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When Giants Slow Down
The most dramatic, and disruptive, period of emerging-market growth the world has ever seen is coming to its close Jul 27th 2013 THIS year will be the first in which emerging markets account for more than half of world GDP on the basis of purchasing power, according to the International Monetary Fund (IMF). In 1990 they accounted for less than a third of a much smaller total. From 2003 to 2011 the share of world output provided by the emerging economies grew at more than a percentage point a year (see chart 1). The remarkably rapid growth the world has seen in these two decades marks the biggest economic transformation in modern history. Its like will probably never be seen again. According to a recent study by Arvind Subramanian and Martin Kessler, of the Peterson Institute, a think-tank, from 1960 to the late 1990s just 30% of countries in the developing world for which figures are available managed to increase their output per person faster than America did, thus achieving what is called “catch-up growth”. That catching up was somewhat lackadaisical: the gap closed at just 1.5% a year. From the late 1990s, however, the tables were turned. The researchers found 73% of developing countries managing to outpace America, and doing so on average by 3.3% a year. Some of this was due to slower growth in America; most was not. The most impressive growth was in four of the biggest emerging economies: Brazil, Russia, India and China, which Jim O’Neill of Goldman Sachs, an investment bank, acronymed into the BRICs in 2001. These economies have grown in different ways and for different reasons. But their size marked them out as special—on purchasing-power terms they were the only $1 trillion economies outside the OECD, a rich world club—and so did their growth rates (see chart 2). Mr O’Neill reckoned they would, over a decade, become front-rank economies even when measured at market exchange rates, and he was right. Today they are four of the largest ten national economies in the world. The remarkable growth of emerging markets in general and the BRICs in particular transformed the global economy in many ways, some wrenching. Commodity prices soared and the cost of manufactures and labour sank. Global poverty rates tumbled. Gaping economic imbalances fuelled an era of financial vulnerability and laid the groundwork for global crisis. A growing and vastly more accessible pool of labour in emerging economies played a part in both wage stagnation and rising income inequality in rich ones. The shift towards the emerging economies will continue. But its most tumultuous phase seems to have more or less reached its end. Growth rates in all the BRICs have dropped. The nature of their growth is in the process of changing, too, and its new mode will have fewer direct effects on the rest of the world. The likelihood of growth in other emerging economies having an effect in the near future comparable to that of the BRICs in the recent past is low; they do not have the potential for catch-up the BRICs had in the 1990s and 2000s. And the BRICs’ growth has changed the rest of the world economy in ways that will dampen the disruptive effects of any similar surge in the future. The emerging giants will grow larger, and their ranks will swell; but their tread will no longer shake the Earth as once it did. The great return The BRIC era arrived at the end of a century in which global living standards had diverged remarkably. Towards the end of the 19th century America’s economy overtook China’s to become the largest on the planet. By 1992 China and India—home to 38% of the world’s population—were producing just 7% of the world’s output, while six rich countries which accounted for just 12% of the world’s population produced half of it. In 1890 an average American was about six times better off than the average Chinese or Indian. By the early 1990s he was doing 25 times better. There followed what Mr Subramanian and Mr Kessler call “convergence with a vengeance”. China’s pivot towards liberalisation and global markets came at a propitious time in terms of politics, business and technology. Rich economies were feeling relatively relaxed about globalisation and current-account deficits. Bill Clinton’s America, booming and confident, was little troubled by the growth of Chinese industry or by offshoring jobs to India. And the technology and managerial nous necessary to assemble and maintain complex supply chains were coming into their own, allowing firms to spread their operations between countries and across oceans. The tumbling costs of shipping and communication sparked what Richard Baldwin, an economist at the Graduate Institute in Geneva, calls globalisation’s “second unbundling” (the first was the simple ability to provide consumers in one place with goods from another). As longer supply chains infiltrated and connected places with large and fast-growing working-age populations, enormous quantities of cheap new labour became accessible. According to figures from the McKinsey Global Institute, a think-tank, advanced economies added about 160m non-farm jobs between 1980 and 2010. Emerging economies added 900m. Riding the whirlwind The fruits of this cheap labour were huge steps forward in global trade. Merchandise exports soared from 16% of global GDP in the mid-1990s to 27% in 2008. The Chinese share of global exports topped 11%, with trade accounting for more than half