The French government is working towards implementation of a direct carbon tax by July 2010. France’s Constitutional Council struck down the first version of the carbon tax bill last 29 December. On 21 January 2010, the government proposed a number of amendments to the original legislation, which is aimed at encouraging French consumers to be more energy efficient and conscious of their energy decisions.

The first version of the bill was meant to take effect on 1 January; halting its inception has been greatly embarrassing to Prime Minister, Nicolas Sarkozy. The legislation was deemed unconstitutional due to a large number of sectoral exceptions. The new version of the bill will maintain the originally proposed 17 EUR per tonne of carbon dioxide with compensation for households. There has been a reduction in the number of exemptions. Though, certain “sensitive and energy-intensive sectors” will still receive special exemptions. Farming and fisheries will pay just one-quarter of the normal rate; road transport and shipping, will only pay 65 percent.

French Environment Minister, Jean-Louis Borloo, has begun a series of consultations with companies, trade unions, and environmental non-governmental organizations concerning the specifics of the legislation. “The goal is to develop a new draft, which will be sent to Parliament for approval by spring,” spokesman Luc Chatel told a press conference after the weekly cabinet meeting.

Under the new proposal, the tax level remains at 17 EUR per metric tonne of CO₂ at over 1,000 of the most polluting sites. The main innovation of the amended bill is the inclusion of previously excluded sectors, such as power stations, oil refineries, and cement works. These plants were exempted in the first version of the bill because they are scheduled to be subject to a European Union quota system to be implemented in 2013. EU regulation calls for emissions in those sectors to be reduced by 21% by 2020.

In late January, a poll released by ViaVoice showed 51 % of the French public thought the government should abandon the tax proposal. “The carbon tax should not be an umpteenth tax used for filling up the state coffers,” small business union CGPME said in a statement. The French government is addressing this concern. It continues to stress that for businesses of all sizes, combined with the reform of local business taxes, the carbon tax will merely serve to transfer taxation away from work and investment. Yet, the debate continues to focus on how to compensate low income households,; due to inefficiency, the tend to use relatively more fuel and many work at night before public transport is running.

“The best would be for it to be ready in 2010 but it’s true that all these details … are complicated,” Michel Rocard, a former Socialist prime minister, said in an appearance on Europe 1 radio. “I don’t know if we will be ready in 2010.”

Last July, Rocard headed a review report of the potential tax for the government. At that time, the burden of the tax was presented as being divided roughly equally between households and businesses. There is no clear indication of how this division will change under the most recent tax proposal.

After a first round of consultations, the French government has unveiled two options for introducing the tax system into industrial sectors already subject to the European emissions quota system.

The first option would levy the carbon tax on all industries, but the introduction would be at reduced rates for companies most exposed to international competition, as well as for those that are the largest consumers of energy. A series of quantitative criteria (yet to be fully unveiled) will be used in order determine the particular rate of tax.

Additionally, under this plan, companies would be entitled to receive a tax credit on investments aimed to reduce both energy consumption and emissions and to prevent industrial risks.

The second option for the tax would construct a bonus-penalty system. All industrial installations would be subject to the tax of of 17 EUR per tonne of carbon dioxide emitted. Under this second plan, each business would receive a lump sum tax credit, dependant upon its efforts made to reduce emissions.

“This is the beginning of a wider process of reflection and consultation,” Economy Minister Christine Lagarde said after the report was presented.

While most politicians agree emissions must be cut to fight global warming, a key part of the debate is on how to compensate poorer households, workers in certain sectors and those who need to drive because they work at night or live in rural areas.

France aims for an 80% reduction in CO₂ emissions by 2050.

France would be the largest economy to apply a direct carbon tax, mirroring existent measures in Denmark, Sweden, and Finland.

In January 2010, California passed regulation over Green House gases by determining the pollution of fuels coming into California: LA times has coverage here:

“The Air Resources Board voted 9 to 1 in favor of the complex new rule, which is expected to slash the state’s gasoline consumption by a quarter in the next decade”

The move was historic with California, evidently not unnerved enough by the state’s precarious financial position to press on with passing a remarkably progressive piece of Climate legislation.

Continue reading…

Canada has slightly adjusted its mid-term climate mitigation targets to match US pledges. Canada’s Environment Minister, Jim Prentice, recently announced that Canada has changed its mitigation goals in an effort to harmonize with the Obama administration.

