CONFERENCE ANTICIPATES EMISSIONS TRADING IN COMPANIES, THE USA AND EUROPE
2. THE CLIMATE CHALLENGE TO INFORMATION AND COMMUNICATION TECHNOLOGY
Quote of the week, illustrating why, in the face of the wasteful spatial layout of the United States, we need to start with emissons trading: Otherwise, in order to achieve the necessary CO2 emissions reductions, "the U.S. would need two to three generations to rebuild the whole country," Professor Dr. Hans-Juergen Ewers speaking at the conference described below
CONFERENCE ANTICIPATES EMISSIONS TRADING IN COMPANIES, THE USA AND EUROPE
Ulrich Mueller (Christian-Democrat), Minister of the Environment and Transport for the State of Baden-Wuerttemberg, opened the conference by distinguishing among the policies being advocated by the European Commission, the German federal Red-Green coalition government and his own state level, "I agree with the Commission that we need a broad debate on the Kyoto instruments". He claimed that the conference was the first event of its kind ever held in Germany; the program is available at http://www.zew.de/flex_mech/frameset.html.
Likewise, Peter Zapfel of the European Commission, DG II, displayed great interest in the Kyoto mechanisms and elaborated on the Commission's May 1999 publication entitled "Preparing for Implementation of the Kyoto Protocol", COM(1999) 230. One of the paper's most salient points, in which Zapfel's fellow speaker Dr. Bergmann of ZEW appeared equally interested, was its announcement that "the Commission is considering organising in the year 2000 a broad consultation of all stakeholders, on the basis of a Green Paper, on the implications of emissions trading in the EU. If appropriate, the establishment of an emission trading system within the Community by the year 2005 could be envisaged," http://europa.eu.int/comm/dg11/docum/99230_en.htm. The entire paper (170 kB) is downloadable at http://europa.eu.int/comm/dg11/docum/99230_en.pdf.
After reviewing eco-taxes and voluntary agreements, the paper emphasises that emissions trading is an important instrument. The existing paper hints at what might come up in the Green Paper. Trading involving companies would have to be based on absolute commitments and reconciled with the Commission's traditional concerns with competition and state aid. One should begin with the most cost-effective measures, probably concentrating on key sectors. Sharing the emissions-reduction burden across sectors would likely involve different instruments. Alternatively, measures taken on the upstream carbon content of primary energy forms would be reminiscent of the Commission's CO2/energy tax proposal made in the early Nineties. Thus "prudent" experimentation with trading should begin with key sectors. The paper considers the future role of official development assistance ODA and a possible code of conduct. The paper advocates that "Multilateral Environmental Agreements (MEA), should benefit from special treatment under WTO provisions." It stresses that EU member states should facilitate participation by the developing countries.
In addition to the political aspects of the Kyoto mechanisms outlined by Mueller and Zapfel, the conference focussed on economic principles as covered by ZEW's Dr. Christoph Boehringer. Basically, Boehringer explained, emissions trading works by equalizing the marginal cost of abatement among the trading partners. His colleague Dr. Tobias Schmidt ran data through ZEW's General Equilibrium Model to show the effect of emissions-reduction instruments on economic growth. Professor Dr. Hans-Juergen Ewers, deputy chairman of one of Germany's top environmental advisory bodies, http://www.umweltrat.de, compared emissions trading with eco-taxes, concluding that with the former "the same avoidance cost yields greater emissions reductions".
Another economist, Axel Michaelowa of the Hamburg Institute of Economic Research HWWA gave an enlightening comparison of the flexible mechanisms. He emphasised that Joint Implementation JI would only amount to 100 Mt of carbon and not start until 2008, whereas the Clean Development Mechanism CDM would start growing next year to a size four times greater than JI, with estimates of the CDM's worth ranging from $14 to 85 billion dollars. Thus the CDM is expected to reach a size comparable with that of official development assistance ODA.
In his comment to Michaelowa, speaker Boehringer even went so far as to assert that the additionality of the CDM is the "biggest issue" of all. Developing countries fear that environmental strings would be attached to the assistance they had traditionally received without such encumbrances; that would comprise conditionality, and they would refuse to sign on to such a treaty.
The presentation of the Russian Dr. Sergey N. Kuraev of the State Committee for Environmental Protection displayed graphically another disadvantage of JI: if the credits from "hot air" become too easily available, the prices of carbon credits could drop precipitously, sending JI entrepreneurs into bankruptcy. High tariffs on imported energy-efficient equipment could be another barrier to the success of Russian environmental policy as a member of Annex I. Dr. Kuraev emphasised that the 70% drop in emissions from 1990-1994 was not due solely to economic collapse, but rather to the fact that recently imposed energy prices were forcing consumers to save.
