Carbon is hot.
This was the main message of a conference on climate change and agriculture that I attended last week in Davis, California. Everyone was talking about carbon, either as carbon dioxide in the atmosphere or soil carbon below our feet. Farmers, scientists, policy-wonks, regulators, graduate students, activists and many others all had something to say about carbon. Mitigation, adaptation, sequestration, cycling, credits, services, allowances, plant productivity, scientific inquiry, data – you name it and carbon was there. By the end of the one-day event, I was soaked in carbon. Luckily, I had left my rental car back at the hotel, necessitating a long walk across campus. By the time I reached my room, I had cleared my head of carbon thoughts.
It wasn’t this way two years ago while attending a similar event in exactly the same venue. Both events were organized by the California Climate & Agriculture Network (CalCAN), which is a nonprofit dedicated to making sure sustainable ag has a seat at the carbon table in policy debates. Some years ago, the California legislature passed, and Gov. Arnold Schwarzenegger signed, a bill creating a process by which a cap-and-trade system would be established in the state. The bill then had to run a gauntlet of legal and electoral challenges, but it emerged intact. The process was completed last fall when Gov. Jerry Brown signed a bill that officially implemented a cap-and-trade market.
Last Tuesday, California held its second-ever carbon emissions auction (by which companies can buy allowances that keep their pollution levels under specific caps) and it was a big success. Not only were all credits sold – all thirteen million of them – but the price per credit was nearly $14, which was considerably higher than experts predicted. The money raised by the auction will be used by the state in a variety of ways, including paying farmers and ranchers to sequester carbon in the soil of their land. That’s the hope of CalCAN anyway, which is fighting to make sure good stewards get a piece of the carbon pie.
According to a representative of the Environmental Defense Fund, which is following this cap-and-trade business closely, the auction demonstrates that California is “a strong and viable carbon market.” Naturally, the California Chamber of Commerce disagrees – and continues to pursue a lawsuit against the state over the auction – indicating that the process is not out of the woods just yet. Still, California has the potential to become the second largest carbon marketplace on the planet, behind one set up by the European Union.
I’ll come back to cap-and-trade in a moment, but first I want to return to the conference. Despite the good news, there was a palpable sense of urgency to this gathering that I didn’t detect two years ago. For example, an organizer asked the opening panel of farmers to relate how climate change was already affecting their lives – something I don’t remember her doing before. The farmers quickly rattled off a laundry list of anxiety, from reduced water availability, increased temperatures, trouble with pollinators, and declining productivity. Audience members then pitched in with their observations – and thirty minutes later I felt pretty overwhelmed. The challenges cataloged by the speakers were serious and complex – and proliferating. I hadn’t quite realized the extent of the concern, but now I did.
But that’s why we had gathered together, and why the room was full – we were here to talk about adaptation to a rapidly changing world. Two years ago, the talk was mostly about mitigation, or how we can slow climate change with certain practices and behaviors, such as storing carbon in the soil. Two years ago, presentations by speakers, and conservations during the breaks, still largely employed the future tense when discussing climate effects. Changes were still abstract – time was still on our side. Not anymore.
Take stone fruits, for example, which include apricots, cherries, and even walnuts. A bountiful harvest requires at least 1000 hours of ‘chilling time’ during the winter, when temperatures drop below 40 degrees. I don’t understand the biology, but apparently if fruit trees don’t achieve the proper amount of chill hours they won’t produce quality fruit. You can guess the rest – the number of warm winter nights is on the rise, and predicted to keep rising. The minimum number of chill hours were barely achieved this winter, said a presenter. The stone fruit industry, as a result, is beginning to feel a sense of panic.
They aren’t the only ones – which is why there was so much talk about carbon: how to repair a broken carbon cycle, how to improve the carbon content of the soil, how to get farmers paid for carbon credits, and so on. It was both fascinating to hear and chilling to contemplate, pun intended.
Here’s a picture of good-looking apricots:
If carbon is hot, I’m not so certain about the carbon marketplace.
In Europe, the price of carbon has collapsed, prompting a crisis that still unfolding as I write this. In January, the trading price for a tonne (European) of carbon fell below $6 (E5) for the first time, having fallen 70% in value since mid-2011. In business circles this is apparently called a “rout” and it signals a collapse in market confidence as well as market price – all bad stuff for a market that has been operating for more than a decade, with a ripple effect that is being felt around the world.
The reasons for the collapse in Europe include weak demand, a still-stuttering economy, a glut of already purchased carbon credits, and – most ominously – a slackening of will among European governments to enforce a reduction of fossil fuel use. In fact, fossil fuel consumption is on the rise in Europe, and there are plans to build new, big coal-fired electrical generating plants. A decision by Germany recently to phase out nuclear power is apparently influencing the return to carbon-based power generation, despite the rapid rise in renewable energy production in a nation known for its gray, cloudy skies.
It gets worse. According to a news report, the Swiss banking giant UBS warned last fall that European consumers had spent $287 billion on the carbon market “for almost zero impact.” Had that money been spent directly to replace the European Union’s dirtiest power plants, UBS said, emissions could have been reduced by 43 per cent by now.
The collapse of the European market is also putting a great deal of pressure on the other new carbon marketplace, in Australia, where the government promised a price of $23 a tonne to buyers and sellers. Moreover, this price is supposed to rise to $37 in just a few years – a promise that is beginning to look shaky. This uneasy situation is fueling political opponents who have vowed to repeal Australia’s carbon tax the minute they get their hands on the reins of government, which might happen this fall.
Watching from the sidelines is China, which is said to be considering a cap-and-trade marketplace of its own. As the Number One carbon polluter on the planet, what the Chinese do – or don’t do – has a tremendous amount of significance for all of us. Of course, another player watching the developments in Europe nervously is California. The success of its recent carbon auction could quickly be reversed if the global market for carbon credits collapses.
Mindful of these implications, the European Parliament is weighing a critical vote on whether to salvage the EU’s carbon market with emergency measures. Mark Nicholls, editor of Environmental Finance Magazine, says a great deal is riding on the vote. “There’s lots of interest in emissions trading as a solution to climate change,” he said, “but if the EU’s system is seen to be collapsing, it could damage the credibility of the approach.”
Complicating the issue is the lack of an international agreement on greenhouse gas emission reduction goals, which many in Europe had assumed would be in place by now. An agreement, in fact, was key to the creation of the EU market in the first place (and possibly California’s as well). By having definite emission targets, markets would know the necessary goals to be achieved and could have responded accordingly. But no agreement has been achieved, of course – and none looms on the horizon. This has roiled the carbon marketplace, helping to drive down the price of carbon to crisis levels.
It’s all very complicated. Still, California is surging ahead and so far the signals appear to be good ones. What happens over the course of the next year, however, will be crucial, and not just to California.
In the meantime, let’s keep talking carbon!
Here’s a picture of solar panels at the Vatican: