The politics of "meaningful participation": how meaningful is meaningful? | Centre for Science and Environment

The politics of "meaningful participation": how meaningful is meaningful?

A. Will the US ratify the protocol? India and China hold the key

In the pre- and post-Kyoto world one thing remains the same. According to US senators it will be countries like India, China and Mexico which will decide if the US will ratify the Kyoto Protocol. The US position has been carefully orchestrated that its action will be dependent on the action of developing countries. In the pre-Kyoto days, the US industry launched an advertising blitz to convince the public that a strong treaty on climate would, on one hand, increase the prices of everything — from oil to eggs — and, on the other hand, developing countries like India, China and South Korea will get a free ride while US consumers will foot the bill. Industry stressed it would lose its competitive advantage.

The US position has been carefully orchestrated to be dependent on the action of developing countries

This position became the pillar of US negotiations — and remains so. President Clinton clearly stated that his country will not agree to "binding obligations unless key developing countries meaningfully participated in this effort."

In July 1997, the US senate passed a 95-0 non-binding Byrd-Hagel resolution which called on the president "not to sign any treaty or agreement in Kyoto unless two basic conditions were met. First, the resolution directed the president not to sign any treaty that placed legally binding obligations on the United States to limit or reduce greenhouse gas emissions unless the protocol or agreement also mandates new specific scheduled commitments to limit or reduce greenhouse gas emissions for developing country parties within the same compliance period. The second requirement of the resolution was that the president should not sign any treaty that would result in serious harm to the economy of the US."

This resolution continues to shape the US position. Responding to criticism by John Passacantando, director of an NGO called Ozone Action, Senators Robert Byrd, a Democrat and Chuck Hagel, a Republican, defended the role of the Senate in determining the US policy on climate change. "Our legislative branch is not meant to be a rubber stamp for our executive branch. The administration can negotiate but only the Senate can provide the consent necessary to give any treaty the force of law in the US." They insisted also that "the agreement reached in Kyoto does not meet either of the criteria laid out in the Byrd-Hagel resolution." And until the tests were met, the protocol should not be signed by the President3.

What is now also evident is that the US negotiating position is crafted on this basis. Its first step was to ask for something vague and undefined as "meaningful participation from developing countries" so that the ball would move to developing countries to say what they could do and of course, the US could easily dismiss it as "not meaningful enough". If the US had proposed, most likely, everyone would have opposed. Therefore, it was best to leave it undefined, but threatening. The US strategy also included making it clear that it would walk out of the Kyoto protocol unless developing countries proposed actions that the US considered "meaningful".

Its second step was to get as good — or weak — an agreement as possible in Kyoto, make it clear it was a partial solution and not try for ratification immediately.

And its third step was, or is, to use the threat of non-ratification and opposition from the Senate unless there is "meaningful participation" from the developing countries. On December 8, 1997 Vice President Al Gore told a press conference in Kyoto that "in order to sign an agreement, or in order to send an agreement to the Senate, we must have meaningful participation by key developing countries." Gore stressed again at the end of Kyoto, "lets be clear, we will not submit this agreement for ratification until key developing nations participate in this effort."4

The pressure on the developing countries will therefore mount as the world’s media targets their attention on their non-participation, which will be seen as holding up ratification by the US. Everyone knows that without the US, the Kyoto protocol is meaningless. And every effort will be made to bind the "reluctant" developing countries in the interest of "us all".

B. Clean Development Mechanism: inequity in dealings
Meaningful participation is being defined in many ways. Depending on the interests of the party involved. One such approach is to use the Clean Development Mechanism (CDM) of the Kyoto Protocol.

The Clean Development Mechanism is as unclear as it possibly is unclean. Southern governments that had staunchly opposed the Joint Implementation — project based investment to get carbon credits — accepted it simply because of a change of the name, from the hated Joint Implementation to a softer (more money-sounding) Clean Development Mechanism. It will be recalled that in its first incarnation, the Global Environment Facility was called the Clean Development Fund and it is quite possible that negotiators in Kyoto halls had wool pulled over their sleepy eyes. It is interesting that the CDM was proposed by Brazil, but as part of a comprehensive burden sharing strategy. But the present CDM, taken completely out of context, is only Joint Implementation and should be renamed as such.

