The Great Carbon COP Out

Presentation for COP101 Speculative Energy Futures Workshop Series University of Alberta, Kule Institute of Advanced Studies, March 20th, 2020

The focus of my presentation will be on the issue of carbon markets that have dominated the COP process and on what the climate justice movement and the scholarly political ecology literature says about them. I will also try to draw some conclusions about what all this means for the climate justice movement and for us as university researchers and research-creators on the Speculative Energy Futures project.

But it will be helpful I think for us to revisit quickly The Drama of the process as it unfolded from Kyoto to Paris to Madrid and also to briefly consider some details of the Paris Agreement which is widely considered to be a major milestone and turning point in this process.

The Drama
After the Rio Summit at which the UNFCCC is drawn up, the Kyoto Protocol is the first step down the road to Glasgow. The Kyoto Protocol sets in place the basic architecture and the main strategy of the COP process that remains in place to this day despite a number of significant changes. As one might remember, this process has been fraught and contentious, with numerous twists, turns and complications.

The Kyoto Protocol is negotiated at COP3 in 1997 but is not actually ratified by the Parties until 2005. In the meantime several things in the world change drastically, throwing the process off its rails. The Kyoto Protocol established legally binding emissions reduction targets with non-compliance penalties but only for what it called Annex 1 countries (the North) under a principle with an incredible acronym: Common But Differentiated Responsibilities and Respective Capabilities (CBDRCC). This principle respects the sovereignty of nation-states and so underpins the factional plotting and counter-plotting that characterizes the process ever since.

By the time Kyoto comes into effect in 2005, China and India have changed status and emerged as major carbon emitting countries so that including them within the scope of emission reduction targets becomes a major issue. The U.S. pulls out in 2001 and plays puppeteer from the shadows (with China) until President Obama brings them back into the game in time for COP15 in Copenhagen in 2009, just as the first commitment period of the Kyoto Protocol is about to run out. With the U.S. back at the table, hopes run high that COP15 will be able to iron out the issues that had delayed the ratification of the Protocol for so long, especially the China / India issue. The Hope at Copenhagen was that this could be done, that the other holdout Parties would all sign on so that the Kyoto Mechanisms would then go into high gear and take us to climate stability. Even though the UNFCCC claims that the Copenhagen Accord, expressed a “clear political intent to constrain carbon and respond to climate change” you might remember, Copenhagen ended catastrophically with no agreement and the UNFCCC process left with little legitimacy.

Six years later in Paris the story is said to be radically different. Despite a myriad unresolved issues and conflicts, some old and new hold outs, and the bare fact that emissions continue to increase, the official narrative about COP21 in Paris among governments, the media and the UNFCCC celebrates it as a major success. The climate justice movement and the scholarly political ecology and environmental justice literature takes a different view however. So let’s pause for a moment to consider the Paris agreement and the road to Madrid.

Why is the Paris Agreement celebrated?

For the first time, world leaders collectively agreed that climate change is anthropogenic, that it’s a threat to the environment and all of humanity, and that global action is needed to stop it. Everybody was in (until Trump, Bolsanoro and Erdogan). The distinction between Annex 1 and non-Annex countries was removed and all parties were brought inside the regime of emissions reduction mechanism. The Paris Agreement articulated the “ambition” to halt global temperature rise at 1.5 degrees Celsius in this century. But not everyone cheered. One researcher called it the “Paris Agreement to ignore reality”; others called it a fraud. So what are the critiques? The Paris Agreement replaced legally binding emissions reduction targets with voluntary national reduction ambitions. It ignored the urgent need to keep fossil fuels in the ground, to restrict aviation and to localize and degrow production and consumption. It pinned all its hopes on the fantasy of a silver bullet techno-fix while reaffirming the centrality of the Kyoto Mechanisms as mitigation tools.

From Paris to Madrid
The main hot button issues and disagreements that have marked the road from Paris to Madrid —regarding the ambitiousness of national emissions reduction pledges, issues of justice and rights, resources for adaptation, compensation for loss and damage— have all been processed, distorted and deflected by the main project pursued by the COP process and this has been to tinker with the Kyoto Mechanisms and to expand them to a global scale.

