Climate Politics

Occupation and privatization

Budapest, 16 April 2007

3 stories

“In India, people see their land taken away and destroyed both for big and ‘sustainable’ developments, for large dams and small hydros (Uttaranchal), new carbon sinks (ITC, Andhra Pradesh), environment-friendly wind mills (Maharashra, Satara), and liquid and gaseous filth from the ‘clean and green’ companies poison their soils, rivers and air. Beyond boundaries of their everyday lives and knowledge, climate games go on with baselines, BAUs, additionality and CER vintages. The Himalayan glaciers meanwhile continue to melt, cloudbursts and flash floods wipe away whole villages, prolonged droughts and extremes of temperature create havoc with agriculture, and cyclones devastate fisherfolk villages. The real and perceptible danger of climate change is offset by the illusion of the most absurd and impossible market human civilization has ever seen.”

Soumitra Ghosh,

National Forum of Forest Peoples

and Forest Workers

[“articulation”]

We do not “consider [Tzankov Kamak] as suitable for the implementation of the Kyoto protocol, ever more since it might be a pilot project in that direction . . . . the Bulgarian energy situation offers a significant potential for profitable investment in energy efficiency which should become a priority for national and foreign investors, including Export Credit Agencies supporting them. One of the most important places for the protection of the priority protected riparian habitat types will be destroyed ”

Balkani Wildlife Society, CEIE, Za Zemiata

CEE Bankwatch:Only six of the 16 installations involved in a World Bank Prototype Carbon Fund Joint Implementation project to use small hydropower plants in the Czech Republic to produce carbon credits represented anything other than business as usual.

Industrial Sector

Annual gift of pollution rights (mtCO2)

+/- Average annual emissions

1998-2003

% of ‘available’ world above-ground carbon dump

Approx. value @ €26/tCO2

(pre-crash)

Power 145.3 -6% 1.5-3.0 €2.180b

Iron/steel 23.3 +16% 02.-.05 350m

Refineries 19.8 +11% 02.-.04 297m

Offshore 19.1 +14% 02.-.04 287m

Cement 10.7 +18% .01-.02 161m

Chemicals 10.1 +12% .01-.02 152m

Other 23.7 +17% .02-.05 357m

TOTAL 252.0 +2% 2.6-5.1 €3.780b

Quasi-Privatization of Existing Global Carbon Dump by the UKProposed National Allocation under

the EU Emissions Trading Scheme, 2005

Windfall profitsfor European fossil fuel-intensive corporations

____________________

BP, Esso, Shell US$ millions/yearRWE (Germany) $1 billion/year

Big six UK generators $1.2 billion/year

CEZ (Czech Rep.) $150 million/3 years

____________________

Czech Republic: In 2005, the electricity giant CEZ received one-third of the 97.6 million metric tonnes of carbon dioxide emission allowances issued to the country. (Only around 90 million tonnes of carbon dioxide were produced yearly in the country before 2005.) This will enable the company to make as much as US$187 million from trading in carbon credits between 2005 and 2007. After having made profits off carbon allowance sales in 2005 when prices were high, the company is looking to buy them back now that prices have dropped. As a result, ‘we’ve also launched more coal production,’ said Chief Executive Officer Martin Roman.

“ETS has done nothing to curb emissions . . . is a highly regressive tax falling mostly on poor people . . . Enhances the market power of generators. Have policy goals been achieved? Prices up, emissions up, profits up . . . so, not really.”

Peter Atherton, Citigroup Global Markets, January 2007

“All generation-based utilities – winners. Coal and nuclear-based generators – biggest winners. Hedge funds and energy traders – even bigger winners. Losers . . . herm . . . Consumers!”

Ibid.

Emissions trading “would make money for some very large corporations, but don’t believe for a minute that this charade would do much about global warming . . . old-fashioned rent-seeking . . . making money by gaming the regulatory process.”

Wall Street Journal, 3 March

“European Commissioner for Energy gives damning verdict . . . ‘A failure’ . . .”

TV Channel 4 Evening News, London, lead story, 7 March

The EU ETS “has not encouraged meaningful investment in carbon-reducing technologies.”