of the country’s GDP. Mr Subramanian and Mr Kessler see China as the first “mega-trader” to grace the world stage since Britain’s imperial heyday. The growth in trade was matched by a growth in demand for commodities as China and the nations supplying it soaked up energy and raw materials such as iron ore, copper and lead (see chart 3). Prices surged, generating a bonanza for the emerging world’s commodity producers and contributing to a broad-based boom, to the great benefit both of fellow-BRICs Russia and Brazil and of smaller economies, including many in Africa. From 1993 to 2007 China averaged growth of 10.5% a year. India, with less reliance on trade, managed an average of 6.5%, more than twice America’s average growth rate. The two countries’ combined share of global output more than doubled to nearly 16%. Global financial imbalances ballooned. From 1999 advanced economies ran a current-account deficit which peaked at nearly 1.2% of rich-world GDP in 2006. Emerging economies’ combined current-account surplus peaked in the same year at 4.9% of GDP. Foreign-exchange interventions made the export surge doubly tricky to manage. After the financial crises of the late 1990s many emerging economies began accumulating dollar reserves to protect themselves against being caught short by big foreign-exchange outflows. Building up reserves helped the growing economies to hold exchange rates below the levels they might otherwise attain, keeping exports relatively cheap. China was a particularly enthusiastic reserve accumulator, and now sits atop a $3.5 trillion hoard, more or less all of it piled up since 2000. All told the BRICs have reserves of about $4.6 trillion. This reserve accumulation contributed to a global savings glut, and the resulting low interest rates encouraged heavy public and private borrowing in the rich world. Some reckon currency manipulation also repressed consumption in emerging markets, so that their exports to big advanced economies like America were not offset by a corresponding rise in consumption of imports. Daron Acemoglu, David Autor and Brendan Price of the Massachusetts Institute of Technology, David Dorn, of Madrid’s Centre for Monetary and Financial Studies, and Gordon Hanson, of the University of California, San Diego, argue that the “sag” in employment growth in America in the 2000s can be blamed in large part on the country’s unreciprocated taste for Chinese imports. Not all the effects of the BRICs’ growth were to be felt as promptly; some, for good and ill, will not be experienced in full measure for decades. Bigger economies mean bigger armies. They also mean flourishing universities: in 2030 China may have 50m more science and engineering graduates in its workforce than it did in 2010. And their growth has entailed an historic rise in greenhouse-gas emissions, now a third higher than they were in 1997, as well as heaps of local environmental damage. China is now the world’s largest carbon-dioxide emitter; America is the only non-BRIC in the top four. But though the impact of the recent rapid change will be felt far into the future, the change itself is moderating. Various signs suggest that an important inflection point has been reached. The emerging world will continue to grow in economic importance. But the pace at which it does so will slow as the BRICs put the days of their steepest ascent behind them. Take a deep breath The emerging economies’ share of output is no longer rising as fast as it did in the 2000s. In 2009 the year-on-year increase in that share was almost one and a half percentage points (see chart 1). Now it is back below one percentage point. This tallies with a striking slowdown in BRIC growth rates. In 2007 China’s economy expanded by an eye-popping 14.2%. India managed 10.1% growth, Russia 8.5%, and Brazil 6.1%. The IMF now reckons China will grow by just 7.8% in 2013, India by 5.6%, and Russia and Brazil by 2.5%. Unsurprisingly, this means that the BRIC economies are contributing less to global growth. In 2008 they accounted for two-thirds of world GDP growth. In 2011 they accounted for half of it, in 2012 a bit less than that. The IMF sees them staying at about that level for the next five years. Goldman Sachs predicts that, based on an analysis of fundamentals, the BRICs share will decline further over the long term. Other emerging markets will pick up some of the slack. Yet those markets are not expected to add enough to prevent a general easing of the pace of world growth (see chart 4). After two decades of rapid growth the most populous emerging economies have taken advantage of most of the easiest steps on the ladder to prosperity. An illustration: in 1997 none of the fastest 100 supercomputers in the world was to be found in a BRIC. Now six computers in China grace that list, as do six from other BRICs. And one of them tops it: Tianhe-2, designed and built at the National University of Defence Technology in Changsha, crunches numbers faster than any other device in the world. That is an extraordinary achievement, and the potential for growth as such technology spreads wider is clear. But it is also an indication that the country’s growth will not now be as quick as it used to be. Bleeding-edge innovation is harder than catching up. Other countries have impressive growth potential. Goldman Sachs touts a list of the “Next 11” which includes Bangladesh, Indonesia, Mexico, Nigeria and Turkey. But there are various reasons to think that this N11 cannot