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Bad for the climate, risky for farmers, good for the World Bank: Andrew Steer’s proposal for “success in Durban”

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Bad for the climate, risky for farmers, good for the World Bank: Andrew Steer's proposal for success in Durban

Andrew Steer, the World Bank’s Special Envoy for Climate Change, was asked in June 2011 what he thought would make the upcoming UN climate meeting in Durban a success? His response provides a fascinating glimpse into how the world is utterly failing to deal with the coming climate catastrophe.

In his six minute reply, Steer talks about moving the Cancun Agreements forward. He mentions technology, the Green Fund, finance, adaptation, small and carbon markets. “We need to see REDD being fully endorsed and nationwide crediting through REDD,” he says.

While he says nothing about the necessity of reducing greenhouse gas emissions from burning fossil fuels, he does talk about bringing agriculture into the UNFCCC negotiations:

“one of the things that we feel very strongly about is agriculture, which has been the orphan so far of the UNFCCC agreements, agriculture is incredibly important for several reasons. One, it emits 14% of greenhouse gases and another 6% if you include what agriculture does to the forest. It could become a great absorber of carbon, but in addition, farmers are the ones most affected by it, by climate change.”

Steer says that agriculture represents a potential “triple win” for the world, by increasing agricultural yields, helping poor farmers, and sequestering carbon. As an example, he mentions about a project in Kenya, funded through the voluntary carbon markets by the World Bank’s BioCarbon Fund. Steer announces with near breathless excitement, that “for the first time in history,” poor farmers will receive “cash payments this year for sequestering a tonne of carbon in their soil per acre”.

But Shefali Sharma of the Institute for Agriculture and Trade Policy (IATP) has been carrying out research into this project. A recent IATP report titled, “Elusive Promises of the Kenya Agricultural Carbon Project”, suggests that all is not as rosy as Steer implies.

IATP acknowledges that the project could result in improvements in productivity, but notes that, “the carbon market approach is a very shaky foundation for climate finance”, and that the environmental and social benefits are “uncertain”. The number of farmers involved and the area covered has shrunk as the project has been implemented.

IATP’s analysis of the distribution of benefits from the project is devastating. According to the figures available, of the roughly US$2.5 million in total financing for the project, 40% will go to various intermediaries in “transaction costs”. Out of what’s left, farmers would only receive an average of around US$1 per year over 20 years. Even this dismal figure could decline, depending on exactly how the “transaction costs” are calculated. It would be less still if the target price of US$4 per tonne of carbon were not achieved (which seems a likely possibility taking into account Swiss Bank UBS’s latest predictions for high-quality EU-ETS carbon credits to fall as low as €3/ton in 2012.)

Source: IATP

Let’s remind ourselves of what is happening here. Andrew Steer, the World Bank’s Special Envoy on Climate Change, is proposing this project in Kenya as a good example of what should come out of Durban. Yet under this project, poor farmers will receive only 60% of what could be paid without the carbon market transaction costs. They will receive less than 2 cents per week. The exact amount of carbon to be sequestered in their farmlands is still uncertain as are the environmental and social impacts. Nevertheless, the project will generate carbon credits that will be sold to allow someone, somewhere, to carry on producing the same amount of pollution, thereby perpetuating climate change, one of the main victims of which will be . . . poor African farmers.

This is the economics of the madhouse. It is a sure route to global climate disaster.

However, what makes no sense in terms of either the climate or economics can still be good for the World Bank. The World Bank’s Forest Carbon Partnership Facility keeps a lot of well-paid Bank staff in jobs. According to the FCPF’s Annual Report for 2010, the Bank’s own costs for managing the FCPF Secretariat and funds from 2009-11 amounted to a staggering 34.9% of the total so far spent by the Fund.

Aid money supposedly intended to alleviate poverty is going instead to large FCPF administrative costs in Washington DC. (Click on the image for a larger version. Source: FCPF Annual Report, 2010.)

This perhaps explains Andrew Steer’s enthusiasm for bringing agriculture into the climate regime. It will help support the Bank’s bureaucracy of 200 carbon-trading staff. And help them avoid the same fate as now faced by many in the same kinds of roles in the private sector: redundancy. For how long hard-pressed donor governments will be willing to continue subsidising such extraordinary inefficiency is, of course, open to question.

