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Tuesday, Oct 7, 2008
A world market for buying and selling pollution credits is poised to take off and could be our best chance to stop global warming. Too bad George Bush won't let it happen.
Jun 4, 2003 | Fifteen years ago, Mark Trexler developed the world's first agroforestry project aimed at offsetting the environmental impact of industrially produced carbon dioxide emissions.
The awkwardly titled AES/CARE Guatemala Agroforestry and Carbon Sequestration Project was based on a straightforward premise: Scientists believe carbon dioxide is a major contributor to the greenhouse effect. Trees remove carbon dioxide from the atmosphere as they grow. A large-scale reforestation project in Guatemala, therefore, would help cancel out, or "offset," the carbon dioxide emitted in North America by AES Corp., an American electricity company. The project would also displace emissions-producing activities such as logging and slash-and-burn farming.
Today, Trexler is the president of Trexler and Associates, a pioneering climate-change mitigation services firm in Portland, Ore. He travels the globe locating and developing carbon-offset projects for the private sector. These range from rural solar-electrification projects in India to methane gas recovery efforts in Ohio.
Some of the companies he works with, such as New Hampshire's Stonyfield Farm Yogurt, are reducing their greenhouse-gas "footprints" as part of a socially responsible business ethic. But the big-time polluters, such as J-Power, one of Trexler's energy-sector clients, are hoping to capitalize on market opportunities arising out of global climate-change concerns. Their goal is emissions trading, in which companies buy and sell greenhouse-gas emissions reductions (acquired from carbon offset or mitigation projects) on the commodities market.
In an emissions-trading market, a steel refinery in Gary, Ind., could purchase the pollution credits generated by a reforestation project in Guatemala. Theoretically, the incentives provided by such a market would lead to a boom in carbon-offset projects and an overall decrease in the amount of greenhouse gases present in the earth's atmosphere.
Several recent developments suggest that the global market for greenhouse-gas emissions reductions is heating up. Last December, Canada ratified the Kyoto Protocol, which mandates limits on pollutants that contribute to global warming. The international treaty is now just one vote short of becoming law in 100 countries. The European Union has already adopted plans for full-scale trading in greenhouse-gas emissions reductions, the key market mechanism under Kyoto. And this June, trading begins on the Chicago Climate Exchange, the first CO2-emissions reductions market in the United States.
"The carbon emissions trading market," proclaims CO2e.com, a London-based global greenhouse-gas brokerage, "has arrived."
Not everyone is so optimistic. Trexler, a lead author for the Intergovernmental Panel on Climate Change, whose scientific assessments helped create the political momentum behind the Kyoto Protocol, is one of the skeptics. For one thing, maintaining the environmental integrity of a global emissions-trading system is an enormously complicated task, he says, prone to all kinds of corruption and sketchy science. But even worse, in 2003 the major roadblock facing the development of a legitimate emissions market is the Bush administration, whose antipathy toward the climate-change issue in general and the Kyoto Protocol in particular means that, so far, U.S. companies have little incentive to reduce their greenhouse-gas emissions.
Even if the rest of the world endorses the treaty, says Trexler, it remains to be seen whether an international trading system can get off the ground without the participation of the United States, where most of the demand for emissions reductions would come from.
"To create a successful trading system you have to create a scarce commodity," he says. "So without the political initiative to regulate greenhouse gases, you can't have a trading system." The United States' failure to endorse the principles of the Kyoto Protocol is exactly why Trexler is hesitant about predicting a "meteoric rise" in market activity. "A couple of years ago, there were expectations that the global greenhouse market would be a $10 billion enterprise by 2010," he says. "But now whenever I see my broker friends in New York, they say, 'Jeez, when is anyone going to start making money on this deal?' Because it hasn't really materialized."
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