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🛢💸 The real deal about Carbon Pricing: Difference between revisions

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🛢💸 The real deal about Carbon Pricing (view source)

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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 “assets”. An asset 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, assets 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 “assets”. An asset 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, assets 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<red>It is the role of the Clean Development Mechanism, one of the Flexible Mechanism established by Kyoto Protocol. It provides help to assets 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 assets 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 asset 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 asset 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.  
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====“<i>Prove that Paris was more than paper promises.</i>”====
====“<i>Prove that Paris was more than paper promises.</i>”====


Global emissions are still increasing worldwide, from 35,21BtCO2 in 2013 to 36,15BtCO2 in 2017. Emissions tend to evolve towards stabilization, but the world is definitely not on-track to meet its agreed target of limiting global warming to 2°C. Under current policies, expected warming will be in te range of 3,1-3,7°C.° Yes, scientists agree to say that emissions rates are falling too slowly to meet Paris Agreement pledges. Moreover, now that the majority of progress has been made in advanced industrialized countries by switching coal for gas, the hardest cuts are the ones to come, and they ask for ambitious measures: construction of renewable energy and/or nuclear plants, transition towards less emitting transportation systems, reshaping of agriculture and forestry sectors, etc. Making an efficient system even more frugal will require massive efforts that already well involved countries are not determined to make. For instance, even the EU “star pupil” is confronted to the fact that 55% of its emissions fall outside of its ETS.*
Global emissions are still increasing worldwide, from 35,21BtCO2 in 2013 to 36,15BtCO2 in 2017. Emissions tend to evolve towards stabilization, but the world is definitely not on-track to meet its agreed target of limiting global warming to 2°C. Under current policies, expected warming will be in te range of 3,1-3,7°C.<ref>Hannah Ritchie and Max Roser, <i>CO2 and Greenhouse Gas Emissions</i>, Our World in Data, 2019.
- Nevertheless, according to European Commission, the GHG emissions of all Member States were reduced by 23% between 1990 and 2018; and they might be on-track to reduce furthermore by at least 40% by 2030 and net-zero emissions by 2050 (2015 Paris Agreement commitment). From 2017 to 2018 for instance, emissions declined by 2%, most significantly in sectors covered by EU ETS.** However, a large amount of CO2 is embedded in traded goods, making countries able to consume more emissions that they actually produce.* But on the mean time, international aviation saw its emissions increase by 19% in only 5 years (2013-2008), while European flights (only) were covered by EU ETS.** This allows us to digress a bit on aviation, a sector that would be among the top 10 emitting countries if it was considered as such. In 2019, the International Civil Aviation Organisation (ICAO) approved a new offsetting scheme called CORSIA that would force EU to ditch EU ETS for this sector. CORSIA would essentially rely on “forest offsets” (or LULUCF*** offsets), unlike EU ETS that never agreed on this kind of offsets, considering that they “cannot physically deliver permanent emissions reductions […and] would require a quality of monitoring and reporting” that is too hard to maintain. And again, unlike EU authorities, ICAO is considered by environmentalists as not rigorous enough to control the emissions trading of the whole aviation sector because they have too much shared interests. All this might end up with no emissions-cut and “tree-planting” greenwashing, that was shown close to ineffective since environmental threats and illegal logging make it impossible to measure the carbon sequestration of forests over time.**** No surprise Swedish ecologist Greta Thunberg insisted on this during her speech at World Economics Forum in Davos, in January 2020.*****
*Datas from CDIAC/Global Carbon Project, projection to 2018 from Global Carbon Project (Le QuĂŠrĂŠ et al. 2018).
- To conclude, the assumption that economic growth is always correlated to a minimum of CO2 emissions growth lays at the heart of carbon pricing, since it was never hidden that its goal is to mitigate climate change with the least negative effects on global markets. It seems obvious for European Commission to compare Europe’s reductions (-23%) with its economic growth (+61%); to show what “tour de force” it accomplished.°° Accordingly, studies diverge about the effects of 2008-2009 global financial crisis (loss of economic growth) on carbon emissions. On one hand, emissions decrease in the US were believed to be caused by gas energy transition, but are suspected to be caused by the crisis.°°° On the other hand, global emissions might have grown faster worldwide following the crisis.°°°° Glen P. Peters, a Norwegian scientist who participated to the later study, considers that in some ways the financial crisis was a missed opportunity to curb future emissions worldwide… A potential next question to open the scope of this carbon pricing series will be: “Will the 2020 economic crisis, that arise from the disastrous COVID19 virus, eventually put some governments on good tracks to Paris pledges, or is it a short minor break on carbon emissions?”
*Consumption-based emissions evaluation is a good way to re-evaluate some low-emissions countries like Switzerland (205% of its domestic CO2 emissions are embedded in trade in 2016) or Sweden (65%); and on the contrary high-emissions countries like China (-13,9%) that have negative results because they export a lot of goods, meaning they “consume” less CO2 than they produce.
 
