Introduction
Should we be worried about climate change?
Yes. The likely impacts of climate change include large-scale species
extinctions, 150 million environmental refugees by 2050, an
intensification of the hydrological cycle with dramatic increases in
extreme rainfall events and droughts, billions of extra people at risk
of starvation and wide-spread changes in disease vectors.
Climate change is the greatest environmental challenge facing
civilization today. If emissions are not curbed, the negative
consequences to life on earth will be profound. Natural ecosystems
around the earth, both marine and terrestrial will be dramatically
harmed, as will human communities.
Do we still have time to do something about climate change?
Yes. Some climate change may be inevitable, but the future is not yet
written. Your activities can help make the difference between climate
change and climate catastrophe.
Can the world afford to stop climate change?
The UK energy White Paper (2003) estimated that for the UK to
implement appropriate measures, the costs would be between 0.5-2% GDP
in 2050. According to Sir David King, the UK's Chief Science Advisor,
"If just one flood broke through the Thames Barrier today it would
cost about UKP30bn in damage to London, roughly 2% of current UK GDP".
Economic estimates of the global costs of tackling climate change have varied, but the IPCC estimates that up to 2.5Gt of carbon equivalent emissions reductions per year (current global emissions are roughly 8 Gt), could be realised by 2020 through measures conferring net economic benefit.
The Stern Review, a 2006 report by the former Chief Economist and Senior Vice-President of the World Bank Nicholas Stern, predicts that climate change will have a serious impact on economic growth without mitigation. The report suggests that an investment of one percent of global GDP is required to mitigate the effects of climate change, with failure to do so risking a recession worth up to twenty percent of global GDP.
What is carbon finance?
Carbon finance is the general term applied to resources provided to a
project to purchase greenhouse gas (GHG) emission reductions
("emissions credits" or "carbon credits). Commitments of carbon
finance for the purchase of carbon have grown rapidly since the first
carbon purchases began less than eight years ago.
What is emissions trading?
Put simply, emissions trading involves the sale and purchase of
"carbon assets" (in the form of greenhouse gas emission reductions or
in the form of a right to release a given amount of greenhouse
gas). It is based on the idea that projects that reduce greenhouse gas
emissions create a recognisable financial benefit which may be traded
on the carbon market.
An entity which is able to reduce its emissions of greenhouse gases is able to sell the "carbon assets" it generates to an entity which would find it more expensive to achieve the same level of reduction through in-house activities. The concept of carbon trading also accommodates persons or corporations which may wish to invest in the creation of carbon sinks to generate carbon assets which can then be traded on the carbon market.
What are greenhouse gases?
Six gases are addressed by the Kyoto Protocol which are collectively
and commonly known as "greenhouse gases". These six gases are:
* carbon dioxide (CO2)
* methane (CH4)
* nitrous oxide (N2O)
* hydro fluorocarbons (HFCs)
* perfluorocarbons (PFCs), and
* sulphur hexafluoride (SF6).
Of these six regulated gases, carbon dioxide is of the most interest to corporate bodies. This is because it is emitted by everyday activities such as burning fossil fuels for energy, industry and transport.
What is the Kyoto Protocol?
The Kyoto Protocol is a subsidiary legal instrument to the United
Nations Framework Convention on Climate Change (UNFCCC). The objective
of the UNFCCC is to reduce greenhouse
gas concentrations in the atmosphere to a 'safe' level. The Kyoto
Protocol sets out (in Annex B) a range of legally binding greenhouse
gas emission commitments (targets) for individual developed countries
designed to reduce overall greenhouse gas emissions and thus
contribute to the UNFCCC's objective. Developed countries are
legally bound to reduce man-made green house gases emissions by
approximately 5.2%. Individual countries have their own reduction
targets outlined in Annex B of the Kyoto Protocol. The text of the
protocol was adopted at the third conference of the parties to the
UNFCCC in Kyoto, Japan, on 11 December 1997.
Article 17 of the Kyoto Protocol provides for "emissions trading" between parties to the Kyoto Protocol to allow those States to satisfy their assigned emissions target. The European Union Emissions Trading Scheme is an example of the practical application of Article 17. Each Annex I country has a certain number of emission allowances (amount of carbon dioxide it can emit) in line with its Kyoto reduction targets. If a country's GHG emissions are below their emission allowances (i.e. meeting Kyoto targets) they can sell these allowances to other Annex I countries who are emitting above the allowance(i.e. not meeting their Kyoto targets).
What is carbon offsetting?
Carbon offsetting is a way of countering greenhouse gas emissions
produced by companies and individuals through purchasing credits from
an emission reduction project which has prevented or removed the
equivalent amount of CO2 elsewhere.
Why should my organisation offset?
While all companies should reduce their overall carbon footprint
through energy efficiency and use of renewable energy, emissions
cannot be completely eliminated. Furthermore, in the short term it
might not be cost (or energy) efficient to make the infrastructure and
behavioural changes needed to make emissions reductions at
source. Offsetting, as part of a wider environmental strategy, is a
cost-effective way to address these unavoidable emissions.
What is the Clean Development Mechanism (CDM)?
CDM allows (developed) countries listed in Annex I of the Kyoto
Protocol to meet their emission reduction targets by paying for green
house gas emission reduction in non-Annex I (developing) countries.
What is Joint Implementation?
Joint Implementation is like CDM but with projects between Annex I
countries instead of developing countries. Eastern European countries
in Annex I such Bulgaria and Romania are likely to benefit from these
projects and have already signed MOU's for their projects.
What is the European Emission trading system (EU-ETS)?
In January 2005, several European sectors including energy, metals,
minerals and pulp and paper came under EU Emissions trading directive
which sets carbon dioxide gas emission limits. If a company emits
lower than it's allowed limit, it may sell its extra allowance to
other companies who are not meeting their targets. The penalty for
violation is 40 Euro for every tonne of carbon dioxide over the limit,
and a requirement to purchase the missing emission
allowances. Starting 2008, this will be increased to 100 Euros. The
law in the future may be extended to include the chemical, aluminium
and transport sectors.