September 2011

You are here: Home » Knowledge Centre » Market news » September 2011

• International Policy Tracker:  Hu’s On First
• African Policy Tracker:  Fifteen Minutes of Fame (and Fossil Fuels)
• Protecting forest roots

If you wish to receive market news updates, please register for our free email newsletter, or call +44 (0)20 7833 6000 to discuss how an effective carbon management strategy could benefit your organisation.  

International Policy Tracker:  Hu’s On First

Public funding for green adaptation is striking out – but a home run for China’s emerging cap-and-trade scheme might convince the US to go to bat.

The Green Climate Fund, the UN mechanism intended to channel an annual US$100 billion in climate finance from the developed to the developing world, will never get off the ground without significant changes, according to a new report from leading analysts Bloomberg New Energy Finance 1.  The Green Climate Fund was established at the Cancún climate negotiations late last year, and a Transitional Committee of representatives from developed and developing countries is currently designing the Fund’s structure and governance.  The funding is expected to come primarily, if not entirely, from government sources.  A number of methods for raising the necessary money have been proposed, including taxes on emissions from aviation and shipping, or taxes on financial transactions.  However, the Bloomberg New Energy Finance report argues that holding out for public money will guarantee the failure of the Green Climate Fund.  The report points out that the proposed taxes would not be politically feasible in most developed countries.  Instead, Bloomberg New Energy Finance sets out a proposal for a comprehensive green finance framework, which would incorporate a variety of private finance mechanisms, primarily cheap debt, to finance climate change mitigation and adaptation in the developing world.

Meanwhile, one form of private climate finance in particular may be on the rise in the US:  Richard Sandor, the economic expert widely regarded as “the father of carbon trading”, stated recently that he is “cautiously optimistic” about the prospects of an American carbon market developing from the bottom up.  Sandor added that among the necessary conditions for a nationwide cap-and-trade system in the US is the success of the cap-and-trade schemes now emerging in California and China.  The Californian system would prove that cap-and-trade could work effectively in an American context, while China’s recent move to pilot regional cap-and-trade schemes could prod American policymakers to follow suit in order to remain competitive in the global market.  “We need to have China surpass us to wake up the politicians in Washington,” Sandor said 2.

Notes
1 Liebreich, Michael.  Towards a Green Climate Finance Framework.  [Online]  Bloomberg New Energy Finance.  Available from http://bnef.com/; last accessed 21 September 2011.
2 Nichols, Mark.  China, California Likely to Dictate US Carbon Market – Sandor.  [Online]  Environmental Finance.  Available from http://www.environmental-finance.com/news/view/1914; last accessed 21 September 2011.

African Policy Tracker:  Fifteen Minutes of Fame (and Fossil Fuels)

South Africa is struggling to reach its carbon reduction targets – and the world is watching.

South Africa’s biggest companies are increasingly taking action on climate change, with many of the country’s top hundred corporations setting voluntary targets to cut their carbon emissions.  However, these corporate pledges are not nearly enough to get South Africa to its national target of a 34% reduction in emissions (as compared to a business-as-usual scenario) by 2020.  Meeting that target (which is non-binding) will mean slashing emissions by 253 Mt of carbon – more than twice the total reduction promised by the nation’s top companies.  It doesn’t help that South Africa’s energy sector has one of the largest carbon footprints of any in the developing world.  A centralised energy infrastructure, relying heavily on coal, has long been a key feature of the government’s policies, and despite South Africa’s commitments to introduce renewable energy technologies, actual development in this area has been slow.  

With the crucial round of global climate change negotiations slated to take place in Durban later this year, South Africa will be in the international spotlight, and the government is eager to be seen as a leader in the environmental field.  The country plans to introduce a carbon tax of 75 rand (about US$10) per tonne of CO2, potentially starting as early as next year; this could rise to as much as 200 rand at a later date.  As the Durban conference approaches, the South African government may well pledge to cut emissions further; however, given the pressures of the country’s brief, intense moment in the limelight, any promises that come without detailed supporting plans should be taken with a grain of salt.

Protecting forest roots

New rules reduce the risk of investing in UK forestry projects.

The UK Woodland Carbon Code, exists to verify the quality of existing carbon reduction projects for investors.  The Code, developed and administered by the UK Forestry Commission, alongside the Department for the Environment, Food, and Rural Affairs (Defra), provides a clear set of quality guidelines for UK forestry projects.  The Code’s standards ensure that registered projects deliver real, measureable carbon reductions through creating and sustainably managing woodlands.  Projects must be independently verified and monitored before they can be approved under the Code, which allows companies to invest in these projects with confidence.  

However, the UK government’s push to encourage domestic forestry projects has opened up a wide-ranging debate over the way the government counts carbon reductions from these projects.  Defra’s most recent guidance states that companies will be allowed to subtract the emissions reductions from forestry projects they fund from their overall carbon footprints.  At the same time, reductions from forestry projects already count directly towards the UK’s national emissions reduction goals, meaning that these reductions are counted twice.  While Defra has made clear that emissions reductions from UK-based forestry projects are not offsets, and cannot be traded as carbon credits, the potential for double-counting has caused concern among carbon experts.