source: https://ourworldindata.org/co2-and-other-greenhouse-gas-emissions</ref> Yes, scientists agree to say that emissions rates are falling too slowly to meet Paris Agreement pledges. Moreover, now that the majority of progress has been made in advanced industrialized countries by switching coal for gas, the hardest cuts are the ones to come, and they ask for ambitious measures: construction of renewable energy and/or nuclear plants, transition towards less emitting transportation systems, reshaping of agriculture and forestry sectors, etc. Making an efficient system even more frugal will require massive efforts that already well involved countries are not determined to make. For instance, even the EU “star pupil” is confronted to the fact that 55% of its emissions fall outside of its ETS.<ref>Nature website, <i>Prove paris was more than paper promises</i>, several scientists, 2017.
(If eco-capitalism shows inefficiency to mitigate global climate change, what are the alternatives left to mankind?)
source: https://www.nature.com/news/prove-paris-was-more-than-paper-promises-1.22378</ref>
 
Nevertheless, according to European Commission, the GHG emissions of all Member States were reduced by 23% between 1990 and 2018; and they might be on-track to reduce furthermore by at least 40% by 2030 and net-zero emissions by 2050 (2015 Paris Agreement commitment). From 2017 to 2018 for instance, emissions declined by 2%, most significantly in sectors covered by EU ETS.<ref>EU Commission website, Progress made in cutting emissions, 2019.
°Hannah Ritchie and Max Roser, CO2 and Greenhouse Gas Emissions, Our World in Data, 2019.
source: https://ec.europa.eu/clima/policies/strategies/progress_en</ref> However, a large amount of CO2 is embedded in traded goods, making countries able to consume more emissions that they actually produce.<ref>Nature website, <i>Prove paris was more than paper promises</i>, several scientists, 2017.
- Datas from CDIAC/Global Carbon Project, projection to 2018 from Global Carbon Project (Le QuĂŠrĂŠ et al. 2018).
source: https://www.nature.com/news/prove-paris-was-more-than-paper-promises-1.22378</ref> But on the mean time, international aviation saw its emissions increase by 19% in only 5 years (2013-2008), while European flights (only) were covered by EU ETS.<ref>EU Commission website, Progress made in cutting emissions, 2019.
- Consumption-based emissions evaluation is a good way to re-evaluate some low-emissions countries like Switzerland (205% of its domestic CO2 emissions are embedded in trade in 2016) or Sweden (65%); and on the contrary high-emissions countries like China (-13,9%) that have negative results because they export a lot of goods, meaning they “consume” less CO2 than they produce.
source: https://ec.europa.eu/clima/policies/strategies/progress_en</ref> This allows us to digress a bit on aviation, a sector that would be among the top 10 emitting countries if it was considered as such. In 2019, the International Civil Aviation Organisation (ICAO) approved a new offsetting scheme called CORSIA that would force EU to ditch EU ETS for this sector. CORSIA would essentially rely on “forest offsets” (or LULUCF<ref>LULUCF: “land use, land use change and forestry”. In EU commitments, the “no debit” rule ensures that land use emissions are compensated by an equivalent removal of CO2 in the same sector.</ref> offsets), unlike EU ETS that never agreed on this kind of offsets, considering that they “cannot physically deliver permanent emissions reductions […and] would require a quality of monitoring and reporting” that is too hard to maintain. And again, unlike EU authorities, ICAO is considered by environmentalists as not rigorous enough to control the emissions trading of the whole aviation sector because they have too much shared interests. All this might end up with no emissions-cut and “tree-planting” greenwashing, that was shown close to ineffective since environmental threats and illegal logging make it impossible to measure the carbon sequestration of forests over time.<ref>EU Commission website, ETS FAQ n°21 “Will it be possible to use credits from carbon “sinks” like forests?”.
source: https://ourworldindata.org/co2-and-other-greenhouse-gas-emissions
*Nature website, Prove paris was more than paper promises, several scientists, 2017.
source: https://www.nature.com/news/prove-paris-was-more-than-paper-promises-1.22378
**EU Commission website, Progress made in cutting emissions, 2019.
source: https://ec.europa.eu/clima/policies/strategies/progress_en
***LULUCF: “land use, land use change and forestry”. In EU commitments, the “no debit” rule ensures that land use emissions are compensated by an equivalent removal of CO2 in the same sector.
****
EU Commission website, ETS FAQ n°21 “Will it be possible to use credits from carbon “sinks” like forests?”.
source: https://ec.europa.eu/clima/policies/ets_en#tab-0-2
source: https://ec.europa.eu/clima/policies/ets_en#tab-0-2
“CORSIA”, Crtiticisms on Wikipedia, 2020.
“CORSIA”, Crititicisms on Wikipedia, 2020.
source: https://en.wikipedia.org/wiki/Carbon_Offsetting_and_Reduction_Scheme_for_International_Aviation
source: https://en.wikipedia.org/wiki/Carbon_Offsetting_and_Reduction_Scheme_for_International_Aviation
*****“Planting trees is good, of course, but it’s nowhere near enough of what is needed, and it cannot replace real mitigation and rewilding nature.”
</ref> No surprise Swedish ecologist Greta Thunberg insisted on this during her speech at World Economics Forum in Davos, in January 2020.<ref>“Planting trees is good, of course, but it’s nowhere near enough of what is needed, and it cannot replace real mitigation and rewilding nature.”
REDD Monitor website, Greta Thunberg: “We are not telling you to offset your emissions”, January 2020.
REDD Monitor website, Greta Thunberg: “We are not telling you to offset your emissions”, January 2020.
source: https://redd-monitor.org/2020/01/25/greta-thunberg-we-are-not-telling-you-to-offset-your-emissions/
source: https://redd-monitor.org/2020/01/25/greta-thunberg-we-are-not-telling-you-to-offset-your-emissions/</ref>
°°EU Commission website, Progress made in cutting emissions, 2019.
 