Canada’s new emissions reduction target for 2020 is a cut of 17% on 2005 levels. Heading into the Copenhagen meeting this past December Canada’s mid-term target was a 20% reduction on 2006 levels by 2020. This adjustment comes as countries report their national targets to the UNFCCC as outlined in the Copenhagen Accord. The new Canadian commitment has been labeled by environmental groups as being slightly less stringent than the previous target, and well outside the range of targets proposed by the European Union (20% cuts from 1990 levels by 2020, with the possibility of going up to 30%).

On the face of things, Canada’s adjusted target is just another step towards an apparent harmonization between the Canadian and US positions on climate change, something that Minister Prentice has been calling for since taking over the portfolio.

However, differences clearly remain on policy direction and actions for addressing climate change. While Canada will now follow US pledges for 2020, it is not clear if Canada will adjust its long term targets to match those included in legislation before the US Senate.  A climate bill passed by the House proposed a sharp cut of 80% on 2005 emissions levels by 2050, a target that the Canadian government does not seem to be considering.

Additionally, as previously reported on Climatico here, there is a big difference in stimulus spending on green initiatives on either side of the 49th parallel. Reports by the Pembina Institute have suggested that the U.S. is vastly outspending Canada on a per capita basis on renewable energy infrastructure.

In a recent speech in Calgary to oil executives, Minister Prentice indicated that any Canadian action on climate change was contingent on American actions. Critics have argued that this matching of American policy may result in indefinite delays as climate legislation faces an uphill battle in the US Congress.  This position has also resulted in furthering internal political divisions within Canada, as Quebec Premier Jean Charest came out strongly against the federal government policy.

If Canada is to wait for certainty in the American position it could be some time before Canada implements a comprehensive program to reduce emissions, either through a cap-and-trade scheme or through regulation.

While the Obama administration is making moves towards regulating carbon emissions through the Environmental Protection Agency it is unclear how far along Canada’s plans are to similarly regulate industry north of the border.  A plan to regulate emissions from heavy industry in Canada was due to be released last year (a deadline already shifted numerous times) but will now likely be stalled indefinitely.

Wind farm in Africa (Image by: lollie pop)

The United Nations’ Clean Development Mechanism (CDM) adopted a novel project approach to countering or offsetting developed countries’ emissions.  The most visible and controversial component of the Kyoto Protocol has made large political and regional advances since its inception.

However, when it comes to global distribution of the projects that are actually generating carbon offsets, it falls short.  Nowhere has this been felt more, than on the African continent.  But why should this be the case when the CDM was designed to be a means to transfer technology, finances and development to the poorest and most vulnerable countries on the planet?

Reasoning a Failure?

The barriers of CDM expansion in Africa surround emission reduction potential, financing and institutional stability.

Africa’s contribution to global emissions is minimal; UN data estimate that Africa accounts for only 4% (1,500 million tonnes of CO₂ equivalent) of annual world emissions.  Stunningly, 75% of Africa’s emissions originate from just four countries (Algeria, Egypt, South Africa and Nigeria).

Consequently, the carbon mitigation potential in the remaining 49 countries is clearly small.  Per capita emissions in sub-Saharan Africa are the lowest in the world at 0.77 tCO₂(e).  Relatively speaking, the financial costs that accompany these potential mitigations are more expensive than anywhere else, so why would a project developer choose an African country to invest in when better and faster returns can be sought elsewhere?

Potential From Nothing

In spite of the obvious low attribution to Certified Emission Reduction (CER) volumes generated so far in CDM projects on the continent, there is a potential for substantial growth.

A study commissioned by the World Bank, detailed the possible emission reductions which could be actualised by a mechanism such as the CDM.

Key areas include: fuel shifting, improved agricultural processes and industrial energy efficiency schemes.  Importantly, the CDM can accommodate these reduction areas – with small-scale renewable schemes and process changes being effectively undertaken within the CDM.

As it stands, only 120 projects are hosted in Africa; of that, only 65 are in 20 sub-Saharan countries.  It has been estimated that up to 3,000 CDM projects can be hosted in Africa – there is a great deal of development left to be done.

