Aerial view of intensively managed Green Diamond Resource Company holdings in Humboldt County, California. Photo credit: EPIC.

Discussing climate change strategies with Dr. Kathy McAfee

Interview with Gary Graham Hughes and Dr. Kathy McAfee

The appropriate place for California to show leadership is right here in our own state.

California’s dependence on Cap-and-Trade is open for public debate and here to stimulate a discussion is Gary Graham Hughes and Dr. Kathy McAfee. Gary Graham Hughes is Friends of the Earth’s senior California advocacy campaigner and works to strengthen our involvement in climate, energy, forest and water issues in the state of California. Dr. Kathy McAfee is a professor in the Department of International Relations at San Francisco State University with a long history of evaluating the efficacy of market-based strategies for dealing with climate change and other environmental challenges.

California’s leadership on climate change policy is gaining a great deal of attention on both a national and international level. Much of this attention is focused on the state’s Cap-and-Trade Program, which has become an increasingly dominant cornerstone of climate change and greenhouse gas emissions reduction policy, and is overseen by the California Air Resources Board. Though Cap-and-Trade is often seen favorably by a public hungry for action to address human-caused climate change, the state’s reliance on pollution trading to reduce a significant portion of its emissions brings with it real dangers and real injustices, and deserves frank and honest public discussion. To add to the concern, CARB is preparing to expand the Cap-and-Trade Program to include international forest carbon credits based on the highly controversial Reducing Emissions from Deforestation and Forest Degradation (REDD+) methodology.

Gary Hughes: Tell us a little bit about your academic background and your current work.

Kathy McAfee: I’ve learned most of what I know from my grassroots work in international development and community organizing since the 1960s, but my PhD study at University of California, Berkeley helped connect the common threads. For my doctoral dissertation I investigated how nature came to be treated as a commodity to be bought and sold, or to be neglected or destroyed when it doesn’t appear to have any profitable use.

GH: When did you first start encountering this as a researcher?

KM: The idea of putting price tags on nature arose in the 1980s as a way to illustrate the importance of conservation by showing what it would cost, in money, to do without certain endangered species and landscapes. But “selling nature to save it” — a phrase I coined that a lot of people now use — soon took on a life of its own.

It showed up in negotiations for the Conventional on Biological Diversity around time of the first Earth Summit in 1992, in the form of markets for so-called genetic resources (information contained in the cells of living things). In the CBD treaty, the potential for profitable “commercial use of genetic resources” is given as a reason for conservation of biological diversity, such as rainforest ecosystems. Many government officials and conservation NGOs were excited that a “market solution” to extinctions and deforestation had supposedly been found.

The idea was for cash-poor countries or communities to sell their rights to genetic information in medicinal plants, animals or microorganisms to pharmaceutical firms and researchers in cash-rich countries. In theory, the poor would get a small percentage of any profits from products derived from their materials and knowledge, and this would give them an incentive to conserve — as if they didn’t have any reasons of their own to take care of their surroundings! This has brought a different way of thinking about what’s important and has often created divisions over who is the rightful “owner” of things that were not own-able before. As it turned out, the drug companies were so much more powerful that they were able to pay very little, if anything, for what they took.

Now we are seeing the same thinking on a grander scale in the attempt to create global North-South markets for ecosystem services, especially the “service” of carbon sequestration by forests, peat lands and soils. The idea is to pay governments, landowners or communities to promise not to cut trees, or to plant trees instead of food crops, or to reduce greenhouse-gas emissions from their farms and ranches. Those who take these actions can sell carbon-offset credits to enterprises that emit greenhouse gases elsewhere or to speculators who hope to profit from selling those credits to polluters. The carbon held in those trees and soils is supposed to cancel out the effects of continued pollution in the wealthy world.

In that way, nature in the form of carbon credits becomes a tradable commodity, just like genetic resources. Meanwhile, the pollution by those who ultimately buy and use the credits continues. That’s why we call carbon credits “permits to pollute.”

This approach takes attention away from the causes of deforestation: big conservation organizations can say they’re saving rainforests without confronting the powerful economic interests behind the main “drivers of deforestation” — oil companies, logging, mining and road-building firms, big ranchers and the meat, grain, biofuel and pulpwood industries — that profit from environmental destruction and global warming.

GH: You have written about the fallacies of carbon trading. Yet the utilization of carbon markets is incredibly popular and accepted as viable climate change mitigation policy. Why is this, in your view?