The Clean Development Mechanism is as unclear as it is unclean

Take away the confusing words surrounding each sentence and what is left of this article 12 of the Kyoto Protocol:

The purpose of CDM is not to help the South but explicitly to "assist" industrialised countries to meet their commitment to reduce emissions. Therefore, it is designed to help the rich and not the poor. Assisting the poor to achieve sustainable development is hogwash.

Under CDM, countries which have commitments to curtail their emissions can invest in projects in developing countries and will buy certified emission reduction. Or will get the credit for the saving in carbon dioxide emission in their own balance sheet.

CDM will be supervised by an executive board (EB). But as this is a market based instrument, the Board at best will have nominal role to play.

The saving in the emissions will be certified. This is a normal trading practice which allows the investor to get the best choice and promotes competition. Under the CDM, the Board will authorise numerous certification agencies that will assess the internal compliance and reporting mechanisms of the country selling the emission reduction units. The rating firms — like investment rating companies — will rate the "compliance capability" of developing countries. This will force the developing countries to compete with each other providing the rich North a cakewalk option; "cheapest, most efficient" portfolio of projects to invest in and take carbon credits for.

CDM will assist in providing funding. This is a clear example of putting in a few words to cajole and bribe the negotiators of the South. CDM is a clear market- based instrument. The North wants to buy and wants to pay as little as possible for it. It will invest in projects and will buy emission units. There is no additional aid or technology transfer which is promised.

CDM will allow the participation of private and public entities. Therefore, not just governments but also multinational corporations can enter into deals with Southern corporations to buy and sell their emission units.

The South must call a spade a spade and must develop its own positions in full knowledge of its own costs and benefits. The scramble for a piece of the brokerage — a percentage of the transactions costs has already begun and meetings are being held to convince the South to succumb to this temptation.

The US proposes to pay as little as US $14-23 per tonne for its emission credits. Their cost for domestic emission reduction would have been US $125 per tonne

Speaking at a recent meeting organised by the Delhi based Tata Energy Research Institute — interestingly sponsored by the JUSSCANNZ group of countries (Australia, Japan, Norway and United States) who have launched the Kyoto initiative to get developing countries to agree to commitments, John Palmisano, director, Environmental Policy and Compliance of Enron International said," CDM is the son of JI. For anyone shopping for cheap emission reduction options, the first option would be CDM — project investment in the South — then JI — project investment in Eastern Europe and Russia, and last would be to look at action to be undertaken domestically."

The key issue is price. What price would the South be paid for its emission units? The interest of the North is to buy these emissions as cheaply as possible. The US administration’s calculations for its bill to meet the Kyoto commitments is "modest" according to its official position simply because it plans to buy as much as 93 per cent of its emission units at the cheapest cost in the market place. The US proposes to pay as little as US$ 14-23 per tonne for its emissions credits. The price the country would have to make for domestic emission reduction programme would be US$ 125 per tonne.

The interest is to bargain for the "cheapest and most efficient deal". One approach to get the best deal is to develop a portfolio approach which drives each project to compete against each other. Effectively leaving the buyer to pick and choose and arm twist for the best option. The World Bank’s Prototype Carbon Fund is one effort in this direction (see box). The Bank has received funding from a number of utility companies and Scandinavian governments to start developing a portfolio of projects from the South. The Bank expects to play the role of an "honest broker" in this trade. The Bank expects to get clearance from its own Executive Board for this proposal in early June and then plans a meeting with its investors in Helsinki to finalise the Fund.


World Bank: the honest broker in the business of selling emissions

The World Bank has a most ingenious proposal in which the Bank would buy and sell, as the most "honest broker", the rights of present and future generations of Indians and Africans and all other such poor nations to the common atmosphere. And would sell their rights so cheap that even the American Indians who sold New York for a few beads, or the Russians who sold Alaska for a song — would be rich in comparison.

The proposal is to set up "global markets for greenhouse gas investments": recently renamed as the Prototype Carbon Fund.