have an impact on the same scale as that of the BRICs. The first is that these economies are smaller. The N11 has a population of just over 1.3 billion. That is less than half that of the BRICs. The N11 is barely more populous than India, which is the BRIC with the greatest possibility for growth still ahead of it, if only it could reform itself enough to put more of those people to work. The second is that the N11 is richer now than the BRICs were back in the day. Economists reckon that the bigger the gap between a country’s output per person and that of the technological leader, the faster the economy is capable of growing. Weighted by population, the average per person output of the N11 is already 14% of that in America. When the BRIC economies began their economic surge their population-weighted output per person was just 7% of America’s. It is a measure of the continued potential for growth in India, where population has risen fast, that its figure today is still just 8%. It is not just the N11. The world as a whole has less catch-up potential than it used to. Its most populous countries are no longer all that poor and its poor countries are no longer all that populous. Two decades of BRIC-led growth mean that there are far fewer people earning very little. In 1993 about half the world lived at below 5% of American GDP per person, according to an analysis of IMF figures by The Economist (see chart 5). In 2012 the equivalent figure was 18% of American GDP per person. The third reason that the performance of the BRICs cannot be repeated is the very success of that performance. The world economy is much larger than it used to be: twice as big in real terms as it was in 1992, according to IMF figures. That means that emerging markets—whether the BRIC economies or the N11 or both—must deliver larger absolute increases in output to generate a marginal economic boost matching that seen in the 1990s and 2000s. The same maths apply to labour markets. New additions to the workforce will henceforward have a harder time disrupting the global economy. The billion jobs that the McKinsey Global Institute sees as having been added to non-farm employment from 1980 to 2010 boosted it by 115%. If the world were to put on another billion jobs from 2010 to 2040 that would represent just a 51% increase in world employment: impressive but much less dramatic. Making the best of it The reality may be a good bit less dramatic still. Some developing economies will add hundreds of millions of new workers in coming years. But some of that contribution will be offset by the ageing of populations elsewhere. China’s working-age population began shrinking in 2012. India, with more favourable demographics, is struggling to create enough employment; it added no net new jobs between 2004-05 and 2009-10, according to a recent survey. Big demographic booms are brewing elsewhere: Nigeria, for example, may be more populous than America in less than 40 years. But such growth will have its peak impact only decades from now. The way that the world economy reacted to the rise of the BRICs has also made it less prone to further shocks of a similar sort. Markets have responded to soaring commodity demand and prices. Firms and households are saving on inputs; businesses and governments have rushed to develop new resources, as seen in the shale oil-and-gas bonanza now unfolding in North America. Currency adjustments have narrowed deficits. The Chinese yuan has appreciated by roughly 35% against the dollar since 2005. Emerging-world reserve accumulation has diminished along with current-account imbalances. Since 2011 Chinese reserves have been mostly flat. Indeed in recent years reserve outflows have been a problem for some emerging markets. An easing in the stride of the emerging-market giants will be cause for anxiety first and foremost for the residents of those countries, where the growth that has delivered higher living standards has also whetted appetites for more. The transition need not be painful. In China a slower overall growth rate may feel fine to workers if the share of consumption in the economy rises relative to investment. In India, though, the picture is not so pretty. A rising tide may lift all boats; a falling one reveals who has no bathing trunks on. Weaker conditions could place pressure on financial systems in emerging economies about which investors begin to worry. If central banks fail to stem capital outflows then slower growth could give way to outright contraction. Many countries will find that commodities no longer provide a crutch. David Jacks, an economist at Simon Fraser University in British Columbia who studies long-run commodity-price movements, reckons that prices may have already begun a sustained period of below-trend price growth. Internationally, lower growth could focus leaders on increased co-operation and a new push for liberalisation. The BRIC era took place in the absence of major new trade liberalisation (though China’s entry into the World Trade Organisation was an important landmark); with trade growing so healthily anyway, the rewards were harder to appreciate. A slowdown could bring new focus to global trade talks. A deal that addressed non-tariff trade barriers, and especially those on trade in services, could yield big benefits. There is a risk, though, that matters may move in the opposite direction. The rich world is more cautious about globalisation than it was a decade or two ago, and more interested in maintaining its export competitiveness. A century ago the world’s last great era of trade integration ended with a war and ushered in a generation of economic nationalism and international conflict. The recent proliferation of regional trade agreements could signal a move towards fractionalisation of the global economy. And slowed growth in the now-large BRICs could lead to the sort of internal tensions that countries can displace by picking external fights. Whether or not the world can build on a remarkable era of growth will depend in large part on whether the new giants tread a path towards greater global co-operation—or stumble, fall and, in the worst case, fight. From the print edition: Briefing Continue reading
