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Are Carbon Credits Going to Work?

Author: Alan Bodger
18 Scouler Way
Bateman WA 6150
Phone: +61 8-93323590
Organization: KIPTON P/L

A discussion of the issues surrounding global warming, greenhouse emissions and those responsible for the emissions. Carbon credits are just one part of a process that assists in the mitigation of greenhouse emissions.


I was invited here today to present a paper on a subject that is inextricably tied to the question of climate change and "greenhouse emissions". That is, Carbon Credits

Since the Stockholm Conference on the environment in 1972, there has been a constant process of defining and refining global environmental issues. The main goal of the analysis is to leave future generations with an environment capable of sustaining them.

Global warming and climate change are two of the symptoms that I will address through the prospect of carbon trading as a responsible tool of sustainable development.

In recent weeks, the global warming and climate change debate has polarised the positions of the most powerful economy of the world, the United States of America, and the 15 economies that comprise the European Union as to the expectations of a globally sustainable environment.

Some lament the recent statement on the US government's position towards the Kyoto Protocol by the United States President, G.W. Bush as naïve and displaying the continuing self interest of the United States of America.

To me the statement by the president and the consequential supportive statements from current White House interests re-affirmed the United States of America's position of the last weeks of the Clinton administration and the lack of support shown in the Kyoto Conference in The Hague during November 2000.

These statements are in conflict with those early statements that provided a glimmer of hope that the United States of America was viewing the global warming issue as an issue of serious consequences. That White House Statement shows the level of commitment of the Clinton Administration in the early days. Heroic words but when the vote had to be made at the Kyoto Conference at The Hague, the United States of Americas position had shifted to one where: "the US would work for real progress toward a treaty that is both environmentally strong and cost-effective".

He set out what the US would seek to do in the negotiations:

  • seek strong, market-friendly rules to fight climate change, and oppose restrictions on the use of mechanisms such as emissions trading
  • urge an airtight accounting system and binding legal consequences for failure to meet targets
  • seek appropriate credit for agricultural and forest sinks which help sequester carbon dioxide and therefore reduce global warmingv
  • urge a prompt start to the clean development mechanism, to help developing nations establish clean energy infrastructures.

It all sounds good, but there are many who feared that the US would seek to use activity abroad as an excuse for inaction in curbing greenhouse emissions at home.

National Environmental Technology Strategy, The White House, Washington:
"The quarter century since 1970 stands out as a period of great environmental and economic achievement, and all Americans can look back on our nation's accomplishments with pride. Yet our work has just begun. We still face major challenges both domestically and globally if we are to achieve continued economic growth and a healthy environment. Today we have a special opportunity to reflect on the past and define a vision for our future. Our views about the environment have evolved and become more sophisticated over the past 25 years. One lesson we have learned is that economic growth and environmental stewardship go hand in hand. A clean environment means a higher quality of life, and technological advancement means economic growth and better jobs for American workers.

"For the past two years our Administration has sought the views of Congress, the states, communities, industry, academia, nongovernmental organisations, and interested citizens on ways to spur the development and use of a new generation of environmental technologies. This document represents the views of thousands of individuals who participated in events around the country to help us craft a national environmental technology strategy that will put us on the path to sustainable development. We thank everyone who participated in this endeavour. If our environmental technology industry is to remain competitive in the global marketplace, we must implement actions today that will be responsive to tomorrow's problems and needs. Meeting future challenges will require our regulatory system to adapt to a changing world by promoting the innovation that will ensure protection of our environment in a cost-effective manner. We want a government that offers opportunity, rewards innovation, and demands responsibility. And we as individuals must develop a more sophisticated understanding of the linkages between our environment and the economy.

"Now the time has come for creative action and bold steps. Let us pledge to use technologies wisely for they are the bridge to a sustainable future. Our foresight will define the structure of that bridge. Our creativity will allow us to build it. And our commitment will determine how quickly we cross it."
Bill Clinton

In reality, what has occurred in the US is that there is potentially no activity proposed at all.

To make matters worse, I read an interesting article in the Times newspaper yesterday that takes to task some of Britain's staunchest supporters of the Kyoto Agreement under the headline "Ministers 'too simplistic' on climate". The article goes on to state the case of politicians taking some facts and developing from them, a dubious hypothesis. Last year's floods can be explained by a weather system known as the North Atlantic Oscillation. David Stephenson, head of the Climate Analysis Group at the University of Reading, said the storms were entirely consistent with the effects of the system. "I am not convinced that the Government can attribute these events to global warming," he said. "They have jumped on the global warming bandwagon because it's easier to do that than take action on things like protecting infrastructure."