source: https://ec.europa.eu/clima/policies/strategies/progress_en
To conclude, the assumption that economic growth is always correlated to a minimum of CO2 emissions growth lays at the heart of carbon pricing, since it was never hidden that its goal is to mitigate climate change with the least negative effects on global markets. It seems obvious for European Commission to compare Europe’s reductions (-23%) with its economic growth (+61%); to show what “tour de force” it accomplished.<ref>EU Commission website, Progress made in cutting emissions, 2019.
°°°Climate Central Website, Recession caused U.S. emissions drop, study says, Bobby Magill, 2015.
source: https://ec.europa.eu/clima/policies/strategies/progress_en</ref> Accordingly, studies diverge about the effects of 2008-2009 global financial crisis (loss of economic growth) on carbon emissions. On one hand, emissions decrease in the US were believed to be caused by gas energy transition, but are suspected to be caused by the crisis.<ref>Climate Central Website, <i>Recession caused U.S. emissions drop, study says</i>, Bobby Magill, 2015.
source1: https://www.climatecentral.org/news/recession-caused-us-emissions-drop-19272
source 1: https://www.climatecentral.org/news/recession-caused-us-emissions-drop-19272
source2: https://www.nature.com/articles/ncomms8714
source 2: https://www.nature.com/articles/ncomms8714</ref> On the other hand, global emissions might have grown faster worldwide following the crisis.<ref>Independent UK website, <i>Recession did not lower CO2 emissions</i>, Steve Connor, 2011.
°°°°Independent UK website, Recession did not lower CO2 emissions, Steve Connor, 2011.
source 1: https://www.independent.co.uk/environment/climate-change/recession-did-not-lower-c02-emissions-6272333.html
source1: https://www.independent.co.uk/environment/climate-change/recession-did-not-lower-c02-emissions-6272333.html
source 2: https://www.nature.com/articles/nclimate1332</ref> Glen P. Peters, a Norwegian scientist who participated to the later study, considers that in some ways the financial crisis was a missed opportunity to curb future emissions worldwide… A potential next question to open the scope of this carbon pricing series will be: “Will the 2020 economic crisis, that arise from the disastrous COVID19 virus, eventually put some governments on good tracks to Paris pledges, or is it a short minor break on carbon emissions?”
source2: https://www.nature.com/articles/nclimate1332
 


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