Action Agenda
Carbon Trading
Despite its potential to make matters worse, international and nation agencies are embracing carbon trading as a major strategy for reducing emissions worldwide. It is a reality that environmental organizations like NAPE must exert their best efforts to ensure that carbon-trading initiatives actually reduce emissions in developed nations, and are not one more false solution.
While developed nations see this as a cost-effective way to mitigate the effects of their carbon emissions, they cannot rely on carbon trading alone. Their emissions must come down, as well. NAPE understands the potential for good in carbon trading, but also the harm it would cause if mismanaged, and we monitor their performance and impacts closely.
To help enable participation by developing nations, the United Nations created the Clean Development Mechanism (CDM) that qualifies emissions-reduction projects in developing countries for obtaining financing. Another UN program – called Reduced Emissions from Deforestation and Forest Degradation (REDD) – targets carbon trading financing for projects that plant trees to absorb carbon dioxide.
How Carbon Trading Works
The basic theory of current carbon trading systems – many current ones are voluntary – is that the carbon credits offer developed nations a less expensive way to reduce worldwide emissions – and give developing nations like Uganda the opportunity to share the economic benefits. An added wrinkle is that third parties can buy and resell these credits at prices determined in markets by supply and demand. This has produced a total value of carbon markets worldwide of $US142 billion in 2010, according to the World Bank.
The theory works this way:
A factory in Europe, for example, needs to comply with sharp carbon emissions reductions. It makes some changes directly that partly achieve the reductions, but then faces some very costly retrofits needed to achieve full compliance. For less money, the factory could instead buy equivalent carbon credits created by an emissions-reducing project in Uganda, paying either the project itself or a third party. The factory saves money in achieving full compliance, the Uganda project gets the financing it needs, the third party makes a profit between the purchase and sale price of the credits and – according to the theory – everyone benefits.
Pitfalls of Carbon Trading
As with all theories, the reality can be different, and can result in false solutions.
For example:
While barely one percent of CDM projects qualified so far have been in sub-Saharan Africa, 40 percent have been in China, most of them to build hydroelectric dams, which can wreak unintended environmental havoc. In fact, over half of qualified CDM projects worldwide are for dams, according to 2010 UN data.
Not only that, most of these Chinese projects would have been built anyway, so there is no net carbon savings – the credits sold to the European factory allow it to continue producing greenhouse gases – and overall emissions increase.
While REDD projects could help finance the reforestation of Uganda, funding is limited in part because these carbon credits fetch low prices in carbon trading markets where investors are uncertain of the emission savings they would actually produce.
REDD carbon trading for reforestation can provide perverse incentives to create monoculture plantations (derided as “sink plantations” by critics) of fast-growing non-native trees like pine and eucalyptus, cheaply planted, instead of the more complex task of revitalizing biodiverse forests.
For example, the UK-based New Forests Company is establishing tree plantations on 54,000 acres in Uganda, financed in part by selling carbon credits under the auspices of CDM. Its self-described “sustainable and socially responsible forestry” involves manual brush clearing and chemical spraying to eliminate all existing plant life, creating what can only be called “green deserts” of single-species trees.
Because REDD-financed forest projects require monitoring and enforcement to prevent losses, affected communities can find themselves shut out of their forest-based livelihoods by government or private monitors, creating conflicts that can result in violence and illegal timbering and encroachment.
Because of market inefficiencies and uncertainties, most of the purchase price of tradable forestry carbon credits goes to intermediaries, dissipating funds sorely needed for sustainable, biodiverse forestry projects. By one estimate in 2009, only 30 percent of the cost of these credits actually reaches a project, on average.
In short, NAPE cannot support carbon-trading market systems that do not require polluting corporations to reduce their emissions significantly first, before buying carbon credits. Further, carbon trading must not result in developing nations like Uganda becoming convenient carbon “sinks” that create harmful projects, like monoculture plantations that displace biodiverse forests, and substitutes for emission reductions in industries that have caused global warming.
NAPE Actions
Despite its shortcomings, the REDD program is potentially a source of new funding for projects to prevent the disappearance of Uganda’s forests, given that great need. For example:
NAPE is working with government to develop effective administrative structures, processes and policy instruments to implement REDD projects.
In turn, NAPE advocates extending criteria for REDD funding “avoided deforestation” projects that preserve rainforests as they are now, instead of qualifying them only after their destruction.
NAPE with other civil society organizations are monitoring REDD project implementation to ensure that the program does not subsidize monoculture “sink plantations,” does not displace indigenous communities, or otherwise threaten biodiversity.
Through our Community Ecological Governance initiative to mobilize communities in forest revitalization, NAPE in 2009 helped organize in such diverse areas as Kalangala Island, Mabira Forest, and the Kiliagye in Hoima and Manga in Mpigi.
In 2010, NAPE held awareness meetings and workshops aimed at educating communities on the benefits and challenges of REDD, as well as advocacy materials and a video documentary, Back to Our Roots.
More broadly, NAPE continues to monitor carbon trading programs in Uganda for their consistency with environmental sustainability and greenhouse gas reduction goals, as well as their impacts on affected communities and human rights. For example:
NAPE has paid special attention to projects funded in part by tradable carbon credits that replace natural forests and wetlands with agrofuels plantations, such as the proposed 25,000-acre palm oil plantation on Kalangala Island in Lake Victoria.
NAPE continues to engage the governing bodies of the Clean Development Mechanism (CDM) program to protect better the interests of affected communities by requiring their inclusion in decision-making and sharing the financial benefits.
To minimize misuse of carbon credits for projects that would happen anyway or exaggerate emission reductions – called “false credits” – NAPE’s review of proposals brings this cheating to the attention of responsible public agencies – and the public.
Concerned about the relatively few alternative energy projects and similar energy efficiency projects that receive CDM funding, NAPE advocates for a major expansion of funding for these projects – perhaps using the World Wide Fund for Nature’s “gold standard” methodology.
NAPE continues to look for new projects that could receive CDM funding and provide significant emission-reduction and other benefits, such as improved solid waste collection in Ugandan cities, better landfill management, and expanded composting of organic wastes.
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