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Transnational Cap and Trade Isn't a Solution to the Climate Crisis

Transnational Cap and Trade Isn't a Solution to the Climate Crisis

Climate change is a global threat that requires a global response. However, for the 5.9 billion people not living in advanced economies, this burden can appear insurmountable. One way some countries are trying to coordinate their climate efforts is through a transnational cap and trade policy. California, for example, is considering a plan to expand its cap and trade program to allow its biggest polluters to offset their carbon reduction shortfalls by supporting conservation efforts lead by indigenous populations in Brazil. Such a plan raises one glaring question, especially in the context of the 21st Conference of the Parties (COP21) to the United Nations Framework Convention on Climate Change (UNFCCC). If the parties in question are still expected to reduce carbon emissions within their own states, is it enough to support conservation efforts while allowing for emissions overages domestically?

Innovative ideas are needed to funnel more money to the developing world--in many respects on the frontline climate change--but such cap and trade programs may not be the solution.

Falling Short

One of the primary outcomes of the COP21 agreement in Paris was the commitment from advanced economies to contribute $100 billion a year to sustainable development projects. Included within these programs are those that build resilience by promoting adaptation projects meant to prepare for climate changes that are already on the horizon. However, $100 billion dollars--especially when spread across developing countries and emerging markets--may be only a fraction of a drop in the ocean. For instance, a 2013 World Economic Forum (WEF) report states that

“Greening investment at scale is a precondition for achieving sustainable growth. The investment required for the water, agriculture, telecoms, power, transport, buildings, industrial and forestry sectors, according to current growth projections, stands at about US$ 5 trillion per year to 2020.”

$100 billion is woefully short of the WEF recommendation, but more damning is a recent analysis from the Brookings Institution that indicates that the money is having little discernible impact on sustainability. The OECD claims that $64 billion a year has been raised for the broader climate finance project, but Timmons Roberts and Romain Weikmans write:

“We independently re-checked how 5,201 projects that OECD countries labeled as having adaptation to climate change as a “significant” or the project’s “principal” objective. We found that about three-quarters of those projects lacked a clear connection to addressing vulnerability to climate change. Instead of the $10.1 billion in adaptation projects claimed in 2012, we were only able to verify that $2.3 billion was clearly adaptation-related.”

Global Responsibility & Consequences

There remains some hesitation over whether or not wealthier economies should fit the bill for poorer companies. The administration of US President Barack Obama, one of the greenest presidents ever to hold the office, has categorically refused the notion that any debt is owed. Obama’s climate negotiator Todd Stern said at the 2009 Copenhagen talks that he “completely [rejects] the notion of a debt or reparations or anything of the like.” However, while climate change is a global issue, the new inconvenient truth is that advanced economies have disproportionately contributed more to the crisis.

The biggest contributors to greenhouse gas emissions are, in order, China, the United States, the European Union, India, Russia, and Japan. It’s also worth noting that advanced economies-- like the United States, the European Union, and Japan--have been polluting the environment for much longer and more aggressively than their co-polluters in emerging markets and the developing world. The United States alone is responsible for a quarter of all carbon emissions ever due to burning fossil fuels and deforestation. In addition, there is another climate divide by wealth:  the poorer half of humanity’s contribution to carbon emissions is just 10%, while the richest tenth contribute 50%. Much of the pollution from emerging markets is the result of the displacement of industrial manufacturing processes that supply finished goods to the developed world to begin with. Finally, the impacts of climate change will affect developing countries sooner and more intensely than it will advanced economies.

The consequences of failure have also recently been discussed in horrific detail and should serve to communalize the burden. Recent reports indicate that even under best case scenarios water scarcity and rising temperatures could render much of the Middle East and North Africa uninhabitable, spurring a migration crisis that may dwarf that of the current Syrian dilemma--a conflict in itself that to some degree may have been precipitated in-part by climate change. Under worst-case scenarios, such a crisis may extend to Sub-Saharan Africa as well as Central and Eastern Asia. This human cost is only the tip of the iceberg (literally) as glaciers continue to melt and parts of the ocean become more acidic or depleted of oxygen.

Is Global Cap & Trade the Solution?

A damning report from the Stockholm Environment Institute (SEI) exposed cap and trade programs in the European Union as little more than effective masks for countries’ refusal to engage in much needed market interventions. Rather than a decrease in carbon emissions, SEI’s report suggests that exchanges have resulted in 600 million additional tons of carbon being released than had such agreements not been in place. This raises serious concerns for California within the context of the massive subsidies put in place to protect the biggest greenhouse gas polluters like agribusiness and big oil--those are more or less third rails in American politics.

SEI places blame on the failure of these cap and trade schemes squarely on the lack of impartial oversight. National authorities want to meet demands to reduce carbon emissions and they have no qualms about exploiting an inadequately regulated cap and trade system to promote such a facade. SEI recommends that members under such schemes be bound by standardized international methodologies when measuring their projections and should overall be more transparent about such processes. But that’s a tough sell globally, and perhaps more so in the United States. Few actors would submit what might otherwise be independent trade initiatives to rigorous international oversight. And if the TTIP negotiating process has demonstrated anything, it’s that trade partners abhor transparency. There’s little doubt that such preferences are not carried over to carbon credit trading.

Cap and trade is a potentially transformative strategy in theory, but only if there is an aggressive and impartial monitoring process. However when it comes to international mitigation and adaptation initiatives, it’s better that they be kept separate from domestic greenhouse gas reduction strategies. A carbon tax would have the same domestic effect and could be used to fund domestic green initiatives. Furthermore, while working with locals to protect the Amazon is a worthwhile endeavor--one that the United States should recognize is in its national interest--the notion that polluters can be leveraged to pay for global sustainability efforts by allowing them to skirt reduction commitments is one that leaves both domestic and international partners spinning in circles.

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