1 were defined in the Kyoto Protocol (COP3) as different ways to achieve emissions reduction as part of the effort to address climate change issues. These have been highly controversial as they were mainly included on strong US insistence and to keep the US in the treaty. These fall into the following categories discussed below:
Emissions Trading, or Carbon Trading as it is alternatively known, involves trading carbon emission credits within nations.
Allowances turn emissions into a commodity that can be traded between industries.
By starting with a limit which would gradually be reduced each year, the remainder emissions are then available to use, or trade if you do not use them yourself.
As limits are reduced each year companies have to find ways to reduce their emissions, through innovation and change or trade.
Supporters say that this mechanism will bring in private corporations by putting a price on carbon, creating market pressures driving for efficiency, innovation and the best results.
The Kyoto Protocol says that it is ok to trade in emissions, but that it should not be the major means to achieve one’s commitments.
Some European countries and corporations have started2 implementing such programs to get a head start and to see how well it will work, while in Chicago, USA, a green house gas emissions trading market is emerging3. Chicago and Mexico City are, for example, joining the carbon trading initiative4.
Critics argue that it will be easier to buy credits than to reduce emissions hence it won’t really work and will just be a license to pollute6.
Because of the collapse of the former Soviet Union, the emissions from the countries of the former Soviet Union is much reduced, but under the Kyoto agreements, they can emit up to their 1990 limits. In essence then, trading at 1990 limits could lead to more emissions, as summarized by the following:
Joint Implementation (also known as Activities Implemented Jointly) is where developed countries invest in emission-reducing activities in other industrialized countries, and gaining reduction units as a result.
The Clean Development Mechanism (CDM) is similar to the joint implementation, but where developed countries invest in Southern, or developing countries. It is aimed to be a part of a program of sustainable development.
For some developing countries, this is important because of the possible attraction of foreign investment.
However, there have been many concerns:
Critics argue that rich countries can avoid responsibilities at home and that it will actually increase emissions because the credits earned will allow rich countries to emit more, while developing countries are not tied to reduction at this stage (because it is unfair to penalize them for what is internationally recognized as largely something caused by the rich countries. See the Climate Justice and Equity13 section for more about this aspect.)
It is also criticized that instead of important technology transfer to developing countries (so that they are empowered to develop and produce themselves), the free-trade mechanisms will instead lead to further dependency14 (and, ironically, on the very multinational corporations that are criticized for being the heaviest polluters.)
By treating emissions as commodities, the structural inequity we see between North and South in commodity trading in general is feared to continue.
In essence then, this is criticized for allowing the rich countries to continue using and burning fossil fuel while paying the third world not to.
Additionally, as Centre for Science and Environment (CSE) points out, the rich get to use the poor countries’ land to tackle their own emissions issues15, not to help the poor, while not actually concentrating on reducing emissions. The Corporate Europe Observatory also has concerns in this area:
It is also controversial because many questions were raised for the Hague conference. For example:
Limits have not been agreed to (or it has not even been agreed if there should be limits.)
It is not clear what the range of activities are that can be included. Nuclear energy, hydropower, renewable energy only are some of the uncertainties.
Public participation and monitoring is paramount.
Will a form of energy tax work?
Accountability and verifiability of emissions and credits etc is very difficult as stocks and flows of emissions are hard to quantify.
Futhermore, as the Corporate Europe Observatory points out, the trade in emissions resulting in carbon credits would lead to “unequal property rights to the atmosphere”17 which in turn “would consolidate the historic overuse by Northern industry at the expense of the South (80% of all CO2 emitted since 1850 has come from the North). A market without clearly defined property rights can never function and the unfair property rights that underlie the currently proposed emissions markets will eventually be rejected by those losing out.”
As CSE further point out to the lead up to the COP8 meeting in October 2002, CDM is still an issue:
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Added small note about cap and trade including a couple of videos
October 4, 2009
Added a note about how CDM could be reformed or improved
January 1, 2009
Small note about poor not benefiting from CDMs and challenge of including forestation into emission reduction numbers
January 1, 2008
Small note about clean development mechanism often not helping the poor
July 4, 2007
A very small note about clean development mechanism in Africa
November 12, 2005
A number of concerns raised years ago about clean development mechanism appear to be coming true, as CDMs are looked at in India. (The remainder of this document is basically unchanged, for now, since October 26, 2002)