One setback is that a country must have a Designated National Authority (DNA) before any CDM project can be contemplated.  This body is responsible for the regulation of CDM projects in their country.  Unfortunately for most sub-Saharan Africa, there are only 21 DNAs, meaning that many reduction opportunities are missed.

Overarching responsibility for tackling this dilemma ultimately lies with the CDM’s administrative body, the Executive Board (EB) and the UNFCCC.  Only recently has any real progress been made with respect to this.

Delivering the Mechanism

The difficulty is that the CDM has been poorly refined for the special considerations that African countries require.

What progress they made was acknowledged at the UNFCCC negotiations in Copenhagen in December 2009.  Regional distribution was only briefly discussed (mainly due to limitations of actual negotiating time) but it was agreed that the DNA registration requirements would be reduced in countries that have difficulty hosting projects.  The reforms are expected to come into force sometime in the second half of 2010.

A CDM concept that is expected to benefit Africa received little negotiating time also.  It is thought that the programmatic CDM (pCDM), or sometimes known as a programme of activities (PoA), could unlock the delivery potential of the CDM in Africa.

In an effort to reduce transaction costs and generating bigger revenues by facilitating larger economies of scale, the pCDM approach would gather a group of similar emission reduction schemes under the umbrella of one project.  Consequently, this could provide an opportunity to tackle small-scale project barriers.

The number of pCDM projects that have progressed is small, but there are some that have the opportunity to generate substantial emission savings in other developing countries.

The same opportunity exists in Africa.  The pCDM concept could resolve some challenges that currently bedevil the African CDM.  However, a large set of barriers still exist before the pCDM can really live up to expectations – including risks associated to the lack of administrative clarity of the pCDM, high upfront costs and lack of successful experience implementing these unique schemes.

So Africa’s CDM potential categorically exists, but toil is required before it can compete with the emission reductions that are possible in the cheaper and more accessible countries such as Brazil, India or China.   Once unlocked though, the CDM could evolve into the flexible mechanism that was anticipated from the very beginning.

Mystery in China (Image by: **Maurice**)

China’s Copenhagen pledges, along with fifty four other nations, have recently been announced. China has pledged to reduce its carbon dioxide emission per unit of GDP by 40-45% by 2020 compared to 2005 levels, raise the level of non-fossil fuels in primary energy consumption to 15% and increase forest coverage by 40 million hectares with a rise in forest stock volume of 1.3 billion cubic metres by 2020 from 2005 levels.

How significant are these pledges? All of them are as China promised before Copenhagen got under way and as such come as no surprise. As has been much discussed elsewhere, these pledges do not amount to any reduction in carbon emissions, but rather a deceleration of rising emissions. The actual level of emissions in 2020 is therefore very difficult for anyone to predict, with some estimates suggesting that at current growth trends China could still see a doubling of emissions by 2020 with the targets. It is also interesting to note that of those countries that have made some sort of pledge, only China and India have specified emissions per unit. All others have offered some form of real cut, albeit often conditional, if they have made an offer.

A more worrying issue is that verifying these targets will be a serious problem. China has already stated that it has no intention of allowing international verification with the exception of projects that are funded with help from abroad. Without any verification it is difficult to take even these pledges seriously. Chinese statistics are notoriously poor with regular falsification from local level governments. It would therefore come as no surprise to find in the coming years that emission statistics are being falsely lowered by the local and national governments in order to meet these targets.

Moreover, in its emission pledge China reiterates the point that these pledges are on an entirely voluntary basis. This is of course true for all pledges made, but its reiteration serves to drive home how little has actually been accomplished at Copenhagen in terms of concrete emissions targets. Taking all of this into account, it seems doubtful that China will be meeting even these targets in 2020.

Australia’s cap and trade system, the Carbon Pollution Reduction Scheme (CPRS), is being reintroduced into Parliament this week, after two rejections in 2009 (see here and here). However, it is almost certain that it will fail again, following decreasing public support for the policy after the Copenhagen conference and Tony Abbott’s ascension to the opposition leadership.

To start with, public support for Prime minister Kevin Rudd’s flagship policy has dived 10 points from 66 to 56 per cent according to the latest Herald/Nielsen poll, while opposition to the trading scheme has risen 4 points from 25 to 29 per cent. While there has always been a high level of confusion in the electorate about climate change policy, and in particular about the CPRS, the failure of the Copenhagen conference shifted to a certain extent the public sentiment about climate change. In particular, extensive media coverage of a series of ‘scandals’ linked to the IPCC’s work has opened new windows for the numerous Australian and international climate sceptics (see for example Lord Monckton).