This idea has been around for some time under the name of ‘Joint Implementation’. The World Bank with its Carbon Fund is keen to join the ranks of a growing number of "honest brokers" who see lucrative deals to be made. The establishment of the prototype is scheduled for May 1998 with an initial commitment from utilities and oil companies like British Petroleum and a number of Scandinavian and European governments totally to US$ 100 million. Five projects in Poland, Russia, Hungry, Latvia and Indonesia have been identified and are in the project pipeline. The price range is expected to be US$ 10-30 per tonne of carbon. For instance, while the domestic abatement option for upgrading a gas fired plan in Norway costs US$ 60 per tonne, the cost of financing a technology switch for a low-efficiency coal power station in India is US$10/tonne of Carbon. The profit made by Norway would be US$ 50 per tonne.

The Bank has set up an investment fund to develop a number of projects with the potential for reducing global warming in countries which have a low contribution to the warming of the atmosphere. It would then sell these projects to prospective countries who are interested in reducing their greenhouse gas emission. This makes good economics for some, as cutting future carbon dioxide emissions in industrialised countries will be more expensive than cutting future carbon dioxide emissions in developing countries. This is because developing countries are using outdated technologies which are very energy inefficient, whereas developed countries are already using very energy efficient technologies. So if an industralised country wants to cut its carbon dioxide emissions it would financially assist, say India, to acquire more efficient power stations, but the credit for the saving in carbon dioxide emissions would go to the industialised country paying for the power station. It is similarly argued that developing countries can be given money to plant trees on a big scale to fix carbon dioxide, because it would be cheaper to plant trees in developing countries instead of developed countries.

Some call this — and the Bank clearly concurs — the win-win option. The industrialised world does not make "expensive" adjustments to its economy which would render its industries uncompetitive in the global market place and the developing world gets some money for reducing its emission. A perfect bargain in such an imperfect world ! Until you start asking questions.

Firstly, accepting this scheme would mean that the developing countries would use up their cheap options for reducing emissions and not even get the credit for it in the global balance sheet of emissions. But once they have reached high levels of energy efficiency, industrialised countries would have no economic incentive to invest in developing countries. They would rather invest in their own countries. And if global warming is still a threat — as it would be because industrialised countries have not taken any action at home — then there will be pressure on developing countries to cut back on carbon dioxide emissions on their own. And then the costs of cutting back on carbon dioxide emissions will be very high. So what will be the form of international cooperation then?

Secondly, what the Bank’s proposed investment scheme does — so brilliantly and so ingeniously — is to further reduce the cost for the industrialised world. It creates competition -- and forces developing countries to outbid each other to sell their rights to the atmosphere as cheaply as possible. The World Bank’s draft paper says this approach" would lower the costs of reducing global emissions substantially". What this means is that industrialised countries would be given on a platter, an option of schemes which allows them to pick the cheapest carbon dioxide reduction investment.

Thirdly, and most importantly, this so called buying and selling take place without any property rights framework which is so essential for market based systems. How can one determine a price or bargain for rights without any clearly defined entitlements to the property. The atmosphere is a global common. The developing countries are being asked to sell their resource in the absence of property rights — only a temporary and increasingly vague understanding that these are low emitting countries. How can the World Bank call this a "market framework" for investment? A market framework would mean that the quota — or entitlement of each country to the global atmosphere — is established. Then these entitlements which we believe should be fixed on a per capita basis, can be traded to allow low level polluters to sell their unused emissions with high level polluters. Without these entitlements, developing countries are mortgaging their future.

A leading US scientist has termed the overuse of emissions by the industrialised North as its "natural debt" to the world. Comparing it to the financial debt which cripples many Southern nations today, he says that the North has for its development borrowed — way beyond its share — from the natural capital of the world. The World Bank, in its magnanimity, would allow the North to write off this liability — without any interest — in this wonderful new scheme.

Interestingly, the Bank’s proposal has reportedly run into hot water with the US administration. The treasury – which coordinates the Bank’s activities has allegedly put on record that it is against any effort to increase the price of carbon units. Under the Bank’s proposal the industrialised countries would have to pay a nominally higher rate per tonne of carbon. This approach of the cost-plus is not favoured by the administration which would like the market- minus approach. And this when the price that is being discussed is only US$ 20-30 per tonne in the early years, stabilising to US$ 10 per tonne of carbon units bought.

