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Corporate Campaign to Corrupt The Kyoto Protocol Continues After COP-6

Corporate Europe Observatory
April 1st, 2001

The UN Climate Change Conference in The Hague (COP-6) last November -- intended to wrap-up three years of negotiations on the implementation of the Kyoto Protocol -- ended without result. At the last moment, European environment ministers rejected a compromise proposal that would not only have enabled industrialised countries and their corporations to escape their promised greenhouse gas reductions, but also would have allowed them to significantly increase their emissions. Northern governments and the unified corporate climate lobby demanded the right to "fulfill" their reduction commitments through various inventive but flawed instruments, including global emissions trading, as well as the accounting of 'carbon sinks' (carbon absorption via forests, wood products, soil and industrial and genetically modified agriculture) and nuclear energy. [1] For a comprehensive overview of the wide range of global equity and environmental problems related to the proposed emissions trading and other market-based "solutions" to climate change, see our November 2000 briefing "Greenhouse Market Mania". [2]

Their efforts received active backing from a new financial sector that has emerged even before consensus has been reached on the Kyoto rules - the emissions brokers. With a massive presence in COP-6, and armed with huge injections of corporate financing, they have been lobbying hard for 'global free trade in greenhouse gases'. The attraction is clear - the market in carbon emission credits could grow to trillions of US dollars over the next few decades. At COP-6, this unholy alliance was only inches away from turning the Kyoto Protocol into the most corporate-friendly environmental treaty in history. Unfortunately, these corruptive efforts do not seem to have lost steam in the run-up to the next UN climate change negotiations, to take place in Bonn in July 2001. The big question mark after COP-6 is which strategy the new Bush administration will pursue: de facto withdrawal of US support for the Kyoto Protocol or a continuation of the Clinton-Gore legacy of trying to reshape the Protocol to serve US corporate interests?


COP-6: Free Trade in Greenhouse Gases?

The International Chamber of Commerce (ICC) and the World Business Council for Sustainable Development (WBCSD) were the most visible industry lobby groups at COP-6, with over 100 and over 200 accredited lobbyists respectively. [3] Oil and gas giant Shell was the corporation represented in biggest numbers, with over 40 lobbyists in the corridors of COP-6. The ICC and WBCSD's messages were all too predictable: no binding government regulation, encourage voluntary action by industry and unlimited use of the Kyoto Protocol's 'market-based mechanisms' instead. In a revealing statement, ICC Vice-President Richard McCormick warned against, "a 'quick-fix, look-good' deal that causes a dramatic and costly shift in the way industrialized countries use energy." [4] Such a shift is, of course, exactly what is needed if catastrophic climate change is to be averted.

While the ICC put great effort into positioning itself (and business in general) as environmentally responsible, it's lobbying efforts aimed to prevent measures which would effectively combat ever-increasing CO2 emissions, measures which the ICC calls "command and control" policies. The Global Climate Coalition, which aggressively opposes the Kyoto Protocol and is widely seen as the most irresponsible business lobby group, used a different rhetoric style, but lobbied on a platform largely identical to that of the ICC, focused on unrestricted emissions trading. In fact the difference between the two groups is far smaller than is often assumed. One of the prime ICC spokespeople in The Hague was Brian Flannery of ExxonMobil, a company infamous for fighting the Kyoto Protocol. With his ICC-hat on, Flannery delivered the ICC's rosy "free market environmentalism" discourse to the media. But during COP-6, Flannery also spoke out as lobbyist of ExxonMobil and then the feel-good rhetoric was replaced by questioning the scientific evidence for climate change and making warnings against government investments in green technology. ExxonMobil is "firmly against the Kyoto Protocol" because "it achieves very little and costs too much," Flannery told the Earth Times. [5] Flannery, whose company has no plans to move out of fossil fuel production, explained that "you are going to need to expand the supply to meet the pressing future needs for energy, for things like the modern Internet, the "e" economy."

