How the World is Responding

The obvious solution is to dramatically reduce our dependence on fossil fuels.  But the vast majority of our power stations, businesses, cars, homes and aircraft are currently dependent on fossil fuels.  Without major shifts in our patterns of production and consumption, they will not be replaced with renewable alternatives within the next few decades.

Responses to this enormous challenge are divided between those driven by regulation (mandated by governments) and voluntary actions which go beyond or pre-empt regulation.  The CarbonNeutral Company has been leading the way in voluntary action on climate change for businesses, Governments and individuals for over 10 years.

The Kyoto Protocol

The Kyoto Protocol of The United Nations Framework Convention on Climate Change (UNFCCC - http://unfccc.int) is the foundation of most regulatory initiatives to control climate change.  Ratified by 163 countries (December 2006), the Protocol is a legally binding treaty committing industrialized countries to reduce their collective greenhouse gas emissions to 5.4% below 1990 levels by 2012. 

The Protocol provides three flexibility mechanisms which give the participating nations cost-effective means to achieve their targets.  These are:

1.  Emissions trading.  This enables participating countries with emissions targets to purchase carbon savings from one another in order to fulfill their Kyoto commitments.  The European Union’s Emission Trading Scheme (EU ETS) is the most advanced, in which EU Carbon Allowances (known as EUAs) are traded among EU member states.

2.  Joint implementation (JI).  This allows developed countries to purchase carbon credits from GHG reduction projects implemented in another developed country or in a country with an economy in transition (specifically from the former communist countries of Eastern Europe).  Emission reductions from JI projects are called Emission Reduction Units (ERUs).
3.  Clean Development Mechanism (CDM).  This is another project-based transaction system enabling industrialized countries access to carbon reductions by financing carbon reduction projects in developing countries.  Carbon savings from CDM projects are traded as Certified Emission Reductions (CERs).

While Australia and the United States chose not to ratify the Kyoto Protocol, state (as opposed to Federal) governments in both countries have initiated their own regulatory processes.  The most prominent is the Regional Greenhouse Gas Initiative set-up by eight states on the East Coast of the US, which includes a regional strategy to reduce carbon emissions using emissions trading.

The first regulated system of carbon trading

Free market systems work efficiently when the full cost of goods and services are known and factored into carbon trading.  Market systems fail when goods and services are not correctly priced.  Until recently, our economic system has not been able to price the value of our stable climate because it has been difficult to put an economic value on a unit of GHG emitted to the atmosphere.  When units of pollution (e.g. tonnes of carbon dioxide emitted to the atmosphere) are translated into units of property (emission reduction units or carbon credits), carbon emissions trading can be used to more properly price the value of a stable climate within the free-market economy.

Over the longer term, progress towards a stable climate requires new low- and no-carbon technologies.  We need to invest in the research required for their commercial development.  And we need to create strong market demand or pull for these new, and sometimes more expensive technologies.  To allow them take root, it must be more expensive to emit greenhouse gases than not.  That is where carbon trading has a key role to play.  By including the price of GHG emissions in our market system, we encourage better informed decisions about when to invest in new  technologies that avoid the ‘costs of carbon’.

Carbon markets make it possible for organizations in one part of the world to exchange carbon credits with another in a different zone.  Considering the nature of climate change, this is a powerful factor, because the concentration of GHGs in the global atmosphere is not affected by the physical location of the source of emissions.  Once markets take shape, emitters have the option to reduce emissions internally at source (for example by investing in energy efficiency measures, new technologies or processes), or to purchase emission reductions (carbon credits) when this is cheaper than reductions at source. 

Voluntary Action

Despite the urgent need to reduce global emissions, less than a third of global greenhouse gas emissions are managed within regulated regimes. 

Even if mandated target reductions are achieved, they will lead to a reduction of less than 3% of global emissions against a 1990 baseline by 2012. 

In the meantime, countries outside of the regulated systems are increasing their emissions substantially.   So, the world has yet to implement an effective means of reducing emissions in absolute terms.  It is also worth noting that the Kyoto Protocol is only designed to run until 2012 and plans to extend it or replace it with further regulated requirements are not yet agreed.

The huge discrepancy between the reductions likely to be delivered by regulation, and the scientific estimate of what is actually required to protect our climate has stimulated the rapid rise in voluntary action. 

Voluntary action happens when individuals, businesses, and public agencies voluntarily set out to measure, and reduce or offset (i.e. compensate for) their greenhouse gas emissions, beyond or before being required to do so by regulation.

Perspectives on Key Issues

About Climate Change:
www.metoffice.com/research/hadleycentre/  The UK’s Met Office Hadley Centre for Climate Change provides a focus in the UK for the scientific issues associated with climate change.

http://epa.gov/climatechange/  The US EPA's Climate Change Site offers comprehensive information on the issue of climate change in a way that is accessible and meaningful to all parts of society – communities, individuals, business, states and localities, and governments

www.bbc.co.uk/climate/  The  British Broadcasting Corporation’s Weather site for Climate Change provides evidence and impacts of climate change and how society can adapt to it.
www.tyndall.ac.uk/  The UK’s Tyndall Centre brings together scientists, economists, engineers and social scientists, who together are working to develop sustainable responses to climate change through trans-disciplinary research and dialogue on both a national and international level  
 

About Carbon Markets:
www.ecosystemmarketplace.com is a leading source of information on markets and payment schemes for ecosystem services, and author of ‘Voluntary Carbon Markets:  An International Business Guide to What They Are and How They Work, Earthscan, 2007.

www.worldbank.org publishes an annual review of carbon markets.  The last was Capoor, K. and Ambrosi, P. ‘State and Trends of the Carbon Market 2006’, World Bank, Washington DC.

www.pointcarbon.com is an advisory and information services which provides daily information covering developments in climate change and carbon markets.

www.carbonfinance.com publishes Carbon Finance, a monthly newsletter and e-mail update service providing in-depth coverage of the global markets in greenhouse gas emissions.

Dissenting views:
http://www.thecornerhouse.org.uk  The Corner House produces a wide range of briefings and documents on topical environmental and social justice issues.  It has published a number of papers critiquing the value and ethics of carbon trading and carbon offsetting.  See for example, ‘Carbon Trading:  A Critical Conversation on Climate Change, Privatisation and Power’ Larry Lohmann, October 2006.

www.lomborg.com is the home site for Bjorn Lomborg author of ‘The Skeptical Environmentalist:  Measuring the Real State of the World’ 2001 in which he challenges widely held beliefs that the global environment is progressively getting worse.

http://en.wikipedia.org/wiki/James_Lovelock is the Wikipedia site where the work of celebrated scientist, Dr James Lovelock is reviewed.  Lovelock published The Revenge of Gaia: Why the Earth Is Fighting Back - and How We Can Still Save Humanity in 2006, making the case that it is too late to avoid significant global heating and significant climate change, predicting that much of the Earth's surface will be less hospitable for humans. As a result, there will be inevitable, major decline in the human population over the next hundred years.