Sandbag's blog

We've launched a brand new map and report today illustrating just how much offsetting is going on in Europe. Our new offset map allows you to explore where offset credits being imported into the EU originate from – for the first time it is now possible to see exactly who is buying what from where.

And what it reveals is that the majority of the offsets used come from just three countries: China, India and South Korea and that they are made up of credits generated from chemical plants, reducing emissions of HFCs and N2O. This is not a surprise since these are the cheapest credits available since it costs very little to destroy these powerful greenhouse gases. This has drawn criticism since it leads to huge profits for the companies investing in these projects. In addition, the investment delivers no environmental or social benefits beyond the carbon saving. Many argue specific regulations banning these emissions would be far more cost efficient way of uncovering these emissions cuts. However, without these regulations in place these emissions would have occurred so there is at least a clear carbon saving.

We’ve also been able to identify which companies are doing the most buying of offsets thanks again to a collaboration with Carbon Market Data. Spanish power company Endesa tops the list with their part-owners ENEL, an Italian power company, coming in second. Power companies are in general subject to tight caps so it is not surprising that they are big users of offsets.

But companies with as many or more permits than they currently need are also using offsets. ThyssenKrupp's Duisburg steelplant in Germany offset 56% of its emissions in 2008 and in the UK Corus is a big buyer of offsets despite having surplus emissions permits. It makes sense for companies to do this since they can either use the cheaper offset credits to comply with the caps and then sell the EU allowances they have been given for free for a profit, or bank them for use in the future when they will be even more valuable.

Our aim in releasing this new information is twofold. Firstly to demonstrate how well companies in the EU are adapting to the carbon constraints they now operate under and to challenge the assertions by industry lobby groups that a higher climate target in Europe would be ‘physically impossible’ to meet (as claimed by ENEL) or "fatal" to our steel companies as claimed by Eurofer.

But secondly we also wanted to open up the offsetting market to more public scrutiny so that companies using offsets would be more discerning in their choice of offset credits in the future. The next stage is to add more information to the map to make it easier to identify projects which are doing a lot for the environment from those that might actually be doing very little or even having an overall negative impact. If anyone has information that can help us do this we’d love to hear from you.

We published a new report today focused on the companies under the EU ETS who are currently building up nice fat surpluses of emissions permits. We launched it at a briefing for MEPs in the European Parliament - we got a good turn out and quite a heated debate ensued. There appeared to be quite a distinct North - South divide on this issue with representatives from Italy and Greece both stoutly defending those they fear will lose out if Europe goes ahead with a tougher target. But the overall message was that some of the biggest corporate lobby groups, currently trying to ensure Europe's targets remain weak, are also some of the companies currently profiting greatly from the scheme.

We were very grateful to work with the company Carbon Market Data to establish a picture of how the EU ETS is working at a company level since the information made available to the European Commission doesn't actually enable you to see this, as it just deals with individual installations. For companies like ArcelorMittal, the number one carbon fat cat, who own many sites in a number of countries they might have been hoping that nobody ever worked out just how flush they are in credits. Today we also heard that their ridiculous legal challenge against the EU ETS was defeated which ironically they might now be quite relieved about, given just how much money they can make from the position they find themselves in. But sadly this won't stop them and the trade association they work through, Eurofer, claiming that the sky will fall in if targets are increased. Hopefully at least there are now some MEPs armed with enough real information to challenge them on this.

Our aim in publishing the report was as ever to point out that trading can be effective if implemented correctly and we also focused on the companies who are being required to make deep cuts - the power companies. Sadly a lot of their effort is being cancelled out by buying spare credits from the fat cats who were handed credits far too generously. In fact, this scheme would have had more effect if we had just included the power sector and left most of the others out. Hindsight is a marvelous thing - perhaps the US can learn this lesson though as they consider what shape their legislation should now take - power first is the key.