While traditional corporate lobby groups attended COP-6 in record numbers, the most remarkable difference with previous meetings was the overwhelming presence of emissions brokers. Reflecting the degree to which the market-based mechanisms dominate the UN climate talks today, the conference centre was teeming with lobbyists from emissions brokerage firms, many from global consultancy giants like PriceWaterhouseCoopers and investment banks that have discovered "the carbon economy" as a new potential goldmine. The emissions brokers are united in a number of lobby groups, the biggest of which is the Emissions Marketing Association, which brought 48 lobbyists to The Hague. [6] Add to that specialised magazines like The Carbon Trader and The Carbon Market Analyst, which flooded the conference centre with expensive glossy brochures, and COP-6 looked more like a trade fair than an intergovernmental conference looking at ways to solve one of the world's most pressing environmental and social problems. Oblivious to the core social and environmental issues of climate change, the emissions brokers' rallying cry for global free trade in greenhouse gases rang loudly in the halls at COP-6 and in the ears of the government delegations deliberating there.

Quantitative and qualitative restrictions in the use of market-based mechanisms, as demanded by many environmental NGOs, will only limit the amount of carbon credits entering the markets, the emissions brokers and rest of the corporate lobby argued. [7] According to ICC lobbyist Brian Flannery: "a ton of CO2 is a ton of CO2. The freer the market is, the lower the price will be". [8] But while low price carbon credits are obviously attractive to business, they are generally bad news for the environment. If the corporate dreams of abundant cheap carbon credits for sale on the emerging global carbon markets came true, it would only reflect that industry had been allowed to escape reducing its CO2 emissions at source. This could be done, for example, by buying credits from industrial tree plantations, generally to be located in the South. Business lobby groups consistently ignore the fact that allowing these "carbon sinks" to count as effective offsets for CO2 emissions is scientifically flawed and would result in a dramatic increase in global greenhouse gas emissions. And as the World Rainforest Movement points out, large-scale tree plantations are "commonly a direct cause of deforestation, deplete water resources, worsen inequity in land ownership, increase poverty, lead to evictions of local peoples, and undermine local stewardship practices needed for forest conservation". [9]


EU Sell-Out Blocked at Last Moment

The corporate groupings could however rest assured that their lobbying efforts before COP-6 would bear fruit. During COP-6 they only had to keep up the pressure to avoid governments shifting under pressure of environmental NGO lobbyists as well as creative actions and demonstrations that took place both inside and outside the conference centre. [10] Until the very last night of the negotiations, the climate summit in The Hague was remarkably uneventful. The positions of the dominant, Northern governments had been clear from the start and mainly differed in the extent to which they advocated the sell-out of the Kyoto Protocol. On the one hand there was the umbrella group, consisting of the United States, Japan, Australia, Canada, Russia and Norway, promoting the unlimited use of the Kyoto market mechanisms, on the other was the European Union arguing that countries should achieve at least 50% of the reduction commitment 'at home'. The EU also voiced doubts about the inclusion of carbon sinks under the market- based mechanisms. While the umbrella group called for an unlimited use of carbon sinks, the EU had proposed a 'positive list' for the UN's Clean Development Mechanism (CDM) that would limit the projects to sound technologies such as renewable energy, thereby excluding nuclear energy investments. [11] Finally, the EU argued for financial sanctions for countries that fail to meet their Kyoto obligations, while the umbrella group opposed binding measures (such as penalties and fines) for non-compliance. Southern governments united in the G-77 Group took positions that were clearer and more progressive than those of the EU. Towards the end of COP-6, the EU moved more and more towards the positions of the US and the Umbrella group. This reflects deep divisions within the EU and the wider trend of growing enthusiasm for "market-based" environmental policies, including emissions trading and business "self-regulation" among European governments.

The last day and night went with the US and EU and a small number of other countries negotiating to find a compromise. COP-6 chairman Jan Pronk (the Dutch Environment Minister), eager to steer the conference to a result, had submitted a compromise proposal that leaned heavily towards the US position. His proposal included allowing unlimited use of market-based mechanisms and very extensive use of 'carbon sinks' as well as hot air trade (in which spare emissions permits are offered up for sale) to 'fulfil' the Kyoto reduction targets. [12] The proposal would de facto have meant a climate treaty that permitted industrialised countries to increase their emissions, in contradiction to what was agreed in Kyoto in 1997. [13] A 'handshake deal' based on the Pronk proposal had actually been reached, but was rejected at the last minute by the more progressive of the EU environment ministers (including Germany, Nordic countries and France).


