Category Archives: trade-environment

Hellishly Complex: taxing foreign carbon

steel cable
THE European Union wants to slash greenhouse-gas emissions to 80% below 1990 levels by 2050. It is on course to cut just half that amount. To get back on track, on February 15th, 2017 the European Parliament voted for a plan to raise the cost for firms to produce carbon. It has prompted growing calls for the bloc to tax the carbon emissions embodied in the EU’s imports. At best, such a levy will barely curb emissions. At worst, it could cause a trade war.

The EU’s latest reforms try to put up the price of carbon by cutting the emissions allowances firms are granted. They include the EU’s first border tax on carbon, levied on cement imports.

Under the EU’s reforms, steelmakers in Europe would pay up to €30 ($32) to emit a tonne of carbon, but foreign producers selling in the EU would not have to pay a cent. Putting an equivalent tax on these imports is a neat solution to this problem. “It’s wonderful in theory,” says Jean Chateau, an economist at the OECD, a club of rich countries. But “in reality it’s very problematic.”
One big problem is how to calculate the carbon in imports. This is not easy even for simple steel sheets; for items made of several bits of metal from different sources, it is hellishly complex. Some countries might even refuse to provide the information. And any method brought in for foreign firms, if not applied to local ones, could fall foul of WTO rules,..

A global carbon price would produce far greater economic benefits than border taxes, but would require closer international co-operation. A trade war is not the way to get there.

Excerpts from Steely defences: Carbon tariffs and the EU’s steel industry, Economist,  Feb. 18, at 62

Supply Chains Live: combating deforestation

366 companies, worth $2.9 trillion, have committed to eliminating deforestation from their supply chains, according to the organization Supply Change. Groups such as the Tropical Forest Alliance 2020, the Consumer Goods Forum and Banking Environment Initiative aim to help them achieve these goals.  Around 70 percent of the world’s deforestation still occurs as a result of production of palm oil, soy, beef, cocoa and other agricultural commodities. These are complex supply chains.  A global company like Cargill, for example, sources tropical palm, soy and cocoa from almost 2,000 mills and silos, relying on hundreds of thousands of farmers. Also, many products are traded on spot markets, so supply chains can change on a daily basis. Such scale and complexity make it difficult for global corporations to trace individual suppliers and root out bad actors from supply chains.

Global Forest Watch (GFW), a WRI-convened partnership that uses satellites and algorithms to track tree cover loss in near-real time, is one example. Any individual with a cell phone and internet connection can now check if an area of forest as small as a soccer penalty box was cleared anywhere in the world since 2001. GFW is already working with companies like Mars, Unilever, Cargill and Mondelēz in order to assess deforestation risks in an area of land the size of Mexico.

Other companies are also employing technological advances to track and reduce deforestation. Walmart, Carrefour and McDonalds have been working together with their main beef suppliers to map forests around farms in the Amazon in order to identify risks and implement and monitor changes. Banco do Brasil and Rabobank are mapping the locations of their clients with a mobile-based application in order to comply with local legal requirements and corporate commitments. And Trase, a web tool, publicizes companies’ soy-sourcing areas by analyzing enormous amounts of available datasets, exposing the deforestation risks in those supply chains…

[C]ompanies need to incorporate the issue into their core business strategies by monitoring deforestation consistently – the same way they would track stock markets.

With those challenges in mind, WRI and a partnership of major traders, retailers, food processors, financial institutions and NGOs are building the go-to global decision-support system for monitoring and managing land-related sustainability performance, with a focus on deforestation commitments. Early partners include Bunge, Cargill, Walmart, Carrefour, Mars, Mondelēz, the Inter-American Investment Corporation, the Nature Conservancy, Rainforest Alliance and more.  Using the platform, a company will be able to plot the location of thousands of mills, farms or municipalities; access alerts and dashboards to track issues such as tree cover loss and fires occurring in those areas; and then take action. Similarly, a bank will be able to map the evolution of deforestation risk across its whole portfolio. This is information that investors are increasingly demanding.

Excerpt from Save the Forests? There’s Now an App for That, World Resources Institute, Jan. 18, 2017

Cooling Down: The Montreal Protocol at 2016

In 1974 scientists discovered that chlorofluorocarbons (CFCs), chemicals used in refrigeration and as propellants in products such as hairsprays, release chlorine into the stratosphere as they decompose. This depletes the ozone that protects Earth from ultraviolet radiation. CFCs are also powerful greenhouse gases, which absorb solar radiation reflected back from the planet’s surface and so trap heat in the atmosphere.

