Boston Globe (pg. E2)  [Printer-friendly version]
May 16, 1999

TRADING AWAY OUR CHANCES TO END GLOBAL WARMING

By Ross Gelbspan

Announcements of the "hottest year in recorded history" are becoming
annual events.

The escalating losses from severe storms, droughts, and floods is
sending shock waves through the property insurance industry. Last
year's 9,000 hurricane casualties in Central America and the $1
billion in damages earlier this month from 318-mile-an-hour tornadoes
are two recent examples.

The signs of warming-driven changes to our climate have become
impossible to ignore. Despite congressional opposition, the United
States will ultimately have to join the rest of the world in tackling
the potentially catastrophic problem of global warming by cutting
emissions of heat-trapping carbon dioxide from coal and oil burning.

But the Clinton administration's mechanism-of-choice for those
reductions centers around a dubious system of international
"emissions trading" designed to find the least costly ways for
wealthy nations to reduce emissions.

Unfortunately, by embracing unrestricted trading, the administration
is pandering to the fossil fuel lobby, alienating allies in Europe and
the developing world, and ignoring what nature requires to keep this
planet hospitable to civilization.

Scientific research states unambiguously that to stabilize the climate
requires cuts of 60 to 70 percent in emissions. Against that
background, a loophole-riddled paper system of international carbon
trading is no more than an expression of institutional denial.

To truly address the climate crisis we need to embark now on large-
scale energy efficiency and conservation programs. Ultimately we need
a global project to replace coal-burning power plants, oil-burning
furnaces and gas-burning cars with low-carbon and renewable energy.
That kind of frontal approach, moreover, could substantially expand
the real wealth and the stability of the global economy far more than
a system of illusory trading credits.

Two years ago, 160 nations met in Japan to forge the Kyoto Protocol,
which calls on wealthy nations to cut emissions by the year 2012. The
US obligation amounts to 7 percent below 1990 levels. Developing
nations will cut emissions under the next phase of the treaty.

Since the Kyoto agreement, the concept of permit trading has gathered
momentum. Companies are researching schemes to pay others to preserve
or increase their own emissions. The World Bank is attempting to price
emissions to jump-start a trading market. Even the Environmental
Defense Fund plans to make money by brokering carbon trades.

Trading between industrial countries allows a nation (or company) that
reduces emissions by more than its quota to sell off leftover rights.
Under a North-South variation, a company in the North can get credit
for "emissions avoided" by paying for low-cost reductions in a
developing country -- planting trees in Costa Rica, upgrading old
Chinese generating plants or financing coal cleaning equipment in
India. But the "emissions avoided" will exist as accounting
artifacts with little impact on our overheated atmosphere.

Most European and developing countries are angered by the Clinton
administration's insistence on achieving virtually all cuts through
trading -- with no meaningful reductions at home.

The recognition is growing, moreover, that trading is simply
inadequate to the climate crisis. "International carbon trading is a
scam that is going to give emissions trading a bad name," said John
Henry, a Washington-based entrepreneur who made sizable profits
brokering trades for the domestic US sulfur dioxide trading program.

Henry explained the domestic sulfur dioxide trading program worked
because virtually all those emissions came from 2,000 smokestacks -- a
manageable number to monitor. Moreover, the program operated under an
enforceable national regulatory system. By contrast, carbon is emitted
from millions of sources all over the world -- far too many to monitor.
And there is no international regulatory system to enforce emission
limits.

The reliance on permit trading, moreover, is inflaming North-South
relations. In assigning quotas, the wealthy nations adopted a 1990
baseline to ensure continuity of their economies. But developing
countries want allocations based on a more democratic per capita
formula. Since an average American uses 20 times the carbon fuel of
his Indian counterpart, a per capita system would scuttle the US
economy.

A leading Indian environmentalist points out that the Kyoto Protocol
allows wealthy countries to buy limitless amounts of cheap reductions
in poor countries. That means that when developing nations must cut
their own emissions under the next phase of the Protocol, they will be
left with only the most expensive options, said Anil Agarwal, of the
Centre for Science and Environment in New Delhi.

Trading appeals to the prevailing antiregulatory, free-market
mentality. But that mentality ignores the physical realities of the
planet. The laws of supply and demand do not supercede the laws of
nature. We can't buy off the climate with derivatives.

The climate crisis requires binding international regulation. One
possible approach involves changing subsidy policies, removing
barriers to energy competition, adopting progressively higher
efficiency rates, and paying for the transfer of clean energy to
developing nations.

The United States spends $20 billion a year subsidizing fossil fuels;
globally the figure is about $300 billion. If those subsidies were
diverted to renewable energy (with a portion set aside to retrain coal
miners), it would create a big incentive for oil companies to develop
solar, wind and hydrogen technologies.

A meaningful regulatory response would remove barriers to free energy
competition, especially protections for dirty, utility coal-burning
plants. It would also establish a progressively more stringent fossil
fuel efficiency standard.

In the United States, that would increase the efficiency of electrical
generation from its current 35 percent efficiency rate to the 70-to-90
percent available with cogeneration technology. It would increase the
dismally low gasoline mileage of cars by phasing in more efficient and
alternative-fuel vehicles. And it would create the mass market
renewable energy needs to become economically competitive with fossil
fuels. Internationally, if each country began at its current baseline
to increase its efficiency by specified amounts at designated
intervals, it would eliminate the North-South impasse over the
inequities of carbon trading.

Finally, since emissions from countries like India, China, Mexico, and
Brazil will soon exceed our own, a fund is needed to transfer climate-
friendly energy to poor nations. A tax on international currency
transactions seems the most equitable, broad-based, and invisible
mechanism.

With $1.5 trillion a day in currency transactions, a tiny tax of a
quarter of a penny on a dollar would generate $200 billion to $300
billion a year for wind farms in India, cogeneration plants in South
Africa, and solar assemblies in El Salvador. The tax, conceived by
James Tobin, the Nobel laureate in economics, would help stabilize the
destructive volatility of capital flows at the same time.

This kind of plan would do more than help return the global climate to
the relative stability it has enjoyed since the end of the last Ice
Age. It would create millions of jobs all over the world and allow
poor nations to raise living standards without compromising economic
achievements in the North.

Schemes like "emissions trading" look neat on paper. Unfortunately,
they will not slow the melting of the earth's glaciers, the breakup of
Antarctic ice shelves, rising sea levels, warming-driven migrations of
disease, the intensification of El Ninos, and the relentless increase
in floods, droughts, and severe storms.

To do that we must restore the 10,000-year-old balance of our
atmosphere that we are destroying with the 6 billion tons of carbon we
emit every year.

Ross Gelbspan is the author of " The Heat Is On " (Perseus Books).

Copyright 1999 Globe Newspaper Company.