On the other hand, we have the opposing groups who may be just as bad by promoting the pro Kyoto arguments.

Whatever the politician espouses needs to be based on scientific fact and evidenced.

What are the facts then?
The facts are too complicated to be presented in this presentation but basically the opinion is that during our children's lifetimes, global warming will raise the average temperature of the planet by 2 to 6 degrees Fahrenheit, or 1-3.5 degree Celsius. Man-made global warming is occurring much faster than at any other time in at least the last 10,000 years.

This information would suggest that the warming Earth is experiencing now is not a natural phenomenon, but caused by the increased concentration of greenhouse gases.

While evidence is strong to support the notion of human contribution to the global warming problem, an alternative view is that recent global warming is a natural occurrence. Some theorists believe that the Earth's climate works in a cycle, cooling, and then warming itself.

Whatever the argument is, it is very possible that global warming is nothing to worry about and is just part of the global temperature cycle. Both theories are credible, but neither has yet been proven and as a consequence one should err on the side of conservatism.


It is important to understand that all of the environmental issues are inextricably entwined and one must not fall into the trap of contemplating each issue in isolation. Hence the Kyoto Protocols are not just issues of global warming and climate change at a political or bureaucratic level but an issue that affects every walk of life. There are processes available for everyone to participate in this decision making process but are the structures in place?


In 1987, the World Commission on Environment and Development (Brundtland Commission) called for the development of new ways to measure and assess progress toward sustainable development. This call has been subsequently echoed in Agenda 21 of the 1992 Earth Summit and through activities that range from local to global in scale. In response, significant efforts to assess performance have been made by corporations, non-government organisations, academics, communities, nations, and international organisations.

In the report, "Our Common Future", the Commission framed the "growth versus environment debate" and defined sustainable development as: "meeting the needs of the present without compromising the ability of future generations to meet their own needs."

Who Developed the Bellagio Principles?

In late 1996, an international group of researchers came together at the Rockefeller Foundation's Study and Conference Centre in Bellagio, Italy to review progress to date and synthesise insights from practical ongoing efforts.

What is Their Use and Who are the Users?

These principles serve as guidelines for the whole of the assessment process including the choice and design of indicators and the interpretation and communication of the result. The principles are interrelated and should be applied as a complete set. The principles are intended for use in starting and improving assessment activities of community groups, non-government organisations, corporations, national governments, and international institutions.


The principles deal with four aspects of assessing progress toward sustainable development. Principle 1 deals with the starting point of any assessment - establishing a vision of sustainable development and the clear goals that provide a practical definition of that vision in terms that are meaningful for the decision-making unit in question. Principles 2 through 5 deal with the content of any assessment and the need to merge a sense of the overall system with a practical focus on current priority issues. Principles 6 through 8 deal with key issues of the process of assessment, while Principles 9 and 10 deal with the necessity for establishing a continuing capacity for assessment.

  1. Guiding Vision and Goals

Assessment of progress toward sustainable development should be guided by a clear vision of sustainable development and the goals that define that vision.

2. Holistic Perspective

Assessment of progress toward sustainable development should:

  • include a review of the whole system as well as its parts.
  • consider the well-being of social, ecological, and economic sub-systems, their state as well as the direction and rate of change of that state, of their component parts, and the interaction between the parts, and
  • consider both the positive and negative consequences of human activity, in a way that reflects the costs and benefits for human and ecological systems, in monetary and non-monetary terms.

3. Essential Elements

Assessment of progress toward sustainable development should:

  • consider equity and disparity within the current population and between the present and future generations, dealing with such concerns as resource use, over-consumption and poverty, human rights, and access to services, as appropriate.
  • consider the ecological conditions on which life depends, and
  • consider economic development and other, non-market activities that contribute to human/social well-being.

