ENVIRONMENT: Cuts in Greenhouse Gases Make Good Business

By Suvendrini Kakuchi Reprint | | Print |

Suvendrini Kakuchi

TOKYO, Dec 6 2000 (IPS) - Less than two weeks after the failure of global talks on climate change, energy and research firms that met here this week say the answer lies in tapping the lucrative market potential in controlling greenhouse gas emissions.

In short, they are saying that the business angle is the cost- effective way to deal with the politically difficult issue of cutting emissions after governments failed to reach agreement on exactly how to do that in The Hague, Netherlands late November.

Talks at the sixth United Nations Conference on global climate change (COP-6) on specific mechanisms to implement the 1997 Kyoto protocol on climate change broke down amid differences among the United States, the European Union and developing countries.

“There is life after COP-6,” Jim Maxwell, director of the Centre for Environmental Health of John Snow Inc, a consulting firm based in the United States, said at a conference organised by the Mitsubishi Research Institute that ended Tuesday.

“More developing countries are recognising that a mixture of energy conservation and renewable energies as a path that must be taken to reduce greenhouse gases,” he added at the meeting organised by the Mitsubishi Research Institute.

His remarks reflected an assessment that countries will continue looking for ways to curb greenhouse gases — produced by the combustion of oil, coal and carbon-based chemicals — and will thus have healthy demand for environmental technology and environment projects linked to business opportunities.

Likewise, his comments reflected the view among businessmen at the two-day seminar here that the situation is more favourable that perceived after the breakdown of the climate change talks.

Experts at the seminar said they see emissions trading under the Kyoto protocol becoming a growing market.

This trading would allow industrialised nations to buy and sell “emissions credits” among themselves through projects in developing countries, to meet targets for cutting greenhouse gases.

American analysts also said the market for emissions control should reach 17 billion dollars by 2010. This is based on the price of 26 dollars a tonne of carbon, proving the lucrative aspects of the business mechanisms of greenhouse gases.

World Bank statistics say business can grow up to 60 billion dollars by 2020 in the emissions trading market.

The notion of having rich, polluting companies transfer environmentally sound technologies and build energy efficient projects on smelly landfills and smoke-belching factories in developing countries, has gathered steam against the gloomy atmosphere surrounding global warming, the same experts added.

“The good news is that on a micro level, companies are finding ways to save energy and cut emissions by investing in projects in other countries that are beneficial both economically and environmentally,” said Robert Reinstein, former U.S. negotiator and current president of Reinstein and Associates International, a consulting firm on energy and environment.

“The bad news is that governments have agreed to unrealistic targets and are confused on how to proceed with the international process now in chaos,” he added.

Many businessmen pointed out that carbon dioxide emissions in industrialised countries like the US and Japan are growing. To them, this situation shows the importance of emissions trading as a practical solution.

But to green activists, this same mechanism is a loophole that allows rich countries to meet reduction targets with little real cuts in greenhouse gas production at home.

This is a sensitive issue given developing countries’ argument that the countries that produce the most harmful gases should do the most to reduce them — and signs that industrialised nations are unlikely to meet reduction figures set at Kyoto in 1997.

At present, U.S. emissions of greenhouse gases are projected to increase by about 22 percent or 1,750 million tonnes above 1990 levels in 2010.

The United States now produces 25 percent of carbon dioxide emissions, but has only four percent of the world’s population.

Japan — which along with the United States, Canada and Australia was accused of trying to weaken the climate change protocol at The Hague — reported an increase in emissions of 9.8 percent from 1990 last year. The government estimates a 30 percent jump by 2010.

Maxwell explains though that developing countries, whose emissions are also rising, are interested this early in taking steps to cut greenhouse gas production.

Brazil, for instance, is expected to produce 208 million metric tonnes of greenhouse gases in 2020, up from 71 million in 1996, a rise that Maxwell says is affected by deforestation despite the country’s heavy reliance on hydroelectric power.

Pilot projects in emissions trading in Thailand, Indonesia, Brazil and some East European countries, which will allow developed countries to earn and ‘bank’ credits, were introduced at the seminar.

American companies like Unocal are involved in the development of Indonesian power plants that use geothermal energy, which produces one-tenth of the carbon emissions of diesel.

In Brazil, a smelly, huge landfill that was leaking methane was converted into a 22 million dollar power plant in cooperation with local enterprises. The new plant captures and bottles methane, and it is estimated this will provide a reduction of 12 million tonnes in emissions in 10 years.

Japanese experts noted that U.S. and European companies have a headstart in greenhouse gas trading, compared to local companies which are only now entering the emissions trading business due to lack of information.

But Dr Tadashi Aoyagi of the Mitsubishi Research Institute said this has changed given growing greenhouse gas emissions in Japan and the realisation of the high expense involved if reduction is attempted domestically — thus creating more room for involvement in emissions trading.

Aoyagi added that Japan’s energy technology and its traditional high investment in Asia will make Japanese companies a major player in the business of greenhouse gas reduction in the region in the next few years.

Aoyagi said Japanese firms are looking to invest in energy efficiency projects. But they are shying away from the forest management sector due to negative discussions on “sinks” such as forests and farmland that absorb carbon, at The Hague talks.