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Carbon Market Fundamentalism
 by Daphne Wysham The waste-pickers of Delhi may soon rank among the world’s endangered species if carbon marketscontinue their rise. Now numbering in the tens if not hundreds of thousands, waste-pickers have plied thegarbage of Delhi’s streets for decades. A disturbing spectacle, often including women and children in their ranks, they nonetheless provide a vital service: recycling. In a country like India, paper, plastic and metalsare an increasingly valuable commodity. And for slum-dwellers, this may be their only source of income.And so they join the cows and dogs in a daily forage through garbage by the side of road, searching for  plastic, paper, metals — anything that can be turned into cash.Bharati Chaturvedi, director and co-founder of Chintan, a small non-governmental organization (NGO)servicing India’s waste-pickers, claims that more than 1 percent of Delhi’s population is engaged in waste- picking — a significant source of revenue for the poorest — and that they recycle 9 percent to 59 percent of all of the waste generated in the city. “These waste-pickers are providing a public service — for free,”Chaturvedi says.But a waste incinerator now proposed in Timarpur, a suburb of Delhi, may change all that. Like other incinerators, this one will generate cancer-causing dioxins, mercury, and other heavy metals and persistentorganic pollutants. What’s new and different about this particular waste incinerator: It will generate carboncredits under the Clean Development Mechanism (CDM).The CDM was originally established under the Kyoto Protocol, the climate change treaty, to address theneed to provide new aid to developing countries to acquire and implement new clean energy technologiesand projects. Its intent was also to provide a vehicle for development. However, critics say, the CDM israpidly devolving into a subsidy for some of the dirtiest industries in the Global South and an excuse for inaction in cutting the significant greenhouse gas emissions by developed countries. Dirty industries and banks are growing rich on the schemes: The World Bank, for example, is becoming a major broker of manyof them, charging a 13 percent commission on all of the carbon trades it brokers.The Timarpur incinerator may be the first in a series of incinerators to benefit from the global carbonmarket, despite India’s informal and effective recycling industry and generally hostile posture towardincinerators. Gopal Krishna, a public health researcher at Jawaharlal Nehru University, New Delhi, hadsucceeded in dissuading government officials from accepting other proposals from Australian and Danishincinerator companies in Delhi, based on public health concerns. “We had managed to stop half a dozen of these dubious projects in the past,” says Krishna. “But this time around, in the name of carbon credits,fraudulent claims are being made with impunity.”In addition to Krishna’s public health arguments, there is another reason incinerators have never gotten off the ground in Delhi: “Delhi’s garbage doesn’t have enough burnable matter,” says Neil Tangri, Waste andClimate Change Campaign Director for the Global Alliance for Incinerator Alternatives (GAIA). “It tendsto be too wet, containing too much ash and sand, and non-combustible inert materials.” In other words, notenough combustible products like plastic and paper, thanks in large part to the diligent waste-pickers.But today, with an incinerator contract looming on the horizon, and with it the potential for millions of dollars in revenue from the global carbon market, the political dynamic has changed. These waste-pickersare being harassed by dump managers and actively denied access to the dry, high-calorie items theincinerator will devour.“They are effectively denying a livelihood to the poorest of the poor in setting up this incinerator,” saysChaturvedi. “To take that miserable existence away, it’s criminal. And now we’re seeing skyrocketing food
 
 prices in India. What will these people do? Huge local skills in recycling are now being wiped out, skillsessential for a sustainable society.”An additional problem with the incinerator is what to do with the fly ash left over. “I’ve been all over India,” says Patricia Costner, science adviser to GAIA and the International POPS Elimination Network. “Iknow what happens to incinerator ash. Most of it ends up by the side of the road. There are no engineeredlandfills in India. Fly ash and bottom ash is required to be managed very carefully in most countries, but inIndia, they simply do not have the infrastructure to do that.”Improper disposal of incinerator waste isn’t the only problem: “When waste pickers are denied access tothe waste stream, they go through the ash looking for metal, the only substance to survive incinerationintact,” says GAIA’s Tangri. “I’ve seen people thigh deep picking through incinerator ash for metals.You’re using the human body as a toxic absorber — you’re basically spoon-feeding it to these people.”Despite doubts raised by the Indian government and Supreme Court as to the advisability of incinerators inIndia, one of the most avid proponents of these carbon credit schemes is India’s former minister of environment and forests, Rajesh Kumar Sethi. Sethi was recently elected chair of the executive board of theCDM, the supervisory body that determines which projects qualify for CDM credits. “It would beimpossible for [Sethi] to question any project that has been incorrectly cleared by the Central PollutionControl Board, a board that comes directly under the ministry he used to direct,” says Krishna.
