Climate Change, Environment, Headlines, Latin America & the Caribbean

CHILE: Environmentalists Slam New Pollution Credit System

Gustavo González

SANTIAGO, May 23 2003 (IPS) - A draft law introduced by the Chilean government that would create a pollution credit system has run into resistance from environmentalists and even ruling coalition lawmakers, who allege that it transforms the principle of ”the polluter pays” into ”the polluter gains.”

Those were the words of parliamentary Deputy Alejandro Navarro of the co-governing Socialist Party, a member of the Environment Commission of the lower house of Congress, who criticised the proposed new law in a conversation with IPS.

Prominent environmentalist Sara Larraín, the head of the Sustainable Chile Programme, is also opposed to the initiative.

Larraín, who ran for president in the 1999 elections as a ”green” candidate, said ”certain sectors” are trying to confuse the public by comparing this ”curious national invention” known as the decontamination bonds law to the mechanisms created by the Kyoto Protocol on climate change, that link foreign investment to carbon dioxide (CO2) reduction programmes.

The decontamination bonds law would set global pollution limits in specific zones and assign companies in those areas the right to pollute up to those predetermined limits.

If a company pollutes below that level, due to the use of cleaner technologies or other measures, it would be able to sell the balance of its pollution rights. As pollution control standards become more stringent, the limits would be gradually reduced.

Industries or mobile-source polluters like bus companies could thus use their emission reductions to compensate emissions from existing polluters that exceed the limits, or from new polluters that must compensate for adding new emissions.

Navarro said President Ricardo Lagos plans to send the bill to Congress before the end of June, as indicated by statements made in the lower house of Congress by Gianni López, the director of the National Commission on the Environment (CONAMA), the government environmental regulatory body, which was set up in 1994.

The controversial initiative forms part of the ”Pro-Growth Agenda”, a set of proposals agreed by the government and the Sociedad de Fomento Fabril (SOFOFA) business association aimed at bolstering economic growth in this Southern Cone nation, CONAMA technical expert Enrique Calfucura told IPS.

SOFOFA, which represents Chile’s large industrialists, is one of the country’s most powerful business associations, whose president, Juan Claro, frequently converses with Lagos, a moderate socialist.

One of the reasons the industrialists support the decontamination bonds is that the plan would be strictly local, which means the mechanism would not be open to foreign investment, Navarro explained.

Larraín and Navarro both complain that the decontamination bonds would essentially set ”quotas for air pollution” based on a company’s toxic emissions, legalise the quotas by issuing bonds, and thus basically ”create property rights over air.”

”The bonds and the legal mechanisms that would allow them to be traded would grant companies the right to pollute the air, and permit them to sell their excess rights to pollute to another industrial concern that has used up its quota for polluting,” said Larraín.

Navarro argued that the bonds, which will be limited to Santiago, one of the world’s most polluted cities, would have a ”perverse effect”: industries in the rest of the country would have an incentive to generate more and more emissions in order to be assigned bigger quotas and gain more bonds to trade on the market.

The parliamentarian said the motivation underlying the proposal is that the government ”wants to try to reduce air pollution in the capital without curbing the horizontal and tremendously damaging urban sprawl in the greater Santiago.”

CONAMA designed the plan to help address Santiago’s extremely serious air pollution problem and the difficulties it has run into in implementing and enforcing decontamination strategies that have a high economic cost, requiring an investment of 1.4 billion dollars over 11 years, said Navarro.

Calfucura did not agree with the criticism of the proposed new law. The CONAMA technical expert told IPS that if it is enacted, it will set pollution limits based on a company’s medium- to long- term emissions, which ”must closely comply with environmental standards.

”It is not correct to say that this is a quota for polluting. It would be more accurate to call it a quota for decontaminating,” according to the CONAMA official, who said that despite the local reach of the bill, it is ”very much in line with” the Kyoto Protocol on climate change and the principle that ”the polluter pays.”

Companies that must reduce emissions to avoid exceeding the pollution limit could purchase decontamination bonds from sources of air pollution whose costs for cutting CO2 emissions were low, said Calfucura.

Although the initial idea is for the bonds to be sold directly, more complex financial transactions on the stock market have not been ruled out, he added.

But Larraín objected to the application of market-based criteria to pollution, saying the bonds would turn it into ”a tradeable asset.”

”Those who have polluted the most in the last few years will be assigned higher quotas to pollute and thus more tradeable bonds. That contradicts the principle of ‘the polluter pays’,” she said.

Navarro agreed, saying that companies that have been polluting in the past ”will convert their environmental debt into an economic asset” through the new law, and ”while the aim of the bill may be to reduce pollution, the principle of ‘the polluter pays’ is translated into ‘the polluter gains’.”

According to Larraín, the initiative runs counter to the Kyoto Protocol mechanisms of ”joint implementation and clean development,” which allow an industrialised state to meet its emissions reduction targets by investing in developing countries.

She pointed out that such investment must specifically go towards forestry plantations that serve as carbon sinks or into alternative energy projects based on renewable sources that do not generate CO2 emissions, like the sun, wind, or micro-hydropower plants.

One of the hurdles keeping such investment from coming to Chile is the lack of a law aimed at promoting renewable, green-friendly energy sources, said Larraín.

But Calfucura said Chile is in a good position with respect to the Kyoto Protocol, due to its low volume of CO2 emissions in global terms, even though emissions are actually higher than the Latin American average, because of the fact that fossil fuels (oil, coal and gas) are the main sources of energy in this country of 16 million.

In terms of emissions in relation to Gross Domestic Product (GDP), the Latin American average is 0.74 kgs/GDP per day, while Chile produces 0.91. With respect to per capita emissions, Chile generates 3.61 kgs per person compared to the Latin American average of 2.15.

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