Carbon credit: All’s not well that starts well

By: Satyakam Bharti

On Sunday the Himachal Pradesh government declared that the World Bank has in principle agreed to finance a bio-carbon project in the state, claiming it to the first in South Asia, the modalities for which would be completed by year end. A good beginning, it can be said, to realize those 1,50,000 crore rupees, or was the amount Rs 15,000 crore, the world owns the state.

The state claims to have taken lead in making use of the carbon credit system as enshrined in the Kyoto Protocol, but with the mechanism itself a suspect, not having answers to several questions, both empirical and ethical in nature, it appears the government functionaries and the politicians are doing a lot of boasting and promising a lot where there is actually not much to it. Amidst all this braggadocio, the state may instead end up in a greater mess if the policy makers fail to see through the complexities of carbon trading mechanism, and also the suspected trap that it may actually prove to be.

While the state government has already conjured up dreams of making millions through the mechanism, the draft policy for climate change prepared by the Department of Environment and Scientific Technologies for making use of carbon credits through the Clean Development Mechanism (CDM) offers nothing specific by way of which the state can benefit, except for measures that the environmentalists’ lobby and probably also the common man have for long been suggesting.

As usual, the government appears to be in a hurry to jump on to the banwagon without realising the actual benefit the state can have from it, and in the process jettisoning some of its earlier commitments that could have delivered some good at least. So what are these carbon credits?  In simple words, the purchase of carbon credits is an additional cost of using fossil fuel energy as they are traded to provide Green House Gas emitter the choice of either reducing its own emissions or financing a cheaper emission reduction somewhere. The Clean Development Mechanism (CDM) of carbon trading, instituted in 2001 under
the Kyoto Protocol, enables developed countries to meet their Green House Gas (GHG) reduction targets at lower cost through undertaking project in developing countries.

It was designed as an element of the sustainable development strategy allowing Industrialized countries investing in ‘clean’ projects in developing countries. The system was designed to benefit all the parties, at least on paper. While rich companies saw it as a way to buy off their obligations to reduce emissions, passing the costs on to the customer, developing nations saw it as a way to finance new development and de-industrialized nations saw it as a way to profit from their economic decline. And now it appears our politicians are seeing it as a means of appearing to do something without actually having to do it. A clear indication to this was the recent verbal duet between former Chief Minister Virbhadra Singh and the current incumbent PK Dhumal over claiming credit for introducing the state to earning carbon credits.

The reality is that carbon credit trading is a complex mechanism and may actually have very little to do with saving the earth from global warming or poor countries earning actual cash from it. So while Virbhadra Singh’s statement that by putting up its case of having banned green felling around three decades ago the state can earn Rs 1,50,000 crore can be described as amateurish, Dhumal’s claim that the state would earn Rs 15,000 from it is also misplaced. Preservation of forests and forestation and reforestation on waste lands are crucial for keeping the atmosphere free from greenhouse gases but the Kyoto Protocol does not provide for any incentive for preserving the forests for maintaining the ecological balance.

And even if the state does get compensated for say following the ‘no green felling’ policy, it would further complicate the basic problem of first right over local resources including forests. Imagine a poor forest dweller being denied wood for his fireplace just because a rich industrialist from a rich country paid the local government not to let anybody use the forest. It is sure that a poor forest dweller would gain nothing out of the deal as is evident from the state’s past record in dealing with the rights of indigenous people. The state has for long been practicing some form of ecological imperialism, but now it would be done openly flouting the ethics of equity and justice.

Already facing scarcity of resources, an external premium on such assets may only add to the problem leading to massive impact on the social front as well. Enticed by huge monetary gains, the government may one day even decide to relocate local people to put in place a carbon sink in the form of a newly planted forest. The fear is already looming large with reports that the World Bank has agreed to extend the facility of carbon credit financing to Himachal Pradesh to encourage people to raise forests on private and ‘community’ lands. While no one in Himachal owns big enough chunks of land from where feasible profits could be earned through carbon trading, there are always chances of the community land being misused in the name of earning some revenue by way of denying local people the right to use the land for other purposes. The lopsided management of forest wealth in the last 30 years has already done enough damage to the hyper-local economies of the place as is evident from mass plantation of the pine tree in the hill state just to meet figures.

