What we can do before Mexico Meet on Climate Change.

The much talked, hugely crowded Copenhagen Meet on Climate Change is over. The next Meet will be in Mexico. More than expected heat - in a way adversely affecting the climate was generated. Some say that the Kyoto Protocol will be a history. Where do we go from here? What actions are needed to make the next Meet a more focused one in terms of real action for the better? Not much clarity is coming from any quarters - be it governments or the United Nations Framework Convention and Climate Change (UNFCCC). But, life is not going to be the same for countries like India. The action of USA appears to have set the cat among the pigeons- atleast the BASICS countries.

Earlier, in the Marrakesh Accords in 2001, three flexible mechanisms were agreed upon for bringing an equitable balance between nature and the mankind. These were,

i Clean Development Mechanism (CDM).
ii Joint Implementation (JI), and
iii Emission Trading (known as ‘carbon market’)


Out of the three mechanisms provided in the Protocol for reduction of Green House Gases (GHG) emission, India as a developing country was entitled to opt for Clean Development Mechanism (CDM) projects only as it was not under obligation to reduce GHG emission as per the Protocol. Rest of the two mechanisms was mainly relevant to developed countries, called Annex-1 countries.

Following the principle of common but differentiated responsibility, India and other similarly placed countries maintained that the major responsibility of curbing emissions rested with the developed countries which have accumulated emission over a long period of time. Besides this, the Kyoto Protocol enabled India to take up clean technology projects with external assistance as per national sustainable development priorities. But, the Copenhagen Meet has thrown out of the window, a number of decisions which formed part of the Kyoto Protocol.

Till the Kyoto Protocol, the Carbon dioxide (CO2) was considered a devil for the humanity. However, when it was turned into a monetary value, the attraction for CO2 became so huge for countries like India and China, called non-Annexure 1 countries under the Kyoto Protocol. For over a decade, the industrialized countries, particularly the USA did not show much seriousness to the noise made by the members of the Kyoto Protocol. In fact, USA did not seem to recognize it at all.

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As of now, countries like India found a good business opportunity in carbon credits which still continues. Typically, a CDM project must provide emission reductions that are additional to what would otherwise have occurred. Such projects which qualify for registration and issuance of credits would require investment in more capital intensive technology. The CERs generated by the CDM project are sold to a CER buyer, which gets additional revenue for the CDM project holder.

Till July 2009, India has 456 CDM projects registered and been issued 71.73 million Carbon Emission Reductions (CERs) / Carbon Credit units which is second to China which has 638 projects and 153.23 million CERs issued to it. It is expected that CERs valued more than 2.7 billion tonnes of CO2 equivalent would be issued to India during the first commencement period of the Kyoto Protocol, 2008-1012. As of now, India is a seller of CERs and not a buyer of CERs.

The Indian corporates and NGOs with the blessings of the government, thought that they can use the hot opportunity to generate good amount of revenue by implementing eco and environment-friendly projects which are eligible for getting support under CDM. Now, with the announcement of the Government of India (GOI) for voluntary (involuntary) reduction of 20-25% in the period 2005-20 in reduction of emission intensity, cold water has been poured (by USA) on the hope of countries like India to make business out of it.

Hitherto, even industrial units emitting CO2 in India enjoyed the benefit of CERs without any co-obligation to have a cap on emission of CO2. In other words, they were emitting CO2 and also selling CERs and making money out of that. Now, such hot opportunity is likely to become a nightmare of sorts for a large number of industrial units in India. If India were to take upon itself the commitment to reduction of CO2 emission up to 25%, then a number of industrial and other units (may be the government also) will have to buy CERs from the market which may more than neutralize the inflow of funds generated so far in carbon credit trading in the country.

In other words, by accepting such measures as a minimum of 20% reduction in emission intensity, it will turn out to be a carbon debit for a number of industries in countries like India. With the move to take reduction in emissions by the developing countries, the carbon credit market may either become more volatile and become adverse for developing countries as it would make the industrial units in developing countries to pay more for each CER unit they need to purchase or get killed by the very carbon credit market.

With monetary conversion of carbon credits, the focus turned to use all the means, both correct and incorrect, to overestimate the carbon credits by the industrial units called ‘Operators’. Moreover, wherever a complex financial product like carbon credits offers huge returns to the project holder, there is bound to be misuse at various levels such as over estimating CERs by the ‘operators’, falsifying records by ‘CDM project holders’ for getting the full value of CERs and above all fooling the world by telling that trading in carbon credit would help discover the real price for the damage done due to climate change. For example, we hear of Accelor Mittal having got allocated far more carbon permits that it needed for which it is estimated to gain around £1 billion by 2012. This is another gravest fall outs of monetizing the CO2 emissions, which one may call misuse or disuse of carbon credits. We also hear of negative propaganda against TERI headed by the Nobel Laurate Dr. Pachuari.
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What can we do now?

As of now, the whole exercise of climate change has been reduced to the level of a financial product traded in the financial markets rather than a definite commitment from all the countries to bring about a positive change in the climate for the sake of the humanity as a whole. For a moment, if we think of removing the carbon trading mechanism and replacing it with a non-monetary value based mechanism, no country would object to voluntary reduction of CO2 emission. So, the best way is to de-couple the climate change dialogue and the carbon credit mechanism.

Is it feasible? The answer is a clear ‘yes’. It only needs conviction among the governments to move with the real work of climate change. At present, under the CDM projects, most of the monetary benefits go the operators and not to the common man who is mostly poor who actually contributes for the improvement of the climate change through such projects. So, to meet the real issues of climate change, countries should make the programmes people centric instead of money based ones helping mainly the ‘operators’ as is being done now.

Say, for instance, a solar panel project is put up by a farmer and the agency implementing it aggregates all such projects and claims the eligible CERs and it stops at that stage. Instead, the NGO should ensure that the proceeds after actual overheads should come to those who have put up solar panel energy systems. Therefore, if people feel that they stand to gain by the climate change, they will participate and this would increase the chances of success of this great exercise.

If we look at the CDM projects sanctioned in India, a large number of them were rural based projects (exception is New Delhi Metro Project). But, very little has been done to make use of the institution like NABARD which has exclusive focus on integrated rural development in the country. It has demonstrated that projects like watershed development, afforestration programmes etc., have contributed substantially for creating eco-balance in the country. It is necessary to use NABARD’s expertise in encouraging setting up of more and more participatory green projects.

Another way to bring about a real change in climate change exercise is to remove the heavy dose of technicalities in communicating the programme contents to the people at large. The language used to popularize and propagate the programme should be simpler and free from jargons for understanding of common man. When I asked a number of farmers about their knowledge of climate change, all of them expressed total ignorance of any such thing happening through their projects. Institutions like NABARD can take up the role of creating greater awareness among the rural masses on climate change.

Most importantly, there is nothing like demonstration effect - Kar Ke Dikana effect. Discourage use of number of vehicles by politicians, bureaucrats and higher segment of population by charging a heavy levy for using more than one vehicle, encourage use of bi-cycles and such measures.