The private sector could help tackle climate change. What a pity it's left out in the cold

A functioning carbon market is vital to reducing emissions. But ours is broken

Share
Related Topics

In a stark reminder of our failure to bring man-made greenhouse gases under control, scientists reported last week that the amount of carbon dioxide in the atmosphere surpassed a level we think we haven’t seen for 3 million years.

A week earlier, I attended the latest round of climate talks in Bonn, Germany.  Some 200 nations were represented and continued to negotiate some form of a binding climate change agreement due in 2015, to cover the post-2020 period. 

The Bonn talks concluded on 3rd May and were true to style:  nothing happened. 

I wouldn’t put my money on anything substantive happening, on current trends, by 2015 either.  In a race to the bottom, nations seemed to compete on who could commit to less in terms of mitigation and adaptation, while the blame game continued unabated (“You caused the emissions”, “but yours are growing faster”, “ah yes but I am a developing nation”, etc.).  

Everyone in Bonn knew that any forceful road map to limit, then reduce emissions will require a comprehensive application of taxes and subsidies; performance standards; bi-lateral investments; legislation; emissions trading; and international treaties.  Two of these instruments place a price on carbon, an essential component of any decisive action.  According to the Brookings Institution, a Washington D.C. think tank, “there is nearly universal agreement among economists that a price on carbon is a highly desirable step for reducing the risk of climatic disruption.”

Yet negotiators preferred to bicker about the possible implementation of initiatives on a voluntary “bottom-up” basis versus agreeing binding “top-down” carbon caps for countries, while ignoring both the private sector and carbon pricing. 

This is irresponsible, for three reasons. 

First, public purses are stretched; no one (other than Norway) talked as if they had any money for tackling climate change.  The private sector on the other hand is flush with cash, with several stock markets at all-time highs and permissive liquidity policies worldwide.  Yet there were no private sector representatives to speak of in these meetings.  Instead, “pretend” stakeholder consultations took place at side meetings hijacked by two or three NGOs, some of which are anti-private sector in their DNA.  

Second, there was no focus on improving what we have.  Indeed, left completely unspoken was the impact of the failure of the Clean Development Mechanism (CDM) on private sector appetite for cross-border climate finance.  For the past 10 years global carbon markets have been synonymous with the CDM, which enables emission reduction projects in developing nations to sell carbon securities to developed country polluters. 

Buyers use the carbon credits to offset their emissions while sellers receive new investments, technologies and jobs.  According to a recent report co-authored by the Center for American Progress and Climate Advisers, the CDM succeeded beyond expectations, unleashing more than $356 billion in green investments.  The CDM was on track to deliver $1 trillion in financing but is currently delivering none at all because the carbon price signal it is sending is zero:  negotiators in Bonn are negotiating agreements and frameworks, while sending – via their own CDM system - a signal that pollution has no cost. 

The private sector relied on developed world governments to create sustained demand for the carbon offsets generated from clean energy projects.  Governments did not deliver what they committed to and the CDM collapsed. 

While efforts to create a post-2015 mechanism are to be lauded, these will not bring about the needed private sector investment unless credibility is restored to the CDM and investors see a return on their already invested capital. 

Third, as the report argues, a carbon price catalyses climate action in developing countries with most of the world’s population:  China, South Korea, Mexico and Brazil are establishing domestic carbon markets in substantial part as a result of their positive experiences with the CDM. In addition, South Africa, India, Vietnam, Malaysia, Indonesia, Thailand and Chile have implemented renewable energy and energy-efficiency incentives, are designing emissions trading systems or are implementing carbon taxes.

In addition to helping change how these nations think about climate policy, the CDM has helped these countries build the governance and private sector capacities needed to go after green initiatives.  As Professor Wei Zhihong, a climate policy expert at Tsinghua University told me: “China’s good practice and positive experience with global carbon markets have helped create the confidence to try carbon markets at home. CDM has given us confidence that well-crafted climate policies can be good for China.”  But a carbon price of close to zero (the price today) may fatally undermine this progress.

If negotiators at UN climate change talks must insist on continuing to use such a flawed forum, they should at the very least significantly enhance dialogue with the private sector - as well as stand behind the international carbon markets they created.

React Now

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
iJobs Job Widget
iJobs General

English Teacher Thetford Secondary

£110 - £150 per day: Randstad Education Cambridge: An Academy based in Thetfor...

