Carbon Market May Bring Financial Bubble, Bolivian Envoy Says
NEW YORK - The global carbon market, valued at about $124 billion in 2010, may create a new financial bubble and is a poor way to address the climate crisis, Bolivia's United Nations ambassador said.
"The possibility of a new financial bubble that will be created through this carbon market is very big," Pablo Solon, Bolivia's ambassador to the UN and the country's chief climate negotiator, said in a telephone interview.
The comments open a new argument in Bolivia's effort to keep CO2 trading off the agenda at the UN climate talks. Solon spearheaded an effort at last year's gathering in Cancun, Mexico, to exclude carbon-market mechanisms from a program designed to protect forests.
Solon's opposition to the measures fed into a rift between rich and poor nations that derailed the UN talks two years ago in Copenhagen. His concerns were overruled in December in Cancun, allowing the discussions to progress.
Speaking in the week before climate negotiators gather for UN talks in Bonn beginning June 6, Solon said carbon credits can be bought for around $15 a metric ton and then resold for $100 a metric ton or more in some cases.
"In reality it is the same ton of CO2, so there are many problems related to the carbon market that are not really under control at all," Solon said. "From our point of view, to launch and to create all this business to solve this problem through this new market mechanism is not a good solution."
$124 Billion Market
The global market for buying and selling emissions allowances was valued at more than $124 billion in 2010, according to data compiled by Bloomberg New Energy Finance.
At the talks in Cancun that finished in December, countries agreed in principle to establish national emissions limits and a climate fund to support developing nations as they cope with rising sea levels and more volatile weather. Bolivia was the only country in attendance to abstain from the agreement.
Solon said developed countries have failed to live up to their promises on emissions limits, and carbon trading has not spurred further action.
"Even with the carbon markets, the emission reductions in developed countries have not increased in a very significant way," Solon said. "We have had more problems than benefits," including a much-publicized theft of carbon allowances In Europe last year that caused trading to be halted.
New Agreement Possible
There are significant roadblocks to achieving the goals laid out at Cancun, Solon said. The culmination of talks this year come near the end of the first commitment period of the Kyoto Protocol, whose limits lapse in 2012. While Bolivia and developing nations want to extend the Kyoto pact, Russia, Canada and Japan have indicated they won't agree to that.
Under Kyoto, industrial nations were given mandatory emissions limits while developing ones including China, India and Brazil had no cap. China since then has surpassed the U.S. as the world's biggest polluter. Delegates meet again at the end of this year in Durban, South Africa.
"To be realistic and pragmatic, the only thing that is possible for Durban is to have a second commitment period of the Kyoto Protocol, even if not all parties agree on that," Solon said. "It's better to have an agreement with many parties than to keep waiting with nothing on your hands until everybody is on board."
Treaty 'Not Doable'
The U.S. never signed up to Kyoto and is pressing for a new treaty that would curb emissions for both rich and poor nations. In April, as envoys were meeting in Bangkok, Todd Stern, who leads the U.S. delegation, said a binding global treaty was "not doable."
Solon said a commitment for cuts from the U.S. would make developing nations more willing to limit their own emissions.
"Many other developed countries will follow that step and increase also their ambitions," Solon said. "Because the U.S. doesn't do that and it is very very short in ambition, the whole negotiation is in some way kidnapped by this pessimistic position from the U.S."
Solon said the fate of the talks ultimately lies in the hands of ordinary voters in the U.S., Japan and other industrial countries.
"If civil society in Japan, in the U.S., and other developed countries doesn't get involved in some way by putting pressure, then probably the negotiations won't move or even go backward," Solon said. "If there is instead pressure, I think we can have some movement."