In the world of the Kyoto Protocol and International Emissions Trading, where did Greening come from? Probably from morally indignant NGOs putting pressure on western bureaucrats. For some reason, early on, people decided that “Hot Air” was politically unacceptable and so invented greening to cover it up.
The recent COP/MOP in Montreal seems to have weakened the hand of those who insist on greening. It was certainly time to put to bed the Hot Air Heresy. This note examines the grounds for a western government to require “greening” of the proceeds of the sale of AAUs. (or for that matter ERUs and CERs in projects which show windfall gains from emission trading).
The signatories and ratifiers of the Kyoto Protocol made a deal. One country commits to something and in return the other country makes a similar commitment.
The Soviet Union’s economy collapsed around 1990. GDP slumped and millions of jobs were lost. And emissions fell dramatically. Seven years later the Kyoto Protocol targets were agreed, in 1997. When they negotiated the respective targets, the parties knew that the economies of Central and Eastern Europe had crashed. Anyone could have witnessed the confusion, the desperation, the joblessness, the idle factories, the lawlessness. So Hot Air was no surprise to anyone – it was just part of the deal.
The countries of Central and Eastern Europe would like to sell some of this surplus, as envisaged in the Protocol itself. That is, as contracted between the parties, if one is short and the other is long, then they can trade.
Then all of a sudden, some want to rewrite the rules. They want to buy AAUs which have been freed up because of reduction in greenhouse gas emissions in host countries. At the same time they want those reductions doubled up by insisting that the money they pay be used to generate even more reductions in emissions.
Check out this parallel.
There was a bloke whose father died rather early. He went through a lot of grief because of this untimely passing. He also inherited a house his father had owned. Because the house was up in Scotland and the bloke lived down in London, he sold the house for around €150,000. A few months later the buyer of the house came back to him. He said: “Hey, you know that house I bought from you. I paid you €150,000 for it. Well, I was talking to the neighbours and found out by chance that you had inherited the house from your dad. Like, you got it free. So I think you really should give me another house as well. It’s quite wrong for you to sell me a house for €150,000 which, after all, you got for free.”
That buyer is a real chump, isn’t he. So perhaps the parallel is not quite right.
A few months later the bloke’s mother passed away. Again, he went through a lot of grief. He then inherited the family house. Because this house, too, was up in Scotland and the bloke lived down in London, he put the house up for sale.
A buyer comes along and says. “Look I will pay you €200,000 for the house.”
“OK,” says the bloke, “Deal done.”
They were about to close the purchase, when the buyer called and said. “Just one more condition I forgot to mention. You have got to use the money for building a new house.”
“Hmm” says the bloke, mystified at this bizarre request. “May I ask why?”
“Well, I won’t buy the house if you don’t.”
So the bloke thought a bit. He checked the laws of conveyancy and housing in Scotland and the laws of conveyancy and housing in England, and found no such requirement that if you sell a house you have to build a new one.
“Sorry, mate, said our bereaved friend, “I am going to sell the house to someone who won’t place such an absurd condition on the sale.”
A few days later the buyer rang again. “I forgot to tell you something,” said the buyer. “I think you are an immoral person and, since I am chief legislator of the Scottish Parliament and secretary of the Housing Market Committee, I am going to rewrite the rules of housing so that you have to build another house if you sell one, if you got the house for free, through a lottery, or some other method which did not require self-sacrifice.”
Is this Kafka or Monty Python?
People think things like: “The countries of Central and Eastern, by historical accident, ended up with a surplus under Kyoto.” Historical accident?
I would draw attention to the British and German dash-for-gas which has practically fuelled Europe’s compliance with Kyoto. Was the availability of natural gas in the North Sea or Russia the result of some particularly ingenious piece of climate change policy by Helmut Coal or Tony Blair? Err … it looks very much to me like a geological accident. Or even a historical accident (what if it had been discovered at a different time, or the gas turbine did not happen yet to have been invented?).
Is the fortunate presence of wind on the coasts of the North Sea the result of protestant hard work and self-sacrifice by the goodly burghers of the Netherlands and Denmark? Err … no. It’s geographical … accident.
There is no difference between historical accident and geographical accident. It’s just good or bad luck.
Developed countries have done nothing to curb greenhouse gas emissions except through enjoying the fruits of historical and geographical accident. So when they request even more sacrifice from the countries of Central and Eastern Europe and want to change the rules of the game, the latter should have little sympathy.
The way to ensure greening without rewriting the rules is this: make strong commitments to a post 2012 regime and allow banking from the first to the second commitment period. In this way the countries of Central and Eastern Europe will have a strong economic incentive to reinvest their surplus in further emission reductions, since those reductions will then have continued economic value under the Kyoto Protocol.