Crusade Continues

It did not take the proponents of this disastrous set of rules for the implementation of the Kyoto Protocol long to regroup after COP-6. In an attempt to achieve a breakthrough, an informal Ministers' meeting involving the US, Canada and a number of European countries took place in Ottawa in early December. According to the Wall Street Journal, a number of EU governments had changed their mind about the proposal they rejected in the last hours of COP-6 and were now ready to endorse it. [14] The "second thoughts in the EU camp," the newspaper writes, "were prompted by major pressure from European businesses." The ministers meeting ended without result, clearly some European ministers remained unconvinced, but the incident shows clearly just how business-friendly the failed COP-6 deal was. It must be the first time ever that business has pressured governments to finalise an environmental treaty.

Indeed industry, bolstered by the reception it has been given by many governments, expects the follow-up conference in Bonn, Germany to deliver the kind of Kyoto Protocol it desires. One observer from a European corporate think-tank stresses that the negotiations only failed due to lack of time and that a deal on the market-based mechanisms was almost reached, making the failure of COP-6, "a minor incident in the history of international negotiations." [15] The pressure remains high for the Kyoto rules to include industrial tree plantations and other controversial projects, in order to supply the emission markets with cheap carbon credits. At an "environmental finance" conference in February, Frank Joshua of the consulting giant Arthur Andersons, stressed that carbon credit markets where only carbon credits earned through renewable energy projects are for sale (i.e. excluding nuclear, large hydropower and carbon sink projects) are not "liquid" enough to be attractive. [16] The Carbon Market Analyst, one of many new publications for the "emerging carbon market," adjusted its so- called ECX index (estimated carbon value index) downwards from 1.31 before COP-6 to 0.51 after the conference, reflecting that increased uncertainty was reducing demand for pollution permits. [17] At the same time, the newsletter remains highly optimistic about future market developments. "It appears likely," writes the Carbon Market Analyst, "that an agreement at a resumed COP-6 will involve a considerable amount of sink activities with low or 'no' costs."

At the same time, there is little doubt that the explosive growth of international emissions trading will continue despite the breakdown of COP-6. More and more Northern governments, not least in Europe, include emissions trading in their domestic climate change policies in the expectation that international markets for greenhouse gas emissions will develop with or without the Kyoto Protocol. [18]


The Bush Factor

The future of the Kyoto Protocol looks even less hopeful after George W. Bush took the office of president of the United States. President Bush, himself an avowed climate change sceptic, has called the Kyoto Protocol "ineffective" and "unfair" and is expected not to submit it to Congress for ratification. On one of the rare occasions during his elections campaign that Bush talked about his future climate policies, he said he would oppose any policies, such as the Kyoto treaty, which "would drastically increase the cost of gasoline, home heating oil, natural gas and electricity." [19] Both Bush and his Vice President Dick Cheney have a background as CEOs of oil companies and their campaigns received millions of dollars of backing from the US oil industry. Cheney was until recently a member of the Board of Directors of the American Petroleum Institute, one of the most hard-line lobby groups among the opponents of the Kyoto Protocol. The Bush administration's position is likely to reflect that of the Republican majority in Congress, which has been traditionally hostile to the Kyoto Protocol. [20] Only a few days after taking office, the Bush administration requested that the COP-6 follow-up summit in Bonn be postponed till July. [21]

The worst expectations seemed to be confirmed by steps taken by the Bush administration in March. First, Bush wrote a letter to four Republican senators in which he said that he does not want to regulate CO2 emissions from US power plants, and that he had made a mistake calling it a pollutant! [22] Shortly after, the White House stated in unmistakable terms that it would not implement the Kyoto Protocol, but instead would work towards a new deal that included reduction commitments for Southern countries as well. [23]