Tony Ward, Ernst & Young, May 2006

“There is no reason to expect that countries will reduce their greenhouse gas emissions to comply with quotas that cannot be effectively monitored and enforced.”

Daniel Cole, Indiana University

• Carbon trading is typical of issues of globalization: neoliberal fixes, technofixes, privatization, etc.

• Climate change and carbon trading will have concrete effects on everyone’s lives.

• Yet both can be addressed only structurally. Because of its gravity and urgency, both climate change and the privatization connected with carbon trading demand a democratizing political movement.

Karl Polanyi, 1944:

“The complete relinquishment of land and labor to the market mechanism would result in the demolition of society.”

”Economic super powers have been as successful today in their disproportionate occupation of the atmosphere with carbon emissions as they were in their military occupation of the terrestrial world in colonial times.”

Andrew Simms, New Economics Foundation

This overuse and unequal use:

• Has provided immense benefits to a few.

• Threatens survival of all, but promises particular immediate suffering to the poor.

Two responses: Delay implementing alternatives

to extraction; try to find new CO2 dumps instead.

Overuse? Cut extraction.

Entrench inequalities through

Unequal use? privatization so big users can keep using most dump space.

Find ways of using dump more equitably.

The first, commonsense type of climate action . . .

• Organize around equal rights to carbon-cycling capacity

• Acknowledge and discuss overuse/unequal use as a political problem that can’t be steered around

• Start by asking what will work climatically rather than what corporations want

• Organize means that directly address the problem: e.g., subsidy shifting, immediate public investment in structural change, antiwar, land rights, legal action, support for existing initiatives at community and other levels, fees and taxation, etc.

The other kind of climate action . . .

. . . carbon trading

CARBON TRADING’S GOAL:To delay or reduce corporate spending on emissions cuts (World Bank: “to reduce the costs of emissions reductions for industrialised countries”*).

TWO MEANS:Emissions trading (“cap and trade”).Trading in carbon credits from

“offsets” or special “carbon-saving” projects.

*Ken Newcombe, Prototype Carbon Fund,, Bonn, 6 June 2000

MEANS #1

Emissions TradingClassroom Theory

A AB B

MEANS #2

Offset Trading (including CDM/JI)Classroom Theory+

Effects on life and livelihoods?

Delays transition away from fossil fuels in the North “tipping points” come closer in South and North.

Slows transition away from fossil fuels in South, too livelihood problems including (again) climate problems.

Provides new finance for corporate or governmental “bad citizens” in local areas, destroying lives and livelihoods.

Trading delays transition away from fossil fuels in the North “tipping points” come closer in South as well.

Why? • ET creates and hands out property rights to the biggest

polluters in the North, increasing their power and the inertia of a fossil-intensive system.

• Neither ET nor CDM/JI selects for immediate investment in long-term structural change in the North.

• Climatic benefits of CDM/JI credits can never be verified, injecting climatically meaningless currency into a system already awash with a surplus of pollution permits. I.e., measurement is impossible for CDM/JI.

• Measurement, while theoretically possible for ET, is currently insufficient, and enforcement is probably impossible.

Trading slows transition away from fossil fuels in the South livelihood problems including climate problems.

Why?• Most CDM projects have zero or negative effects on a

transition from fossil energy: gas capture projects generate 72% of CDM credits, renewables 2% associated effects on life and livelihood.

• Genuinely constructive Southern movements and initiatives are not recognized in the carbon market. Property ownership in purported new carbon dumps is dependent on command of technical Northern expertise. Carbon credit generators (CDM project developers) are generally in conflict with local people.

CDM tends disproportionately to provide new finance for corporate or governmental “bad citizens” in local areas destroying lives and livelihoods.

Why?• Well-capitalized, highly-polluting firms are best

able to hire consultants, get official approval, generate large blocks of cheap credits, etc.

• Local-friendly renewable projects tend to be fiddly, small, expensive per credit generated, and unable to capture green finance.

• The trade is structured in order to annex land, air and community futures in the South.

“The carbon market doesn't care about sustainable development. All it cares about is the carbon price.”

Jack Cogen, Natsource

“[F]ew in the market can deal with communities.”