Next up this week will be a second report accompanying an interactive map focused on the use of offsetting to meet caps in the EU ETS. For the first time exactly who is offsetting, what type of projects they are using and where they are getting them from will be revealed in a glorious technocolour googlemap. Again this reinforces the message that companies will find it far easier to hit future targets than they are claiming. More on this to follow shortly.

Environment Ministers meet on March 15th to discuss the EU's climate targets - we hope they will reach the obvious conclusion that caps can and must be tightened irrespective of what happens internationally. Only then can we cut down on the excessive profit making and start getting companies to make real investments in emissions cuts.

The informal meeting of EU Heads of State held last week failed to cover all the topics set out in the agenda and was instead dominated by a discussion about economic governance and the current economic crisis in Greece.

The summit had been scheduled as an opportunity to discuss the EU's economic policy more widely, consider climate policy post Copenhagen and also aid efforts in Haiti. A short statement was issued offering solidarity towards Greece and in a press conference after the meeting Spanish President Jose Luis Zapatero described discussions about the need for enhanced economic governance and a strategy for generating growth and job creation to 2020. Protecting and enhancing the Eurozone's competitiveness was clearly a dominant issue.

This is not surprising as some reports this week indicated that after a very brief period out of recession the EU economy could be headed back into negative growth. A key question in this debate is where the EU considers future growth will come from? Will it stem from a return to growth in the heavy industries, manufacturing and retail firms that have been hit in the recent recession or from newer sources of wealth based on innovation, intellectual property and service provision? This will determine the EU's approach to many policies that will need to be decided in the coming months not least the future position the EU takes in international climate negotiations.

President Zapatero hinted that the EU's economic strategy may be more comprehensive than simply protecting the status quo when he added: "I not only refer to economic government concerning the EU-27, but the world economy and the positions that the EU should take in decisive matters for the future, such as regulation of the financial system, regulation of raw materials and climate change”. The name check for climate change is welcome but equivocal. Defenders of our high emitting companies and practices will interpret this as meaning we cannot go further without the rest of the world joining in for fear of damaging our competitiveness. Proponents of clean and innovative technologies and services will be hoping the EU sees that its future security lies in being a dominant player in the post-carbon economy and that growth will be achieved through massive investment in new energy infrastructure. Significantly both the US and China have indicated that they intend to invest in low carbon energy irrespective of what the rest of the world does. The extent to which the US is allowed to do this by its own internal politics will be a decisive factor in future negotiations.

This debate, due to take place during Thursday's meeting, was in the end postponed. When it does happen it is likely to be heated as countries have already aligned themselves on both sides of the argument with the UK, France, Holland and Denmark supporting the case for stronger targets leading to higher innovation and investment in future technologies. While Poland and Italy are dominant in taking the opposing view.

The Environment Council on March 15th may be the next opportunity for this discussion to be aired but anything decisive may be held over until the Spring Summit on March 25th-26th. If the EU wants to play a role in getting the world's emissions on to a declining pathway it has to make its mind up on which target it will adopt before the next Ministerial negotiation which is likely to be in Bonn this June. Spring Council is therefore the last chance. It would be short sighted to miss this opportunity, whatever the short term economic circumstances are at the time. Some issues are too important to postpone.

Disappointingly, in last week’s informal meeting to discuss the Copenhagen outcome, Environment Ministers in the EU failed to move any further forward and are still playing the same old record: “We may increase our climate targets but others have to do more first.”

This tired old tune has been doing the rounds since 2008 when the EU first hit on its cunning plan to set itself a target but then offer up a higher one if other countries were prepared to do the same. The problem is they are never very clear exactly what they want from other countries, how many countries they mean or precisely what numbers they want them to agree to. The lack of precision seems to imply that they themselves do not know what they want. It is very tempting to see this proposition as nothing more than a clever ruse to hide their lack of appetite for genuine leadership.