KM: Economists developed methods for valuing nature based on the notion that “externalities” such as environmental assets and damages can be brought into the economy, as if economy and nature were separate! In theory, if ecologists can measure precisely what needs to be saved, economists can calculate the monetary values of that “natural capital.” Then, if governments clarify property rights to ecosystems and species, making sure that somebody owns and can sell them, market forces will send environmental “investments” to wherever they can buy the most conservation.

These methods appear, deceptively, to offer low-cost, objective, non-political guidelines for complex problems that existing policies and institutions have failed to solve.

On the surface, carbon-offset trading between rich and poor regions seems like a great conservation bargain. If cap and trade systems permit international offsets, as California is considering, polluters can emit more GHGs than the regulations allow by buying offset credits from regions such as Brazil. The revenues are meant to be used in Brazil, etc. to subsidize and enforce conservation there. Such offsets would be cheaper than offsets based on greening activities in richer countries, benefitting the polluting businesses. But of course, this would allow more pollution to continue in California by putting more of the burden of addressing climate change to the global South.

GH: There is a great deal of confusion about carbon cycles on our planet that is exacerbated by carbon trading. Can you briefly explain your critique of offsets from both a carbon science and a social science foundation?

KM: One major problem is that nature’s functions are too diverse and dynamic to be measured precisely, as any ecologist can tell you. Offset trading allows a certainty — continued GHG emissions — on the grounds that the polluter is paying for something very uncertain — that the carbon stored in trees paid for by the offset will never return to the atmosphere.

If the fate of anything is determined solely by its market price, then whoever can spend the most money can get the greatest amount of that thing, be it beans, safe water or dumping grounds and storage sites for carbon in the atmosphere, oceans and forests.

Another problem is that it is impossible for even the most sophisticated experts to ascribe values to things without making use of one or another set of value judgments. Consequently, those things that seem most valuable to more powerful groups are priced more highly. Obviously the market values of genetic resources or carbon-storage functions are small portion of the values of forests or other ecosystems, especially their values to the people who depend on them directly for their material and spiritual livelihoods, and to future generations.

If the fate of anything is determined solely by its market price, then whoever can spend the most money can get the greatest amount of that thing, be it beans, safe water or dumping grounds and storage sites for carbon in the atmosphere, oceans and forests.

GH: Can you describe some of your experiences in the field and how that informs your understanding of the risks inherent in market-based policies that take precedence in determining climate change mitigation strategies? What is at stake for affected communities who find their landscapes coveted for inclusion in a globalized carbon market?

KM: I’ve been looking at the pros and cons of Payment for Environmental Services programs — which are the model for REDD+ — since my years on the faculty of Yale’s School of Forestry. I’ve visited people engaged in PES schemes in Mexico and Central America and have read hundreds of case studies and meta-analyses of PES and REDD-type projects.

Some communities targeted for PES and pilot REDD projects have obtained short-term cash payments, other modest material benefits and technical assistance. But it should have come as no surprise that in almost every scheme for market-based management of ecosystem services, efforts to make projects more “market-efficient” conflict directly with project criteria meant to reduce poverty.

People have lost access to resources and territories that they depend upon as a result of “green grabbing” (the takeover of land, forests or water ecosystems for ostensible environmental purposes).

There’s no evidence that PES overall has resulted in net environmental gains. Numerous studies have documented the near-impossibility of monitoring and preventing “leakage” when deforestation for timber, agriculture, mining and ranching shifts from the targeted project area to a neighboring village or valley or to a distant jurisdiction. The “permanence” of activities to store carbon is even harder to guarantee. “Perverse incentives” mean that landowners and states exaggerate their past or future deforestation intentions in order to gain more certified credits to sell. Officials, credit brokers, government officials and consultants in charge of certifying compliance with project requirements tend to cherry-pick data to demonstrate project success.

There are already cases where people have lost access to resources and territories that they depend upon as a result of “green grabbing” (the takeover of land, forests or water ecosystems for ostensible environmental purposes). There are cases where PES or proto-REDD programs have only a temporary effect, such as when payments stop after a few years as the investors move on, and many cases where such programs exist on paper but have little effect on the ground. And, payments can make things worse: when the idea that careful treatment of nature requires payment is introduced, the social ties and cultural expectations that have guided traditional, sustainable practices by local people can be weakened.