It is vital for the South to understand the implications of this cost issue. It has to realise that the cheap option that it is offering the North today will be at a heavy cost to it in the future. Developing countries will use up their cheap options for reducing emissions and not even get credits for it in the global balance sheet. And when the South has reached high levels of energy efficiency and the cost of curtailing emissions will be high domestically, the North will have no economic incentive to invest in these countries. And if global warming is still a threat — as it is most likely to be with the industrialised countries not taking any action domestically — then the pressure will mount on developing countries to take the tough expensive route.

The market is so distorted simply because it has no rights of property — of the sellers in this case. It is vital that a clear system of entitlements is set up so that the market can function with the property rights clearly defined and enunciated.


Costa Rica: swapping forest for emissions

The Costa Rican government has recently agreed to swap its tropical rainforest with a Nebraska based power company, Tenaska Inc. The deal would mean that the US power utility would pay the Costa Rican government US$ 0.5 million and help raise another US$ 0.5 million to buy 5000 acres of rainforest in Piedras Blancas National Park. This deal would compensate Tenaska Inc for the carbon dioxide that will be emitted by a new plant in the state of Washington. Called, "Ecoland" the project, is proudly presented as a cheaper way for Tenaska to reduce carbon dioxide buildup than installing expensive pollution control equipment back home. Tenaska pays US$ 200 for an acre of tropical rainforest.

Costa Rica also sold 1,000 emission permits — each costing US$ 3 for a tonne of carbon dioxide to a Chicago based financial company called Centre Financial Products brought together by the Earth Council. These were sold in January 1997. It has since then sold the Certified Tradable offsets (CTOs) to the Norwegian government and a consortium of 3 Norwegian companies, including ABB, Kvaener Energy and Eeg-Henriksen Anlegg, a contruction company. These purchases represent sequestration of over 200,000 metric tonnes of carbon, priced at US$ 10 per tonne. And have raised more than US$ 2 million for the Costa Rican government, which uses the money for sustainable forestry projects on private land — 3,000 farmers who collectively own 150,000 hectares of land have been funded to plant trees to cut greenhouse gas emissions. The carbon credits have been independently certified by third party inspection. The CTO project allow the buyer of the certificates the right to a specific amount of carbon that has been sequested5.

C. Voluntary (sic) commitments

Yet another innovative method of tightening the noose around the necks of the developing world is to hold out the threat of some countries "voluntarily acceding" to join the Kyoto protocol and to take on commitments. This divide and rule would break the ranks and would force a "ratchet" effect to go into place. The model set out by the World Trade Organisation and its protracted haggling about membership to China is being cited as the way ahead.

Yet another innovative method of tightening the noose around the necks of the developing world is to hold out the threat of some countries "voluntarily acceding" to join the Kyoto protocol and to take on commitments

In fact, the Basel Convention conference of parties which met in early 1998 in Kuching, Malaysia, found the "voluntary acceding" model very useful in negotiations. Annex VII of the Basel Convention has been created to include European countries that were not in OECD but among countries prohibited to export hazardous wastes. It was not meant as an open annex or a trading bloc within the convention. At the recent CoP it was increasingly suggested that this should become a "voluntary club" and any country which has the capacity to manage hazardous wastes could join Annex VII and become part of global waste traders6.

At Kyoto, Argentina had already set an example, by agreeing "voluntarily" to take on emission cut commitments. The proposal has once again been revived and is up for discussion at the next CoP in Buenos Aires. New Zealand had also put forward its proposal for commitments by all parties. This will also be discussed in the coming months.

More recently, British environment minister, Michael Meacher, speaking at the Globe International Launch of "Contraction and Convergence" has called for ways "for engaging developing countries in the process." The first, says Meacher, is to "allow developing countries to take on voluntary reduction targets. Although this wasn’t a part of the final agreement in Kyoto, it is possible that it may be revived. We would have no difficulty with such a proposal (emphasis ours)".

And even more recently, the G8 Final Communique signed in Birmingham states, "We look forward to increasing the participation from developing countries, which are likely to be most affected by climate change and whose share of emissions is growing. We will work together with developing countries to achieve voluntary efforts and commitments, appropriate to their national circumstances and development needs."7

The second way of engaging developing countries, says Meacher, "would be for a review under UNFCCC of the commitments of ALL parties to it. Such a review would need to consider what extra commitments would be necessary in the longer term. Meacher also says that the EU — the British hold the EU Presidency currently — favours the second approach8.

