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Fair trade carbon trading
Crowded bus station in Kampala. The challenge facing Uganda, and other African nations, is to make carbon trading work effectively and fairly
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Fair trade carbon credits: will certification benefit people and planet?

Adam Corner

3rd May, 2011

In Uganda, as in the rest of the world, carbon trading is a controversial topic. But could the concept of fair trade carbon credits revolutionise the sector, or is it just a distraction from the bigger problems with carbon markets? Adam Corner investigates

In the debate about how best to reduce global carbon emissions, there is one topic that never fails to attract controversy: carbon trading. The logic is simple. Things that absorb carbon (like trees) or prevent it from being released into the atmosphere (like energy-efficient cooking stoves) can be assigned a carbon value. By putting a price on carbon, it can be traded on a market. And because nature doesn’t care where or how carbon is reduced, the market can work its magic and deliver carbon cuts in the cheapest and most effective way.

Plus, because carbon reductions are typically cheapest in developing countries, carbon trading offers a method of transferring wealth, and of encouraging sustainable development. On the surface, it sounds like a promising method of tackling climate change whilst transferring wealth to developing countries. And in Uganda – a country that has done nothing to cause climate change, but is already feeling its effects – one might expect that any additional funding for sustainable development would be welcomed with open arms.

But carbon trading is viewed with a great deal of scepticism by many environmental campaigners in Uganda, because there are serious concerns about who will be the real beneficiaries of carbon trading. As Robert Bakiika, of the Environmental Management for Livelihood Improvement in Kampala, says, there is a major risk in locking critical community resources like trees up in complex financing mechanisms:

'There is a very, very big danger in involving most of our developing countries in financial mechanisms because financial mechanisms are so tricky. And our counterparts the developed countries have designed the system. They have designed the system and we are just players in a system.'

A glance at the economic destruction wreaked by badly designed and regulated financial markets tells you all you need to know about the dangers that carbon markets pose. In 2009, the Camp for Climate Action targeted the European Climate Exchange in London (the biggest carbon trading platform in Europe). On the same day – and just down the road – G20 protestors were venting their frustrations about the role of greedy bankers and complicit politicians in the rapidly growing financial crisis.

No second chance

The slogan neatly capturing the shared sentiment of the protests was "nature doesn’t do bailouts" – with the obvious implication that if carbon markets failed to tackle climate change, a second chance would not be forthcoming.

But "false solution" or not, carbon markets are already here. As well as the voluntary markets offering guilt-ridden holiday makers the option of offsetting their flights, the EU Emissions Trading System (ETS) is about to enter its third stage. This means that there are important questions about how carbon markets function, and this is something that Bill Farmer, Director of the Uganda Carbon Bureau (UCB), has spent a lot of time thinking about.

One of the leading voices on carbon trading in East Africa, the UCB links companies and individuals who want to buy carbon credits with people in Uganda who want to sell them. This is nothing remarkable – there are many carbon consultants offering similar services around the world. What makes UCB different is that they want to see carbon credits sold in a way that benefits Ugandans, not the movers and shakers of the financial markets.

'Our aim is to support individuals and organisations to access the international carbon markets', says Farmer. 'There’s a lot of educational content in what we do – especially raising awareness about climate change, and the need for everybody to lower greenhouse gas emissions. A general lack of knowledge about the carbon markets, and little experience in negotiating carbon sales contracts, means that there is a need to support local project developers to avoid being exploited in poor sales deals.'

Market value

According to Farmer, part of the problem is the Euro-centric position of the people who control the carbon market:

'Their banking headquarters are in London, they are trying to feed these cheap low hanging African fruit carbon credits, and there are groups like us saying "no, that’s outrageous". Those credits have a market value, and they belong to the people here, and our philosophy is one of fair trade and open access.'

The UCB are trying to develop a process for putting this philosophy into action – fair trade criteria for carbon credits. But what would fair trade criteria for carbon credits look like?

UCB’s intention is to develop a system analogous to the World Fair Trade Organization standards – likely to involve increased accountability and transparency. 'Carbon revenues need to reach the actual generators of the emission reductions' says Farmer. '(Trading) should be done on a free, prior and informed basis. That’s not achieved by terse small print on a sales agreement.'