They should not be allowed to continue along this cowardly path a moment longer. A lot has happened since 2008. Countries have increased their targets, changes in government in Japan and Australia have led to more ambition, the arrival of the Democrats in the Whitehouse led to the US offering up a target, and, for the first time, developing countries, who are not expected to agree targets, are coming forward with their own too. Some like Brazil have already set them out in domestic legislation. If the EU sticks to its very weak 20% target then it is effectively ignoring all of these achievements in the run up to Copenhagen.

Emissions in the EU have also fallen dramatically. The effect of the recession saw emissions tumbling throughout 2008 and 2009. This has dramatically reduced the distance between current emissions levels and the future target, and also led to a large amount of hot air being created in the EU’s flagship emissions trading scheme, making hitting targets even easier for EU’s businesses.

The wait for possibly a decision to be made at future UN meetings in Bonn or Mexico is too long. The industries operating under the EU’s cap and trade policy, which provides the EU with the easiest way to meet their targets, need to be told what is expected of them. And given how close the EU is to hitting the 20% target already, the move to 30% is critical to supporting a healthy carbon price and maintaining investor confidence in emissions reduction projects.

Perhaps the most frustrating aspect of the EU’s position is the fact that they continue to put out statements about the importance of taking action to keep world temperatures from rising 2 degrees and complaining that targets are currently not in the range to meet that goal, but then still state that they are not prepared to move their own target. As the third most polluting block of countries in the world today and the biggest historic emitter over time, the EU’s is one of most important targets in this equation and absolutely critical to averting climate disaster.

The most likely explanation for all the dilly-dallying is that industry lobbying has taken its toll on our political leaders’ desire to do something real about climate change. Already last week a letter went in to Commissioner Barroso from the EU’s chemical industry lobby group CEFIC, stating that the targets should stay at 20%. This is typical of the kind of special interest lobbying which puts vested interests and protection of profits ahead of the bigger picture, which in this case is the future of society. In reality, the chemical companies of Europe are faring very well in the EU’s emissions trading scheme, many of them have very generous growth targets and they are further profiting by buying in cheap overseas credits and either banking or selling their EU permits.

Some countries have thankfully realised that leadership means standing up for what you believe in, in spite of this lobbying. It is very welcome to see the UK, France, Belgium and Holland doing what they can to move things forward at the EU level. The laggards appear to be Italy and Poland and it is not yet clear where Germany really sits on the question. Clearly more needs to be done in these countries to increase the political pressure on leaders to act. We will soon have our campaign action into German and hope to do the same soon for Italy and Poland.

The January 31st deadline set under the Copenhagen Accord still sets an important test for EU leadership, if they fail to show any movement at all, those countries who have moved their positions since 2008, and all the most vulnerable countries, must be strong and outspoken in their criticism of the EU’s continued prevarication. The hypocritical nature of their complaint that the 2 degrees target is at risk because people are not prepared to commit to action, while continuing not to commit to action, has to be exposed and action must be forthcoming. Not to act means 3 billion tonnes more emissions in the atmosphere and right now that’s the last thing the world needs, especially when it could be so easily prevented.

To lend your voice to the call for action from the EU please sign our letter to EU leaders.

The Copenhagen talks have ended in chaos and confusion with the multilateral process stretched to the point of collapse. It seems distrust and narrow self-interest have won the day.

So what now?

The Copenhagen Accord exists and has been heralded by some as a new beginning, involving a wider number of countries in a common effort to avert catastrophe. Despite its unclear legal status, countries who support it should now record nationally derived targets in an annex before the end of January 2010. This raises the question of what targets will countries enter and can they be increased?

Europe was the first to invent the conditional target offering a 20% reduction by 2020 but a higher 30% cut in the event of an international deal. Australia and New Zealand quickly followed suit. The difference between the lower and upper end of the range of targets in Europe represents some 3 billion tonnes of emissions between 2013 and 2020. This is a significant sum. As leaked UN documents showed the gap between what countries are pledging to do over the next decade and what science demands is already worryingly large. If Europe decides to allow 3 billion tonnes more emissions to occur it will knowingly increase the global risk we face, locking in high emission technologies and making the task of catching up more difficult in the following decade.