California’s Market for Hard-to-Verify Carbon Offsets Could Let Industry Pollute as Usual
By Maureen Nandini Mitra and Michael Stoll San Francisco Public Press Earth Island Journal — Jul 8 2013 – 2:21pm Timber, dairy and chemical companies line up to sell credits to biggest emitters One hot day this spring John Buckley scrambled up a dusty slope of a patch of deforested land in the middle of California’s Stanislaus National Forest in the Sierra Nevada, five miles west of Yosemite National Park, and surveyed the bleak landscape: 20 acres of blackened tree stumps and the shriveled remains of undergrowth. On neighboring ridges, similar brown expanses dotted the green forest canopy. “This,” he said, spreading his arms wide, “is resource management.” The denuded clearing is on a tract of private forestland owned by timber giant Sierra Pacific Industries that is close to being approved as a sort of carbon bank under California’s new cap-and-trade scheme. It will soon grow into a plantation of mostly Douglas fir, ponderosa pine and cedar. Based on calculations of how much carbon the new and old trees in this forest area will remove from the atmosphere, the timber giant will soon be able to sell carbon credits, which regulators call “offsets,” to the largest California polluters so they can compensate for their greenhouse gas emissions. Looking to make a profit from their environmental practices, companies in forestry and other industries are rushing to meet the demand. Buckley, an environmental activist from Tuolumne County, is dismayed that projects like these — that involve clearing out old, diverse forests and replanting the area with a handful of quick-growing timber varieties — are being considered as a means to enable California industries to emit more pollutants into the air. Many environmentalists say that because it is notoriously difficult to prove that such projects actually reduce the state’s overall carbon footprint, California should proceed slowly in approving a vast expansion of the cap-and-trade market. The plan is to start the Compliance Offset Program this summer. Sellers include some of the largest forestland owners in the U.S., dairy farms and companies that neutralize greenhouse effect-producing refrigerants. The program might also expand to other activities, such as methane capture from mining and rice farming. Proponents say that by providing incentives to voluntarily reduce emissions and use new technology, the offset program could help California meet its legal requirement, set in 2006, to reduce its carbon footprint from all sources by about 16 percent by 2020, and even more in later years. But critics call offsets a loophole that could undermine an effective cap-and-trade system. They say pledges of reductions that are not required by law often cannot be considered real, since companies might have made them anyway without the extra money from selling offsets. Left unchecked, the critics warn, poorly measured offsets could lead to an overall increase in California’s emissions. Depending on the future price of offsets, the addition of these credits from around the country and possibly abroad could swamp the existing regulated emissions market. Independent environmental economists now estimate that offsets could grow to more than 200 million tons of carbon dioxide or the equivalent in other greenhouse gases — representing at least 50 percent of the program. And under certain supply-and-demand conditions, state trading rules could allow offsets to cover 100 percent of the reductions required under cap-and-trade. In those circumstances, no power plant, cement factory or refinery would have to cut its emissions to comply with the carbon cap. Offsets “create the illusion that we are doing something to mitigate climate change,” said Kathleen McAfee, a professor of international relations at San Francisco State University, who studies global markets for environmental services. Instead, she said, the government should impose strict regulations on fossil fuel extraction and invest in renewable energy technology. Dave Clegern, a spokesman for the California Air Resources Board, the main state agency writing regulations to fight global warming, argued that carbon reductions can take many forms and should not be limited to one accounting method. He said several other regulatory programs in the state also aimed at lowering greenhouse gas emissions cover many of the same sectors regulated by cap-and-trade. “Frankly, as long as the emissions are reduced we are achieving our goals,” Clegern said. “Whether that’s done with offsets, whether that’s done with allowances, whether that’s done with reductions, there obviously would have to be some reduction in there to achieve this.” BILLIONS OF DOLLARS