3. Swaps, deals and much more (or is it much more for much less)?
A lot of heat is being generated after Kyoto as nations try to operationalise the emission cut targets, and make quick profit in the process. The Kyoto protocol and its "flexibility mechanisms" help the North to maximise its options:

It can reduce emissions by taking domestic action (priority: low and only if not painful);

It can reduce emissions by trading its emissions with another country in Annex 1 which is underutilizing its share of emissions (priority: not clear as rules still not formulated); and,

It can reduce emissions by buying emission units — investing in carbon-efficient projects — of other countries in Annex 1 which are able to sell emission units. In other words enter into a joint implementation project (priority medium: better option than domestic action but not as good a Joint Implementation project or CDM in developing countries, where the price paid would be lower or just peanuts).

The best option is clearly spelt out in the US estimate of its own domestic costs of meeting Kyoto obligations. Under the Kyoto protocol, the US has agreed to cut its carbon dioxide emissions at 7 per cent in the period 2008-2012 measured against the base year 1990. Because the US economy has grown since 1990, the real cut required would be much higher at the current levels of emissions.

Janet Yellen, chairperson of the White House Council of Economic Advisers while speaking to the House subcommittee on energy and power said compliance with the Kyoto Protocol would mean an emission price range of US$ 14-23 per tonne of carbon equivalent. "This increase in energy prices at the household level would raise the average household energy bill in 10 years by US$ 70-110 per year." The Yellen calculation is based on one important assumption — that the US will reduce its domestic annual emissions only by 3 per cent during 2008-2012 and would make up the most of the rest of its commitments by paying other countries to reduce their emissions through a system of tradable emission credits. And to keep the costs low the maximum trading would be with developing countries.9

The Yellen estimates are as follows;

  • cost of domestic action in the US: US$ 125 per tonne of carbon equivalent;

  • cost of trading with other industrialised countries including Russia and Eastern Europe: US$ 30-50 per tonne of carbon equivalent;
  • cost of trading with developing countries: US$ 14-23 per tonne of carbon equivalent.

"Hot air"
It is in this context that a cap — a limit — is being suggested on the non-domestic mechanisms used to curtail emissions. This is being suggested so that industrialised countries are forced to engage in expensive action at home. But it is being contested. British environment minister, Michael Meacher says that EU will oppose in Bonn, a limit to the amount of emission reductions that can be achieved through flexible mechanisms.

But at the same time and in the very next sentence, Meacher talks about the issue of hot air. Which he defines is a problem "where some countries under the protocol have targets significantly less demanding than their business and usual projections. If these countries sell this surplus (or hot air) there is an overall environmental loss since the two countries involved (the buyer and seller) do not take any action to reduce actual emissions."

Meacher goes on to say, "there is a real concern here — that "hot air" would set an unwelcome precedent for developing countries, many would invariably end up with less than challenging targets which would undermine both the overall aim of the protocol and the system of trading in emission permits."

What Mr Meacher is saying is fairly muddled.

One, EU should be allowed to use all flexibility mechanism with no limits on the quantum of change needed domestically. It can therefore, make no change domestically — similar to the US plan and only concentrate on buying emission units from other industrialised countries such as Russia or even cheaper emission units from developing countries.

Two, developing countries would end up with less than challenging targets which would undermine the aim of the protocol. And all because of the trading between Russia and the US.


Domestic inaction: US politics heats up
In the US, domestic politics is gearing up for a round of shadow boxing before the world. No sooner does the US president flex his muscles on climate change which he called "the biggest challenge facing civilisation worldwide"10 does the powerful Congress slap him across the wrist.

Yellen testified that the US would experience only a "modest" economic impact from meeting the protocol’s obligations

In April 1998, the Clinton administration was to announce a $6.3 billion five-year package of tax incentives and research to improve energy efficiency. But even before the package was announced senators had put spokes in the wheel of this grand design. In early May, Republican senators, John Ashcroft from Missouri and Joe Kollenberg from Michigan had introduced bills to block the administration from spending money on these programmes unless the senate ratifies the agreement in Kyoto. Kollenberg, a bitter critic of the Kyoto protocol, calls it "a terrible deal for the United States which the Senate would reject". He believes that the Kyoto protocol which only requires the industrialised countries to cut emissions will give the developing countries such as China and Mexico an unfair competitive edge11.