Rabobank official

Cautions: These are not mere “anecdotes” or “exceptions.” They are (by and large) not “aberrations” that can

be “fixed” but are built into the trading system. Carbon trading is not compatible with more

constructive approaches (i.e., it is not a “mere instrument” or “tool”).

We have a choice.

What’s worse . . .

Equivalences can’t be verified

This gives “carbon consultants” even freer rein to come up with fanciful numbers allowing corporations to swindle, seize assets and close out alternative futures

Business as usual

Negative climatic effects

+

Unverifiability makes gaming easy

Example: 125 MW registered wind project in Karnataka

– Wind energy investments attract accelerated depreciation of 80% in the first year

• Effective tax shelter of 24% of the project cost (at corporate tax rate of 30%)

– Wind energy gets a 10 year income tax holiday– IRR in PDD: 7.3%– IRR without tax benefits calculated by independent observer:

11%– IRR with tax benefits: 22%

Source: Axel Michaelowa, Perspective GmbH

“The argument that producing pig iron from charcoal is less bad than producing it from coal is a sinister strategy . . . What about the emissions that still happen in the pig iron industry? What we really need are investments in clean energies that contribute to the cultural, social and economic well-being of local populations.”

Letter from 50 trade unions, local groups and academics, Minas Gerais, Brazil

% of CERs generated/yr (April 2006)

0

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RNR LH E

“It is widely recognized that . . . [the bulk of CDM projects] have no direct development benefits.”

Holm Olsen, UNEP

The CDM is “not working.” CDM Gold Standard staff member

Join us!

• Exchange information

• Help hasten return to constructive solutions

For more information

http://www.thecornerhouse.org.ukhttp://www.sinkswatch.orghttp://www.carbontradewatch.orghttp://www.wrm.org.uy

Download Carbon Trading: A Critical Conversation on Climate Change, Privatisation and Power from http://www.dhf.uu.se.

Contact Larry Lohmann at larrylohmann@gn.apc.org.

Markets require private property rights

The Kyoto Protocol, the EU Emissions Trading Scheme, etc. require a new global property settlement . . .

. . . which, so far, has transformed industrialized societies’ de facto “occupation of the atmosphere”* into a de jure distribution of assets to them.

*”Economic super powers have been as successful today in their disproportionate occupation of the atmosphere with carbon emissions as they were in their military occupation of the terrestrial world in colonial times.”

Andrew Simms, New Economics Foundation

Conflict among US elites over the Kyoto Protocol

Continue de facto superpower “occupation of the atmosphere”* (status quo)?

- OR -Accept some limits but “propertize” carbon-

cycling capacity to ensure continued dominance through trading mechanisms (Kyoto)?

*”Economic super powers have been as successful today in their disproportionate occupation of the atmosphere with carbon emissions as they were in their military occupation of the terrestrial world in colonial times.”

Andrew Simms, New Economics Foundation

“No Kyoto! No limits!” “Kyoto! Carbon trading!”

“[I]t is not an exaggeration to brand the mechanisms of the Kyoto Protocol as ‘Made in the USA.’ . . . The sensitivity of the Protocol to the market was largely instigated by the negotiating positions of the USA.”

Michael Zammit Cutajar,

former Executive Secretary, UNFCCC, 2004

“. . . the EU – now fully committed to emission trading – was insistent [at first] that trading should be supplementary to domestic action . . . seen as essential to the development of technologies that would open the way to a low-carbon future.” -- Zammit Cutajar

“No Kyoto! No cuts!” “Kyoto! Carbon trading!”

Both of these US-centred approaches (Kyoto and anti-Kyoto) are actively interfering with more constructive approaches . . .

• Subsidy shifting• Public investment in structural change• Taxation• Legal action• Less emphasis on numerical targets and more

attention to historical processes• Recognition that there are no political short cuts• Promotion of public discussion in plain language

rather than the jargon inevitable with carbon trading

• Support for existing initiatives

• The earth might possibly have the capacity to “handle” the equivalent of 5 cubic kilometres of graphite being released to the air each decade.

• But in fact the equivalent of 28 cubic kilometres of graphite are going into the air every decade.

  

+

Windmill Project Satara District, Maharashtra

• The government leased land for a demonstration project in 1996, later buying it from villagers at a cheap price. Four 3.75 MW windmills were set up. Private companies like Suzlon were later invited to invest in windmills in the area.

