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Is Latin America Really a Carbon Market Pioneer? |
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By María Amparo Lasso*
Latin
America could help reduce carbon dioxide emissions by up to 55 million
tons through the sale of carbon credits. But this strategy doesn't
convince the critics, who ask if the region would foment clean and
renewable energy sources or would merely sell cheap carbon credits
to the highest bidder from the industrialized North.
MEXICO CITY - Latin America is a big player
in the world's carbon market: the region has already negotiated
210.6 million dollars of carbon emissions trading in the context
of the Kyoto Protocol, which is to take effect in February 2005
and has rekindled the debate about how to fight global warming.
The region's countries presented 46 projects under the treaty's
Clean Development Mechanism (CDM), which could reduce emissions
of around 55 million tons of carbon dioxide (CO2), the main greenhouse
gas, produced from the combustion of fossil fuels.
Latin America, second only to Asia, is at the forefront of efforts
in the developing world to reduce greenhouse gases, which are responsible
for global climate change.
But critics ask if the Latin American strategy will foment cleaner,
renewable energy sources in the region, or if it will merely be
limited to selling cheap carbon credits to the highest bidder from
the industrialized North.
The CDM is one of three flexible mechanisms set up by the 1997 Kyoto
Protocol that are designed to help industrialized countries meet
their goals for curbing greenhouse gas emissions to 5.2 percent
below 1990 levels by the year 2012.
The mechanism, which began instrumentation even without the treaty
in force, allows companies from industrialized nations to invest
in CO2 emission abatement projects in developing countries.
Through carbon credits, these companies can count the emissions
reductions as their own in their countries of origin, or trade them
on the emissions market.
Such is the case of the French-German corporation Vallourec & Mannesmann
(V&M), which plans construction in Brazil of a thermoelectric plant
to be run on derivatives of plant carbon produced in reforestation
processes.
The plant will generate electricity for the V&M steel factory in
Barreiro, in the southeastern state of Minas Gerais, and is slated
to reduce emissions of CO2 equivalent by 1.15 million tons in 21
years. The company will claim that reduction as its own.
The principal motivation of V&M ''was not environmental, but rather
to limit the risks of interruption in the supply of electricity,
which is terrible for the operation of the furnaces in steel production,''
said Eduardo Botelho, a V&M operations executive, in a conversation
with Tierramérica.
V&M caused serious ecological harm in Minas Gerais, recalls Maria
Dalce Ricas, an activist with the Minas Environmental Defense Association.
''But about eight years ago it improved its environmental policies,
and that is why we are giving a vote of confidence for the (Barreiro)
project, which is unique because it uses waste as its raw material.''
In Latin America, Brazil has the greatest potential as an exporter
of carbon credits, followed by Colombia, Panama, Costa Rica and
Peru, according to a study by the Economic Commission for Latin
America and the Caribbean (ECLAC). The document reports there were
at least 46 CDM projects in the region in March. Several more entered
the application process in the last few months.
European corporations like V&M seem to be the most enthusiastic.
From Spain alone, the companies Endesa, Unión Fenosa and Iberdrola
announced investments worth 850 dollars in CDM projects in Latin
America.
But the carbon credits derived from renewable energy projects represent
just 10 percent of all credits negotiated in the CDM framework,
according to the non-governmental group CDM Watch, based in Bali,
Indonesia.
And this is the most recurrent criticism from environmentalists:
so far, governments and corporations from the industrialized North
have been using the CDM for projects that generate large quantities
of cheap carbon credits, focusing on gases like methane and hydrofluorocarbons
(particularly HFC-23), which allows them to quickly and comfortably
meet the Kyoto Protocol reduction targets.
These are the preferred gases on the carbon market, which traded
64 million metric tons of CO2 equivalent during the first half of
2004. The governments of Japan and the Netherlands, and the World
Bank, are the leading buyers.
The CDM, say activists, simply shifts the location where greenhouse
gas reductions are recorded, without much environmental or social
benefit for the countries involved, and they do not promote changes
in energy use and production.
In Colombia, social investment was a requirement for developing
a wind-energy plant in Jeripachi, in the Guajira region. It is the
country's first CDM project, of 15 being planned.
The project, which would reduce emissions worth 3.2 million dollars
in credits, is part of the World Bank's Community Development Carbon
Fund, and includes efforts to modernize school and health infrastructure
to benefit the Wayuú Indians living in the area.
''When it comes to indigenous lands, the members of those communities
must be able to participate as partners'' in CDM projects, Wilder
Guerra, a Wayuú and director of the Observatory of the Caribbean,
an academic research center.
But there are those who see this type of investment as minor in
the larger context, and argue that all CDMs should exclusively involve
renewable energy sources.
However, that is unlikely to happen, ''because we are in a transition
phase in which we are also using cleaner fossil fuels,'' Carlos
Loret de Mora, president of Peru's national environment commission,
CONAM, told Tierramérica. Peru is another CDM leader, with 19 projects
and investments totaling 935 million dollars.
On Dec. 1, Peru will sign its first sale of carbon credits to the
Netherlands, through the Poechos hydroelectric project in the northern
city of Piura. It will replace thermoelectric plants that run on
diesel and coal, and reduce CO2 equivalent gas emissions by 30,229
tons a year. The company is required to provide electricity to the
surrounding community, as well as other social benefits.
The Spanish energy giant Endesa, with operations in Argentina, Peru,
Chile and Colombia, will place on the European carbon market credits
coming from the planned hydroelectric dam in Callahuanca, outside
Lima, which will reduce CO2 emissions by 460,000 tons.
''Callahuanca will be completed despite the uncertainty that still
exists with respect to the future price per ton of CO2, which implies
a risk. But interest in obtaining experience with CDMs has prevailed,''
said Wilfredo Jara, environment and sustainable development manager
for the Endesa affiliate in Chile.
The price per ton of CO2 currently varies between 3.5 and 7.0 dollars
-- still considered quite low. And the transaction costs reach 200,000
dollars per project, which does not leave much room for small-scale
undertakings.
''In Argentina, the costs and the complexities of presenting a CDM
project have hindered participation by small and medium companies,''
Victoria Baláustegui, of the Argentine Health Ministry's clean production
division, told Tierramérica.
And there hasn't been much interest in Mexico, which, despite the
size of its economy, has registered just four projects, all related
to the hydroelectric sector.
The implementation of the Kyoto Protocol in 2005 could catapult
the Clean Development Mechanism to the forefront, but its lifespan
could be very short. The commitments of the treaty last only until
2012 and, although new climate talks are slated for next year, what
happens beyond the Kyoto Protocol is a great unknown.
* María Amparo Lasso is Tierramérica's editorial
director. With reporting by Mario Osava in Brazil, Abraham Lama
in Peru, and Yadira Ferrer in Colombia.
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