Beijing Looks to Market to Fix Pollution from The Wall Street Journal. The interpretation as an anti-pollution policy is curious. The announcement, released from the Third Plenum of the Chinese Communist Party’s (CCP) 18th Congress, was a typically vague CCP utterance, announcing that markets will have a stronger role in allocating water, electricity, oil, and natural gas. Chinese natural gas, oil, and electricity sell at prices well below international averages. Higher natural gas prices would actually have a negative impact on pollution in China, as gas burners clearn than coal, and has become a choice fuel for cities like Beijing that are facing gross limits on coal consumption imposed as a means of pollution control. The policy will also have no impact on pollution pricing through carbon tax and cap and trade schemes. Those are separate policies, and where they do exist in China, their prices are still too low. China’s carbon taxes of US$1.6 per ton of coal will not create a differential price with gas. While some trades in Shenzhen’s market have closed at over $US 11 per ton, these have been largely speculative trades in a low-liquidity environment that shouldn’t be taken as indicative of a national price. Direct carbon pricing, of course, is not the only way to curb polluting. Ending subsidized electricity prices to energy users in theory could cut waste. However, the Party was clear in its announcement on the continuing centrality of state owned enterprises, and they are unlikely to lose their influence with the government any time soon. Moreover, energy efficiency is already on the negative end of the mitigation cost curve where incremental price increases are unlikely to have significant, if any, effect. Water pricing is a different thing than pollution discharge pricing and will not have any salutary impact on the 70% of China’s water supply that is contaminated. China’s pollution controls will continue to advance primarily by command and control, where they advance at all.
‘Signature’ achievement on forests at UN climate talks from BBC. REDD+ had two small wins at COP 19—the commitment of an extra US$ 280 million of funding for the World Bank’s BioCarbon Fund and the formal adoption of REDD+ through the COP. Formal adoption will pave the way for standardized criteria for baseline measurement and pay for performance financing. Innovations such as publically available data for deforestation detection from the LandSAT and MODUS satellites has greatly improved the odds that pay for performance for forestry can be verifiable and accurate. However, the adoption REDD+ by the COP 19 does not and cannot provide what the forests most critically need—a sustainable source of conservation finance. This, of course, cannot be provided without binding targets, and the COP cannot achieve binding targets. What the COP can achieve, however, is the creation of new institutions. The Warsaw COP REDD+ finance texts reaffirmed the Green Carbon Fund as the administration of pay for performance mechanisms for forestry, but the BioCarbon Fund will administer the $US 280 million dollar commitments made at the same meeting. This intuitional proliferation and redundancy is, unfortunately, typical of the UNFCCC process. For more thoughts on this, see Sindicatum CEO Assad Razzouk’s recent article, Why We Should Kill the Green Carbon Fund.