Thursday, March 08, 2007

Why Kyoto is the Problem

A few weeks ago I was one more voice in the chorus begging for American participation in Kyoto. After undertaking a bit of research on the subject I have made a complete about face. Kyoto, among numerous other problems, has created an entirely new problem with regard to climate change. Specifically, Article 12 of Kyoto stipulates that developed nations may provide clean development aid to non-Annex B nations to aid in meeting their reduction targets. Under Article 12 China can generate UN approved carbon credits to trade with Annex B nations, but is under no obligation to comply with any development standards.

is more than happy to comply with this system, especially as not all GHGs (greenhouse gasses) are created equal. The potent GHG HFC-23 is roughly 11,700 times more potent than CO2. That means that for every one ton of HFC-23 (used as a refrigerant and for plasma etching in the semiconductor industry) captured, the company receives 11,700 tons of CO2 credits. Chinese companies have profited in to the tune of around $5.9 billion for an investment of less than $200 million while companies in states that have ratified Kyoto have had that many more carbon credits available for purchase. The Chinese government takes a 65% cut of that income, and though the official line is that it will be used for “sustainable development.” The word “sustainable” seems to have a very flexible meaning when translated into Mandarin.

This system essentially doubly empowers China as a polluter giving them both a free pass relative to industrial nations and a source of income for building out new infrastructure. Though I have only anecdotal evidence on which to base this assumption, I firmly believe that stories about Chinese wind farms and clean energy projects are the environmental equivalent of TrerezĂ­n (the Third Reich's so-called "model concentration camp" used to fool the Red Cross).

Encouraging this "gold-rush" atmosphere in carbon trading is Kyoto's limited time horizon. By drafting a treaty with such a near-term expiration date (Since when is climate change a short-term problem?) the international community has discouraged the building of large clean energy projects that require massive capital layout and have a long lifespan. From a certain standpoint the treaty actually incentivizes the construction of dirty industry. The feedback loop of revenue generated when the Chinese government taxes income on carbon credits produced cleaning up Chinese infrastructure actually incentivizes the construction of old-style dirty infrastructure. If the goal of the Chinese government is to industrialize rapidly (a safe bet, I think), then building infrastructure which will produce the additional boon of carbon credit income just slathers gravy on the meat and potatoes of industrialization. Again, were it not for the short-sighted time frame of Kyoto investors would be incentivized to build out large-scale projects which would generate these credits ad infinitum, especially if the promise of continued benefits beyond potential adherence to Kyoto by China were laid out. Instead, Kyoto merely creates an attitude of "get while the gettin's good." That hardly seems productive.

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