By now, everyone should know that rather than meeting our emissions reduction target under the Kyoto Protocol, New Zealand will exceed it - by 36.2 MTCO2-equivalent, according to the projected balance of units. So what can we do about it?
One option is to buy our way out of trouble - not by purchasing credits outright, but by using the Clean Development Mechanism. The Clean Development Mechanism (CDM) allows parties to the Kyoto Protocol to gain credit for reducing emissions in developing nations. The logic is impeccable: a ton of CO2 is a ton of CO2, and it doesn't matter whether it comes from New Zealand or Nauru, provided it is not emitted or balanced with a sink. And given that many developing nations use older, dirtier technology, equipment upgrades to reduce emissions there are often going to be cheaper than equivalent reductions in richer nations. We will therefore be able to get a greater reduction at lower economic cost. Or at least, that's the theory; in practice, the CDM hasn't been used much due to problems with certifying projects and uncertainties about the price of carbon. But now that seems to be changing:
A World Bank fund signed deals to buy pollution credits from two Chinese chemical companies for $930 million under a plan that lets richer countries meet commitments to cut greenhouse gas emissions by paying for reductions in poorer economies.
The two Chinese companies, Jiangsu Meilan Chemical Co Ltd and Changshu 3F Zhonghao New Chemicals Material Co Ltd, agreed to cut their greenhouse gas emissions by 19 million tons a year for an unspecified period, the bank said.
The World Bank will get credits at least until 2012, but are being cagey about the exact length of the contract. But that means they're getting their carbon for only US$9.80 a ton, and proportionately lower the longer the contract lasts. Conceivably, they could be getting it for only half that, if the contract goes for ten years.
The opportunity here ought to be obvious. US$10 per ton is at the lower end of estimated carbon prices, and with it looking increasingly likely that New Zealand will have to take responsibility for its emissions through the acquisition of credits, we ought to be looking seriously at it - though with more of a development and environmental focus. I am not suggesting for an instant that we should give up on efforts to actually reduce emissions (I think there is quite a lot we can do on that front) - but carbon trading is likely to be part of our solution. And if we're acquiring credits, I'd rather this was done in a way which helped people in need, rather than simply lining people's pockets...