However the biggest challenge faced today by the government is without doubt the unexpected come back of the opposition (the Liberals) in the climate debate. The previous opposition leader, Malcolm Turnbull, is a supporter of the scheme, which had greatly divided his party over the climate issue, to the benefit of the government. Yet Turnbull has recently been ousted by Tony Abbott, a strong opponent of cap and trade and climate policy in general, not to say a climate sceptic. The change here is that Abbott has come forward with an alternative to the governmental policy. The Coalition’s (Liberals+Nationals) “Direct action plan on the environment and climate change” would create an AUS$2.5bn fund to provide incentives for industry and farmers to reduce emissions through measures such as storing carbon in soil. The plan also includes the planting of 20 million trees by 2020 and would provide $1000 rebates to home owners for solar cells. The plan has immediately been slashed by environmentalists, Greens and the Labour Party as been unable to lead the country to a minimum 5 per cent cut in emissions by 2020 compared to 2005 levels, as Australia pledged in Copenhagen. While Kevin Rudd has ridiculed the direct-action plan as “a climate con job”, most business groups have backed the plan, agreeing with the opposition Leader’s assertion it is “cheaper, simpler and more cost-effective” than Labour’s proposed carbon emissions trading scheme.

With a now clear opposition to the scheme, the government’s CPRS is very likely to be rejected by the Senate this week. The government would then again have the possibility to trigger an early election, though it would be very unlikely since the next general election will take place this year. In the most optimistic scenario, a cap and trade system would therefore not be voted for another year. Kevin Rudd’s approval rating is still way ahead from his potential challenger, though Abbott’s popularity is rising. But it is surprising that Rudd is not working to rally public opinion: he has not made a speech about climate change in the past weeks and is, instead, trying to change the subject. It is time now for Prime minister Rudd to start campaigning for his cap and trade scheme and explain to people why Australia should be moving when things look bleak internationally.

The extremely high hurricane season of 2005 highlighted the vulnerability of coastal communities to extreme weather events.  The costliest (Katrina) and the most intense (Wilma) hurricanes were recorded in this season.

Hurricane formation is closely linked to sea surface temperature. Climate models agree that the intensity and frequency of hurricanes will increase over the next few decades as a result of anthropogenic climate change.

This poses important developmental and policy challenges to Mexico.

Developmental challenges

The economic losses associated with hurricanes are huge, with post-disaster recovery accounting for 30% of the regional economy.

The most affected States in Mexico are Veracruz, Tabasco, Yucatan and Quintana Roo.

The former two are highly dependent on climate-sensitive activities including monocrop agriculture and fishing. Monocrop agriculture is economically and structurally vulnerable to climate extremes. For instance, farmers in Veracruz often define hurricanes as “the worst of enemies”-not only do they destroy farm plots, they also affect the quality of soil. Climate change disasters therefore pose important challenges to rural livelihood security.

In contrast, the State of Quintana Roo-where the world-famous tourist resort Cancun is located-depends on tourism for its economic viability. Hotels are constructed on the shoreline and are hence very vulnerable to the winds that accompany hurricanes. During the 2005 hurricane season, losses of over $100 billion were reported.

Policies: disaster risk reduction as a strategy for climate risk management

The socioeconomic implications of hurricane risk are clear. The policy implications, however, are not so clear.

The Mexican adaptation strategy deals mostly with progressive changes (such as desertification and long-term water scarcity) but ignores climate extremes. This is because of the institutional arrangements: climate change is dealt with by a number of agencies, including the Ministries of Environment and Foreign Affairs, whereas disaster policy is prepared by the Ministry of Civil Protection. Disasters are dealt with on a more ad hoc basis, depending on the nature and scale of the emergency.

Disasters continue to be treated as “unavoidable”, and so policy tends to be reactive rather than responsive. However, as part of the Hyogo Framework for Action (2005), several countries (Mexico included) have moved towards disaster risk reduction. By linking risk reduction to climate change, it is possible to adapt to future climate threats. In Mexico, institutional commitment has been attained (with all major government agencies accepting risk reduction as a fundamental aspect of climate policy), but no comprehensive achievements have yet been attained.

