Is Kyoto Protocol a steal?

By Anil Agarwal
Published: Wednesday 15 March 2000

Global warming is caused by the use of fossil fuels, common examples being burning coal in power stations, running automobiles, etc. What would you then call an instrument that ends up subsidising this same energy economy, making it cheaper, and therefore, even more attractive. And what if the instrument, like the Kyoto Protocol - the agreement to set legally-binding emission reduction targets for industrialised countries - was being implemented in the name of combating global warming.

Why do we say this? The US state department desperate to sell the Kyoto Protocol to its Senate has no choice but to bill the Protocol as "economically effective". It knows that to buy cheap emissions reduction quotas it is imperative to get developing countries to participate through the Clean Development Mechanism (CDM) - a trading system in which industrialised countries would invest in cleaner technologies and would earn credits for the carbon dioxide emission saving in their balance sheet of carbon dioxide accounting.

This will force the South to compete - within a market framework - and will provide the industrialised countries the cheapest, most efficient portfolio of projects to invest in and to get carbon credits. This "meaningful participation" of developing countries, as it is termed by the US government, would mean that at current rates emissions can be bought for as low as US $3 to US $20 for each tonne of carbon saved. This when compared to what it would cost to do the same carbon reduction by taking measures at home, around US $125 is a real steal.

Last month the World Bank joined this "undercutting" business by launching its Carbon Prototype Fund which will develop a portfolio of emission reduction projects to be sold to the cheapest bidder on the world carbon exchange. But this very principle of "economic effectiveness" of the Kyoto Protocol makes it "ecologically ineffective". The cheapest emission reduction options lie with the inefficient fossil fuel economy of the South. Using CDM, the Kyoto Protocol would invest further in the fossil fuel sector increasing its competitive advantage over non-carbon based energy systems like solar and wind. Literally locking out the cleaner energy sources and promoting unclean energy. No wonder the CDM can qualify to be termed the (un) Clean Development Mechanism.

It is clear that the only real answer to avert global warming is for the world to make a transition to non-fossil fuel energy sources. The UN's intergovernmental scientific body studying climate change, the intergovernmental panel on climate change (IPCC), estimates that the world must stabilise its concentration of atmospheric carbon at 450 parts per million by volume (ppmv) by the end of the 21st century to avoid the worst impacts of climate change. The world is already close to emitting 360 ppmv of carbon emissions alone and most of this comes from the industrialised world. Therefore, the challenge of global warming is to reduce emissions in the industrialised North while moving the developing countries towards a non-fossil fuel energy trajectory.

Currently renewable energy is more expensive and therefore less economically viable. But huge investments are likely to be made by the South in its energy systems in the coming years. An estimated 52 per cent of the global investments in energy will be made in developing countries. Once these countries are locked into the fossil fuel grid it would literally mean that the scope for renewables to penetrate would be lost for another century. Global warming is then a certainty. And ironically the Kyoto Protocol with its emphasis on cheap options will actually push the world towards ecological catastrophe.

There is another concern. CDM encourages the current generation of developing countries to sell off their cheaper options today, leaving future generations straddled with high cost options. Economists predict that the many carbon saving options that currently cost as little as US $10-25 per tonne of carbon, could cost up to US $200-300 per tonne in the long run.

When the South has reached high levels of energy efficiency and the costs of curtailing emissions are high, the North will have no economic incentive to buy emission credits from it. And if global warming is still a threat. Which it definitely will be, because industrialised countries would have taken little action domestically, then the pressure on developing countries to take on the expensive emission reductions options is bound to grow.

It is imperative that the world tries to make the Kyoto Protocol both ecologically and socially effective. The world's poor who are not locked into fossil fuel energy and therefore, underutilise their share of the global atmospheric space should be given entitlements to their share of the global commons. This would give them the incentive to invest in zero-carbon emitting technologies even if these are currently more expensive than fossil fuels. But this will demand more political sagacity then we have seen from politicians who continue to protect their dinosaur-age oil and automobile industries.

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