The General Accounting Office, the investigative arm of Congress, published a report Tuesday analyzing the UN's Clean Development Mechanisms, arrangements under the Kyoto Protocol that allow rich countries to meet their commitments to cut greenhouse gases by investing in projects – such as a wind farm or a reforestation program – that reduce emissions in poorer countries.
The GAO found that the cap-and-trade scheme successfully created a working carbon market, "but its effects on emissions, the European economy, and technology investment are less certain." The report noted that the use of carbon offsets can "undermine the system's integrity" because there is no way to ensure that the projects invested in would not have been built anyway, or that they will last long enough to reduce the amount of emissions that they are expected to reduce. Carbon offsets, the report concluded "involve fundamental tradeoffs and may not be a reliable long-term approach to climate change mitigation."
Yvo de Boer, executive secretary of the UN Framework Convention on Climate Change, said that, while the program can certainly be improved, the fundamentals of the system were sound. Mr. de Boer, who is attending the UN climate summit in Poznań, Poland,
"It's not as though we're printing money in the garage," de Boer told Reuters, adding that there are mechanisms in place to verify the emissions cuts. "There is room for improvement and there are projects that perhaps make it through that shouldn't have...we are in a learning experience."
A complex system
The GAO is not alone in saying that cap-and-trade systems are an invitation to abuse. The Times, a British daily, ran a story this week describing the system as "the greatest and most complex commodity trading market the world has ever seen." It quotes leading US climate scientist James Hansen, who calls the approach "terrible":
“Carbon trading does not solve the emission problem at all,” he says. “In fact it gives industries a way to avoid reducing their emissions. The rules are too complex and it creates an entirely new class of lobbyists and fat cats.”
The Times's Jonathan Leake offers a pungent example of how this can happen:
Daniel Co, a Filipino pig farmer, used to shovel the dung from his 10,000 animals into ponds on his Uni-Rich Agro Industrial farm. The manure generated thousands of tons of methane, a global warming gas, but Co did not want to spend £110,000 on kit to trap the gas.
Then EcoSecurities, a British carbon trading firm, worked out that anything that captured the methane would entitle the farmer annually to nearly 3,000 “certified emission reductions” – the nearest thing to a carbon trading currency.
EcoSecurities did the paperwork for Co and gave him just over £2 per certificate. He put in the methane-capture kit, generating power and saving about £24,000 a year in utility bills. EcoSecurities sells the CERs for about £10 each to a French bank, which sells them on to power plants that need to offset emissions. The consumer pays through higher bills. A nice little earner for everyone except the poor mugs (us) at the end of the chain – but can it save the planet?
Mr. Leake notes that Britains carbon trading sector already employs about 3,000 people and has created "few dozen new millionaires."
Instead of of a cap-and-trade system, Mr. Hansen endorses a straightforward carbon tax. In a letter to president-elect Barack Obama [PDF] last month, the NASA climatologist proposed taxing fossil fuels at the mine, derrick, or port of entry, and turning all of the revenues over to the public:
The entire tax should be returned to the public, equal shares on a per capita basis (half shares for children up to a maximum of two child-shares per family), deposited monthly in bank accounts. No bureaucracy is needed.
A tax should be called a tax. The public can understand this and will accept a tax if it is clearly explained and if 100 percent of the money is returned to the public. Not one dime should go to Washington for politicians to pick winners. No lobbyists need be employed.
The public will take steps to reduce their emissions because they will continually be reminded of the matter by the monthly dividend and by rising fossil fuel costs. It must be clearly explained to the public that the tax rate will continue to increase in the future.
A carbon tax has attracted other endorsements. The consumer advocate and electoral gadfly Ralph Nader and the Canadian journailst Toby Heaps called for a global carbon tax in an op-ed in Wednesday's Wall Street Journal. And in a speech this July, Al Gore said that he has long supported a sharp reduction in payroll taxes with the difference made up for in carbon taxes. "We should tax what we burn," he said, "not what we earn."
Despite these endorsements a carbon tax seems unlikely in today's political climate. Mr. Obama has long endorsed cap-and-trade as a way of achieving an 80 percent reduction in US greenhouse emissions by 2050, and he has shown no signs of changing his mind.