emissions isn't going well. Any real prospect for coordinated international action is, post-Copenhagen, dead in the political water.
Photo: Troy Media
The war on carbon dioxide emissions isn’t going well. Indeed, while the climate summit in Cancun, Mexico will make a show of sifting the geopolitical wreckage from last December’s climate summit, any real prospect for coordinated international action is, post-Copenhagen, dead in the political water. Making matters worse, the bête noire of climate alarmists is, once again, reigning supreme: King Coal.
Why false hopes?
All of which begs the question: with all hopes for a global CO2 impact blown away, why are politicians tenaciously clinging to the fiction that regionalised carbon trading schemes – like the Western Climate Initiative – can succeed where national and international ones have failed?
Dalibor Rohac, Research Fellow at London’s Legatum Institute, explains, “If you believe that CO2 emissions are a major factor driving climate change, you need to reduce emissions globally. Cutting emissions unilaterally through, say, increasing the price of carbon in one country or group of countries, leads to carbon leakage as carbon-intensive industries will move to jurisdictions where emissions are not restricted.”
Without international and national binding agreements, the reluctance of industry to participate is already reflected in the slow death of carbon-trading initiatives.
By the end of the year, the Chicago Climate Exchange, the only US national carbon market that trades all six greenhouse gases, will quietly close its doors to its carbon-credits business – the main purpose for which it was set up. While the Atlanta-based Intercontinental Exchange purchased the CCX only last April, its voluntary but legally binding system has reportedly ground to a halt in the absence of a federally enacted cap-and-trade scheme.
Meanwhile, across the water, the European Climate Exchange, the leading platform for the EU’s Emissions Trading Scheme, is still trading. But when the Kyoto Protocol expires in 2012 with its requirement for mandatory carbon caps, the European Climate Exchange is widely expected to go the way of its Chicago sister – and a new British report makes clear why.
According to the report by Sandbag, a group calling for even tighter greenhouse controls, the entire five-year period of the EU’s ETS is set to deliver miniscule carbon savings of less than one-third of one per cent of total emissions. The world’s oldest carbon-trading scheme has simply failed to make any serious impact on global carbon emissions, the purpose for which all such schemes exist.
In June 2010, Japan put on hold plans to introduce emission-trading laws. Australia has delayed any decision on a carbon-trading scheme until 2013 at the earliest, and at the Copenhagen conference India’s environment minister Jairam Ramesh stated flatly, “India will not accept any emission-reduction target – period.”
In North America, however, local politicians still insist that regional initiatives, including the Greenhouse Gas Initiative in the Eastern United States and the Western Climate Initiative in the US West and Canada, could prosper. The WCI, for instance, is a partnership of seven US states and four Canadian provinces. The WCI wants to establish a cap-and-trade system by January 2012 that, ultimately, aims to reduce regional greenhouse-gas emissions to 15% below 2005 levels by 2020.
“This is simply puzzling,” says Rohac. “Regional initiatives are unlikely to have any effect whatsoever on global emissions and therefore on climate change.”
Far from being over, the age of coal is experiencing a renaissance. Just as in the West, coal is driving growing economic prosperity of China, India, Brazil and other fast-industrializing nations.
“Cheap coal and the wide availability of shale gas make decarbonisation in the near future very unlikely. Even if developed countries committed to switch to renewables, this would be offset by the rising emissions in China,” said Rohac.
Such is the current and prospective growth in coal use that investment bankers, such as Tudor Pickering & Co. in the US, are once again advising there’s plenty of money to be made in buying coal stocks. In 2009, US coal consumption averaged 10 million barrels of oil equivalent (boe) per day – a 52.3% increase over 1973 levels. Over the same period, natural-gas consumption increased by just 3.8% and oil by just three per cent. The importance of coal to the U.S. economy cannot be overstated. Globally too, coal consumption currently totals around 66 million boe per day, a 107% increase – more than doubling – since 1973.
In today’s global commodities market, King Coal still reigns supreme. The International Energy Agency projects global coal consumption will increase by more than 50% by 2030. Ninety-seven per cent of that increased coal consumption will be in Asia. China is currently opening one coal-fired power station every week, a process set to continue for years to come.
The World Bank, meanwhile, has been severely criticised for continuing to support investment in coal-fired power stations in places such as India and South Africa; in the latter case the electricity produced also serves surrounding countries. The simple fact is that coal is cheap and accessible, and a coal-fired power station can be as much as eight times more efficient in electricity generation than renewable-energy projects.
As the World Bank maintains, it’s hard to fight poverty for people without any electricity. Put bluntly, when it comes to the developing world, investment in efficient poverty eradicating electricity projects ranks morally higher than fighting a war against carbon that is based on a speculative theory, and which is, as the statistics make abundantly clear, already lost.
As Rohac puts it, “Decarbonisation has never been in the interest of developing countries. “But given that the fast-industrialization of the developing nations will continue to eclipse all Western carbon initiatives, it is hard to disagree with Rohac’s assessment that “Western carbon-cutting efforts are mostly a waste of effort and resources.”