For the EU, which has long proclaimed its leadership in committing to action on climate change, the move to the higher target should be a no-brainer. The 20% target is now so weak as to be equivalent to business as usual. Compared to a 2005 baseline it will deliver less investment in solutions in the near term than the paltry US target, despite the fact that we have a head start, with the policies in place already to deliver the reductions. Recent studies have shown that hitting the 30% target will cost over €100 bn less than the 20% target would have cost pre the recession partly because of the huge volume of ‘hot air’ that has been generated under the weak caps set under the much vaunted ‘EU Emissions Trading System’. Tightening caps provides a highly cost effective way of meeting the higher target.

For all these reasons Europe has to move to a higher ambition target and enter it into the accord – to do anything less would be an insult to all those vulnerable countries relying on leadership from developed countries and put us well behind in the race to develop a low carbon economy.

But despite these compelling reasons the EU is prevaricating. The stated reason is that they want to wrest greater commitments from other countries before agreeing to move. But that strategy has clearly failed. Europe cannot now stay at its lower number when it knows that doing so will take us ever further from the goal of 2 degrees they claim they so vehemently support. They would do well to listen to other countries who were unequivocal about their intention to press ahead unilaterally. President Lula demonstrated real leadership when he passionately explained why Brazil would be taking on an ambitious target despite having no obligation to do so, Premier Wen Jiabao used his speech to list off China’s unconditional unilateral climate policies and Obama firmly stated the actions the US was preparing to take to protect their own self interest irrespective of what the rest of the world did. Only Europe persisted in its ineffective ‘I will if you will’ schoolyard strategy.

Obviously the real reason for the EU temerity is the fact that countries such as Germany and Italy are under considerable pressure from industrial lobby groups who know well that a move to a higher target will result in tighter caps on their emissions. But we must persuade Europe’s leaders to move. These are the voices of old industry – the voices of the bright green companies that are emerging to challenge the old order are less clear but they must become more vocal join with NGOs and counter the negative lobbying.

We have a month to turn the EU’s position around. All European NGOs interested in salvaging something positive from the flames of Copenhagen must address their efforts at securing this policy change. Three billions tonnes is worth fighting for – we cannot allow our leaders to knowingly allow this level of pollution. Its time Europe started acting like it truly meant what it said.

These negotiations are like a multi-player game of three-dimensional chess played blindfolded. The sheer number of issues and degree of interconnectedness are mind-boggling. Keeping track of them all is incredibly difficult and it would seem that time has run out to reach a comprehensive and coherent agreement here in Copenhagen. There has been some progress over the last 24 hours and some less contentious issues have been agreed. However the gulf between where ideally things would stand entering the last day of formal negotiations and where they actually are is still enormous.

Yesterday the USA made the first move with Hilary Clinton making a statement in support of the idea of long term financing of around $100 bn per annum by 2020. There was little clarity about where this money would come from and how it would be distributed but nevertheless it was seized upon as a welcome sign of progress.

In return stories began circulating that China was prepared to give ground on the issue of how its targets are monitored and verified. The US wants them to be recorded at an international level and subject to appropriate scrutiny. Of course this would bring the requirements on China quite close to those the US wants to see imposed on itself – a loose compliance regime based on reporting applied to voluntarily decided national targets. Given that what China says it will do it generally does do the concession to report on progress is not a huge one but it does at least show that China is playing the game and not just stonewalling.

Neither offer is a great leap forward in terms of the most important issue at stake – namely how to bridge the gap between what countries are offering as emissions cuts and those that are needed to get the world on to a more sustainable path. The UN’s analysis of the situation was leaked yesterday – it wasn’t really news to many: the pledges on the table so far add up to a 3 degrees scenario but the fact that this information has been conveyed so clearly to the negotiating parties is welcome. No-one can claim they didn’t know.

