China, India Smile as West Overpays for Climate: Andy Mukherjee
By Andy Mukherjee
Feb. 21 (Bloomberg) -- Governments in rich nations are spending billions of dollars to buy a clearer conscience over climate change. Are they getting their money's worth?
Enlightened individuals, those who stay awake at nights wondering what they can do to prevent the polar caps from melting, at least have a growing menu of choices.
Sydney-based Easy Being Green says it will mitigate your cat's flatulent contribution to global warming for A$8 ($6). The same company could also make your granny ``carbon-neutral'' at A$10 a year, according to a report in the Australian newspaper last weekend.
Then there's Carbon Planet Pty, another company cited in the article. If you are hopping on a short-haul flight between Sydney and Canberra, and feeling bad about the damage you are doing to the ecosystem, you can buy credits worth A$23, for which the Adelaide-based company will guarantee to keep 1 ton of carbon dioxide out of the air for 100 years.
By comparison, the governments that have undertaken to cut greenhouse emissions under the United Nations' Kyoto Convention on Climate Change have chosen a tougher -- and more expensive -- route to guilt reduction.
Michael Wara, formerly of Stanford University's Program in Energy and Sustainable Development and now a lawyer at Holland & Knight LLP in San Francisco, made that point in a much-publicized article in the science journal Nature this month.
Countries that must purchase emission credits to atone for their higher-than-mandated production of carbon dioxide are paying a tiny group of chemical manufacturers in China and India massive sums to reduce industrial gases and methane, which are rather inexpensive to capture and destroy, Wara says.
China and India
The improvement that can be obtained by spending just $31 million on incinerators could cost developed nations as much as 750 million euros ($986 million) through the elaborate trading mechanism of the Kyoto Protocol, and even then only two-thirds of the problem would go away, Wara estimates.
China and India are getting a prize for producing lots of hydrofluorocarbon-23, one of the six greenhouse gases under the Kyoto Protocol. One ton of it is considered the equivalent of 11,700 tons of carbon dioxide.
Six Chinese companies have consented to be paid to destroy this toxic byproduct of a gas used as a common refrigerant and a Teflon feedstock. Their total commitment is more than 43 million tons of carbon dioxide equivalent per annum. India, with two registered projects, is second with about 7 million tons. Thus, barely eight chemical plants in China and India control about 44 percent of the existing annual supply of emission credits.
That's a very high level of concentration, considering there are 506 projects in more than 40 nations that are currently registered under the Kyoto Protocol's trading system, known as the Clean Development Mechanism.
Kyoto Protocol
The total greenhouse reductions taking place through the trading system are expected to exceed the combined annual emissions of Canada, France, Spain and Switzerland.
All of this is making politicians optimistic.
A caucus of lawmakers from developed and developing countries agreed in Washington last week on the need to replace the Kyoto Protocol after it expires in 2012. There is a good chance the U.S., which hasn't accepted a binding commitment so far, may also change its mind.
U.K. Prime Minister Tony Blair told the British Broadcasting Corp. that the Group of Eight industrialized nations has a real chance to have the outline of a new agreement in June.
A new accord will be good news if it leads to the planting of trees, commissioning of wind farms or other projects that directly make a difference to carbon-dioxide levels. That's where the developed world's money ought to go.
Reforestation, Energy Savings
So far, just one reforestation project -- in China's Pearl River basin -- has come under the ambit of emissions trading. It would cut the equivalent of 26,000 tons of carbon dioxide annually. A hotel in the eastern Indian city of Kolkata has sold to the U.K. government an even more humble 3,000 units of carbon dioxide savings, derived from the replacement of electric heaters by solar-powered ones. We need thousands of such projects.
Otherwise, emission trading would continue to represent a disproportionately high subsidy from the developed to the developing world to clean up industrial byproducts. These are so harmful that they ought to be captured by chemical companies without any incentives being given to them.
Perverse Incentive
These gases have ceased to be a problem in rich nations where companies such as DuPont Co. do a good job of destroying them at their own expense, Wara says.
Gujarat Fluorochemicals Ltd., the first company from India to join the Clean Development Mechanism, reported earlier this month that it had tripled its revenue in the quarter ended Dec. 31 from a year earlier.
Shareholders have earned 662 percent on the stock since March 2005, when Japan, the Netherlands, Italy and the U.K. agreed to pay the company to destroy hydrofluorocarbon-23.
Italy may pay 12.8 billion euros over the next four years to buy emission credits, the newspaper Finanza & Mercati reported last week. That's about the equivalent of the annual gross domestic product of Iceland.
That kind of money may be a beginning, though it's very doubtful that we will be breathing a lot easier because of it.
(Andy Mukherjee is a Bloomberg News columnist. The opinions expressed are his own.)
To contact the writer of this column: Andy Mukherjee in Singapore at
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