As per information available, growers will be paid Rs.25,000 per hectare for raising the plantation and Rs.3,500 to Rs.5,000 per hectare annually for 10 years depending on the carbon sequestration efficiency of the plants. The amount hardly makes any business sense, considering that one hectare of land is capable of delivering much more than Rs 5,000 a year. And to repeat the same old foolishness, the state forest department claims to have identified species, which not only have a good capacity of carbon sequestration but also help regulate the hydrological cycle, even if at the cost of disturbing the local eco-system.

The draft policy prepared by the government to earn carbon credits anyways lays too much emphasis on hydro projects, which, as we are all aware, have changed the topography of the state for ever. Now if companies from the western world rush in to fund hydro projects in the state, they will of course offset their baggage of carbon emission but the whole exercise may leave the state in a mess.
The important thing here being that the government should be able to see through to acess the benefits and damages at the local level and not just join the banwagon.

Note: To read the draft report Click Here

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  1. NITYIN
    Jul 21, 2008 - 07:35 PM

    Interesting analysis!

    Has this project been taken over in any other country. Can you point to some links on the subject on the net

    Reply
  2. Matthew Reddy
    Jul 22, 2008 - 11:45 AM

    In order to gauge how beneficial the scheme may be we need to ascertain the carbon price paid. 5000 rs per annum for ten years seems reasonable but what is the sequestration likely over the life of the project? No community should be signing up to less than US $20 a ton.

    Reply
  3. Kanwal Jit Singh
    Jul 22, 2008 - 11:47 AM

    This is a program under REDD – Reducing Emissions from Deforestation and forest Degradation in developing countries -under the Kyoto Protocol. The methodological issues are being discussed and have not been finalised.

    The need for this methodology is documented in Decision 2/CP.13 of COP .

    According to estimates, the emissions arising out of the deforestation is more than the transport sector. According to another estimate, the emissions due to deforestation in Indonesia make it amongst the largest polluters, though on other anthropogenic emissions, Indonesia is very low. Amazon forests in Latin America are the other major location of rapid deforestation.

    It is important to understand that the Kyoto Protocol and the methodologies framed under it are aimed at the anthropogenic emissions and not the biogenic emissions.

    This means that forest degradation is to be arrested, but wastage in the natural process is not to under the purview.

    Carrying the argument further, taking care of natural wastage by removing it also reduced the emissions, since natural wastage leads to decay of the dead wood – which leads to methane emissions. Methane has a Global Warming Potential 21 times that of Carbon Dioxide.

    The result of the programme if implemented properly would be the stakeholders (the poor dependent on the forests, the government departments, etc) working together to remove the natural wastages and planned felling, which is to be compensated by planned reforestation.

    There can be operational issues in that aspect, agreed. However, casting doubts ab initio without appreciating the complete dimensions of the issue, is misplaced journalism.

    Reply
  4. NITYIN
    Apr 12, 2009 - 06:36 AM

    Here is an informative link about Carbon Credits by 'farmer Steve" from North Dakota, United States – A farmer’s view on carbon credits.

    Some good points raised here:

    I own two cows and a goat on three acres of property. Do I get money for the grass on the property or a bill for the cows and goat?<i/>

    and

    An Aussie farmer had grown rows of trees as a wind break and a guy calling himself a carbon trader turned up and told him he could get carbon credits for the carbon the trees were capturing. It turned out he got around $800 for the credits which covered his costs, so the farmer was happy. The trader took a percentage.

    The trader then onsold the credits to a power company that burnt coal – the trader took a second percentage.

    The power company would pass the cost on to the public. You can see who benefits.

    Reply

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