The degree to which Bush decides to obstruct future UN climate negotiations remains to be seen. Some observers expect that US corporations who see commercial opportunities in global emissions trading will encourage Bush to stay involved and continue the Clinton-Gore policy of shaping the Kyoto Protocol to benefit US business interests. Among these are the companies working with the Pew Center, which considers greenhouse gas regulations unavoidable, thereby making it a sound business strategy to benefit optimally from emissions trading and other market-based mechanisms. Chemical giant DuPont, for instance, is "very anxious" for an international trading system in greenhouse gas emissions, and "supports a resumption of the Kyoto talks", says company spokesperson Paul Tebo. [24] The wish by parts of US industry not to be locked out of international emissions trade might bring Bush back to the negotiating table. [25] Others, however, expect a more general US disengagement on climate change issues, a perspective that reportedly pleases many major corporations who believe they will now "be let off the hook." Remarkably, one of these is self-proclaimed environmental angel BP Amoco, where according to Earth Times, the Bush victory has sparked "a debate about the usefulness of participation in the global debate on climate change." [26]


Kyoto Protocol without the US?

French, Danish, German and other European environment ministers have proposed that the European Union countries ratify the Kyoto protocol without the U.S., in an attempt to "shame" the U.S. into action. Such moves would however face massive opposition from European industry lobby groups. CEFIC, a powerful lobby group which represents the chemical industry, warns against "any agreements that would be too unilateral" and that would give US industry a competitive advantage, as secretary general Jean Marie Devos made clear in the weeks after COP-6. [27]

It can certainly be argued that it would be beneficial for the future of the UN climate talks if the US would (temporarily) withdraw. This would remove a major obstacle for creating an environmentally and socially responsible set of rules for the Kyoto Protocol. If the US chooses to stay involved and continue to pursue only its own narrow commercial interests, meanwhile corrupting other governments in the process, the US deserves to be isolated in the negotiations. Rather than accepting a flawed Kyoto rulebook to ensure US acceptance, a deal could be struck among the governments that do have a real commitment to stop global warming. The US government would then have the choice to sign on or to reveal itself as the prime rogue state in international climate change politics. However, aside from the fact that isolating the US government is hardly politically feasible, the truth is that the pressure to undermine the Kyoto Protocol with flawed market- based mechanisms is far from limited to North America.

Two new UN reports released in the first months of 2001 present new evidence of human-caused climate change and the disastrous effects it could have in the 21st century (including more droughts, floods, storms, and the spread of insect-borne diseases). In order to avoid these terrifying scenarios, it is a matter of great urgency to halt the massive over-consumption of fossil fuel-based energy in the North. Recalling that the Kyoto Protocol's reduction target are in themselves far from sufficient to halt climate disaster, it is absolutely essential to close off the commercial escape mechanisms that are aggressively pursued by international business.



NOTES

  1. The 1997 Kyoto Protocol mentions three types of market-based mechanisms, originally intended to play a minor role in achieving CO2 emission reductions: emissions trading, joint implementation (JI) and the Clean Development Mechanism (CDM). Emissions trading allows the 39 governments committed to collective reductions under the Protocol to trade the right to pollute among themselves. Under this scheme, due to start in 2008, a country might choose to buy emission credits from another country that had managed to reduce its emissions below its Kyoto targets. Joint implementation and the Clean Development Mechanism (CDM) grant Northern governments and corporations emission credits through special projects aimed at reducing greenhouse gas emissions in the host country. These projects can be carried out among industrialised countries and corporations (JI) or between one industrialised government or company and one Southern country (CDM). The market-based mechanisms are often simply referred to as emissions trading. For a critical analysis of these mechanisms, see "Greenhouse Market Mania - UN climate talks corrupted by corporate pseudo-solutions", is a 55-page CEO briefing published in November 2000, http://www.xs4all.nl/~ceo

  2. Ibid.

  3. COP-6 participants list, see the UN's COP-6 website: http://www.unfccc.de

  4. Richard D. McCormick, "Charting a New Course for the Environment - and the Economy", International Herald Tribune, November 18-19, 2000.