The Kyoto Mechanisms

A keystone of the Paris Agreement was the expansion of the Kyoto Mechanism on a global scale. So what are they?
Significantly, they are called mechanisms not socio-ecological policies. When you get into the weeds here, there are few references to people, if any, to their everyday life situations of livelihoods, environments, of their health and nutrition. Astonishingly, there is no reference to the oil and gas industry, let alone any discussion of sunset policies for them or of other policies that would advance a renewable energy transition. At best, these kinds of issues are relegated to being domestic matters for each country under the Kyoto principle of CBDRRC. As the political ecology literature points out, and indeed our current pandemic also makes evident, addressing planetary scale challenges such as climate change mitigation and adaptation, concretely and universally, requires planetary scale public sector socialist-like universal life-care institutions and a planetary scale progressive taxation system that redistributes capital as common wealth to create meaningful green jobs so that the work of mitigation and adaptation can be done. Questions of climate justice and of the various rights require institutional innovation both at the planetary scale and a radical reform of the labyrinth of colonizing institutions we live in domestically. Such measures are now so objectively necessary that their urgency is also registered by the Kyoto Mechanism negotiations which do not tackle these questions openly, directly and democratically but rather through indirect and opaque strategies of carbon markets.

The plan for an emissions trading system was introduced to the Kyoto negotiations by the U.S. delegation and was accepted by reluctant Parties as a concession to keep the U.S. at the table. Since then, several emissions trading systems have been established but under Kyoto they take two main forms: “cap and trade” markets and the Clean Development Mechanism or “North-South” carbon offset market, renamed after Paris as the Sustainable Development Mechanism (SDM). So what are these things and how do they work?

Let’s consider the EU Emissions Trading System, the world’s second largest “cap and trade” carbon market involving 15 EU countries and more than 10,000 industrial installations. (Bohm et al, 2012, 4) The EU-ETS sets maximum allowances for the GHG emissions for individual countries and the governments of these countries then allocate allowances to carbon-emitting firms under their jurisdiction. If a factory emits more carbon than its allowance it will have to buy allowances from other emitters in order to avoid paying fines. By participating, the firm and country gets “flexibility” in the fact that it does not have to actually reduce its carbon emissions. But if it does, whether by introducing greener production processes or by moving its emitting activities to another jurisdiction, then it can sell its surplus carbon allowances on the market and generate income. All cap and trade carbon markets follow this basic design, including the world’s largest now in China. Their virtues are argued to be their capacity to incentivize technological innovation, be a concrete application of the polluter pays principle and provide firms and governments flexibility. Last but not least, the sheer existence of large carbon markets are said to model tipping-points demonstrating that massive climate action is possible and indeed underway. I will come back to this point later. While this cap and trade system might then seem to be eminently reasonable and practical, they suffer from the same design flaw of all markets diagnosed by Adam Smith long ago. If they succeed systemically in reducing emissions below caps so that more surplus permits flood the market, this cuts the price on carbon so that the incentive evaporates and business as usual continues. This has resulted in what researchers have described as the zombie character of carbon markets ever re-tweaked to rise from the dead from Kyoto to Copenhagen to Paris to Glasgow.

Climate justice activists and critical research have identified several other specific problems with this design. Along with carbon price volatility, these include governance problems, monitoring problems, unambitious caps and over-generous permitting. The Paris Agreement did away with the Kyoto Protocol’s original legally binding emissions reduction targets in the name of flexibility. Thus COPs from Paris to Madrid have consumed themselves with the futile hand-wringing over the ambition of voluntary and unenforcible targets while national delegates wrangle over being able to carry-over credits purchased under older rules. Moreover, carbon permits have tended to be granted rather than auctioned under a principle of grandfathering within the Kyoto Protocol, enshrining a right to pollute. As one researcher puts it “This free gift of pollution rights to some of the worst industrial polluters amounts to one of the largest projects for the creation and regressive distribution of property rights in history”.19 (Gilbertson and Reyes 2009)