Initially, the consequences for the ozone layer caused most concern. In 1985 a gaping hole in it was found above Antarctica. Two years later, leaders from around the world acted decisively. They signed a deal, the Montreal protocol, to phase out CFCs. Now ratified by 197 countries, it has prevented the equivalent of more than 135 billion tonnes of carbon-dioxide emissions, and averted complete collapse of the ozone layer by the middle of the century. Instead, by that point the ozone hole may even have closed up….

In order to manage without CFCs, firms replaced them in applications such as refrigeration, air-conditioning and insulation with man-made hydrofluorocarbons (HFCs). These substances do not deplete ozone and last in the atmosphere for just a short time. However, they still contribute hugely to global warming.  The average atmospheric lifetime for most commercially used HFCs is 15 years or less; carbon dioxide can stay in the atmosphere for more than 500 years. But, like CFCs, HFCs cause a greenhouse effect between hundreds and thousands of times as powerful as carbon dioxide while they linger. Total emissions are still relatively low, but are rising by 7-15% a year. Controlling HFC emissions has been under discussion for the past decade; America and China, the world’s two biggest polluters, made a deal on the issue in 2013, which paved the way for co-operation on limiting carbon emissions ahead of UN-sponsored climate talks in Paris last year. There leaders agreed to keep warming “well below” levels expected to be catastrophic.

Average global temperatures are already 1°C higher than in pre-industrial times….America wants action on HFCs speedy enough that emissions will peak in 2021 and then start to fall; after recent talks in Hangzhou between Mr Obama and Mr Xi China may be ready to commit to reaching that point by 2023. Brazil, Indonesia and Malaysia lean towards 2025, and India has lobbied for a later date, closer to 2030.

Some sectors firms are already preparing to move away from HFCs: in 2015 the Consumer Goods Forum, an international industry group whose members include Walmart and Tesco, began enacting a plan to phase out the substances.

A big question is what to use instead….Some HFCs commonly used in refrigeration could be replaced by others that would have an impact more than 1,000 times smaller. Honeywell, an electronics giant, already makes these less-damaging alternatives. But patents covering such substances have been a sticking point in past discussions, says Achim Steiner, until recently the head of the UN Environment Programme….Other possible replacements include isobutane, propane and propylene, all of which occur naturally. These hydrocarbons are cheap and non-toxic, and can be used as coolants without the same harm to the ozone layer….

Excerpts from The Montreal protocol: To coldly go, Economist, Sept. 24, 2016,at 58

Exotic Pets and other Illegal Markets

Animal Markets. Caged Nycticebus. image from wikipedia

It’s easy to catch grey parrots, say researchers from Birdlife, a global grouping of conservation groups. A team of hunters will use decoys or go to the birds’ water and mineral licks in the forests where flocks gather. They then throw nets over them and take dozens at a time.

Once caught they will be smuggled over borders, stuffed in tiny cages and flown illegally to Europe, South Africa, the Middle East and China, where they may fetch up to £1,000 each. All this makes the African grey probably the most highly traded bird in the world, causing their numbers to plummet… Some conservationists estimate only 1% of their historical numbers remain…

“Africa’s overall elephant population has seen the worst declines in 25 years, mainly due to poaching over the past 10 years,” the IUCN’s director-general, Inger Andersen, will say. “Their plight is truly alarming. Poaching has been the main driver of the decline, while habitat loss poses an increasingly serious, long-term threat to the species.”..

Laos has pledged to phase out its controversial tiger farms, which supply neighbouring China with bones and other parts for traditional medicine. But international animal trade inspectors will report in Johannesburg that rhinoceros horn, elephant ivory and many other wildlife specimens are being regularly smuggled through the country both to China and other south-east Asian countries. “Laos is being targeted by organised crime groups as a transit point,” says wildlife trade monitoring network Traffic.

South Africa.. has lost nearly 6,000 rhinos to poachers since 2007, including more than 700 this year. Vietnam needs to crack down on its rampant illegal rhino horn trade and China has been identified as the world’s primary destination for precious woods…..The street value of ivory is now more than £1,500 a kilogram in Beijing, and rhino horn can sell for £50,000 per kilo – far more than the price of gold or platinum – on the Chinese black market. Meanwhile rosewood can sell for many thousands of pounds a cubic metre.

Excerpt from The grey parrot and the race against Africa’s wildlife extinction, Guardian, Sept. 24, 2016

Industrial-Scale Hunting and the Verbal Bravado

Killing the Cecil lion, Zimbabwe

Starting September 25, 2016,  thousands of conservationists and top government officials will be thrashing out international trade regulations aimed at protecting different species.A booming illegal wildlife trade has put huge pressure on an existing treaty signed by more than 180 countries — the Convention on International Trade in Endangered Species (CITES)….