Also, in May, another global warming controversy started brewing as the White House refused to turn over information requested by the US House Oversight Panel, which is beginning its hearings to consider the US commitment under the Kyoto treaty. On May 13, the panel heard Janet Yellen who testified that the administration’s economic analysis found the US would experience only a "modest"economic impact from meeting the protocol’s obligations. However, the subcommittee remained unsatisfied with the numbers provided and on May 20, Republican Senator David McIntosh had given the administration the final ultimatum to turn over its economic analysis or face subpoenas12.

President Clinton has meanwhile unveiled a new plan — this time aimed at the household energy sector — to cut energy use in American houses by 50 per cent by 2010 through better windows and insulation, energy saving appliances and more efficient heating and cooling systems. Under this plan a collaborative research and implementation agenda has been set up under the Partnership for Advancing Technology with US$ 70 million in the kitty13. And while the Clinton administration continues to argue that emission trading and tax incentives will create new markets and export opportunities for the US, the Congress is adamant. "There will be no implementation of the Kyoto protocol and no funds expended," says Republican Senator, Chuck Hagel.

Investing in projects and buying emission units
The Kyoto protocol provides under article 6 that parties in Annex 1 (industrialised countries) can agree to invest in carbon efficient projects in each other’s countries and can buy and sell emission units: Joint Implementation, but restricted to the industrialised countries.

The first such post-Kyoto deal has been struck between two most likely partners: Russia and Japan. Japan has to meet a difficult target of 6 per cent cut from 1990 levels, while Russia can easily meet its target of zero per cent rise in emissions because of the shutdown of inefficient industries.

Under the agreement between Russian president, Boris Yeltsin and the Japanese Prime Minister during their recent summit meeting, Japanese companies would invest in 20 Russian power plants and industries to cut greenhouse gas emissions. These reductions of Russian emissions would be added into the Japanese carbon dioxide balance sheet. Japan’s trade ministry has allocated nearly US$ 20 million in the current annual budget to help Japanese firms to carry out feasibility studies for possible joint implementation in foreign countries.14

Trading in emissions and ...swapping "hot air"
The atmosphere is increasingly becoming an intensely traded commodity. Seeing the opportunity in buying and selling permits to pollute a number of agencies and companies are setting up businesses to manage this dirty air. Article 17 of the Kyoto Protocol says that the conference of parties (CoP) shall define the relevant principles, modalities, rules and guidelines for emission trading. But without much ado and without waiting for the CoP to define principles, emission trading is starting to take place. Interestingly, petroleum companies — the prime causes of greenhouse gas emissions — are beating everyone at the game. The earliest entrants are:

British Petroleum (BP) is going to use its sprawling oil company as a testing ground for emission trading. Various units of BP will buy and sell permits to emit carbon dioxide. This will help develop uniform ways to measure and limit emissions of carbon dioxide and assist BP to reduce its global carbon dioxide output.

The oil giant Shell is considering a plan to launch an international market in carbon dioxide permits. In early May, Shell broke the ranks of the climate-opposed — it announced it was leaving the Global Climate Coalition which lobbies against limits on carbon emissions. "I find myself increasingly persuaded that the climate effect may be occurring," said Mark Moody-Stuart who is slated to become Shell’s CEO in July15.

On May 6, London-based International Petroleum Exchange announced its proposals to develop trading in carbon dioxide permits. IPE is prepared to launch a carbon dioxide emissions futures contract valid for a month.Under the IPE proposals, government would legislate and play a part in the allocation process before free markets were allowed to evolve. Emission trading would allow companies to emit as much pollution as they had permits for. Those that cut back on emissions with energy efficiency measures could sell or lease their surplus permits. IPE expects two separate markets to evolve; first, a primary market of bilateral deals between individual companies. Second, a secondary market to provide additional flexibility to all participants to assist in credit management and to provide greater transparency and liquidity16.

The United Nations Conference on Trade and Development (UNCTAD) is working towards a deadline of setting up an emissions market by 2000.

On May 21-22, 1998, a emission trading conference was held in Canberra, Australia. It is understood that the Australian government is considering launching a tradable emissions programme. The conference organiser — the Executive Director of ABARE, was a member of the Australian negotiating team in Kyoto.