Transparency

Rob Elsworth, Policy Officer at the UK climate change and carbon trading campaign group Sandbag, has followed the development of carbon trading closely. 'The key feature of "fair" carbon trading might be a system that puts more emphasis on the sustainable development aspects of the projects generating credits, ensuring they have real transformative effects, create local employment, local health benefits and technology transfer' suggests Elsworth, adding that '"Fair" carbon trading will only be successful if transparency in the current system is dramatically increased.'

The concept of fair trade carbon credits is a fascinating one. Carbon markets‘ potential to transfer wealth, and promote sustainable development would be significantly enhanced by a system built on fair trade principles. But for commodities like coffee, cocoa and bananas, fair trade means more than just increased transparency. It means a minimum price-per-unit, and a social premium for the local community. Can carbon trading really achieve standards like these?

A Sandbag report from 2010 on the EU trading system makes an interesting observation: while public pressure to improve the ethical and environmental impacts of consumer choices has had a major impact in many sectors, similar pressure is not yet being applied to carbon markets – where environmental gain is (supposedly) the primary objective. So perhaps, through consumer pressure, the carbon trading sector can also be made to work more favourably for producers in developing countries.

How fair is fair?

But Jutta Kill, a carbon trading campaigner with FERN (a European NGO that advocates for forest protection and forest people’s rights), argues that previous attempts to improve the community benefits of carbon credit schemes have not fared well.

'Numerous certification schemes have recently been developed to address the now widely acknowledged risks that offset projects can pose to forest communities. It is doubtful that a 'fair trade' offset label would fare better than schemes like the Community Carbon Biodiversity Alliance, which appear to be failing in guaranteeing that offsets do no harm to forest peoples.'

Beyond concerns about the capacity of a labelling scheme to solve the problems associated with (unfair) carbon trading, there is also a great deal of scepticism in Uganda about the whole concept of carbon markets, and what they are designed to achieve.

Sarah Kisolo, from the Ugandan organisation RUDMEC which promotes the understanding of sustainable development issues, sees it this way: 'There’s a lot of unfairness with carbon trading. Because you can’t say "let’s continue polluting without reducing the carbon and then you in Africa plant trees to protect us"…I mean that’s not fair.'

Distractions

Perhaps the single biggest issue with carbon trading is that the challenge presented by climate change is to reduce not stabilise carbon emissions at their current rate – but carbon trading can only deliver genuine reductions if an overall cap on carbon emissions is in place (which it is not). Making carbon credits "fair" does nothing to address this major flaw in the logic of carbon trading. So might fair trade carbon credits be simply a distraction from the wider issues with carbon markets?

'No certification scheme can remedy the fact that each and every offset - irrespective of the quality of the underlying project - is a dangerous distraction from addressing the key task at hand: drastically reducing greenhouse gas emissions', says Jutta Kill.

'Offsets by definition do not reduce emissions, they only move them from one place to another. This is not just unfair, it is unjust and would seem to make a "fair trade offset" label an oxymoron.'

However, Rob Elsworth cautions that carbon credits should not be dismissed lightly. Although there are examples of carbon credits that have no sustainable development benefits whatsoever, Elsworth suggests that there are some projects that are having a genuinely positive effect on sustainable development, arguing that 'it is these examples that should be prioritised by the EU for use within its carbon market.'

The challenge for Uganda – and other developing countries that have yet to see much in the way of concrete benefits from carbon trading – is to ensure that the right type of carbon credit programmes are established. 'Africa is the continent most affected by climate change' says Bill Farmer, 'so there is a sense of equity in helping it to access carbon revenues via projects that are genuinely additional and are good for the communities in which they are located.' 

It is an admirable sentiment. But opinion is still very much divided on whether fair trade carbon credits are an innovation for Uganda, or simply a method of sweetening the bitter pill of carbon trading.

Dr Adam Corner is a Research Associate in the Understanding Risk group, School of Psychology, Cardiff University.
www.twitter.com/AJCorner

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