• Suzlon purchased land from villages within a 20 km radius to expand the project. It has invested Rs. 400 billion in about 1000 windmills

• Other companies like Bajaj Auto, Tata, Star and Sarita Chemicals then invest in the Suzlon windmills.

• The companies sell electricity to the Maharashtra State Electricity Board at Rs.3.16 per unit, at the same time that they consume electricity at a concessional rate of Rs.1.20 per unit.

• The company acquired the land cheaply, having told villagers that they would get employment. But employment has turned out to be contract or daily labor only.

• Grazing – the major previous land use – is now banned on the land occupied by windmills,

• Many villages are are still without roads except roads that serve the windmills. Vankuswade village has no public transportation, and children walk 14 km to school. Villagers are not supplied with electricity from the windmills.

• Wildlife previously inhabiting the area (altitude 2500 feet), including panthers, bears, snakes, deer and bison, has disappeared after the trees were cut.

• When windmill blades stop rotating due to lack of wind, they are rotated by electric power from the Maharashtra Electricity Board.

• A local dam (also applying for CDM credits) produces electricity that helps rotate the windmill blades when necessary. The dam displaced nine villages.

• Although the windmills receive government subsidies, many windmills are not working properly.

• Bharat Forge Ltd., the largest exporter of auto components from India, has invested in 4.2 MW of wind energy capacity.

• The company used its political and administrative connections to acquire land. People who lost out in Kadve Kurd village began protesting in 2001, and a court case is ongoing.

• The company has fought back by framing villagers for theft of equipment.

• Suzlon tried to force Shivram Ahare to sell his land to the project for Rs. 50,000. Later it made death threats, compelling him to leave his village for two months. Only the intervention of a Maharashtra state minister took the pressure off Ahare.

• The company has also tried to derail Ahare’s attempts to use the courts to hold on to his land. One court declared Shivram’s documents outdated. Company agents burned village records Ahare was using as evidence of possession.

BRAZIL

Plantar’s carbon project, Minas Gerais

• Part of the World Bank Prototype Carbon Fund (PCF)

• Carbon credits will finance expansion of already vast eucalyptus plantations by another 23,100ha

• After approx. 7 years trees will be cut to make charcoal – produce pig iron – make steel – manufacture cars – allow more CO2 in the atmosphere

Charcoal

“The eucalyptus planted over here is meant for charcoal. It is a disaster for us. They say it provides jobs, but the maximum is 600 work places in a plantation of 35,000 hectares. And, when everything has been planted, one has to wait for six years. So, what work does it generate?”

“The argument that producing pig iron from charcoal is less bad than producing it from coal is a sinister strategy . . . What about the emissions that still happen in the pig iron industry? What we really need are investments in clean energies that contribute to the cultural, social and economic well-being of local populations.”

Letter from 50 trade unions, local groups and academics, Minas Gerais, Brazil

Demonstration against deserto verde, Espirito Santo, Brazil, 2005.

“We used to produce coffee and pasta and cotton. Several different little factories in their suitable regions. Nowadays, there is only the eucalyptus. It has destroyed everything else. . . . Why do they come to plant in the land suited for agriculture instead of most suitable areas? Because it takes ten to 20 years and over here only seven. All the best pieces of land went to the eucalyptus plantations, pushing the small producers away and destroying the municipalities.”

Jorge, former Plantar worker: “When I started working at Plantar I was

OK. One day I fainted after lunch. I was already applying the insecticides,

fungicides. Then therewere headaches, weakness.

My superior told me, ‘I am firing you because

you do not know if you are sick or not.’ Six or seven

people died. Plantar said it was heart failure. Now I

don’t dare eat the fish from the streams here.”

How nearby indigenous people feel about commercial eucalyptus plantations in their territories.

What people in the Uganda forest department said

“We just have to admit that we know nothing about the trade in CO2, neither how it will function nor how much the foreign investor will profit from it.”

• CEE neither “the Third World” nor W. Europe.

• Yes. With carbon trading, it may get the worst of both worlds – both destructive carbon projects and the rewards to established polluters characteristic of emissions trading.