In March 2015, Bloomberg quoted Jens Frølich Holte, political adviser to Norway’s Minister for Climate and Environment, as saying that, “Carbon trading can speed up the global transition away from a fossil economy. Trade creates benefits and this is as true for carbon as it is for other commodities.”
REDD-Monitor sent Holte three questions about this statement. A month later, Holte replied by email. I’ve inserted the questions into Holte’s response, below.
A recent paper in Nature looks at which fossil fuel reserves must stay in the ground if we are to stand a chance of avoiding dangerous climate change. The study’s co-author, Christophe McGlade, a research associate at the UCL Institute for Sustainable Resources, says,
The study suggests that in a two degrees scenario, if we want to have a good chance of staying below two degrees, all of the oil and gas resources in the Arctic need to stay in the ground. We would conclude from that, that Arctic resources should be classified as unburnable.
In January 2015, Norway announced a new licensing round for oil exploration in the Arctic. Perhaps we shouldn’t be surprised, considering the sort of advice that Norway’s Minister for Climate and Environment is getting.
REDD-Monitor: Could you please explain why you believe that carbon trading can speed up a transition from fossil fuels, particularly given the fact that carbon trading schemes have been operating for many years, without a global reduction in burning fossil fuels.
Jens Frølich Holte: I support using markets and pricing carbon as an effective means to achieve the reductions we want in emissions. Emissions trading systems have delivered the emission targets that they were meant to deliver. Using taxes on emissions have also shown good results.
Through the emissions trading system we put a price on carbon that stimulates cost effective measures to mitigate climate change. This means that we can achieve our targets at least cost. Another way of describing cost effectiveness is that it maximizes the effect of a given sum of money. In effect this means we can do more mitigation than if we spent the money in a less effective way.
REDD-Monitor: How do you respond to the argument that the corporations responsible for emissions from fossil fuels buy carbon credits in order to continue polluting, e.g. through coal-fired power plants, thus locking in emissions from fossil fuels for decades into the future?
Jens Frølich Holte: Markets involve the private sector. While politicians have to create the right framework for cutting emissions, it is ultimately the private sector that will have to deliver the solutions we need to achieve the 2 degree’s target. The European emissions trading system sets a limit to how much carbon that can be emitted from the energy and some industrial sectors. As this limit is gradually shrinking, the industry has to transform itself to avoid excessive emissions. In practice this can be done through production from non-fossil sources, enhanced efficiency and/or carbon capture and storage.
The European ETS puts a price on carbon in Europe. The CDM gives reduced emissions of carbon a value in developing countries. Using CDM in the ETS and in the government purchase program has provided finance to for example renewable power facilities that are necessary in a low carbon development strategy.
REDD-Monitor: Please also respond to the argument that carbon trading does not reduce emissions overall – it’s a zero sum game. Emissions may be reduced in one place, but the buyer of carbon credits uses those credits to continue emissions, and the one cancels out the other.
Jens Frølich Holte: It is correct that in theory an offset mechanism such as CDM in itself does not lead to lower emissions. However, the existence of CDM made it possible for Norway, and other industrialized countries, to take on tougher targets under the Kyoto Protocol than we could have done without such a mechanism, and in that perspective it reduces global emissions. I also believe that there can be positive additional effects of CDM since it generates capacity and increased focus both in public and private sector to reduce emissions, and not all reductions from the projects are used as offsets.
A price on carbon is an incentive to use and develop more efficient technology. The price reflects ambition. Today ambition is too low, and consequently prices in the markets are low and do not give the incentives we want on technology development.
Using carbon markets is only the means to an end. Our goal is emission cuts. And markets do not always deliver the results we want at a speed we desire. So we also use many other tools such as R&D, information and financial support to implement efficient technologies and even direct regulations.
PHOTO Credit: Jens Frølich Holte, Klima- og miljødepartementet.