Posts Tagged carbon credits

Financing the Tropical Forest Conservation Act

Posted by on Friday, 20 August, 2010

The Tropical Forest Conservation Act is an incentive program that provides less developed countries with debt relief when they protect their forests. According to USAID, this act includes funding from both the United States federal government and private organizations. The Tropical Forest Conservation Act funds protect forests throughout all regions of the world, including Bangladesh, Belize, Jamaica, and Botswana, as well as others.

The Tropical Forest Conservation Act was originally authorized by President Bush in 2001. President Obama has continued funding this program and more nations and sources of funding are added periodically. The University of California, Santa Barbara reports that the debt structure of this program provides several beneficial effects. The program includes terms which allow a debtor to convert loans due in a foreign currency into loans due in its own currency. A debtor pays loans to a Tropical Forest Fund in its own country rather than a bank in another nation which loaned it the money. Additional leverage may be available, since in some cases the US government can purchase a developing country’s bonds for below their face value because foreign bond purchasers previously didn’t expect the developing country to be able to pay off its debt.

Conservation funds available through this program are still much lower than the amount of money necessary to completely protect the world’s tropical forests. The United States has spent $83 million since this program started, according to USAID, and Harvard claims that it will cost $15 to $30 billion a year to defend the tropical forests. A method of continual payment provides a stream of income greater than the income provided by cutting down the forest and setting up farms or industrial sites.

The United Nations has established a program called REDD which assigns a value to protecting these forests. This program is a carbon offset market. Private investors can purchase carbon credits, and sell them to other nations or industries at higher prices if the carbon offset laws become stronger in the future. The money gained from purchasing carbon credits goes to the nation where the tropical forests are located. Harvard claims that this has already provided an incentive for organizations such as banks and multinational corporations to stop development of several tropical forests, because of potential gains in a future carbon credit market.

REDD provides a method for the United States government to find private investors to finance the Tropical Forest Conservation Act. Most of the current partners who are helping the federal government pay for tropical forest protection are nonprofits. The United Nations reports that European countries, including Spain, Norway, and Denmark, are funding tropical forest protection. Norway provided $52 million in funding for 2009 to support the UN’s REDD program. This is still a long way from the $30 billion a year that Harvard claims is necessary to protect the rainforest.

Carbon Credits and the Icelandic Volcano

Posted by on Monday, 10 May, 2010

A volcanic eruption spewed out a huge amount of carbon into the atmosphere, and clogged the air with flakes of ash for several weeks. Flights are grounded because of the eruption, so planes cannot run their usual routes in Europe and connect travelers on the Atlantic coast to airports across the ocean. Surprisingly enough, the volcano eruption has another effect, on the airlines’ allocation of carbon credits from the European Union.

Since the volcano eruption grounded flights, airliners will fly less hours. According to the Environmental Leader, this will lead to increased carbon credit costs for airlines. The reason is that airlines are not currently covered by the mandatory European carbon credit exchange, which will affect them in 2012. This means they will have a lower baseline carbon emissions standard to use as a comparison in 2012.

The article doesn’t mention a huge disincentive here. This volcano forces airliners to fly less, leading them to appear like they used less energy, which is used in the regulatory calculations of the European Union. This suggests that airliners would gain an advantage by not attempting any form of carbon emissions reduction for their current flights, so they would have a higher base point to start from. Airliners even have an incentive to waste additional fuel now, since if flying less hours will raise their costs in two years, flying more hours now will give them targets that are much easier to meet in the future. This is extremely counterproductive. Since the Environmental Leader mentions that the airlines will be paying more than $3 billion for these credits each year, increasing in the future, an incentive to waste additional fuel and produce more emissions in the next two years which will lower airliners’ future costs needs to be addressed. Fortunately, according to Business Green, the expected effect of the volcanic eruptions so far is two percent of the total carbon emissions for the year, not a huge factor by itself. This article further mentions that the flight reductions caused by the international recession further decrease flights, adding an additional factor that lowers the baseline energy usage of the airliners.

The Canadian Climate Change Accountability Act

Posted by on Sunday, 9 May, 2010

Climate change accountability has come to Canada. The act establishes strong goals, including a very sharp decrease in carbon emissions. The New Democrat Party states that this plan sets a reduction of twenty five percent emissions by 2020, and eighty percent emissions by 2050, below the 1990 levels of carbon emission. This is a very significant move, since those are some aggressive targets.

The New Democratic Party gets to claim responsibility for this act, since others in the Canadian government were trying to reduce the climate change targets. The Green Party of Canada notes that Prime Minister Stephen Harper’s conservative legislators are attempting to weaken previous legislation. Negotiators at the climate change conference in Copenhagen noticed these attempts, adding blame to Canada during the international talks. According to the Green Party, the United States planned to invest more money in green energy funding than Canada’s government, although this accountability act will definitely change the likelihood of getting green energy subsidies for renewable energy plant construction in Canada.

The act itself is available at the Parliament of Canada site. The summary explains additional features of the act, such as how it will be enforced including subsidies and penalties. The act is broken up into five year plans that set targets for periods between 2015 and 2045. The gas regulates several greenhouse gases other than carbon dioxide, including methane, sulfur and nitrogen dioxides, and chlorofluorocarbons and related chemicals. It does specify that the regulation applies to the shorter chain CFCs, since larger chains do not rise into the atmosphere. Shorter carbon compounds such as propane are gas at room temperature, longer chains such as waxes are solid at room temperature.

This bill includes room for flexibility. There is a lot of room for the Canadian government to set up monitoring methods later, although the legislation does include a mandate to create these monitoring methods. This includes possible permits and inspection for any machine that releases any of these greenhouse gases as well as a possible carbon credit trading exchange. In addition, these regulations are intended to set specific targets for each province of Canada, which brings up the possibility that provinces may trade carbon credits among each other as well. United States manufacturers and resource extractors should pay attention to this legislation, since they are likely purchasing supplies from Canada and this act will add compliance and inspection costs as a component of sales. Truckers should also be concerned, since this act could include additional inspection and installment of devices on trucks allowed into Canadian provinces.