Secondary Teacher Great Yarmouth

£115 - £140 per day: Randstad Education Cambridge: Randstad are currently work...

Teaching Assistant to work with Autistic students

£60 - £65 per day: Randstad Education Leicester: Randstad Education Leicester ...

Special Needs Learning Support Assistant

£60 - £65 per day: Randstad Education Leicester: Randstad Education Leicester ...

Day In a Page

Read Next
Jules and Delaney  

Disney needs a princess with Down's syndrome

Keston Ott Dahl
JK Rowling is releasing a new Harry Potter story about Dolores Umbridge  

Step away from Pottermore, JK Rowling. Your new Harry Potter stories are driving me mad

Caspar Salmon
The drugs revolution starts now as MPs agree its high time for change

The drugs revolution starts now as MPs agree its high time for change

Commons debate highlights growing cross-party consensus on softening UK drugs legislation, unchanged for 43 years
The camera is turned on tabloid editors in Richard Peppiatt's 'One Rogue Reporter'

Gotcha! The camera is turned on tabloid editors

Hugh Grant says Richard Peppiatt's 'One Rogue Reporter' documentary will highlight issues raised by Leveson
Fall of the Berlin Wall: It was thanks to Mikhail Gorbachev that this symbol of division fell

Fall of the Berlin Wall

It was thanks to Gorbachev that this symbol of division fell
Halloween 2014: What makes Ouija boards, demon dolls, and evil clowns so frightening?

What makes ouija boards and demon dolls scary?

Ouija boards, demon dolls, evil children and clowns are all classic tropes of horror, and this year’s Halloween releases feature them all. What makes them so frightening, decade after decade?
A safari in modern Britain: Rose Rouse reveals how her four-year tour of Harlesden taught her as much about the UK as it did about NW10

Rose Rouse's safari in modern Britain

Rouse decided to walk and talk with as many different people as possible in her neighbourhood of Harlesden and her experiences have been published in a new book
Welcome to my world of no smell and odd tastes: How a bike accident left one woman living with unwanted food mash-ups

'My world of no smell and odd tastes'

A head injury from a bicycle accident had the surprising effect of robbing Nell Frizzell of two of her senses

Matt Parker is proud of his square roots

The "stand-up mathematician" is using comedy nights to preach maths to big audiences
Paul Scholes column: Beating Manchester City is vital part of life at Manchester United. This is first major test for Luke Shaw, Angel Di Maria and Radamel Falcao – it’s not a game to lose

Paul Scholes column

Beating City is vital part of life at United. This is first major test for Shaw, Di Maria and Falcao – it’s not a game to lose
Frank Warren: Call me an old git, but I just can't see that there's a place for women’s boxing

Frank Warren column

Call me an old git, but I just can't see that there's a place for women’s boxing
Adrian Heath interview: Former Everton striker prepares his Orlando City side for the MLS - and having Kaka in the dressing room

Adrian Heath's American dream...

Former Everton striker prepares his Orlando City side for the MLS - and having Kaka in the dressing room
Simon Hart: Manchester City will rise again but they need to change their attitude

Manchester City will rise again but they need to change their attitude

Manuel Pellegrini’s side are too good to fail and derby allows them to start again, says Simon Hart
Isis in Syria: A general reveals the lack of communication with the US - and his country's awkward relationship with their allies-by-default

A Syrian general speaks

A senior officer of Bashar al-Assad’s regime talks to Robert Fisk about his army’s brutal struggle with Isis, in a dirty war whose challenges include widespread atrocities
‘A bit of a shock...’ Cambridge economist with Glasgow roots becomes Zambia’s acting President

‘A bit of a shock...’ Economist with Glasgow roots becomes Zambia’s acting President

Guy Scott's predecessor, Michael Sata, died in a London hospital this week after a lengthy illness
Fall of the Berlin Wall: History catches up with Erich Honecker - the East German leader who praised the Iron Curtain and claimed it prevented a Third World War

Fall of the Berlin Wall

History catches up with Erich Honecker - the East German leader who praised the Iron Curtain and claimed it prevented a Third World War
How to turn your mobile phone into easy money

Turn your mobile phone into easy money

There are 90 million unused mobiles in the UK, which would be worth £7bn if we cashed them in, says David Crookes