Global concerns about climate change and the effects of carbon emitted into the atmosphere is driving a world-wide trade, between those who exceed carbon caps set by the Kyoto protocol and those who emit less than their allocated share, and between regulated countries and non-regulated countries.
Supporters laud carbon trading as an effective way to encourage sustainable development. Critics reject it as a cheap way out for countries that want to buy off their failure to meet their Kyoto targets – a scheme that benefits the brokers and institutions who swarm around the lucrative carbon honeypot much more than it benefits the environment.
Whether you approve of it or not, the value of the carbon market is likely to grow to US0 billion in the next three years. In 2006 the equivalent of 764 million tons of carbon dioxide equivalent (tCO2e) had been traded by September, as opposed to the 324 million tCO2e traded in 2005. Brokers, consultants, carbon procurement funds and hedge fund managers have proliferated and are scouring the earth in search of carbon credits, particularly in developing countries.
Carbon – a new market force
Organised agriculture in South Africa can’t afford to ignore developments in the carbon market. In January Stuart Rose, the CEO of Marks & Spencer, predicted that M&S would change the way it operates “beyond recognition” over the next five years. “We will become carbon neutral, using offsetting only as a last resort,” he said. “We’ll clearly label the food we import by air. UK, regional and local food sourcing will be a priority. We’ll also help our suppliers and customers to change their behaviour.”
In the same month Sir Terry Leahy, CEO of Tesco, announced Tesco’s plans to create a “green consumption revolution”. Leahy was emphatic about the way forward, “I’m determined that Tesco should be a leader in helping to create a low-carbon economy. We’re going to have to rethink the way we live and work, and transform our business model so the reduction of our carbon footprint becomes a central business driver. We must also help stimulate the development of low-carbon technology, and work with our suppliers and others to deliver significant CO2 reductions throughout our supply-chain. We’ll begin the search for a universally-accepted and commonly-understood measure of the carbon footprint of every product we sell.”
David Farrell, director in charge of Group Strategy for pro-active South African fruit export company Colors, has spent the past year studying the ramifications of greater carbon-footprint sensitivity in world markets. Colors is currently calculating the carbon footprint of its entire supply chain, including production inputs such as irrigation, chemicals, vehicles, staff and land use. Packing operations are evaluated in terms of the carbon footprints created by machinery, packaging, refrigeration and waste. The head office footprint is evaluated, as are those of all the participants in the shipping and distribution chain, including receivers.
Farrell explains the reason for this move: “In 2006 Colors had 79% of its business in ‘developed countries’ who’ve ratified the Kyoto Protocol and have stringent emission caps in place. If ‘non-ratified’ and ‘in transition’ countries are included, then Colors has 84% of its sales in countries where customers are exerting or will exert pressure to reduce the carbon footprint of the products they’re offered – including fruit.”
Its next step is to implement
in-company energy saving projects and behavioural changes, before expanding these projects into their supply-chain.
A market for voluntary offsets
In addition to demanding a change in behaviour, the carbon market offers “offsetting” opportunities for industries, including agribusinesses, that know how to reduce their carbon footprint. Farrell says this offset market is growing rapidly. While still much smaller than the regulated market, it’s attracting a growing number of companies and people who don’t fall under the regulated “cap and trade” emissions market. The demand for voluntary carbon offsets is expected to reach 400 million tons of CO2 per year by 2010.
In America, for example, farmers have seen an opportunity to trade in carbon credits. In August 2007 the National Farmers Union (NFU) in the US invited farmers to enrol in the Farmers Union’s Carbon Credit Program, which allows producers and landowners to earn income by storing carbon in their soil through no-till crop production and long-term grass-seeding. NFU got approval from the Chicago Climate Exchange, North America’s only legally-binding integrated greenhouse gas emission registry and reduction and trading system, to aggregate carbon credits. The idea is to enroll producer acreages of carbon into blocks of credits. These will be traded on the Carbon Exchange, much like other agricultural commodities are traded.
On 23 July 2007 Australia launched its first voluntary carbon offset trading platform – the Australian Climate Exchange (ACX). According to ACX’s managing director, Tim Hanlin, businesses are now engaging in carbon trading voluntarily, regardless of government policy and are therefore “getting ahead of the game”.
What’s happening locally?
In 2007 Backsberg wine estate near Paarl became the first South African wine producer (and one of only three in the world) to gain carbon neutral status by sequestrating (that is, completely countering) its carbon emissions by planting 900 trees. The farm produces carbon-neutral wine and grows carbon-neutral citrus, blueberries, figs and pomegranates. Backsberg’s carbon-neutral success will be discussed in more detail in the next issue.
In South Africa, carbon awareness has surged over the past year. Jeunesse Park, CEO of Food and Trees for Africa, which provides carbon offsetting through tree-planting projects, says since the media headlines about Backsberg’s carbon neutrality have appeared, applications for carbon footprinting have streamed in. “We’ve had applications from citrus farmers, avocado farmers, organic cosmetics companies and many players in the wine industry,” she explains.
While Back is passionate about carbon neutrality, he opposes carbon-trading with developed countries. His attitude illustrates the ethical complexities associated with carbon trading.
“Carbon trading is another form of colonisation,” says Back, “When we sell carbon credits to our cousins in the north, we’re selling our ‘capacity to pollute’ to guys who are already over-polluting. We are, in effect, selling our potential to develop. I believe you should offset what you do locally. I wouldn’t be against trading carbon credits within South Africa.”
Whatever one’s ethical stance on carbon trading, the urgent need to reduce carbon emissions is a commercial and environmental imperative that South African agribusinesses can’t afford to ignore.
Next week: Carbon farming –
what can you do to reduce the carbon footprint of your farm? |fw