4. Adequate Scope

Assessment of progress toward sustainable development should:

  • adopt a time horizon long enough to capture both the human and ecosystem time scales thus responding to needs of future generations as well as those current to short term decision-making.
  • define the space of study large enough to include not only local but also long distance impacts on people and ecosystems, and
  • build on historic and current conditions to anticipate future conditions - where we want to go, where we could go

5. Practical Focus

Assessment of progress toward sustainable development should be based on:

  • an explicit set of categories or an organising framework that links vision and goals to indicators and assessment criteria.</li>
  • a limited number of key issues for analysis.
  • a limited number of indicators or indicator combinations to provide a clearer signal of progress.
  • standardising measurement wherever possible to permit comparison, and
  • comparing indicator values to targets, reference values, ranges, thresholds, or direction of trends, as appropriate

6. Openness

Assessment of progress toward sustainable development should:

  • make the methods and data that are used accessible to all, and
  • make explicit, all judgments, assumptions, and uncertainties in data and interpretations.

7. Effective Communication

Assessment of progress toward sustainable development should:

  • be designed to address the needs of the audience and set of users.
  • draw from indicators and other tools that are stimulating and serve to engage decision-makers, and.
  • aim from the outset, for simplicity in structure and use of clear and plain language..

8. Broad Participation

Assessment of progress toward sustainable development should:

  • obtain broad representation of key grass-roots, professional, technical and social groups , including youth, women, and indigenous people - to ensure recognition of diverse and changing values, and.</li>
  • ensure the participation of decision-makers to secure a firm link to adopted policies and resulting action..

9. Ongoing Assessment

Assessment of progress toward sustainable development should:

  • develop a capacity for repeated measurement to determine trends.
  • be iterative, adaptive, and responsive to change and uncertainty because systems are complex and change frequently.
  • adjust goals, frameworks, and indicators as new insights are gained, and
  • promote development of collective learning and feedback to decision-making.

10. Institutional Capacity

Continuity of assessing progress toward sustainable development should be assured by:

  • clearly assigning responsibility and providing ongoing support in the decision-making process, and
  • providing institutional capacity for data collection, maintenance, and documentation supporting development of local assessment capacity.


The United Nations Conference on Environment and Development held in Rio de Janeiro in June, 1992 adopted the Agenda 21 plan for sustainable development.

Agenda 21 explains that population, consumption and technology are the primary driving forces of environmental change. It lays out what needs to be done to reduce wasteful and inefficient consumption patterns in some parts of the world while encouraging increased but sustainable development in others. It offers policies and programs to achieve a sustainable balance between consumption, population and the Earth’s life-supporting capacity. It describes some of technologies and techniques that need to be developed to provide for human needs while carefully managing natural resources.

Agenda 21 provides options for combating degradation of the land, air and water, conserving forests and the diversity of species of life. It deals with poverty and excessive consumption, health and education, cities and farmers. There are roles for everyone: governments, business people, trade unions, scientists, teachers, indigenous people, women, youth and children. Agenda 21 does not shun business. It says that sustainable development is the way to reverse both poverty and environmental destruction.

We currently gauge the success of economic development mainly by the amount of money it produces. Accounting systems that measure the wealth of nations also need to count the full value of natural resources and the full cost of environmental degradation. The polluter should, in principle, bear the costs of pollution. To reduce the risk of causing damage, environmental assessment should be carried out before starting projects that carry the risk of adverse impacts. Governments should reduce or eliminate subsidies that are not consistent with sustainable development.

A major theme of Agenda 21 is the need to eradicate poverty by giving poor people more access to the resources they need to live sustainably. By adopting Agenda 21, industrialised countries recognised that they have a greater role in cleaning up the environment than poor nations, who produce relatively less pollution. The richer nations also promised more funding to help other nations develop in ways that have lower environmental impacts. Beyond funding, nations need help in building the expertise Ð the capacity Ð to plan and carry out sustainable development decisions. This will require the transfer of information and skills.

Agenda 21 calls on governments to adopt national strategies for sustainable development. These should be developed with wide participation, including non-government organisations and the public. Agenda 21 puts most of the responsibility for leading change on national governments, but says they need to work in a broad series of partnerships with international organisations, business, regional, state, provincial and local governments, non-governmental and citizens' groups.

As Agenda 21 says, only a global partnership will ensure that all nations will have a safer and more prosperous future.

Interestingly enough, the European Union has kept a sharp watch on Agenda 21 progress and hosts a review of the Agenda 21 progress in 2002.

