UN CSD-14 New York, May 2006

Delegate: Nicola Creighton
Representing: Feasta, the Foundation for the Economics of Sustainability

Brief: to build contacts, interest in and support for the ARREST campaign (for a real review of the EU emissions trading scheme, www.euemissions.org)

In summary:
Energy was the core discussion topic at CSD-14, both at the core events and the side events and a recurrent focus was energy access for developing countries. For summaries and brief analysis, here’s the link to the Earth Negotiations Bulletin:
http://www.iisd.ca/csd/csd14/

Here is a brief analysis of the side events:
http://www.iisd.ca/csd/csd14/enbots/enbots0511e.html

Thursday brought an interesting session on sustainable energy, for a summary see
http://www.iisd.ca/csd/csd14/enbots/11may2006.html

Representatives of NGOS and other organisations whom I spoke to, apart from those mentioned in the detailed report below and a few others I’m sending follow-up mails (from Winrock Intl, Sierra Club, Global Coral Reef Alliance, Heinrich Böll Foundation, PADEP Consultores, Women’s Netowrk for a Sustainable Future, Red Global Mexico), were either uninterested in ETS or carbon trading generally, or knew little about it and regarded it as something for business and governments that they didn’t need to know more about.

Carbon trading was not something that was on the general agenda at CSD; there was a Side Event on 5 May though (i.e. before I arrived) entitled ‘Mobilizing Environmental Finance for Sustainable Development: The MDG Carbon Facility’, presented by the UNDP, and one on carbon capture and sequestration, by the Intergovernmental Panel on Climate Change. According to the bulletin on these events, carbon trading was not or not substantially discussed at either although JI and CDMs were.

At the Business and Industry Day one speaker referred to the need to redefine the pricing of electricity to take into account externalities. When I pushed the speaker to suggest what ideas for redefinition he had in mind, he fudged the answer and more or less just explained what the externalities were (not insignificant, considering it was a business and industry meeting).

My overall success in building the ARREST campaign was limited but I succeeded in clarifying the positions of some of those who won’t sign and making some contacts who may sign.

Details:

Starting close to home, Frank Corcoran, Chair of An Taisce, whom I thank for arranging a slot for the ARREST presentation at an energy caucus, said he was convening a working group at the EEB in Brussels on the issue of ETS. He suggested that Feasta should be involved in briefing that working group and that it would be a good idea to repeat for them the presentation I did at the UN.

I spoke to Felix Matthes of the Öko-Institut (Institute for Applied Ecology, a non-governmental, non-profit environmental research organisation based in Germany), the leading expert on emissions trading in Germany. Marc Berthold of the Heinrich Böll Foundation, whom I spoke to before speaking to Matthes, suggested that Matthes – and the Öko-Institut – might be ripe for an alliance with Feasta on ETS. Speaking to Matthes himself led me to doubt this, however. In a moment I will clarify why. First, though, I should add that this does not rule him out for ARREST. I asked him to consider signing up and, when writing all my follow-up e-mails this week, will ask him for his decision on it.

So what is his stance? To begin with, he is strenuously against any upstream version of the scheme, contending that the focus must be on the emissions, not on the CO2 content of fuel used, because otherwise, he claims, the discovery aspect gets lost. The price signal must work for business and industry; they have to be the ones faced with the choice of pursuing business as usual or moving towards other energy solutions. We also have to look at the differing price elasticity in each country, he says. Clearly, in those countries with low price elasticity, the price signal given by passing on the emissions trading cost gets lost.

Matthes, like most other sane people at this stage, apart, of course, from those with shares in energy firms, sees a big problem with the NAPs. He forecasts that there won’t be any substantial change on this before 2012, though. There will however be attempts to modify the existing Directive between now and then to the effect that the national governments would continue to set the cap (this has to remain the case initially because of the transitional nature of the scheme, and the national governments are answerable to home industry), but a controlling body would check and ensure each state’s allocations hadn’t been set too high. Auctioning is the way to solve the NAPs problem, Matthes thinks, with the extent of auctioning being increased from one year to the next.

Industry in general (excluding the energy firms for obvious reasons), as we know, is attacking ETS. Producers of non-ferrous metals, an example Matthes cites, are baulking at the scheme because of the resultant high energy prices, which are far from offset by their allocations. It is therefore important, Matthes says, to be cautious in any critique of the scheme to avoid risking its being thrown overboard altogether. (This stance is also adopted, in a more robust way, by Greenpeace. More on them below.)

When I ask Matthes whether he considers the ETS as it currently operates to be counterproductive, he says it is “not only counterproductive”. In some ways it is, he says, providing the right kinds of incentives. It is, he adds, bringing about emissions abatement, as Germany’s figures for 2004 versus 2005 already show.
While he favours a downstream scheme, Matthes also comes out in favour of personal allocation of allowances, indirect allocations, he calls these, to compensate the end consumer for energy price increases. This would also have an incentivising effect. Matthes does not consider the ETS expandable to include the transport sector. The opportunity costs of other policy measures designed for other sectors will, however, likewise be passed on to householders, whose anger at this will have to be carefully channelled, he suggests. Incentives will be key here.

Matthes is looking for linking opportunities with other emissions trading schemes for mutual learning and correction, e.g. in Australia, Switzerland, US (RGGI – Regional GHG Emissions Initiative). Matthes, after years of extensive involvement with the carbon trading issue, is increasingly convinced that it is not possible to go public with it – in other words, he feels that, because of the complexity of the issue, no public campaign could be built around it. In conclusion, when asked where the push for reform or review of ETS would come from if not from the public, Matthes said from national governments under pressure from domestic industry.

Jürgen Maier, Director of the German NGO Forum on Environment Development and one-time Green politician, thinks per capita allocation is pie in the sky and that we’ll never get governments to agree to it because of the redistribution of wealth involved and the lobbying power of big industry to avoid such a move. Like Matthes, he agrees that there are serious problems with the NAPs and that ideally the UNFCCC should provide the framework for a check and balance system for future NAPs, with per capita calculation (but not allocation) of emissions as the basis.

Roque Pedace of Friends of the Earth Argentina, known in COP and UNFCCC circles for elaborating the concept of north to south “climate debt”, opposes personal allocations on the grounds that if allocations were per capita and equal for developed and developing countries, then the historical imbalance between north and south would never be redressed. I suggested that that imbalance was all the more reason to keep the revenue from emissions trading out of the hands of national governments and that should emissions trading go global, there would be a need to incorporate a mechanism for addressing that imbalance. Pedace did not wish to sign, saying I should contact FoE Europe instead.

Steve Sawyer of Greenpeace International did not in fact reiterate the Greenpeace stance I’d heard from, among others, Daniel Mittler, namely that we should be happy to have emissions trading at all and best not tinker with it or it will be scrapped altogether. Sawyer instead concurs with Feasta’s critique of ETS but has reservations about any scheme involving per capita allowances. Like Maier, he sees per capita allocation as a very useful indicator but at the operational level it is, he says, every libertarian’s nightmare. I suggested that there were ways around infringing civil liberties – depending on the body holding the info and the kind of tool used to administer the system – and that there was a discussion going on right now within Feasta of how best to avoid civil liberties problems and the best tools to use (DTQs, the ID card issue, etc.). Steve had his laptop open when I was speaking to him, so I drew his attention to the ARREST website. I said there was the option to sign on behalf only of yourself, not your organisation, but he quipped, and I suppose he’s right, that for him that’s not an option. He said he’d take the briefing with him to Brussels and discuss it with colleagues there before deciding if he can sign.