Trading in carbon emission credits is a legitimate way of meeting our Kyoto obligations and claims that we are buying our way out of a problem are misplaced, argues Donal Buckley.
The findings of the recently published Stern Review were unequivocal: "The scientific evidence is now overwhelming: climate change presents very serious global risks and demands an urgent global response."
Faced with such need for immediate action, it would seem obvious that every available option be harnessed. Not so in Ireland, where purchasing overseas carbon allowances has been widely criticised and misunderstood. It is much used, cost-effective and very necessary. Failure to use it will have long-term detrimental economic and environmental implications.
The Kyoto Protocol was designed to counter the two main reasons put forward by states for not addressing climate change: effort by individual nations would be too costly and make no difference. A global framework with binding targets for individual nations, underpinned by a market for carbon, makes cumulative efforts significant, reductions achieved at least cost and technology transferred to developing nations.
Projections show rapidly rising emissions from developing nations increasing their overall share and those from developed nations shrinking. The EU percentage of world emissions will halve from 14 per cent to 7 per cent between 2000 and 2050 while China's will rise to 25 per cent. Climate change responses confined to the developed world, no matter how successful, are doomed to failure.
Kyoto was far from perfect. But it nevertheless succeeded in creating a functioning carbon market which has expanded rapidly. In 2005, 320 million tonnes of CO2 worth €6.5 billion were traded in the EU alone, a 40-fold increase over 2004. Significant investments occurred: the UN estimates 1,400 projects exist with potential to deliver one billion tonnes of reductions, which at €10 per tonne equates to €10 billion of carbon finance flow, potentially attracting a great deal more.
The immense possibilities of these projects are emerging. If developed nations meet the 60-80 per cent reduction targets and if, as expected, they purchase half these reductions from developing nations at €10 per tonne, then an annual fund of €100 billion may be created to tackle climate change.
Purchases will be required not only in the long term, but in the medium and short term also. Most countries will use them because, while undoubtedly preferable, reducing emissions in modern, energy-efficient economies is difficult and expensive. Similar reductions could be achieved for a fraction of this amount elsewhere, achieving the environmental objective more efficiently.
At EU level, reductions between 15-30 per cent of I990 levels by 2020 are under discussion. It is worthwhile considering some options for Ireland to meet even the less onerous limit domestically; reducing emissions from all houses and from all forms of transport, private, commercial or industrial, to zero. Alternatively, reducing emissions from agriculture to zero, primarily by banning all livestock, would bring national levels close to what is needed.
Either scenario is unpalatable.
Society must be decarbonised by improving energy efficiency, introducing low-carbon technologies, renewables, alternative fuels, to name just some measures. Unfortunately the quantity or delivery is unlikely to be sufficient or fast enough. Significant national barriers and constraints exist; our energy supply structure, large agricultural sector, prohibition on nuclear power, rapidly increasing transport sector, poor spatial development, and efficient industrial base.
Government will buy 18 million overseas credits, 6 per cent of national emissions, funded by a €270 million budget allocation and introduce the Carbon Fund Bill in the Dáil today. All are welcome but long overdue.
Criticisms of purchases by governments and companies are rooted in a fundamental misunderstanding of how Kyoto is designed to work. Claims we are buying our way out of a problem are misplaced and undermine the most potent weapon we possess. A global framework where investment and deployment of low-carbon technology where most needed should be supported, not damned.
Donal Buckley is assistant director and head of Ibec's environment unit