"Commission launches EU preparations for the World Summit on Sustainable Development in 2002. On the joint initiative of Environment Commissioner Margot Wallström and Development Commissioner Poul Nielson, the European Commission today adopted a Communication "Ten Years After Rio: Preparing for the World Summit on Sustainable Development in 2002", setting out priorities and actions for the EU in preparation for this event. It focuses on the following strategic objectives: Increased global equity and an effective global partnership for sustainable development; better integration of environment and development at the international level; adoption of environmental and development targets to revitalise and provide focus to the Rio process and more effective action at national level with stronger international monitoring. In order to reach these objectives, the Commission proposes a number of substantial issues to be addressed at the World Summit, including the protection of the natural resource base of economic development; integration of environmental protection and poverty eradication; sustainable globalisation, and enhancing good governance and participation nationally and internationally."

"Environment Commissioner Margot Wallström said: "This is an important milestone in our preparations for the World Summit in South Africa in 2002. It is important that the EU sets the ball rolling and takes a lead in preparing the agenda. Ten years after the landmark Rio Summit, expectations have not been met. Pressures on the environment have increased and poverty has continued to increase globally. We need to speed up our efforts now to make sure that the World Summit next year rises to the challenge of sustainable globalisation". Development Commissioner Poul Nielson characterised the Rio Summit as "a real breakthrough in terms of acknowledging the complexity and dynamics of sustainable development. For good reasons", he said, "environmental concerns became the headline message in the decade following Rio. Revisiting Rio, we must re-state the fact that fighting poverty and fighting environmental degradation are part of the same battle, in which increasing development aid is indispensable ammunition. The global community must reawaken its collective awareness of a shared objective towards which all sides must contribute and from which everybody will benefit".

In today's Communication, the Commission stresses the need to ensure an effective EU contribution to a World Summit. In an ideal world, the Agenda 21 processes would be established at a local level enabling the community to participate in the decision making process. It is very obvious that these processes are not in place in Australia or if they are they are not promoted in a meaningful way in the community.

Most people want to be treated with respect by government and with issues as threatening as sustainable development, the governments argument need the support of all levels of the community.


In December 1997, more than 150 nations met in Kyoto, Japan, to negotiate the terms of the Kyoto Protocol, a global climate agreement under the U.N. Framework Convention on Climate Change (UNFCCC). It was open for signature from 16 March 1998 to 15 March 1999 at United Nations Headquarters, New York.

The Kyoto Protocol, is a comprehensive plan with the aim reducing greenhouse gas emissions, in particular carbon dioxide (CO2). The intention is to achieve an ecologically sustainable global balance of greenhouse gas emissions from 2008 onwards.


The text of the Convention was adopted at the United Nations Headquarters, New York on the 9 May 1992. It was open for signature at the Rio de Janeiro from 4 to 14 June 1992, and thereafter at the United Nations Headquarters, New York, from 20 June 1992 to 19 June 1993. By that date the Convention had received 166 signatures. The Convention entered into force on 21 March 1994. Those States that have not signed the Convention may accede to it at any time.


High-stakes negotiations at The Hague aimed at finalising a treaty to curb global warming broke down after a tense all-night bargaining session foundered on last-minute disputes between European and American negotiators. The breakdown, after two weeks of intensive talks in November 2000 stunned many participants, environmental groups and observers, even though they had recognised from the start the enormous task of finding common ground on ways to cut greenhouse gases The UNFCCC has set aside a period in July 2001 for the reconvening of the COP 6 conference at a venue in Bonn.


The global mandate for reducing Greenhouse Gas (GHG) emissions was put in place in the December 1997 Kyoto Conference. Participating countries agreed to specified GHG emissions budgets that are tied to 1990 emission levels and that will be progressively reduced.

Companies and corporations can meet established emissions goals through traditional command and control methods but where these are difficult or too costly, the alternative will be the acquisition of carbon credits.

It is Carbon Credit (air credit) trading that has emerged as a mechanism to reduce greenhouse gas (GHG) emissions such as carbon dioxide and methane and such trading has replaced command and control as the method of choice to counterbalance emissions from existing sources. Carbon credit trading provides the mechanism for companies to develop strategies by which their emissions can be inexpensively balanced. It is a regulatory program that allows organisations the flexibility to select cost-effective solutions to achieve UN required environmental goals. Those companies in deficit can also obtain carbon credits by acquiring forestry themselves. This latter option includes leasing trees, the outright purchase of tracts of plantations or the purchase/lease of land to create forests.