The cap-and-trade program, which went into effect in January, covers about 80 percent of the state’s greenhouse gas emissions, those emitted by the biggest electricity, industrial and fuel facilities. It sets an annual limit on total emissions that California’s largest polluters can release. The total supply of pollution allowances falls each year, helping the state reach emissions targets established by the landmark Global Warming Solutions Act of 2006. The offsets program allows regulated industries to use offsets to cover up to 8 percent of their carbon emissions. But analysts say that based on the rules, that figure could exceed the reductions required statewide for the entire cap-and-trade program. That means offsets — until now offered mostly as voluntary credits to companies hoping to burnish their green image — could soon become a major part of California’s lucrative mandatory program. Experts estimate that the higher price for California’s state-issued carbon allowances, currently more than $14 per metric ton, make the use of cheaper offsets, projected to bring costs down to about $10, especially attractive. If California industries do require at least 200 million offsets over the next eight years it would make them worth more than $2 billion on the market. The high financial stakes make accurate measurement of offsets a key concern. Cap-and-trade sets carbon allowance targets based on gases detected from smokestacks at the state’s 350 largest polluting companies at about 600 facilities. By contrast, offsets are calculated as comparisons with predicted future “business-as-usual” levels of pollution. This modeling requires teams of scientists and economists to anticipate choices that companies would have made had the offset payments not been available. And as any economist will admit, predicting the future is hard. Even when emissions cuts are proved to prevent the business-as-usual growth scenario, the exact amount of carbon dioxide stored or released comes with great scientific uncertainty. Supporters of offsets concede that it is hard to verify whether the offsets are valid. The use of offsets is also associated with unintended consequences such as increases in other pollutants locally, loss of biodiversity in timber plantations and reduced incentives to invest in local mitigation technologies. That is why some scientists and environmental advocates say cap-and-trade should not incorporate offsets. “The integrity of the offsets is the integrity of the cap-and-trade program, because of how strongly the program is relying on them,” said Brian Nowicki, California climate policy director at the Center for Biological Diversity, an environmental group headquartered in Tucson, Ariz. FOGGY FUTURE Offsets preapproved for California’s cap-and-trade program are thus far restricted to U.S.-based projects in four sectors — industrial forestry, urban forestry, dairy digesters and destruction of ozone-depleting substances. The Air Resources Board has developed elaborate protocols for each. The first round of credits, totaling 6 million metric tons of carbon from 45 offset projects, are expected to go on sale after a final staff review, according to a Reuters Point Carbon analysis. The board is considering adding offsets from other domestic sectors, such as methane capture from rice plantations and mines. It will expand the program internationally, linking up with Quebec’s offset program in 2014. It is also considering including offsets from a controversial program called Reduced Emissions from Deforestation and Degradation, or REDD, that offers carbon credits for preserving forests and plantations in Mexico, Colombia and other developing countries. One obvious benefit of offsets for polluters is lower-cost mitigation. Since global warming can be addressed by reducing greenhouse gases anywhere, offsets proponents say innovative projects out of state or in other countries can achieve reductions more cheaply. “You want to make the program as cost-effective as possible to reduce the economic burden of the program for California consumers,” said Gary Gero, president of Climate Action Reserve, a Los Angeles-based organization that helped California design the four offset protocols and one of two groups screening companies seeking California credits. He said offsets offer businesses now outside cap-and-trade an incentive to curb emissions through innovation. Critics say this reasoning ignores myriad uncertainties that beset offsets, including measurement, verification and environmental justice concerns. The conundrum facing climate offsets policy is the debate over “additionality” — whether emissions reductions would have been made anyway. Carbon-saving technologies include installing methane-capture devices at large dairy farms or keeping trees standing for 100 years instead of 50. But there is no counterfactual world against which to measure which reductions are real. In many instances they must accept offset developers at their word. Economist David Roland-Holst at the University of California, Berkeley, said background changes in consumer demand for products and services with a lower carbon footprint make additionality difficult to determine. “Rising energy prices and a rapidly increasing public desire for environmental quality will drive emerging markets toward pollution mitigation,” he wrote in a recent paper on sustainable economics. But Roland-Holst notes that relying on offsets also produces “unwelcome secondary