Why the voluntary carbon market is the only carbon market that matters

A new report out from Environmental Defense (pdf) lays out a critique of the UN’s Clean Development Mechanism (CDM), suggesting it does nothing incrementally positive for the environment beyond the caps set out under the Kyoto Protocol.

We’re fans of mandatory caps. And we’re also fans of offsets as a mechanism to achieve the same environmental benefits at a lower cost. The CDM is a prime example of a mechanism whereby companies and countries can meet their meet their emissions targets by sponsoring reductions in the developing world.

So recent claims from the UN on the success of the program, including the number of projects, and total tons, should give us something (anything! please!) to celebrate in the continued fight against climate change, right?

Well, as the authors of the ED paper correctly point out, no. Every reduction generated by CDM is just an offset for an increase under the caps in the developed world. No net progress is achieved over and above the limits imposed by Kyoto. The report shows this graphically quite clearly. First, the UN divides the world into developed countries (subject to a cap) and developing countries (with no obligation).

Even though they are under a firm cap, developed countries can locate an emissions reducing project in the developing world.

And, once approved by the UN, this can be used to satisfy their obligations.

To experienced climate observers, this is nothing new. After all, CDM and its developed world sister program JI, are called “flexibility mechanisms,” and are designed to make it easier and more cost effective for Kyoto signatories to meet their commitments. Of course, the CDM does serve as a technology transfer institution and is allowing some nations to leapfrog to cleaner solutions. But, for the atmosphere, incremental progress on CDM simply means it is cheaper and easier for Kyoto signatories to hit their targets.

And yet this somewhat obvious conclusion is also somehow startling.

The logical extension of this argument is my somewhat comment-baiting headline — that the only incremental progress on climate change is coming from the voluntary market, where market demand for carbon offsets signals *new* commitments on the part of firms or individuals to address their climate impact.

In short, if you were the earth sensing an oncoming fever, you’d want strict credibility from the UN’s CDM program to make sure these projects were indeed balancing out a rise in emissions from the west, but you’d be looking from incremental progress on the fever from the voluntary emissions market.

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  1. Anonymous - August 29, 2007

    Let’s stir up the pot a little.

    Isn’t population control the potentially only effective way to decrease net greenhouse gas on the planet? Doesn’t a condom, a vasectomy, a tubal ligation, or, dare I say, an abortion have more carbon-reducing bang for the buck than any other offset out there?

    Let me explain my point . . . Let’s face facts about our species: we humans are always going to want more, more, more. That’s just human nature and can’t be changed so why bother? Wanting more, more, more is certainly antithetical to reducing the net cumulative amount of greenhouse gases in the environment and thereby reducing the planet’s temperature. To actually reduce the net amount of greenhouse gases, we have to reduce greenhouse gas production below greenhouse gas absorption. This can be done by decreasing production, increasing absorption, or some combination of both. Let’s consider each of these and then consider why population control is a crucial part of the equation of reducing net greenhouse gases in the earth’s atmosphere.

    Reducing Production

    I would agree that, on the side of reducing production, there is a lot of low-hanging fruit. We have a long way to go to increase efficiency in our energy use (and even conservation if people are so inclined). I would also agree that offsets are an excellent idea, but if offsets ever become mandatory on a worldwide basis (which they should), the cost of offsets will quickly increase for two reasons – increased demand and reduced (or perhaps more costly) supply. The factor of increased demand is obvious. Today, there are a few do-gooders who willingly buy offsets for a few of their activities. My hat is off to them.

    But if everyone suddenly had to buy offsets for all their net greenhouse gas-generating activities, the demand would increase exponentially. The supply of offsets will also become more costly because offsets will clearly obey the law of diminishing returns – i.e. there is some low-hanging fruit but with each offset that is completed, the next offset will become more and more expensive and/or have less and less benefit. As a result, if all else is equal such that science can’t find cheap offsets at a pace to keep up with the exponential demand, the price of offsets will skyrocket and quickly become politically unacceptable. I think it highly unlikely that science could keep pace.

    The other alternative for reducing production is for us to find an alternative energy source that is so clean and so plentiful that we don’t have to make any trade-offs, and we can all continue to have more, more, more. Good luck with that one. I believe that we will get better and better at producing such clean energy, but I doubt that we will ever find a “free lunch” or even find a source of clean energy that can outpace our seemingly insatiable demands.

    Increasing Absorption

    We could increase absorption through our own efforts or indirectly by letting the planet do its thing.

    I don’t believe that science has had much success to date increasing the planet’s ability to absorb and/or process greenhouse gases. But I will keep my fingers crossed that we do find something that can increase absorption. Are there any solar-powered greenhouse gas filters out there that can do the trick???? Admittedly, my knowledge in this area is limited.

    Earth, if left alone, has done pretty well since the planet’s formation in taking care of greenhouse gases. We wouldn’t be here if that were not the case. But nature doesn’t stand a chance with 6.6 billion people on the planet (and growing), and all the cars, homes, cities, arable land, water consumption, etc. that 6.6 billion consume. Like a virus, we seem to reproduce at a rate that outpaces the ability of our environment to cope with us.

    This of course gets me right back to my point about population control . . . Fewer people means less greenhouse gases. If a person is never born, that person won’t need a car, a climate controlled home, an airline flight, a tractor to produce his food, etc. There won’t be any need to erect a windmill to offset the unborn person’s carbon footprint if the person never has a footprint to begin with. Fewer people also means that we may have a shot at catching up in terms of finding a way to have absorption outpace production. (Yes, I know that the child that we abort might have been the child who grows to be the next Einstein who solves cold fusion and thereby saves our planet. To this I would respond, have you seen our public schools lately? There is a lot more to a child’s intelligence than simply being born a genius. It actually takes education.)

    But, but, but . . . what about the ethical issues of population control? Well, to these people, I would first say that I agree that there are some ugly, UGLY issues that come to mind when we open up the issue of population control. But, to these people, I would also say the following: there is going to be population control whether we like it or not.

    If things keep going the way things are going, disease, flooding, rising oceans, loss of resources, and the like are going to impose population control on us . . . unless we evolve gills rather quickly. In the alternative, rather than letting the climate control our population, we could begin to offset our carbon footprint by undertaking population control under our own terms. The choice is ours.

    Perhaps, mandatory caps are really a way of forcing population control. Consider how likely it is that you would have the first, second, or tenth child if you had to pay to offset all the net carbon that you and your children produce in a world where everybody else also had to pay for their net carbon production. It might make you long for a condom. Well, if that’s the case, why don’t we simply jump to the root cause and talk about the real issue at hand – namely population control.

  2. Laura - October 24, 2007

    I couldn’t agree more on population control. There is a show on discovery that touts “they have two six year olds and six two year olds” and i can’t even bear to see the commercials because i become apoplectic. i’m assuming this is in vitro (i could be wrong) which makes me even crazier.

    it would be a positive step if people would wake up and realize that overpopulation is disastrous and act accordingly. some of our mainline churches won’t help on this issue while they march for climate change. i don’t understand that at all. i know people who want babies because they are so cute. yes, but a huge responsibility -not just at home. to the whole world.

    just had to get my agreement in there. i don’t really have deep backup arguements for this, but i would love to read some other opinions and stats, whatever. perhaps its just too obvious to even touch.