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U.S. Companies See Practical Benefits in Carbon Emissions Market |
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Dozens
of U.S. corporations are already trading emissions credits, even
though the Bush administration has rejected the Kyoto Protocol on
Climate Change. The international treaty, designed to curb emissions
of greenhouse gases like carbon dioxide, enters into force Feb.
16, 2005.
NEW YORK - With 127 countries poised to take
action on global warming, many companies in the United States --
a world leader in greenhouse gas production -- are moving to cut
their own emissions, even in the absence of federal regulations.
The Kyoto Protocol, the 1997 international treaty that sets targets
for the industrialized world to reduce emissions of carbon dioxide
and other greenhouse gases considered responsible for global warming,
will take effect Feb. 16.
With the recent approval by Russia's legislature, the treaty achieved
the number of adherents necessary to finally enter into force even
without Washington's participation.
The United States, the world leader in greenhouse gas emissions,
initially signed the Kyoto Protocol but did not ratify it. Then
President George W. Bush withdrew the U.S. signature, arguing that
industrialized nations are unfairly singled out, and that the treaty
would cost the United States upwards of five million jobs.
But many U.S.-based multinationals that do business in countries
where greenhouse gases will soon be regulated have long seen a financial
incentive in getting a head start on curbing emissions.
The chemical giant Dupont, for example, earns a third of its 26.9
billion dollars in annual sales in countries that have ratified
the Kyoto Protocol. Over the last decade, Dupont has cut its greenhouse
gas emissions by 65 percent, largely by targeting non-carbon greenhouse
pollutants, like nitrous oxide.
"I believe it's only a matter of time before we'll face (U.S. federal)
regulatory mandates to reduce our emissions. It's a problem that
needs a prudent response from industry, and there is evidence that
more and more companies are taking this seriously," said Tom Jacob,
Dupont's senior adviser for global affairs.
Dupont is one of dozens of companies participating in a pilot greenhouse
gas emissions credit trading program called the Chicago Climate
Exchange. Emissions trading allows a business that pollutes less
to sell emissions "credits" to a business that exceeds its target.
The Kyoto Protocol allows buying and selling of emissions credits
as one of the treaty's "clean development mechanisms".
Several regulations governing these mechanisms will be debated during
the 10th Conference of Parties to the Convention on Climate Change,
taking place in Buenos Aires, Dec. 6-17.
Members of the Chicago Climate Exchange buy and sell six greenhouse
gases, gain credits for carbon sequestration projects, and pledge
to cut their emissions by a modest four percent by 2006.
Since trading began in December 2003, the average daily volume has
been 7,396 metric tons of carbon dioxide, although some analysts
note that this is relatively insignificant, given the total U.S.
greenhouse gas emissions, estimated at 6.8 billion metric tons in
2002.
"I don't really see a market for carbon in the United States right
now," said William Pizer, an economist at Resources for the Future,
an environmental policy think-tank in Washington. "It's hard to
have a market without demand, and who's going to buy allowances
if there's no incentive?"
"I do see companies increasingly aware of their liability and what
would likely happen if a regulatory scheme comes into play," he
said. "The use of fossil fuels is so pervasive, everybody becomes
a culprit. In the long run, emissions trading will have to be a
part of the solution."
Frustrated by inaction in Washington, many local politicians are
taking the lead in regulating greenhouse gases. Nine states in the
U.S. northeast and mid-Atlantic region plan to unveil a cap-and-trade
scheme in April that would ultimately create an active carbon trading
market.
"State and private activities go hand in hand," said Barry Rabe,
a professor of environmental policy at the University of Michigan
and author of "Greenhouse and Statehouse: The Evolving State Government
Role in Climate Change."
"There's a trend toward broader regional initiatives to regulate
greenhouse gases, and many companies are seeing the advantage in
taking early action," Rabe said.
Some analysts predict that by 2010 global commodities trading will
reach more than nine trillion dollars, driven by crude oil, natural
gas, and carbon dioxide. Washington's refusal to ratify the Kyoto
Protocol could end up costing U.S. companies millions because they
will be mostly cut out of the potentially lucrative emissions market.
"It's pay now, or pay more later," said Peter Fusaro, chairman of
Global Change Associates, an international energy and environmental
consulting firm. "Corporate America isn't dumb -- they have to be
competitive."
"The disconnect is in Washington, but it's not that far-fetched
that the feds could change their minds in the next four years and
start regulating emissions," Fusaro said. "Bush likes market-based
solutions. The market is there. We have buyers and sellers. The
issue becomes: what's it going to cost?"
* Katherine Stapp is a Tierramérica contributor.
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