effects.” If industries meet the majority of their cap-and-trade requirements through out-of-state offsets, local air pollution in California’s industrial areas would worsen. In June 2012, two environmental groups, Citizens Climate Lobby and Our Children’s Earth Foundation, sued the state. They said offsets “credit emission reductions that would occur or have already occurred without the incentive of offset credit payments,” resulting in “false accounting of progress.” They sought a court order prohibiting offsets trading. But a San Francisco Superior Court judge rejected the petition in January, saying the judiciary could not rewrite the statute. Our Children’s Earth Foundation filed an appeal on May 24. A hearing date has not been set. State officials say that they have developed stringent standards for additionality, and that offsets are subject to continuous monitoring. If the state finds flawed credits, they will be invalidated. “There are third-party verifiers who have been certified by us and there are more of them being trained,” said Air Resources Board spokesman Clegern, adding that independent experts will do on-site inspections. “If ARB finds malfeasance by any party that developed or verified the offset,” he said, the state “can take enforcement action on that party.” LARGER THAN THEY SEEM Steven Cliff, manager of the cap-and-trade program at the Air Resources Board, said it was “premature” to make assumptions about the scope of the offsets program. Offsets, he said, “can account for a pretty high portion of overall reductions. But under the most likely scenario, offsets would cover no more than 41 percent of the reductions.” Cliff based his assessment on a 2011 white paper by Adam Diamant, an energy and environment analyst at the nonpartisan, nonprofit Electric Power Research Institute. More recent assessments by Diamant and at least one other independent researcher, Barbara Haya, a fellow at the Stanford Environmental Law Clinic, show that offsets could represent a big chunk of the allowed emissions from industry — anywhere from 53 percent to 224 percent of required carbon reductions, measured cumulatively through the year 2020. Diamant said the range of projections is so wide because the calculations depend on several variables. The first is the overall cap. The state plans to block off a small portion of credits each year to ensure a steady price for allowances. This reduces California’s emissions limit. But if demand for allowances is high, the state will release reserves starting at $40 per metric ton. Other complementary state policies aimed at reducing greenhouse gases might further reduce emissions. These include energy efficiency, mandates on electric companies to produce renewable energy, and the low-carbon fuel standard for vehicles. That would ease the reductions requirements under cap-and-trade. If reserve allowances were untouched and complementary policies achieved their targets, total allowed offsets could add up to more than twice the reductions needed to make cap-and-trade work. Achieving reductions from complementary programs achieves the same overall environmental goals, Diamant said. “So it’s not like nothing is happening.” But critics say that if industries can buy offsets to meet all their reductions requirements in the program’s first eight years, technological innovation could stagnate. They say it also deprives California of the environmental, economic and public health benefits that Gov. Arnold Schwarzenegger promised when the global warming law was passed in 2006. “The more offsets you allow to be used,” said Nowicki of the Center for Biological Diversity, “the more you put the program at risk.” FOREST OR TREE FARM? The risk is most evident in the case of forest offsets, which market analysts predict is the sector where the bulk of California offsets will be generated. “Forestry offers the greatest opportunity, but it is also by far the most complicated and challenging offset protocol,” said Belinda Morris, California director of the American Carbon Registry, another agency certifying offsets for the state. Environmentalists say the state’s forest protocol, which rewards carbon sequestration through reforestation, forest management and avoided conversion of forests to other uses, contains several fundamental flaws. The rules do not account for “critical carbon pools” on the forest floor. It also inadequately accounts for soil carbon released during logging, said Nowicki of the Center for Biological Diversity. The protocol only accounts for soil disturbance through “deep ripping, furrowing or plowing” on more than 25 percent of a project area, which can cover several thousand acres. The U.S. Department of Energy’s guidelines for voluntary greenhouse gas reporting estimates that one acre of typical California mixed-conifer forest contains 60 percent more carbon collectively stored in soil (19.2 tons), litter and duff (12.6 tons), down deadwood (2.6 tons), understory (0.9 tons) and standing deadwood (2.5 tons) than in live trees (25.4 tons). Nowicki said even conservative estimates like these show that if logging takes place on smaller parcels, soil disturbance could dramatically change the overall carbon storage capacity of the area: “The worst case would be that the project gets carbon credits in a year that they should actually show a carbon deficit if they had fully accounted for the soil carbon emissions.” California’s forest protocol is also the first in the world to credit