Carbon Trading 101
Little understood by all but a few insiders, carbon trading was established under the Kyoto Protocol andinvolves two types of credits. There are “offsets” and “allowances.” Allowances are the limited number of government-allocated credits that are either auctioned or given away to certain industries within adeveloped country that has signed on to the Kyoto Protocol. One allowance equals one ton of carbondioxide. Polluters that emit more than they are allowed must buy enough carbon credits within their countryor from other designated developed countries (grouped as “Annex B” countries in the Kyoto Protocol) tomatch their allocated greenhouse gas emission levels. Thus, Company A may have exceeded its permittedcarbon allowances by 100 tons, and so buys from Company B, which has managed to reduce its emissions by 100 tons carbon. The theory is: The overall cap is the same regardless of the trade, and the invisiblehand of the market allows emissions reductions to occur with greater flexibility, less “command andcontrol” and produces a “win-win” scenario for everyone involved.The Clean Development Mechanism also permits carbon allowances to be traded between Annex Bcountries and developing countries — countries that are signatory to the Kyoto Protocol but don’t yet havelimits on their greenhouse gas emissions. The problem here is that trading under the CDM is thus occurring between a set of countries that have an overall cap on their emissions, Annex B countries, and a set of countries that have no caps on their emissions, developing countries. In order to avoid bogus emissionscredits being sold by developing countries to Annex B countries, the UNFCCC decided that carbon creditswould be issued under the CDM only if they were “additional” — or “not business as usual.” This conceptof additionality, which requires the proof of a counter-factual, has been all but impossible to verify.The CDM is a subset of an overall category of carbon trading, “offsets,” which critics claim do notconstitute actual emissions reductions. There are two primary markets for carbon offsets: the voluntarymarket and the so-called “compliance” market of the CDM. The voluntary carbon offset market — muchlike the “compliance” one — offers up for sale the replacement of a climate “bad” with a climate “good.”So, for example, if I am going to fly across the country, I will “offset” the carbon emissions from the flight by investing in a tree planting program. Greenhouse gas emissions may rise from my transcontinentalflight; however, I can feel better knowing that I’ve “offset” my flight by investing in a tree farm that willabsorb a quantity of carbon roughly equivalent to my flight. These voluntary offsets tend to be poorlyregulated and therefore cheaper than compliance-based offsets, which have more rigorous — but stillinsufficient, to many — regulatory requirements.
 
Even the “Certified Emissions Reductions” sold under the CDM seem a far cry from actual “emissionsreductions.” In fact, according to David Victor of Stanford University, as many as two thirds of the credits being produced by the CDM from projects in developing countries are not resulting in any emissionsreductions. Victor and Michael Wara, a law professor at Stanford, found in an April 2008 paper thatvirtually all of the hydropower, natural gas and wind projects in China are applying for CDM credits. Yet,clearly, China could not make the argument that none of these projects would have gone forward withoutCDM credits — a key criterion for support under the CDM.A separate study published by International Rivers argues that nearly three quarters of all registered CDM projects were complete at the time of approval, suggesting that the requirement that project developerscould not have gone forward without the “additional” source of CDM funds is being routinely waived.Even compliance-based offsets, such as those sold under the CDM, are proving highly problematic. Withthe price of offsets remaining quite low, the most common form of offsets involves large dams, thedestruction of industrial pollutants and the combustion of landfill methane — the “low-hanging fruit” in acarbon market where the price of carbon has hovered at very low levels.
Policy Goals Achieved? Not Really
The same deregulatory fervor that is playing out in the bankruptcy of Wall Street banks, credit cardcompanies and derivatives traders brought the theory of carbon trading: Open up the free markets — in thiscase, the newly minted market in carbon — eliminate regulatory interventions such as carbon taxes or  precise standards for polluters, and the market will seek out the most efficient means of achieving the sameemissions reductions goals.“None of us is clever enough to work out what is the best way to tackle climate change,” states MatthewWhittell of Climate Exchange, a company that owns the European Climate Exchange and the ChicagoClimate Exchange. “But, if we have a global carbon price, the market sorts it out.”However, early evidence suggests that what is being sorted out is just how much more consumers will payfor an increase in greenhouse gas emissions. The European Union Emissions Trading Scheme (EU ETS),has thus far resulted in a rise in greenhouse gas emissions while profits have skyrocketed for utilities andenergy traders. In a powerpoint presentation entitled, “Citigroup Analysis of the Impact of the EU CarbonMarket on European Utilities,” Citigroup’s Head of European Utility Research Peter Atherton summarizesthe EU ETS this way: “All generation-based utilities: winners. Coal and nuclear generators: Biggestwinners. Hedge funds and energy traders: even bigger winners. Losers?? Herm … consumers!”He goes on to note: “Have policy goals been achieved? Prices up. Emissions up. Profits up. … So, notreally.”Emissions have risen under the EU ETS because companies essentially fudged their numbers at the outset,claiming they would emit more than they expected to, so they would have an excess of permits to sell.Others were equally crafty, and the price of carbon plummeted.A similar fiasco is unfolding in the newly minted Regional Greenhouse Gas Initiative (RGGI) an emissionstrading scheme for U.S. northeastern states launched in September 2008. The RGGI initiative involves ninestates aiming to provide a domestic pilot “cap and trade” market for carbon. Early results from the RGGIinitiative, like the EU ETS, show evidence of over-allocation of permits to pollute and a concomitant dropin the price of carbon, as demand for carbon trades proved virtually non-existent.Recently, the Chicago Climate Exchange (CCX), which claims to be “North America’s only and the world’sfirst global marketplace for integrating voluntary legally binding emissions reductions with emissionstrading and offsets for all six greenhouse gases,” saw its shares drop in value by almost 80 percent from ahigh of $7.50 in June to a low of $1.50 on October 23, 2008. Bankrupt Lehman Brothers was among those“distressed sellers” of CCX shares that drove down the price of carbon on the U.S. markets to one of its
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