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Domestically, the automotive and coal industries, and their considerable lobbies, are concerned that the Kyoto Protocol will cost them too much. Robert Byrd, Democratic senator from West Virginia, where waning coal interests still hold sway, cosponsored the Byrd-Hagel resolution in 1997 with Senator Chuck Hagel, a Nebraska Republican. The resolution declared that the U.S. should not become a party to any international treaty that imposes "serious harm" on U.S. companies or that does not hold developing countries responsible for their emissions, the second sticking point for opponents of the treaty. Under the protocol, only developed countries such as the U.S., Russia, Japan, and Germany have to reduce their emissions; developing countries such as Brazil, Uganda, and China would have no obligation to do so.
Another division exists between nations that favor unlimited greenhouse-gas-emissions trading (the U.S., Canada, Australia, Russia, New Zealand) and nations that want a restricted system (the European Union). The EU is more interested in using increased taxes to curb fuel use, and therefore emissions, as can be seen by comparing the price of a gallon of gas in the UK$4.60to that of one in the U.S.$1.66.
The fate of the protocol will in part depend on the U.S. elections. Al Gore favors the treaty, while George W. Bush, who claims he realizes global warming is a problem, opposes it. In the meantime, U.S. negotiators will continue to haggle over details during a UN session on the treaty to be held in the Hague this November. "There's just an incredible amount of work to be done," says Roger Ballentine, President Clinton's climate-change director. "Hopefully after [the November talks] the end will be in sight."
While there are still kinks to be worked out with the Kyoto Protocol, emissions trading is already having the effect of bringing all sides in the debate to the table. Bartels, for example, came to Cantor Fitzgerald from an environmental nonprofit background. "I've done more on this side [as an emissions broker] than I did in 10 years of arguing as a regulator at an NGO," he says.
Bartels predicts that relationships between environmentalists and various industrieslike agriculturewill change for the better as businesses realize there is money to be made by investing in the creation of emissions credits.
Among those who have changed their tune are hog farmers, Bartels says. Like cattle, hogs are major producers of methane, the second most significant human-influenced greenhouse gas after carbon dioxide. According to Bartels, it costs farmers only about 25 cents a ton to trap and store their hogs' gas emissions. The resulting credits sell for between $1 and $4 a ton, with profits ranging from 300 to 1500 percent.
Not everyone thinks emissions trading is the be-all and end-all solution to global climate change. "All we're doing is rearranging deck chairs on the Titanic," says Dr. Michael Molitor, associate director of the Center for Environmental Research and Training at the University of California, San Diego. Molitor would prefer that polluters invest in concrete, technological solutions that would actually reduce emissions in the first place.
Molitor sees another problem with treating pollution credits strictly as a commodity whose prices are set by world financial markets: That method doesn't take into account the wildly varying standards of living around the globe. "I like to call them luxury emissions," Molitor says, referring to a ton of American greenhouse gas, which might be generated by a utility producing power that keeps a 7-Eleven open 24 hours a day so people can buy giant bottles of soda around the clock. Compare this to Russia, Molitor says, where the economy is "going through the shitter," and a ton of emissions credits are more likely to be applied to a power plant that keeps people warm. He feels asking the same price for these emissions is unfair, if not immoral. "You're allowing Americans to continue to be hyperconsumers," he says.
To the business world, howeveras well as to some powerful environmental groups like Environmental Defensethe cost-effectiveness of emissions trading far outweighs such concerns. Giant oil companies and utilities are already actively trading among themselves in an effort to show that the system can work. These include BP Amoco, Shell, PG&E, and Ontario Power and Generation.
Another pioneering trader is the Calgary-based TransAlta Corporation, Canada's second largest investor-owned electric utility and its second largest polluter. "We've been in this game since 1996," says Paul Vickers, director of sustainable development for TransAlta. "We think we've got a pretty good idea of how the rules will play out, and of the risks."
Last year, the company was part of a consortium that bought credits from Iowa farmers who promised to till their soil in ways that restrict the release of carbon dioxide. More recently, TransAlta made a greenhouse-gas-emissions trade equal to 30 million tons over a 20-year period.
TransAlta bought those credits from Global Livestock Group, a Fairfax, Virginia- based company. GLG has devised a project to feed Ugandan cows a supplement that will increase the efficiency of their digestive systems, thereby reducing the amount of methane they release. According to Bernard J. Du Charme, business manager for the GLG, the levels of methane from cows with the feed supplement and without are known, and the reduced levels are translated into the emissions credits TransAlta has agreed to buy.
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