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IBEC and Friends of the Earth debate Kyoto

22 Dec 2006

In December's budget the Government announced it was putting aside 270 million euro to buy "carbon credits" internationally to cover Ireland's excess climate pollution over and above our Kyoto target The Irish Times has now published comment pieces by IBEC's Head of Environment, Donal Buckely, and Friends of the Earth Director, Oisin Coghlan on the merits of "buying our way out of Kyoto. This exchange is reproduced below, with Donal Buckley's article first.

Buying carbon credits cost-effective and necessary - Donal Buckley, IBEC

The Irish Times, Thursday, 14 December, 2006

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

Carbon credit purchases delay the future - Oisin Coghlan, Friends of the Earth

The Irish Times, Friday 22 December, 2006

Large-scale overseas purchases of carbon credits would be ill-judged and short-sighted, argues Oisín Coghlan.

The Government's plan to purchase at least €270 million worth of pollution permits overseas is a breech of the spirit, and most likely the letter, of the Kyoto Protocol on Climate Change. It is a U-turn based on pandering to vested interests rather than sound economic analysis. It will penalise ordinary taxpayers instead of polluters while failing to trigger the shift to a sustainable economy.

The latest official projections are that, without new policies and measures, we will exceed our Kyoto target by 35 million tonnes of greenhouse gas emissions over the 5-year period from 2008-2012. The Protocol is clear that buying credits internationally to cover such an overshoot can only be "supplemental to domestic actions for the purposes of meeting commitments".

In his Budget speech on December 6th, Brian Cowen insisted that "we will meet our Kyoto target mainly through reductions in greenhouse gas emissions in our own economy". And yet in his very next sentence the Minister indicated the Government planned to buy credits for 18 million tonnes of emissions, just over half Ireland's projected overshoot.

When you factor in that Irish businesses are preparing to buy about 10 million tonnes of credits through the EU trading scheme that leaves a maximum of 7 million tonnes, or just 20 per cent of our overshoot, to be dealt with through "reductions in greenhouse gas emissions in our own economy". In such circumstances, it is hard to come to any other conclusion than that the Dáil was misled by the Minister. Moreover, the Government has yet to announce any new policies to achieve those limited domestic reductions.

Evading our Kyoto commitment in this manner is not only indefensible, but also uneconomic. The EU reckons that Europe's energy usage could be reduced by 20 per cent before 2020 just by cutting energy-waste, at no net economic cost. Such an approach would bring us a long way towards honouring Kyoto.

Investing €270 million in energy-efficiency, for example, would also reap enormous long-term benefits. It could be done by measures such as extending the Greener Homes scheme to cover insulation, tightening the Building Regulations and linking stamp duty rates to the new energy-ratings for houses - the more energy-efficient the house the lower the rate. But it would require a seriousness of purpose and a willingness to disturb vested interests in the building industry that has so far been singularly lacking.

The Government's plan also violates a core principle of sustainable development - to make the polluter pay. The money to buy the carbon credits will come from general taxation, in a form of stealth tax, hitting taxpayers no matter whether they make every effort to curb their own pollution or fail to make even a single change. It would be much better to put a price on carbon and send a powerful signal to individuals and companies encouraging us all to cut our pollution. Income tax, PRSI or stamp-duty could be reduced correspondingly.

Purchasing pollution permits internationally is not even the get-out clause that the phrase "buying our way out of Kyoto" suggests. Whatever part of our projected emissions overshoot we fail to cut domestically before 2012 will simply be carried forward and added to our new reduction commitment post-2012.

The Government's procrastination is simply storing up a new "climate debt" Ireland will have to repay just like the national debt that dominated public discussion in the 1980s. Ultimately, Ireland will have to do its fair share to prevent climate chaos and that means reducing our greenhouse gas emissions by two-thirds at the very least.

To achieve this, the transformation needed over the next 20 years is as big as the one Ireland has experienced in the last 20 years. As the Stern report emphasises if we start now the opportunities far outweigh the costs. If we continue to procrastinate, the following 20 years will see an even bigger adjustment, forced on us by climate and energy shocks, with far more disruptive and uncertain consequences.

Oisín Coghlan is Director of Friends of the Earth

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