Although Andrew Steer’s views on the carbon market seem to be oddly out of touch with reality, in fact Steer is well aware of the problems. In April 2011, he wrote about many of them in a blog post. In this, he made a bizarre analogy between the carbon market and the European Champions League football competition. The recent performance of the carbon market, according to Steer, was less like FC Barcelona and “more like my old fourth division club, Bexley United, which I believe has now ceased to exist”.

But Steer posts a picture of FC Barcelona after winning the 2011 Championship, with the a caption suggesting that “with new players and new rules”, the carbon market could be as successful:

Far from ever being likely to win the Champions League, even with new players and rules, Bexley United went bust 35 years ago. They played their last game in 1976.

It would take more than “new players and new rules” to make Steer’s losers into champions: it would take a full-on miracle.

Given the seriousness of the climate crisis, the world cannot afford to be misled by carbon trading proponents such as Andrew Steer. To return to his football metaphor, Steer’s “team” may presently have the financial support of some super-rich backers, but he is still managing a losing, relegated, dysfunctional football club. There comes a time when even the most generous of football-supporting oligarchs loses patience and shows the manager the door. That time for Steer is surely fast approaching.

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  1. Agree on most of what you’re saying, except one thing: It’s not only the Bank’s decision to keep those jobs, it’s the governments’ decision that give money to the Bank. And as regards the FCPF, maybe the money was well spent, considering that most of the achievements in fleshing out Readiness standards so far have been brain work, communication and coordinating efforts. Fair enough that the Secretariat got a big share. I guess REDD-Monitor would be the last to support “quick and dirty” due-diligence in order to increase disbursements rates. Setting high standards takes time and money. Now we’ve got the RPP assessment standards, the Common Approach to Social and Environmental Safeguards, and a boost for mutual learning between countries. All very valuable and hardly dependent on the carbon market.

  2. @Seeker – Thanks for this comment. Yes, it’s governments that are handing over money to the World Bank to keep the jobs in the FCPF. Your argument about most of the “achievements” of the FCPF consist of standards, communication and coordinating efforts echoes what Benoît Bosquet said recently at a meeting in London.

    But the history of the FCPF has been one of cutting corners and smoke and mirrors.

    And as the recent NGO letter to the Bank argues, the Bank is in serious danger of undermining REDD readiness by rushing ahead with its Carbon Fund.

    It’s also worth highlighting the answer that Benoît Bosquet gave after his presentation to the question how many of the RPPs will lay a solid foundation for the basic issues (land tenure, forest rights, carbon rights) to be addressed in the numerous countries where the FCPF is operating? He mentioned the Colombian and Nicaraguan R-PPs but did not answer “how many” part of the question.

    “Setting high standards takes time and money” is probably true, but that’s not what the World Bank is doing through the FCPF.

    Andrew Steer, on the other hand does want to get the money out of the Bank’s door as quickly as possible. At a recent meeting in China, CIFOR reported the following,

    Precautionary measures to avoid mistakes in approving forestry plans and spending are often necessary due to the complexity of forestry projects, said Steer. “But I sometimes wonder if we can do a little bit faster and simply just get on with the job.”

  3. I expect Andrew “Two Cents” Steer earns more than that in less than the time it takes to say it.

  4. One of the main issues this highlights, which is not talked about yet in the marketplace, is the prohibitive transaction costs. They are only rising with the standards certifying organizations. For large swathes of land for REDD, the standards costs are very high and are not justified by the work provided. There should be a cap on what can be charged in terms of fees, as they are mostly a fixed cost in terms of the work required, regardless of size of project. The current fee structures are higher than traditional investment banking fees, which are measured in basis points. This makes little sense. Between all the middlemen required to create a certified and verified carbon credit, transaction costs overwhelm the projects and very little is left for the communities themselves. The middleman transaction costs are directly taking from community benefits. The asset creation process and transaction costs associated with it need to be overhauled in general, if communities are going to see the benefits of REDD.