The EU met last night in a mini-summit to decide on its final position. This was the chance for them to re-enter the game by agreeing to move to their more ambitious target. Hopefully today we will find out they did. The EU’s game theory strategy should be to lead by example since this is the only way to build trust and encourage others to do the same. Trying to be the last to act will appear cowardly and lead to failure especially since it is now their turn to move given the USA and China’s meagre but politically important efforts yesterday.

So the end game begins today. Judging from the report backs from the smaller negotiating groups very early this morning many things remain unresolved and world leaders will not be greeted by a comprehensive agreement to read over their breakfast. The groups on mitigation, appropriate actions for developing nations and the use of market mechanism all still have multiple options on the table and appear stalled. The finance group failed even to provide a report back and the chair of the shared vision group appeared stressed. The groups that are proceeding and which are therefore likely to form the bulk of any new agreement are on avoided deforestation, action on emissions from agriculture, technology co-operation and adaptation. Though all important issues they do not address the critical question of how and how quickly the world will act to decarbonise the global economy.

Obama has now arrived and maybe the world leaders can find time to sort key issues out between their extended lunch and group photo. Somehow I fear not. We should not expect anything concrete to emerge until Saturday and even then unfortunately it may not be worth the wait.

The real fight in the Copenhagen climate negotiations is between China and the USA, the top two mega-emitters both with no legal requirement to reduce their emissions. Each wants the other to sign up to targets. In the US’s case this is so they can reassure their constituency back home they can move forward on climate change without fear of impacting their economic competitiveness. For China it is about the West making good on its moral responsibility to lead given the historic contribution the West has made to emissions. But also potentially to ensure there is a growing market for the low carbon technologies they are quickly becoming dominant in.

It was China who landed the first blow with chief negotiator Su Wei saying in a Chinese press conference – itself an unusual event - that the US’s target didn’t really amount to much and implying they wanted to see them commit to a 25% reduction on 1990 levels by 2020 – more than double the 17% off 2005 levels they have offered to date.

In a slightly more covert attack the choreographed leak of the ‘Danish text’ lead to outraged reaction from African nations. China played no visible part in the furore but most suspect African nations are acting as their allies.

Arriving in Copenhagen yesterday Todd Stern was quick to rally: China is a rich country with a booming economy – without their involvement any deal will be meaningless and so they must add their national commitments to the international framework.

So far so predictable. But then what’s this? Tiny island nation Tuvalu has entered the ring with a new proposal to discuss a framework that includes all countries, the US and China included. A move certain to upset the major developing countries, who did indeed object, causing a suspension of the negotiations as Tuvalu stuck to its guns.

So ends round one. At this stage it’s hard to say who’d ahead on points but the G77 and China coalition does appear to be showing signs of stress. Clearly a lot has changed in the world since 1997 when Kyoto was signed, China’s boom since then has been remarkable while Western economies have shown signs of stagnation. The UN system has to show itself capable of adapting to changes in the real world or it could be rendered irrelevant something the least developed countries really can’t allow to happen.

You have to feel for the Danes – they have pulled out all the stops to host this conference, which is completely unprecedented in its scale, and so far they have done a bloody good job. The broadside against the city’s prostitutes was a bit mad but the provision of free public transport to all delegates and the expansive facilities provided in the cavernous Bella centre show how much thought has gone into this event.

But now their name is being dragged through the mud because of their leaked text that appears to have upset everyone.

I suspect many seasoned commentators will simply dismiss the current storm over the ‘secret document’ as all part of the theatre of international negotiations. Of course there is a document in circulation – it would be naïve to think there wouldn’t be. The official public document is still hundreds of pages long with innumerable square brackets everywhere. And yet Ministers and then World Leaders arrive next week and they need something to discuss and sign.

So the Danes did what they had too – drafted something and then set about consulting on it. The fact that the developing countries were able to produce a line-by-line commentary shows that far from keeping it secret they were sharing it with everyone. It is actually difficult to think of any other way they could have done it. Everyone concedes that the UN process is unwieldy and time consuming and, sadly, as far as the outside world is concerned, time has run out for this negotiation.

