A few weeks ago we were part of the foundation of the Zurich Carbon Market Association (Zurich CMA), an association bringing together researchers and people from private companies based in the Zurich region who share an interest in the development of market mechanisms for climate change mitigation.
Well, as we learnt from the initial Zurich CMA workshop “Carbon markets on the road from Copenhagen to Cancun” on Monday, 15 March, at ETH Zurich, some people even believe market mechanism should be applied to climate change adaptation in the future.
I am rather sceptical: Don’t we already have a fully developed aid system for official development assistance, and could’t this do the job for adaptation in developing countries? Adaptation projects have been part of aid projects for a long time (sometimes without being named as such), and quite some expertise has been developed in aid agencies on how to deal with tricky issues such as bad governance and corruption which may hinder the success of such activities. There is also quite some evidence that aid cannot be handled through a normal market.
Surely, some more competition might be very useful even in the context of aid delivery. But on the other hand, the problem which currently seems to preoccupy those involved in the aid sector seems to be fragmentation – and the transaction costs implied – much more than the lack of competition. Adding new players for the development and implementation of adaptation projects would increase this problem even more.
The advantage of using the existing aid infrastructure would also be that we would not need to define distinct adaptation activities. Screening through a new project-based AidData base (PLAID) which will soon be made available to the public, it seems that it is extremely difficult to truly make this distinction. Moreover, if the idea is to help people in developing countries to overcome problems induced by emissions in the North, it may sometimes be more efficient to resort to a “normal” development activity (e.g. income generation through new infrastructure, a market, or the provision of microfinance) than through a typical adaptation project (like the building of a dam or the introduction of adjusted crops).
Of course, in order to ensure financial additionality, funding provided to compensate for climate related damage in the context of a post-Kyoto agreement would need to be earmarked separately. But notifying what pool of funding they belong to is a different story from generating a whole new system for allocation, monitoring etc.
There is certainly more discussion required on the issue.
Another possibly even more controversial issue discussed on the workshop was forestry carbon sequestration and double counting – the Swiss conundrum. Carbon markets need high quality approaches if public trust in these innovative approaches is to be guaranteed. The Swiss government has clearly stated that any sequestration of carbon by Swiss forests belongs to the government. Nevertheless, a project is developed by a Winterthur-based consultant with the Oberallmeindkorporation of the canton of Schwyz that wants to generate forestry carbon credits for the voluntary market. The developer claims that he has told his customers that these credits eventually lead to double counting, but nevertheless they are willing to buy these credits.
Does a fully transparent sale of double-counted “credits” make sense? Certainly not, if the forestry “credits” are sold on and become mixed with other credits from high quality sources. Therefore, the double-counting approach is dangerous and should not be pursued further.
There is also an easy solution to the problem: The Swiss offset provider MyClimate also carries out domestic energy projects in Switzerland whose emission reductions are eventually helping the Swiss government in reaching its Kyoto target, but they cancel real offsets, for example through projects in developing countries for each credit generated by a Swiss project. Here, the overall carbon balance is thus guaranteed. Of course, one might still wonder why they do not rather sell these developing country projects in the first place. This is what indirectly happens after all. Are those who buy the credits aware of this?
Further debates of this type will be hosted by Zurich CMA in the future. In a few days, the new organization should also get a proper website so that further information can be obtained from there. This type of a network – with a non-lobby, non-political character, but founded as a real platform for networking, knowledge sharing and outreach, is unique on a world-wide scale. It also benefits from the exceptionally high number of Zurich-based actors active in the field – who share a common interest in the evolution of sustainability focused and high-quality carbon markets.