When participants listened to speakers from the companies actually going ahead with carbon mitigation by market-based instruments, they seemed deeply impressed. Carbon trader Garth Edward, http://www.natsource.com, related how U.S. buyers perceived climate change as a miniscule risk. Then he evoked amazement in his listeners, telling them that "insurance" was being bought against even such "remote" possibilities with dollars and cents through derivatives on the commodities markets already in place for SO2, NOx and CO2. Peter Knoedel of BP Amoco Germany reported how his company trades a ton of CO2 internally at a price around $17, considerably higher than Natsource's level. When his company's emissions-trading system covers all of the company's subsidiaries by next year, it will be the size of Denmark. A consortium of KPMG, DNV and ICF are now verifying last year's emissions against 1990's for BP Amoco. Knoedel reported that the emission-reduction program initiated by his boss Sir John Browne had attracted great public interest, and judging from the many questions posed after Knoedel's slide show, the conference-goers in Stuttgart were no exception.
Two Americans from Washington DC presented creative proposals: the advocacy group Environmental Defense Fund EDF, http://www.edf.org, and the self-avowed non-advocacy group of economists Resources for the Future RFF, http://www.rff.org. Lawyer Annie Petsonk from EDF described a bill to help companies that are willing to take "Early Action" from being disadvantaged by reducing their baselines before the official commitment period begins in 2005 under the Kyoto Protocol. The Early Action bill now before Congress would establish a new form of liability for government when it makes agreements with the business community, thus relieving progressive businesses of the liability that Kyoto might fail or be replaced.
RFF's Ray Kopp was skeptical of the success of the Kyoto Protocol; he based his proposal instead on the commitments made in Rio. According to his idea, government would apply the extremely efficient instrument carbon permit to primary energy forms such as coal and natural gas right at the source, and auction off the permits for a maximum price of $25 per ton of carbon, raising some $35-50 billion per annum. Revenues would be returned in an equitable manner to the U.S. households affected. It soon became apparent that RFF's proposal was similar to a carbon tax, the same idea from the early Nineties that the European Commission had described in its paper cited at the beginning of the conference. The difference this time is that the RFF proposal is designed to be compatible with international emissions trading, most economists' perspective on the future. A volume of conference proceedings will be printed and distributed to participants by the ministry.
2. THE CLIMATE CHALLENGE TO INFORMATION AND COMMUNICATION TECHNOLOGY (ICT)
We at the ASIS project begin with the thesis that computer networks, along with lower transport costs, are helping make possible the current "globalization" of the economy. Many of these ideas come from Professor Dr.Dr. Radermacher, who spoke at the Stuttgart conference on July 27th called "Flexible Mechanisms for an Efficient Climate Policy". He defended the negative-sounding concept of pollution rights as a new form of human rights, essential to billions of people in emerging economies wanting to eat a steak and drive a car. With per-capita emission rights, the poor -- for the first time in their lives -- would have something to sell. If China and India would sign the Kyoto Protocol, the industrialized countries in Annex B should promise in return that emission rights would converge toward a per-capita basis. Otherwise the parties in Annex B would find it impossible to combat climate change by themselves. Professor Radermacher pointed to the 1999 Human Development Report as the most recent public expression of the interplay among technology, globalization, growing North/ South inequality and the need for global governance; the table of contents is viewable in HTML, while the entire document is downloadable in PDF at http://www.undp.org/hdro/report.html.
The Climate Change Action Group continued its debate based on the theses on the potential of ICT outlined at http://members.tripod.com/ruddyconsult/theses.htm. The convergence toward per-capita property rights mentioned in Thesis No. 7, as explained earlier by Professor Radermacher, did not meet with resistance. However Thesis No. 12, which makes core standards, the "regional frameworks of minimum standards" mentioned in Chapter 5 of the HDR above, into a prerequisite for benefitting from technology transfer, would be interpreted by the G-77 developing countries as another form of the detested conditionality. Therefore, the wording should be more focussed on bringing equity aspects into the post-Kyoto agenda. Christine Zumkeller, Axel Michaelowa and Sergio Trindade pointed out how the international negotiation process has not yet found ways to overcome such differences in the standpoints of the North and South as these -- perhaps after 2012 they will.
U.S. Congress Considers Bill to Grant Pollution Credits for Teleworking
Representative Frank R. Wolf from Virginia has a plan that would give companies pollution credits if they let their employees work from home, as reported by the Washington Post on July 20th, http://www.house.gov/wolf/newsrel/1999/19990719article.htm. With his proposal, Rep. Wolf intends to build upon experience he gained in promoting the United States' SO2 permit-trading system and in establishing 17 modern telecenters. If his bill is approved, the National Environmental Policy Institute, http://www.nepi.org, would receive funding for a telecommuting pilot project, "the centerpiece of which is a voluntary pollution credits trading program" for NOx in five cities, including Los Angeles and Washington DC. AT&T Corp., Litton Corp., AOL, Orbital and the Science Application International Corporation have expressed interest. Wolf wants these companies to participate in a regional symposium that would be part of the TeleWork America initiative spearheaded by the International Telework Association and Council, http://www.itac.org. ITAC is holding its annual national conference from 3-6th October in Seattle, WA, USA, from 3-6th October, Seattle, WA, USA, Telework: A Virtual Revolution, $595.00, Phone: +1-800-942-4978, Fax: +1-509-335-0945, e-mail: firstname.lastname@example.org, http://www.telecommute.org or http://www.eus.wsu.edu/c&i
Browse on to next issue
Go back to Archive page
Go back to homepage