Financial innovations & carbon markets: a modest extension of The Kyoto Protocol can end the impasse between industrial and developing nations.

• Author: Chichilnisky, Graciela

THE POINT OF NO RETURN

For the first time in recorded history, humans are altering the planet in ways that can endanger its basic life-support systems. We are rapidly transforming the planet's atmosphere, its bodies of water and the complex web of species that makes up life on Earth. Human emissions of carbon dioxide and other greenhouse gases have changed the Earth's atmosphere, unleashing a potentially catastrophic climate change that can threaten the survival of human civilization. This is real, and it is happening now. As the polar caps and Greenland's permafrost start to melt, the sea level rises. Entire towns in Alaska are sinking into the warming seas. Species such as the polar bear are on the verge of extinction. Island nations like the Seychelles and low-lying countries such as Bangladesh risk sinking into the ocean. And hundreds of millions of people could follow suit. Indeed, 50 million "climate change refugees" are expected by 2010 and more than 200 million, by 2050--one out of every 45 people who will be alive at the time. (1)

In June 2009 the UN General Assembly invited the UN Security Council to intensify its efforts in addressing climate change and its possible security implications. (2) In as little as 20 years' time, we could be past the point of no return.

We are at a critical point in the history of humankind. This article explains what we must do now to prevent significant and irreparable damage to our planet and its life support systems. The Kyoto Protocol is the only international agreement we have to address the risk of climate change, and it expires in 2012. Its fate will be decided this December at the UN Climate Change Conference in Copenhagen. This may just be the most important event you read about in 2009. I will explain what we can do to resolve the climate crisis in practical terms, and how Copenhagen can resolve the impasse between the industrial and the developing nations in the global negotiations. I will propose two entirely practical and feasible solutions that build on existing law, in effect, modest extensions of the Kyoto Protocol's "carbon market" and its Clean Development Mechanism (CDM). These two proposals can overcome the gulf between rich and poor nations. They involve financial and technological mechanisms and have elicited positive responses in various nations including China, India and the United States; they reflect the requests of developing nations at the recent meeting of the Group of Eight main industrialized countries (G8) in July 2009; and they elicited a positive reception at the Expert Meeting on Trade and Climate Change held by the UN Conference on Trade and Development (UNCTAD), with the official participation of 100 nations and members of the UN Framework Convention on Climate Change (UNFCCC) Secretariat, in April 2009. (3) Copenhagen could be the beginning of a cold war about limiting emissions between the largest economies in the world--such as China and the United States--or it could initiate an era of international cooperation that could benefit all nations.

[ILLUSTRATION OMITTED]

[ILLUSTRATION OMITTED]

CARBON CYCLE AND KYOTO PROTOCOL

Climate change is a truly global issue and we all must be part of the solution. Carbon in the atmosphere is uniform across the globe and is produced by all nations. It resembles a physical law which does not depend on economics or politics. As the sea level rises there is nowhere to hide. The Organisation for Economic Co-operation and Development (OECD) ranks Miami, Florida as the most threatened city in the world, facing $3.1 trillion in damages from global warming: Shanghai comes second with $2.3 trillion.

While much of the world remains in denial, UN representatives from all 192 Member States have been trying to hammer out a solution. The Kyoto Protocol, signed by 160 nations in 1997, is an historic agreement, based on the creation of a new market-trading in user rights to the atmosphere. The critical aspect is that it reduces emissions from wealthy nations, which cause the majority of the world's emissions, and accelerates a solution by changing market values so that emitting becomes costly, while clean technologies and sustainable development become profitable.

Kyoto is the first global agreement based on a global market solution--one that changes the value of global commons. For the first time in history, we are enlisting financial innovation for the conservation of the planet's global commons, and the survival of our species. Nearly 100 per cent of all species that have ever existed have become extinct. Our challenge is to be the exception, not the rule.

The Kyoto Protocol took almost 13 years to negotiate and ratify. As an insider with 25 years of working with the UN system and an architect of the carbon market, I know how it originated, the main protagonists behind its creation and the current issues that threaten to undermine it. (4) Key to the survival of the Kyoto agreement, and that of the Earth as we know it, is a greater cooperation between developing countries and the West, closing the global income divide while simultaneously resolving the climate crisis. The growing wealth gap between the rich and the poor nations is not incidental to this situation. It is its root cause. It is at the foundation of an unsustainable use of the Earth's resources. (5)

The fate of the Kyoto Protocol will be decided this December in Copenhagen. The last and most formidable bastion of opposition to the Kyoto Protocol, the U.S. House of Representatives, unexpectedly fell in the summer of 2009, endorsing emissions limits and cap-and-trade legislation. On the face of it, the Protocol's record has been almost implausible--walking along a knife-edge of success and failure--the international equivalent of Rocky II. Yet, despite a heroic performance, it is now on its last legs. It is generally believed that its odds of survival at Copenhagen are vanishingly small.

Modest changes in Kyoto's carbon market could shift the playing field on which the Copenhagen agreement will be negotiated--making it much more likely to have a successful outcome--one that is more advantageous to the United States, the European Union and Japan...