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🛢💸 The real deal about Carbon Pricing: Difference between revisions
🛢💸 The real deal about Carbon Pricing (view source)
Revision as of 18:06, 19 March 2020
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Despite the goodwill of governments, some frauds have been spotted, like the case of French cement producer Lafarge who benefited of an overestimated CO2 emissions permit, while shutting down plants; thus being able to sell its extra allowances on the carbon market for a total exceeding €1100M in 5 years. Between 2008 and 2014, the cement sector might have made €2,7B of windfall profit from this allowances surplus.<ref>Carbon Market Watch & Sandbag are 2 NGOs who contributed to unveil this scandal. | Despite the goodwill of governments, some frauds have been spotted, like the case of French cement producer Lafarge who benefited of an overestimated CO2 emissions permit, while shutting down plants; thus being able to sell its extra allowances on the carbon market for a total exceeding €1100M in 5 years. Between 2008 and 2014, the cement sector might have made €2,7B of windfall profit from this allowances surplus.<ref>Carbon Market Watch & Sandbag are 2 NGOs who contributed to unveil this scandal. | ||
source: https://carbonmarketwatch.org/wp-content/uploads/2016/11/Cement-windfall-from-the-ETS_4page_final.pdf</ref> No surprise the EU decided to decrease the share of free allowances since 2013: some industries were literally paid to pollute! | source: https://carbonmarketwatch.org/wp-content/uploads/2016/11/Cement-windfall-from-the-ETS_4page_final.pdf</ref> No surprise the EU decided to decrease the share of free allowances since 2013: some industries were literally paid to pollute! | ||
To make it even harder to foresee, the carbon market is not only composed by allowances provided and auctioned by governments, but also allowances “created” by so-called “offsets”. An offset is basically a reduction of emissions made in order to compensate emissions made elsewhere. A polluting company would typically invest in a renewable energy project, reforestation or even de-pollution of environments, to get allowances in exchange, and emit more CO2 than they were “allowed” to. At least, The Kyoto Protocol (2007) has sanctioned offsets as a way to earn carbon credits that can be traded with other companies.<ref>Thanks to this measure, offsets cannot be a direct source of profit. “Carbon Offset” on Wikipedia, introduction, 2020. | To make it even harder to foresee, the carbon market is not only composed by allowances provided and auctioned by governments, but also allowances “created” by so-called “offsets”. An offset is basically a reduction of emissions made in order to compensate emissions made elsewhere. A polluting company would typically invest in a renewable energy project, reforestation or even de-pollution of environments, to get allowances in exchange, and emit more CO2 than they were “allowed” to. At least, The Kyoto Protocol (2007) has sanctioned offsets as a way to earn carbon credits that can be traded with other companies.<ref>Thanks to this measure, offsets cannot be a direct source of profit. “Carbon Offset” on Wikipedia, introduction, 2020. | ||
source: https://en.wikipedia.org/wiki/Carbon_offset</ref> They also created an organisation for approval of offsets<ref>It is the role of the Clean Development Mechanism, one of the Flexible Mechanism established by Kyoto Protocol. It provides help to offsets projects which generate Certified Emission Reduction units (CER). | source: https://en.wikipedia.org/wiki/Carbon_offset</ref> They also created an organisation for approval of offsets<ref>It is the role of the Clean Development Mechanism, one of the Flexible Mechanism established by Kyoto Protocol. It provides help to offsets projects which generate Certified Emission Reduction units (CER). | ||
“Clean Development Mechanism” on Wikipedia, introduction, 2020. | “Clean Development Mechanism” on Wikipedia, introduction, 2020. | ||
source: https://en.wikipedia.org/wiki/Clean_Development_Mechanism</ref>, which are very tricky to evaluate on the long run (a solar energy project or the renewal of a facility to emit less may not always be successful) and may benefit to developed countries getting “cheap” offsets from low-cost projects abroad. Moreover, the risk of fraud is high, in the form of “non-additional” credits: it means that the offset project will have taken place anyway, without the help from an interested carbon emitter. In this case, money is only going from hands to hands without financing anything else than pollution. This would even suggest that a wide part of carbon offsets do not represent actual emissions cuts, allowing companies to skew their emissions reduction easily. | source: https://en.wikipedia.org/wiki/Clean_Development_Mechanism</ref>, which are very tricky to evaluate on the long run (a solar energy project or the renewal of a facility to emit less may not always be successful) and may benefit to developed countries getting “cheap” offsets from low-cost projects abroad. Moreover, the risk of fraud is high, in the form of “non-additional” credits: it means that the offset project will have taken place anyway, without the help from an interested carbon emitter. In this case, money is only going from hands to hands without financing anything else than pollution. This would even suggest that a wide part of carbon offsets do not represent actual emissions cuts, allowing companies to skew their emissions reduction easily. | ||
[[File:emission-vs-free-allowances_2013_carbonleakage_evidence_project_ecorys.png|thumb|Thumbnailed image|“For every year under the EU ETS thus far, the verified emissions in the iron & steel sector as a whole were lower than the allocation of free EU Allowances for that year. During 2008-2012, mainly due to the economic downturn, almost 360 million tonnes CO2-eq were built up from the excess of EUAs, which if valued by the yearly average price result in freed-up allowances of roughly €5 billion.” | |||
Emission versus free allowances in the steel industry. Carbon-leakage evidence project, Ecorys, 2013, p.33. (Commissioned by European Commission.)]] | |||
Exaggerating the carbon benefits of an offset is a common practice too<ref>Take for instance the HFC-23 GHG destruction model that made China built 18 new refrigerant manufacturing plants equipped with HFC-23 incinerators for $100 millions, thus generating $5,7 billions in CDM offsets credits. This type of offset credit has since been eliminated by EU officials (in 2011). | Exaggerating the carbon benefits of an offset is a common practice too<ref>Take for instance the HFC-23 GHG destruction model that made China built 18 new refrigerant manufacturing plants equipped with HFC-23 incinerators for $100 millions, thus generating $5,7 billions in CDM offsets credits. This type of offset credit has since been eliminated by EU officials (in 2011). | ||
source: https://www.carbontax.org/carbon-tax-vs-the-alternatives/offsets/</ref>; and same goes with what is called “carbon leakage” scam: companies are threatening governments, pretending they will close plants and delocalize in countries with no or less costly carbon pricing systems. Governments are then weakened when it comes to the negotiation of free allowances, but all this claim that carbon pricing could disadvantage companies dangerously has never been proven right in years. EU commissioned reports show no proof of carbon leakage<ref>See those different documents: | source: https://www.carbontax.org/carbon-tax-vs-the-alternatives/offsets/</ref>; and same goes with what is called “carbon leakage” scam: companies are threatening governments, pretending they will close plants and delocalize in countries with no or less costly carbon pricing systems. Governments are then weakened when it comes to the negotiation of free allowances, but all this claim that carbon pricing could disadvantage companies dangerously has never been proven right in years. EU commissioned reports show no proof of carbon leakage<ref>See those different documents: | ||