Major obstacles to the successful inclusion of disaster risk reduction into Mexico’s climate change policy include:

• Lack of involvement of business: it is necessary to sensitise the private sector and to highlight the profitability of engagement in risk reduction strategies (for example, through insurance).
• Lack of community participation: it is necessary to integrate vulnerable communities in climate policies so as to give them a sense of ownership with the projects.
• Lack of experience with risk reduction strategies: it is necessary to develop policies and learn from past experiences.

By integrating the political epistemologies of disaster risk reduction and climate change adaptation, it might be possible to adapt the most vulnerable coastal communities in Mexico to extreme weather events.

Environmentally friendly in Chengdu, China (image by: preetamrai)

Back in the mid-2000s China began to experiment with the notion of Green GDP as a new way of accounting for its growth in an environmental context. This was touched on in a previous blog post, but I thought a more in depth look into exactly what Green GDP showed and why it failed would provide some insight.

The Green GDP for 2004 was published in September 2006 which calculated the loss for the year at 511 billion yuan ($66 billion) or 3.05% of growth. Within that figure it was calculated that water (286 billion yuan) and air (216 billion yuan) pollution were the most significant costs, followed by solid wastes and pollution accidents at 5 billion yuan.

On its publication SEPA director Pan Yue announced that “This marks only the beginning of our efforts in a Green GDP calculation”. But of course it was the first and only year that Green GDP was calculated, its results of near zero (or worse) growth in many areas considered too politically damaging by China’s authorities.

However, the expectation at the time from many such as the World Bank was that Green GDP accounting would show a loss of GDP of between 8-12%, far higher than the actual estimate. Much of this larger estimate owed to large water shortages, air and water pollution, desertification and ecological losses.

And indeed, the SEPA admitted it was a conservative estimate, as it only included environmental pollution costs (such as healthcare for air pollution – direct and relatively easy to measure). A more accurate estimate would also have included not only the costs of environmental pollution but the ecological damage done and the costs of natural resource depletion as well. As a result problems such as soil contamination, desertification, depletion of fish stocks and wildlife etc. had all been excluded from the estimate. Further accounting issues meant that even those items included in the measure were often underestimated or not fully included due to what was described as issues with “localization of departments, limits of technologies, and the limitation of basic data”.

The estimation of Green GDP also suffered further challenges. Such practices are relatively few and far between and most countries have declined to attempt to make them. Any true measure of Green GDP would have to make estimates of goods such as forests which have no obvious market value. Compounding statistical issues is the nature of the Chinese political system. While some regions certainly stood to benefit from the calculation, seeing in it an opportunity to demand greater subsidies from the central government as their environment has been depleted. However, many more local officials objected to the scrutiny that Green GDP would put on them and as a result of pressure they placed on the central government the detailed regional breakdowns were not published.

Future Green GDP results were to attempt to correct for some of these deficiencies and as such it is perhaps not so surprising that the authorities ultimately decided to kill the project before more accurate, and more politically damaging estimates could be made of the true extent of environmental damage in China.

The elimination of Green GDP was a significant step back for the Chinese government’s attempt at environmental preservation and it exposes wider issues facing China’s attempts to repair its environment. One such issue is that any attempt to set targets or evaluate local official performance within the context of the environment is bound to meet strong resistance. At the same time, any attempt to do so is likely to be met with the challenge of insufficient data, issues of computing value and the statistical manipulation that China is notorious for.

What has been made apparent however, is that even with the very low estimates of the Green GDP report, Chinese are at best experiencing a modest improvement in their overall welfare and at the worst may, despite rising GDP, be seeing a fall in their welfare over time. While Green GDP was unpalatable to many Chinese officials, it does suggest that China’s current growth strategy may actually be doing more harm than good today and in the future.

That said, studies (and here for some results from the Index of Sustainable Welfare) into the developed world’s environmental track record (and other factors), pioneered by William Nordhaus and James Tobin in their 1973 paper, suggest that our own welfare may not be doing so much better when we factor in issues such as the environment into calculations of our GDP. While these measures are in themselves contentious and do not solely focus on the environment – the basic point is the same and as such, perhaps China’s reluctance to use Green GDP shouldn’t come as too much of a surprise.