  5. "Kyoto treaty flawed says top exec of ExxonMobil", Earth Times, November 15, 2000.

  6. "Emissions Marketing Association Well Represented at COP-6", EMA press release November 2000.

  7. See for instance "How COP-6 may affect the value of permits", The Carbon Market Analyst, 5 November 2000.

  8. Our translation of quote in "Commercie helpt ook een handje mee", Financieel Dagblad, 25 November 2000.

  9. "Forests and plantations in the Carbon Dealers' Market", World Rainforest Movement, November 2000.

  10. For an overview of non-violent direct actions during COP-6, see the website of the independent media centre: http://www.climateconference.org

  11. The Clean Development Mechanism (CDM) was intended to facilitate the transfer of funding and technology for energy efficiency measures to Southern countries. The umbrella group wants all technologies, including nuclear energy and the whole range of carbon sinks, to be included in both the CDM and under JI.

  12. Pronk's 'compromise' proposal included: no limits on the use of international market mechanisms (EU and G-77 would give up their demands for respectively 50 and 70% domestic action), allowing very extensive use of sinks (although not in the CDM), largely unlimited hot air trade (Russia, Ukraine and other countries could sell almost all their hot air), big dams included in the 'Clean development Mechanism', nuclear energy acceptable in joint implementation projects (Central and Eastern Europe), and extremely weak rules for 'compliance' (sanctions for not fulfilling Kyoto targets). Source: "Pronk bids to break climate talks deadlock", ENDS Daily, November 23 2000.

  13. During COP-6, European negotiators estimated that the package proposed by the U.S., including the use of carbon sinks, would actually allow industrialised countries to increase CO2 emissions up to 7%, instead of the Kyoto Protocol's 5.2% cut.

  14. "U.S. Will Resume Talks With EU On Climate Pact", Wall Street Journal, December 6 2000.

  15. Christian Eggenhofer of Brussels-based corporate think-tank CEPS writes that, "the Kyoto Protocol is alive and well": "A Post- Mortem on COP6 in The Hague: The Kyoto Protocol is Alive and Well", CEPS commentary, December 2000, http://www.ceps.be

  16. Mr. Joshua heads Arthur Andersons' Green House Gas (GHG) Trading Team; quoted in "Trading in Carbon: A Viable Risk?", Network 2002, March 2001.

  17. "The (preliminary) outcome of COP-6", The Carbon Market Analyst, 28 November 2000.

  18. See for instance "Carbon trading set to boom despite COP6 failure", Reuters, November 30 2000.

  19. "New Reports Warn of Threat of Global Warming", Houston Chronicle, February 27 2001. Bush continued to present a set of policies that closely mirror those promoted by industry groupings like the Global Climate Coalition and the Business Roundtable, including "market-based mechanisms," increased use of natural gas (which has slightly lower CO2 emissions), and tax measures for U.S. businesses that develop cleaner energy technologies.

  20. "The Carbon Market Analyst" calls ratification of the Kyoto Protocol before 2004 a "low-probability scenario" due to the Republican dominance in the US Senate and estimates the chance to be 25%. "The (preliminary) outcome of COP-6", The Carbon Market Analyst, 28 November 2000.

  21. The Bush government argued this would allow them to "take a thorough look at US climate policy". "EU Sets New Targets on Greenhouse Gas Cuts, 'Worried' About Bush", IPS, January 24 2001.

  22. "How Carbon-Dioxide Cap Vanished Into Thin Air", Wall Street Journal, March 15 2001.

  23. "Bush rejects Kyoto emissions treaty", Financial Times, March 29 2001

  24. "Kyoto Talks Collapse; EU Energy Taxes Loom", Chemical Week, December 13, 2000.

  25. "Clinton Presses for Restart of Climate Talks As Bitter End of Meeting Hides Real Progress", Oil Daily, December 4, 2000.

  26. "First came the PR blitz, now comes the rollback", The Earth Times, November 15, 2000.

  27. "Kyoto Talks Collapse; EU Energy Taxes Loom", Chemical Week, December 13, 2000.