The Stuff that Dreams are Made on

The news of a scandal about carbon credits in Russia and Ukraine is unsurprising. The whole system of carbon credits involves paying people not to produce something that we do not want. It is an attempt to create a market in something that is both economically useless and dangerous by bribing industries not to produce the stuff.  Continue reading

Reviewing Budgets From an Environmental Perspective

I used to review each UK budget for its impact on the environment. Governments would be keen to announce a series of measures to reduce carbon dioxide emissions, or to save energy or to any of the myriad things that should be done or could be done to protect what we have now for our descendants. Continue reading

Emissions Trading – a triumph of hope over reality

The European Union’s Emissions Trading Scheme was doomed from the start. I have always held that you cannot use the devices of the casino to reduce emissions. You can tax emissions, making them more costly to produce and creating an incentive to encourage ways of using clean renewable emissions, but to set up a system where emission producers can speculate on the price of carbon dioxide, which is a commodity that no one wants and no one can use, as a way of reducing carbon dioxide emissions, will make no difference to the amount of greenhouse gas emissions that are produced. Continue reading

The Clean Development Mechanism seems on its way out

The Clean Development Mechanism was supposed to be one of the climate change weapons devised under the auspices of the United Nations to fight global warming. In essence the developed nations which are heavy emitters of greenhouse gas can buy carbon credits which are issued by undeveloped nations. The undeveloped nations get the right ti use carbon credits based on real measures that they have taken to prevent future emissions as a result of their attempts to change from undeveloped nations into developed ones. The undeveloped nations get UN money to finance these measures.

The Clean Development Mechanism has been heavily criticised (and not just by me). One criticism is that the UN money often goes to finance emission savings which would have happened anyway by companies with enough money and a commercial rationale to carry out the measures. In that sense the CDM has offered in some cases “free money”.

My criticism has been on a different basis. I think that the CDM is artificial and the emissions savings are largely theoretical not actual. It was conceived in the time when complex financial instruments were widely used – derivatives, hedges and hedges within hedges within hedges. This complexity did not in the long run help the world’s economy and the complexity and theory of the CDM will not help climate change; only real measures will do that.

At the height of its fashion the CDM received around 200 approval requests a month, which meant 200 projects seeking funding and claiming a climate change value to their projects. At first the administrators were, in my opinion, not sufficiently robust in rejecting applications which would have gone ahead without UN funding. Where there is a grant there will always be someone seeking to exploit it.

Today, for than five years after the CDM started its theoretical savings of emissions, grant application are down to around 75 a month and it looks as though they will fall further. Part of the reason is the present economic climate. It seems around 60% of people involved in CDM projects polled by Point Carbon give this the reason and there will be a reduction in carbon credits issued together with a corresponding reduction in theoretical emissions saved.

These credits are often financial investments for institutions and emitters of greenhouse gas. The recession is causing them to sell their existing credits (because they are polluting less with less economic activity) and not seek to invest in new credits.

Another reason of the decline seems to be the political uncertainty surrounding how to deal with climate change. The CDM was conceived at Kyoto and a new climate change treaty is due to be negotiated in 2012, so many investors and institutions are adopting a wait and see policy. While there is this political uncertainty at the international level the CDM applications will continue to decline.

All coal is dirty

There is no such thing as clean coal, but Gordon Brown does not seem to know that. He talked about clean coal in his recent speech to the Labour Party Conference in Manchester, as though it existed and the conference members cheered and applauded him. It is a bit like the Government’s zero Carbon Homes policy – it is something that just is not possible, with the state of knowledge and technology today. Continue reading

Windfall taxes on energy companies

Should the government impose windfall taxes in the energy companies?

The Business Secretary, John Hutton, will not answer the question save as to say that the government is looking at all the options. That is a hint that the windfall tax may be a possibility. The idea that is being strung up the flagpole to see if anyone will salute it, is that the energy companies – the electricity and gas suppliers and the oil companies should be relieved of some of their record profits by the taxman, who would, Robin Hood like, pay them over to people who cannot afford soaring energy bills. Continue reading