So the question now is what happens next? Will the angry reactions by developing nations mean the text is shelved? Will the content be changed, and if so how, or will someone be tasked with merely changing the document’s appearance so a ‘new’ document can be produced at some later point in the proceedings?

Hopefully what will happen is that after all the apparent outrage has died down the process of knitting together a document that both the G77 and China and the US, Europe and the rest of the industrialized nations are happy with will begin. In fact it almost certainly already has.

The main sticking point in the new text seems to be the rather laissez-faire approach to developed country targets. The text implies that targets will be derived from the pledges made by countries rather than by any top down science led formula. In that sense it reflects the political reality of the situation. But there is also no mention of any compliance mechanism which is a serious omission guaranteed to undermine trust.

The US is much more concerned with its domestic situation; its primary aim is to make sure the UN process does nothing to exacerbate problems back home. So the chances of them signing up to anything more ambitious than the target currently on offer are virtually nil. They may, however, be persuaded to give ground on some of the structural aspects of the new deal including on compliance regimes and finance arrangements. These are the issues the developing countries now need to focus on as well as ensuring that all other developed countries – most notably Europe - commit to at least the upper end of their target ranges.

Putting aside this latest ‘furor’ it is still true that all the major countries now have quantified targets on the table and the political stars have never been more favourably aligned to achieve a deal. This cannot be squandered.
Copenhagen should capture current ambition from all countries and create a framework for action over the next five years. During this time global emissions will in reality be dictated by domestic policies in China, the US and Europe, and those will be guided, but not dictated by UN agreement.

Then in 2014 the next IPCC report will be issued and it is sure to sound an even louder alarm call for action. At that point 2020 targets can be reviewed and the gap between where targets are now, and where they need to be, can be addressed.

Something like the Danish text has to emerge at the end of this process. It will serve no-ones interest, least of all the poorest nations, to abandon hope of producing a clear, intelligible text indicating the way forward. Lets hope the Danes can succeed in this monumental task of diplomacy.

It seems everyone at the moment, from the extreme right in Australia, to famous climate scientists and leftist eco warriors in the US, has got it in for cap and trade. The Story of Cap and Trade has succeeded in simplifying the subject but has perhaps gone too far with the result being a rather glib dismissal of the policy, mainly on the grounds that it is quite detailed and complicated. Show me a climate policy that isn't! David Roberts of Grist's very eloquent response is worth reading to get a different perspective.

At Sandbag we're not dyed in the wool supports of market based solutions - we just want whatever is being done to tackle climate change to be done efficiently and effectively. Having experienced life in the private, Government and NGO sectors when it comes to efficiency unfortunately the 'evil capitalists' have got it taped.

Since cap and trade is the main policy in play in Europe at the moment we are going to continue lobbying to improve it. To disengage now would simply mean it continued to be the plaything of industry and politicians, a great shame when it has such potential to divert funds into real solutions. We strongly believe civil society has to get increasingly involved.

Our latest briefing sets out 10 reasons why we think cap and trade can work. Whether it will or not will be down to whether the political will exists to tighten caps.

The meetings in Copenhagen starting this week will crucially decide whether the EU moves from its current weak target of a 10% reduction on current levels by 2020 to its higher conditional target. Any move to a higher target will trigger a review of the EU ETS caps which will mean increased levels of funding for emissions reductions in Europe and overseas. So this time, unlike in 1997 in Kyoto, targets signed up to will have an immediate effect on pre-existing policies, with real financial consequences. There is a lot to play for. There is a meeting European Council meeting scheduled for December 10 -11th December which could create the authority for tougher targets. We hope over the next two weeks Europe will rise to the challenge.

As for the NGO movement, we hope we can avoid splitting apart over the pros and cons of individual policy mechanisms and instead focus on collectively securing the higher levels of political will that will be needed to implement any policy effectively.