What strikes me is all the time and resources that go into designing, setting up, running, monitoring and reporting these schemes, and all the attention they get in policy circles and the press. Meanwhile, little attention is given to the large-scale activities — mining, logging, ranching, plantations for export crops and biofuels, mega-infrastructure projects, and elite tourism — that are far more responsible for deforestation and degradation than the activities of the small-scale farmers and forest dwellers that PES and REDD+ programs usually focus on.

GH: From your experience, who is it that is benefiting from these schemes?

KM: Although governments, agencies like the World Bank and conservation NGOs such as Environmental Defense Fund have been trying to prop up carbon markets by means of subsidies and market interventions, carbon markets have remained too weak to attract investors on the scale anticipated by their sponsors. The prices of tradable emissions allowances and offsets remain far, far too low to persuade most polluters to reduce their emissions substantially when they can buy inexpensive credits instead. Unless much stronger, global-scale compliance regime — a global cap — emerges from an international process, this is likely to remain the case.

Carbon-credit trading is a new growth industry in itself, one that is rife with conflicts of interest.

Carbon markets can nevertheless be lucrative. For-profit consulting firms and non-profit conservation NGOs collect fees for identifying or setting up credit-earning projects and shepherding them through the process of qualifying for cap-and-trade credits or offsets. Others who may benefit include banks, commodity trading firms, oil and power companies, energy speculators, and pension, hedge and private-equity funds that invest in carbon credits, as well as firms established specifically to broker the new carbon commodity. REDD-related projects, sales conferences, roundtables, guidelines, sub-ministries and safeguard policies — not to mention theses and dissertations — proliferate. Clearly carbon-credit trading is a new growth industry in itself, one that is rife with conflicts of interest.

GH: What would be a fair and responsible path forward for California to contribute to the global imperative to conserve forests? What are some answers that you see as being a viable alternative to what we describe as the “false solution” of offset trading in a cap-and-trade market?

KM: There is already a surplus of cap-and-trade credits in California, a surplus of offset credits in North America and a really huge global surplus of both. The last thing we need is to link California’s climate strategy to a REDD+ scheme in a developing country, creating yet another means for our own polluting industries to buy their way out of full compliance with the state’s modest greenhouse-gas reduction goals.

It would behoove the California Air Resources Board to beware the influence of the REDD+ ‘industry’ itself. Undoubtedly, most of the people working on REDD+ in NGOS, government agencies in California and abroad, academia and the Governors Climate Task Force genuinely want to avert catastrophic global warming. This is also one motivation of some people in the growing army of for-profit project developers, certifiers, bankers and brokers. But other motives, especially profit and career growth, and the satisfaction of working on the technical aspects of the climate challenge, are also at work. REDD+ could become self-perpetuating regardless of its actual environmental outcomes.

The carbon-credit finance industry, through bodies such as the International Emissions Trading Association and the International Chamber of Commerce, is lobbying hard for broad expansion of offsetting “business opportunities” by means of forest and industrial offset credits that could be traded and substituted across jurisdictions worldwide. This would create more profitable work for offset-industry professionals, but it would also delay the actions that emitters must be required to take for the sake of the planet and our inheritors.

The greatest strength of [California Global Warming Solutions Act] AB 32 is its regulation-centered approach. Let’s keep it that way.

GH: Any last words for readers to keep in mind when tracking California climate politics?

KM: Markets can be very useful ways to distribute things we produce and things we need. But markets work best when trade takes place among groups or individuals who are relatively equal, or at least a lot more equal than in today’s world, where markets tend to redistribute wealth toward those who already have it. We need to recognize these ethical and power dimensions of our values and choices up-front; not pretend that “the market” can supersede politics and guide our decisions in some neutral way.

Finally, the U.S. and Canada together comprise the world’s largest source of greenhouse-gas emissions both absolutely and per capita. It seems arbitrary and somewhat opportunistic to argue, as ARB staff have suggested, that California has a special responsibility to try to shape forest policy in Acre (or anywhere else), while we continue to enable continued emissions from our own state and make emissions even easier by adding more offset options in the name of “reducing compliance costs”. Both Brazil and the U.S. have made commitments under that Paris climate agreement to make significant reductions in their climate-warming emissions. The appropriate place for California to show leadership in meeting this commitment is right here in our own state.

As for people in forest regions — they should be compensated for their work, wisdom and sacrifices in stewarding nature. Yet, there’s little basis for expecting that credit sales will reduce inequality significantly, or slow global warming at all. That will happen only where compensation arrangements are linked to locally-determined strategies that reinvest wealth in all forms within the locality and region, to increase productivity by working with nature to meet people’s needs.

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