[T]he plight of Africa’s elephants, targeted for their tusks, generated fierce debate as the talks kicked off.Zimbabwe, Zambia, South Africa and Namibia castigated Western-based animal charities, saying they “dictated” on how African resources should be managed.”Please leave us alone, don’t just come and dictate what we should be doing,” Zambian Tourism Minister Stephen Mwansa said.Fortune Charumbira, head of Zimbabwe’s traditional chiefs, blasted “elitist NGOs who are coming from countries where there are no animals”, describing them as “domineering”.

A coalition of 29 African countries is pressing for a total halt to the ivory trade to curb poaching of elephants, but other delegates believe it would only fuel illegal trading…CITES forbids trade in elephant ivory, but Namibia and Zimbabwe have made a proposal asking for permission to sell off stockpiles to raise funds for local communities that co-exist with the animals….

CITES’ secretary general John Scanlon… warned illegal wildlife trafficking was “occurring on an industrial scale, driven by transnational organised criminal groups”.

African countries lash out at Western charities at international wildlife conservation meeting, ABC News, Sept. 24, 2016

All for the Oil: forest fires

Indonesia forest fire. image from wikipedia

…In 2015 a dry spell caused by the El Niño weather pattern made Indonesia’s forest fires  especially severe. Smoke settled over Singapore for months and even reached Cambodia, Vietnam and the Philippines. At least 2m hectares of forest were burned. Dozens of people were killed and hundreds of thousands sickened. For much of October 2015 greenhouse gases released by those fires exceeded the emissions of the entire American economy. The losses over five months of fires amounted to around 2% of the country’s GDP…[The event has labeled  the 2015 Southeast Asian haze]

Between 2001 and 2014, Indonesia lost 18.5m hectares of tree cover—an area more than twice the size of Ireland. In 2014 Indonesia overtook Brazil to become the world’s biggest deforester.

One of the reasons for those forest fires is economic. The country produces well over half the world’s palm oil, a commodity used in cooking and cosmetics, as a food additive and as a biofuel. It accounts for around 4.5% of Indonesia’s GDP, and demand is still rising. To meet it, Indonesian farmers set fires to clear forest and make way for new plantations. Often these forests grow on peatlands, which store carbon from decayed organic matter; in tropical regions these hold up to ten times as much carbon as surface soil. Draining peatlands releases all of that carbon. The peat also becomes a fuel, so it is not just felled trees that are burning but the ground itself.

But politics also plays a part. … The president declared a moratorium on peatland-development licences and called for peat forests to be restored, even as his agriculture minister pointed out that burned peatland can be used for corn and soyabean planting….

Civil-society groups have had some success. At least 188 Indonesian palm-oil companies have made some sort of sustainability pledge, including five large multinational firms that in 2014 signed the Indonesian Palm Oil Pledge (IPOP), which commits them to avoiding deforestation and planting oil palms on peatland. Together those five firms account for 80% of Indonesia’s palm-oil exports.All the same, deforestation continues. Perversely, it may even have increased temporarily, as companies cleared as much land as they could before the agreement took effect. Besides, opaque supply chains allow companies to buy palm oil from suppliers not bound by IPOP.

Forests: A world on fire, Economist Special Report on Indonesia, Feb. 27, 2016

Illegal Waste Gangs: the case of ENI

eni logo. image from wikipedia

Italian prosecutors on August 12, 2016, agreed to release energy giant ENI’s Centro Oli oil treatment plant from court-ordered seizure. The plant near the town of Viggiano in the Agri Valley in the southern Basilicata region was seized on March 31. 2016  in a probe that resulted in ex industry minister Federica Gudi resigning amid conflict-of-interest claims. It treated some 75,000 barrels of oil a day, before two tanks and a reinjection well were seized.

State-controlled ENI, nine other companies, and 60 individuals have been investigated for illegal waste trafficking in the southern Basilicata region,..The 70 subjects were notified that the investigation has ended, in Italy usually a prelude to indictment.

Prosecutors say ENI reaped millions in “unjust profits” from illegally dumping waste from its Viggiano plant. As well, the probe found irregularities in the construction of Total’s Tempa Rossa oil centre between Corleto Perticara near Potenza and Gorgoglione near Matera.
Former Total chiefs as well as various businessmen and officials were sentenced to terms ranging from two to seven years in prison on April 4, 2016.

The current suspects include former Corleto Perticara mayor Rosaria Vicino from Premier Matteo Renzi’s Democratic Party (PD), former Basilicata environmental department chief Donato Viggiano, former ENI southern region exec Ruggero Gheller, his current replacement Enrico Trovato, and five ENI staffers who have been under house arrest since March 31.
ENI earlier defended its Viggiano plant operations….

Excerpts from : Prosecutors OK freeing of ENI oil plant (2)
Basilicata plant seized in waste trafficking probe,  ANSA, Aug. 5, 2016