So what about carbon offset markets? The Clean Development Mechanism is an offset market that enables countries in the North, and transnational corporations headquartered there, to buy carbon credits from so-called “clean development” projects located in the global South in countries that were not required to reduce their own carbon emissions during the first commitment phase of the Kyoto Protocol. The presumption was that it was easier and cheaper to fund new development projects in the Global South, since industries had been relocating there in droves for decades to take advantage of cheapened labour and relaxed environmental protection legislation mandated by the IMF as conditions of debt rescheduling. The CDM would thus allow de-industrialization of the North and the export of pollution to the South to count toward the emissions reduction targets of firms and countries in the North. The problems here are quite severe. Industries are subsidized to do what they would have done anyway, while attributed credits allow other firms to exceed their caps. The carbon reduction credit traded on this market is not based on any empirical measurements. Rather it is derived according to how much less greenhouse gas is presumed to be emitted than would have been the case if the project had never been undertaken. This is the so-called rigorous criteria of the “additionality” of a counter-factual emissions reduction. World Bank officials and carbon consultants, financial analysts and accounting firms involved in launching these projects often admit privately that there is no way to demonstrate that it is carbon finance that makes the project possible. “Offsets are an imaginary commodity” writes one researcher, “created by deducting what you hope happens from what you guess would have happened.”(Welch 23) Carbon offsets thus replace a requirement to verify emissions reductions in one part of the world with a set of stories about what would have happened in an imagined future elsewhere. What in fact has happened is an overall increase in greenhouse gas emissions. As journalist George Monbiot observed: “the protocol created an exuberant global market in fake emissions cuts . . . Entrepreneurs in India and China have made billions by building factories whose primary purpose is to produce greenhouse gases, so that carbon traders in the rich world will pay to clean them up.” The CDM has granted billions in subsidies to the world’s most polluting industries and is indiscriminately funding both fossil fuel power generation projects alongside renewable energy projects. Forest commons are being enclosed and converted to plantations and logging operations in order to qualify for SDM certification. With this, whatever traditional rights to forest commons indigenous people around the world can still assert are being undermined as the fate of forests pass into the hands of carbon traders and green investors in the North. (Gilbertson and Reyes 2009) If the UNFCCC resists calls to tighten caps, reduce permits and price carbon higher because more ambitious reduction targets will lead to “carbon leakage” the SDM is the very mechanism for enabling leakage. Together, emissions trading and C/SDM ensure that building new markets to solve the problem of what some neoclassical economists call the world’s greatest market failure is bound to lead, once again, to market failure.

Given these deep problems why does the UNFCCC continue to promote their zombie march to Glasgow? What are the implications for the climate justice movement? Here we need to evaluate the Kyoto Mechanisms in terms of the wider geopolitical-economic system of which they are a part.

Global warming is much more than a market failure. Global warming is throwing life on this planet into a toxic media ecology of deepening and proliferating crises. Carbon markets are linked to markets of capital and capitalist markets are much more than mechanisms for distributing goods and services. Capitalist markets are also much more than efficiency allocation machines; they are, above all, media for exercising class political power on a planetary scale. This is not an absolute power, however. It is predicated on at least one key condition: turning a definite quantity of money into a larger quantity of money. This is both a symbolic and an ecological process; hence the obsession with the idea of economic growth ever since world capitalism was rebuilt after the Second World War under U.S. leadership. Political power of this kind depends on the endless colonization of the planetary ecology, cheapening labour, cheapening energy, cheapening nature and cheapening food as limitless throughput to turn money in the form of capital into more capital. Because the planet itself is now protesting, most nation-states around the world have had austerity imposed upon them, in most cases, after years of structural adjustment. The COP negotiations on how the carbon markets might be best tinkered to generate adaptation funding or loss and damage compensation is, in this context, just obscene.

The United States has never wavered in pushing carbon finance as the central strategy of the COP process. The point is to consolidate proprietorial class power and prevent any alternatives from emerging. World capitalism is being rebuilt now just as it was after the Second World War. Just as there were some winners and many losers then, so now the key issue at stake is who gets adaptation and who loses. The trade unionist Antonio Gramsci called this rebuilding process “passive revolution” and COP today is part of a proprietorial class project of green passive revolution. The more the world gets lost in the weeds of tweaking this or that implementation rule of the global carbon market the more we can believe that massive climate action is underway even when science points the other way.

Climate Justice Movements and COP?
This has resulted in a protracted tension among climate activists. The climate justice movement concluded that the COP process is a lost cause as early as Copenhagen. But some of the big environmental NGOs, unions and universities were swayed by the hype that was built up for Paris and climbed back on the COP wagon. COP21 in Paris thus became a dilemma for activists and the movement split between reformist organizations which still hoped to influence negotiations by mobilizing protest at the beginning of COP and those that wanted to communicate COP’s irrelevance to genuine climate action and denounce its corporate greenwashing by protesting online and at the end. Both kinds of protest took place in Paris. And yet, paradoxically, the largest protest mobilization at any COP flatly failed at getting mass media coverage. If the main value of COP as a mass media mega-spectacle is it that can serve as a platform for mobilizing the world public to take climate action, Paris demonstrated that this too is a dead end. While these tensions and dilemmas continue down to Madrid and Glasgow, many in the climate justice movement have concluded that the real action happens elsewhere.

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