A newly established group from Europe, offer an online carbon credit trading facility. have determined that carbon credit trading will persist as the world negotiates the Kyoto Protocol and that the Clean Development Mechanism provisions of the Kyoto Protocol along with the other Kyoto provisions will co-exist with or without the support of the United States of America.

Ratification of the Kyoto Protocols is not an "if" but a "when". The use of forestry as method of sequestering carbon for carbon credit trading is not the only benefit of forestry. Sustainable forestry in "old forests" can only be achieved by very careful management and planning. Plantation forestry eases the pressure on the "old forest" by providing a method of management for sustainable yields. In addition, the trees can also be used for multiple purposes such as windbreaks, salinity moderation, timber as well as carbon credits. Plantations of nut and fruit bearing trees should be considered for carbon sequestering and carbon credits.

The identification and measurement of the carbon credit as a tangible object has been an underlying issue with the regulatory bodies. Certification of the"tradeable objects is the prime focus of For forests and forest products (including carbon credits) the emphasis will be on the grower/owner to show that these objects are real and have been developed in accordance with the appropriate ISO standards.

The database will employ advanced GIS and imaging software together with appropriate certification from an ISO 14000 and EMAS auditor, issue a certificate that guarantees those particular "tradeable objects". This certificate acknowledges the legal ownership and existence of the "tradeable objects". The Guiding Principles of are that the Emission reduction credits will be real, surplus, retrospectively quantifiable, verifiable and unique.

The Register tracks the creation, transfer, use and retirement of credits traded on the exchange. These records determine:

  • Present ownership or initiators and owner of emissions reductions in a geographic area/region.
  • Initiator and owner of emission reduction processes.
  • What reductions are still available and who owns them?
  • When were reductions created, transferred, used, or retired and who owns them?
  • Where were the reductions created (precise geographic location)?
  • Where were the reductions used (precise geographic location)?
  • How were reductions created or used (precise geographic location)?
  • How many reductions were created, transferred, used, or retired (precise geographic location)?
  • How many reductions are still available (precise geographic location)?

All actions taken by all parties operating on comply with the letter and intent of all laws and regulations both at the local, national and international jurisdictions.


The Concept of "sustainable development,"as proposed in the Brundtland Commission report "Our Common Future", is an attempt to balance two moral demands. The first demand is for "development," including economic development or economic growth that arises mainly from the urgent calls for steps to improve the quality of life of people in developing countries. The second demand is for "sustainability," to ensure that we do not mortgage the future for the sake of gains in the present.

As the Brundtland Commission recognises, these two moral demands can conflict. In fact, economic growth or development is a prime source of threats to the natural environment. These demands however can be balanced, difficult as it may be.

The abstract basis of the Commission's concern for sustainability is reflected in the Commission's balancing of the "needs of the present "with the "needs" of future generations, or in the implicit assumption that the two sets of needs have equal moral weight.

I have offered the process of sustainability as a influential factor in the drive behind the Kyoto Protocols. We now have two competing forces, one on the side of the present incumbent US President who view the reduction in greenhouse emissions as having the potential to cause an economic downturn and those from the EU who view greenhouse emissions and global warming issues as requiring immediate attention and that the costs are not of a magnitude to affect economies in the long term.

What we have, in effect, is a one group who take quality issues such as ISO 9000 seriously and work through the processes towards improving business and manufacturing processes and then developing the ISO 14000 standards that embrace environmental quality issues in the same way as ISO 9000 did in the commercial world. The benefits of these QA procedures has improved the quality of goods and services over the past twenty five years.

On the other hand we have a nation who have difficulty in applying the QA principles outside of the ISO 9000 or continental equivalent standards for the reasons of international competitiveness and economic gain. Where does this leave us with "carbon credit"? And are carbon credits going to work?

I have tried to embrace the issues surrounding global warming, greenhouse emissions and those responsible for the emissions. Carbon credits are just one part of a process that assists in the mitigation of greenhouse emissions. Carbon credits alone will not reduce global warming, nor will any other single process or procedure. As stated earlier, sequestering carbon in trees, especially plantation forests, has a unique position in the process.

The provision of a suitable venue to trade the sequestered carbon is essential. Certification, verification and registration of the sequestered carbon is a basic requirement if the process is to be considered seriously and not just a quick money-making scheme.

Carbon credits will work but there has to be a quality process in place that manages not only the forests but the claimed sequestered carbon content. This documented and certified information would then be stored in one of many clearing-houses.