The evolving framework for emissions trading
The current proponents of emissions trading are very "simplistic" in their view of this system. All they say is needed first is a source of pollution which can be measured and monitored and a market place of polluters willing to accept and trade in permits. Second, what is needed, is to have legally binding targets. These were introduced, for the first time in Kyoto. The stage is then set.

Emission trading is starting to take place without waiting for the CoP to define principles, and petroleum companies are beating everyone at the game

The only issues before this group of traders is, first, who should trade — government or private parties? The US government suggests that governments should be allowed to trade with each other. But then how will the system avoid what is known as "hot air trading" and ensure that all parties have sufficient incentives to reduce actual pollution. Adair Turner, director general of the Confederation of British Industry argues that "emission trading should only take place between companies and not between countries, and adjustments should automatically be made to a country’s achieved levels when the intercompany trade is carried out."17

Second, should the government charge for initial permits or issue them free to existing polluters. But this would restrict new entrants to the market once the allocation is complete18.

"We want to make sure we are not creating a new crop for nations to sell

The term "hot air" is being furiously debated in this context. Some economists believe that "in the short term you may get a certain amount of hot air trading but in the long term it has to be good for the environment" .

But there are critics as well. Ambassador Raul Estrada-Oyuela who chaired the Adhoc Group on the Berlin Mandate, has said that emission trading will have to go, over a phase out period of 8 years. "We want to make sure we are not creating a new crop for nations to sell." Estrada was responding to concerns expressed by developing countries that emission trading would create a market for cheap emission reduction options19.

The most important issue is — allocation of rights to trade — has been completely marginalised in this debate.

Fred Pearce 1998, Playing dirty in Kyoto in The New Scientist, 17 January, London.

Fred Pearce 1997, Dishonest brokers in The New Scientist, 6 December, London.

Robert C.Byrd and Chuck Hagel 1998, Advice to heed on the Kyoto treaty, Washington Post, May 6, Washington.

Anil Agarwal 1998, Lifting the veil, in Down To Earth, January 31, New Delhi.

Anne Goodman 1998, Carbon trading up and running in Tomorrow, Global Environment Business, number 3, volume VIII, June 1998, Stockholm.

Rajat Banerji 1998, The way of all waste, in Down To Earth, March 31, New Delhi.

1998, G8 Final Communique, May 17 Birmingham.

Michael Meacher 1998, speech at the Globe International Launch of "contraction and convergence" in the house of commons 14 May, London.

1998, Sustaining the American way of life in DTE/CSE supplement on global environmental governance, Centre for Science and Environment, April 30, New Delhi and 1998, Clinton economist predicts small costs for warming treaty, meets skepticism, Wall Street Journal, March 5, Washington.

1998, Clinton warns on global warming, UPI, San Fernando, California May 4.

1998, US house bill would block spending to curb carbon, Reuters, May 6, Washington.

1998, Cost estimates of US climate policy debated in house hearing and White House continues to provide few details about cost estimates of climate policy (weathervane).

John M.Broder, 1998, Clinton unveils plan to help homes use less fuel, New York Times, May 5, New York;

1998, Japan and Russia conclude landmark greenhouse gas swap, Reuters News Service, April 19, Kawana, Japan.

Brad Knickerbocker 1998, Global warming debate cuts two ways, Christian Science Monitor, May 11, Boston.

Gautam Malkani 1998, IPE calls for CO2 emission permit trading, Financial Times, May 6, London.

1998, Dow Jones Newswires, May 11, London.

1998, Of a grey market, Financial Times, April 16, London.

1998, Emissions trading in warming pact may be phased out, Wall Street Journal, March 3, Washington and Short-lived scramble? in DTE/CSE supplement on global environmental governance, Centre for Science and Environment, April 30, New Delhi.

Doha, Qatar
Milan, Italy
Durban, South Africa
New Delhi, India
Cancun, Mexico
Marrakech, Morocco
Copenhagen, Denmark
The Hague, Netherlands
CoP5 Bonn, Germany
Bali, Indonesia
Buenos Aires, Argentina
Nairobi, Kenya
Kyoto, Japan
Montreal, Canada CMP 1
Geneva, Switzerland
Buenos Aires, Argentina
Berlin, Germany

Uthra Radhakrishnan
Tel: +91 11 29955124