durable wood products, including building materials and furniture, that lock carbon out of the atmosphere for a long time. The Air Resources Board says objections to state rules are premature because none of the proposed offsets have yet been approved for the market. LOBBYING REWARDS That the forest protocol allows timber companies to sell offsets by replanting trees in areas they clear-cut is among the most controversial of the state rules. This is called “even-aged management” — a stand of trees all planted at the same time, for future harvesting. Landowners may clear-cut up to 40 acres at once, as long as they show that tree growth elsewhere in the project area stores more carbon than is lost. But environmental groups contend that making even-aged management more profitable undermines less damaging alternative carbon storage options. Clear-cutting degrades forest ecosystems, water quality and wildlife diversity, scientists say. Initial drafts of the forest protocol disallowed clear-cutting. But around 2007, the timber industry began to seek more favorable rules. Some of the most aggressive lobbying came from Sierra Pacific Industries, California’s wealthiest timber company and largest private landowner. It made sure to regularly attend offset rule-making workshops hosted by Climate Action Reserve. The company, which owns nearly 1.9 million acres of timberland in California and Washington, has long sparred with environmentalists who oppose its clear-cutting practices. A recent report by the Center for Investigative Reporting found that between 2007 and 2008 Sierra Pacific Industries hired a Sacramento lobbying firm, California Strategies, for $37,500, to present its case. In September 2007, the company sent a letter to the Air Resources Board requesting rule changes to permit even-aged management and storage of carbon in wood products. The board accepted most of the recommendations. But the decision to include clear-cutting led to a schism among environmentalists. Nearly 50 groups, including the Sierra Club, Friends of the Earth, Rainforest Action Network and Buckley’s Central Sierra Environmental Resource Center, urged the Air Resources Board to exclude offsets for clear-cutting. But other big green groups, such as the Nature Conservancy, the Environmental Defense Fund and the Pacific Land Trust supported the idea. “It’s a sticky situation, but it’s probably the best way to get landowners to follow better forest management practices,” said Paul Mason, vice president of policy and incentives at the Pacific Land Trust. Mark Pawlicki, director of corporate affairs and sustainability at Sierra Pacific Industries, said the company’s influence in framing the forestry protocol was completely aboveboard: “It was an open and public process, and there were many diverse groups involved. We just participated in the process like anyone else in the public would.” Rajinder Sahota, the Air Resources Board’s offsets policy manager, dismissed criticisms that carbon accounting was imprecise and that the standards for additionality were lacking. “With an approved forest project you can have situations where you are able to harvest within a geographical boundary and also sequester carbon at the same time,” Sahota said. WILDLIFE VS. CARBON Sierra Pacific Industries is now preparing four offset project areas on its land totaling 80,000 acres for approval by the Air Resources Board. This includes the clear-cut area near Yosemite that Buckley surveyed. The company owns about 130,000 acres of forestland in the area. Viewed from an airplane, its land resembles a patchwork quilt of green forests and brown clear-cut land that stretches for miles. Pawlicki said improved land management practices in the project areas would remove an additional 5.6 million tons of carbon from the air over 40 years. That would yield the Redding-based company $56 million at current offset prices. For Buckley, who finds clear signals of climate change in the Sierra Nevada’s rapidly receding snow line, this is worrisome news. “It is not the loss of a 20-acre block of forest that hurts any particular species, because most wildlife can move to another area when bulldozers and chainsaws destroy a block of forests,” he said. Aggressive logging and replanting, he explained, leads to “a loss of the biggest trees — most of the oaks, dogwoods, maples and alders, and most of the plant diversity. It wipes out blocks of habitat, one after another, that are important shelter and food sources for wildlife species that depend upon mature shady forest conditions.” Heavy logging has been associated with the disappearance of the American marten and Pacific fisher from that corner of the Sierra Nevada, and has affected populations of the spotted owl, the northern goshawk, the pileated woodpecker and the northern flying squirrel. “To somehow claim that this will reduce greenhouse gas emissions and have no impact on the environment,” Buckley said, “is ridiculous.” This story is part of a special report on California’s cap-and-trade program, in collaboration with Earth Island Journal and Bay Nature magazine. It was made possible by the Fund for Investigative Journalism. – See more at: http://sfpublicpress.org/news/2013-07/californias-market-for-hard-to-verify-carbon-offsets-could-let-industry-pollute-as-usual#sthash.j0HTp5dx.dpuf Continue reading
Urban Edge Apartments | Apartment for sale in Brisbane Australia – LJ Hooker Dubai
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