Climate change expert seeks expansion of carbon trading

25 January 2007
In the media
Published at
International Herald Tribune
DAVOS, Switzerland: The foremost European expert on climate change, Nicholas Stern, called Thursday for a huge expansion of carbon trading with China and India, and described 2007 as a "year of opportunity" to step up efforts to tackle global warming. Under an existing program, businesses in wealthier countries in Europe and Japan already are helping pay to reduce pollution in poorer ones as a way of staying within government limits for emitting climate-changing gases like carbon dioxide under the Kyoto Protocol. Stern, who is the chief economist for the British government and an author of an influential report on climate change, said during an interview at the World Economic Forum in Davos, Switzerland, that the program must "be capable of operating on a much bigger scale than it does at the moment." Stern said he saw "a wonderful market opportunity" and that trade under the program could be raised to $30 billion a year from the current level of about $1 billion. Critics of the program complain that the reductions are hard to verify and that it mostly enriches a few bankers, consultants and factory owners. Stern gained international stature last year when Prime Minister Tony Blair of Britain presented his report on climate change, the Stern Review, which said that tackling global warming now would be far less costly than taking action later. Stern has been one of this year's star draws at Davos, where one of the main topics under discussion by political leaders and chief executives has been how business should adapt to climate change and how to persuade China and India — which remain outside the Kyoto accord — to reduce their emissions. On Thursday, Stern recommended that countries negotiating a new Kyoto- style treaty, which would go into effect when the current treaty expires after 2012, should aim to reduce emissions worldwide by 30 percent by 2050 compared with 1990 levels. But Stern's call to expand use of carbon-trading as part of efforts to reach that goal comes amid doubts that the quality of credits some companies are buying under the current program are not verifiable, and whether some projects are genuinely reducing emissions. Kevin Smith of Carbon Trade Watch, a not-for-profit research group with a branch in London, said factories in China can sell large amounts of credits by installing equipment often required anyway. "Strapping on a bit of machinery rarely contributes to one of the original goals of offsetting carbon — to promote renewable energy," Smith said. Yuriko Koike, a delegate at Davos who is a special adviser to the Japanese prime minister and a former minister of the environment, said it "had taken a long time over what is beneficial and what is not" in making adjustments to the way the program works. But Koike supported Stern's call for an expansion of the program as it created "a win-win situation" benefiting businesses in Japan and China, and helped combat global warming. Stern acknowledged that the design of the current verification procedure, which is overseen by the United Nations Framework Convention on Climate Change in Bonn, Germany, had flaws. But he said that the program remained the most potent tool to bring down emissions in countries like China, which is poised to overtake the United States as the world's leading polluter by 2009. The Chinese would face huge challenges to reducing their emissions quickly even if they pledged to do so partly because industries there use roughly four times the energy in their manufacturing sector compared with the global average, according to Milo Sjardin, an analyst with New Carbon Finance in London. The Chinese "need a lot of new technology to improve their performance," said Sjardin, adding that the existing carbon trading had been "the first step to a low-carbon footprint" in a process that could take decades. Stern also said the program was the fairest way for the rich world, which is responsible for 75 percent of the existing level of greenhouse gases, to help finance the majority of emissions reductions. "We have to make it much easier for European firms to buy carbon reductions elsewhere," said Stern, but "you've got to be able to have some clarity as to what a reduction is." Although questions remained about whether existing institutions could do the job of overseeing such a vast expansion of carbon trading, Stern suggested that the World Bank and three United Nations bodies, including the climate change monitor, could take on the expanded verifications role. "Obviously we've got to design a mechanism that's capable of operating on a market of that big of a scale," Stern said. At the same time, Stern said that the need to strengthen international verification should not be an excuse for Europe to scale down its carbon-cutting ambitions or for decision-makers in the United States to turn away from the possible introduction of a similar system. "I think you see change across America," said Stern, praising ambitious targets set by California to lower emissions, the fledgling carbon-trading programs among a group of states in the northeast of the country, and the pledge this week by President George W. Bush on energy efficiency. Stern, who goes by foot and by train to work in central London from his home in Wimbledon, kept the door open to taking on a political role in the future with either Gordon Brown or David Cameron as the British prime minister, or in a role overseeing international policies on climate change. "I'm always ready to help," said Stern, who said he still expected to rejoin the faculty at the London School of Economics this summer.