Rewards and Punishments
188 countries involved in the Kyoto protocol pollution must be reduced. or else…
Damiàn Kantor
Image Mario Suarez
With more doubts than certainties, the most ambitious worldwide programme to attempt to slow down global warming is already under way.
The Kyoto Protocol made its debut last February, based on an agreement signed in 1997 which commits 35 industrialised countries (most of them European) to reduce emissions of toxic gases which contribute to the greenhouse effect. The pact commits governments to convert industry in order to reduce pollution to 5.2% lower than 1990 levels by 2012. The greatest confusion lies in the fact that the United States, which is responsible for generating a quarter of the world’s polluting gases, has not signed the agreement, despite pressure from the European Union.
In order to ensure that aims are met, a system of awards and punishments for companies in the countries involved has been drawn up, in line with UN procedure.
Paradoxical though it might seem, refuse is in great demand around the world, as it produces a high quantity of gas, which if eliminated or sold, could translate into credits
Any process change which incorporates clean technologies able in some way to reduce the emission of polluting gases like carbon dioxide or methane, will be eligible to receive vouchers, known in financial jargon as carbon credits. Companies are not obliged to ensure that compliance with the pact takes place in their country of origin, but can buy these vouchers in countries which meet the required objectives or which are not obliged to comply, such as developing countries. This has led to the creation of a market for trading these credits, currently valued at between 5 and 7 dollars each.
And it has worked. In Argentina, for example, Ceamse, a state-owned refuse company, has signed contracts with three companies which are requesting carbon vouchers as payment. The president of the company, Carlos Hurst, has revealed that contracts were signed with the Dutch capital company Van Der Viel, the Canadian company Conestoga-Rovers & Associates, and a joint-venture formed by ASJA (Italy) and IMPSA, part of the Argentine group Pescarmona. A deal has been established for the next ten years to the total value of 35 million dollars, destined among other things for the construction of systems in sewage tanks, which are highly contaminating, to treat or burn methane gas. In both cases vouchers are received.
Hurst guarantees that these are among “the first contracts to be drawn up in the world” since the Kyoto protocol was signed, and in one of these there is only one stage to complete: for the UN to certify the quantity of gas that will be eliminated. “There are no costs for Ceamse, which will keep a percentage of the vouchers. The other companies will be installing the systems and treating the gas”, he explains enthusiastically.
Paradoxical though it might seem, refuse is in great demand around the world, as it produces a high quantity of gas, which if eliminated or sold, could translate into credits. Graciela Gerola, president of AIDIS, an Argentine non-governmental body which studies the environment, explains: “The most interesting projects presented before the closing date were definitely those concerning the recovery of methane gas from sewage tanks. This type of project offers the lowest degree of uncertainty, and means that the precise quantity of gas which can be recovered can be calculated. If we know the quantity of refuse we can estimate the quantity of methane produced. The agreed mechanism is as follows: the company invests in the facilities needed to recover the gas and if necessary, use it, then certifies the quantity reduced, which translates into vouchers which can be sold to companies which need to reach emission abatement objectives”.
Image Mario Suarez
After coming into force, and up to 2021, the 188 countries involved in the Kyoto Pact are required to report annually on the work carried out to reduce pollution. However it is not yet clear what will happen to the countries that do not meet the objectives. Fines have been mentioned, but nothing has been decided. This adds a further element of uncertainty to the efficacy of the agreement.
With regards to the mechanism of Clean Development in exchange for vouchers, Fernando Canzani of Eco Securities, a specialised consultancy agency, explains that it only applies to new process changes: “Studies are carried out to determine the level of abatement of gases. These are presented to the UN, and if approved, the certificates are handed over”.
In short, to determine whether the operation is cost-effective, companies must assess the following: when a modification featuring the use of clean technology is being planned, they are obliged to carry out a feasibility study costing between 50 thousand and 150 thousand dollars, depending on its level of complexity, to establish the exact level of abatement of greenhouse gases.
If the project is cost-effective, it must then pass an inspection by experts who will certify it. And finally, the UN must approve the entire thing. According to the final assessment, every year the company will receive one voucher for each tonne of carbon eliminated, over a ten year period.
The economic benefit thus depends on the volume saved and the duration of the initiative. Canzani estimates that, “At current prices, a good project should raise the rate of return on a process change by between 10% and 30% annually”. In any case the expert underlines that there are other gases, such as those produced in landfill sites, which are more profitable: eliminating a tonne of methane is the equivalent of eliminating 23 tonnes of carbon.
