A Free Carbon-Trading Area of the Americas?

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Published on March 9th, 2009  |  Discuss This Article  

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Time was when the U.S. economy sneezed, Latin American economies keeled over from pneumonia or worse, but no longer.

While not exactly immune from the economic turmoil in the United States, economies like Brazil and Mexico will suffer less and recover earlier. There is more than a little schadenfreude south of the border at seeing Uncle Sam with custard pie all over his face after all those stern lectures about economic rectitude and belt-tightening our governments have been subjected to over the years. But, custard pie on the face or no, everyone knows how important Uncle Sam continues to be for the hemisphere, and  everyone is watching the United States intently for evidence of how you guys and gals plan to get out of this mess.

In that regard something very interesting happened two weeks ago — a new presidential budget from Obama that breaks historical patterns in a lot of ways, not least by proposing to set up a cap-and-trade system to reduce carbon emissions in the United States. So far, so European…but American cultural norms kick in with the idea of what to do with the revenues — tax cuts.

It’s interesting to run a compare-and-contrast with what the Europeans have done with their cap-and-trade revenues. The Germans,  for example, use some of them to finance an International Climate Protection Initiative that in 2008 financed 74.8 million euros — around $100 million — of worthy projects around the world. I spent much of the last month working on a proposal to help create new protected areas in the Andes with this funding, and I hope it will be the first of many such.

Which set me to thinking. The United States has a proud tradition of defending free trade, and has set up a number of free trade agreements in recent years in Latin America — in the last couple of years accords have been signed with Peru and Central America, with Colombia waiting in line.

North of the border, there are thousands of companies positioning themselves for the cap-and-trade system they know is coming. South of the border, there are millions of hectares of threatened grasslands and tropical forests, and millions of people — farmers, indigenous peoples, communities of every kind — living in and around degraded ecosystems they’d love to be restoring. It shouldn’t be beyond the bounds of human ingenuity to put this particular two-and-two together and bolt a hemispheric dimension onto a U.S. cap-and-trade system for carbon emissions.

Why not include a provision in the U.S. carbon trading system that allows U.S. companies to gain carbon credit for offsets in Latin America? After all, if the Amazon goes, the climate shifts will hit the United States almost as hard as Brazil, Peru and the other Amazonian countries. Things that drive climate — like atmospheric convection and surface temperatures — don’t exactly respect political frontiers.

But frontiers do create political realities, and most U.S. cap-and-trade revenues will have to be channeled to U.S. taxpayers. That’s as it should be. Yet the Germans have shown that a small proportion of cap-and-trade revenues channeled abroad can make a difference. (Rather a big difference, actually, to those Andean ecosystems, if we can get that proposal funded; and protecting those carbon-rich Andean montane forests will benefit the United States by buffering climate change just a little bit.) But it is precisely the accumulation of those little bits that will eventually make an impact on climate change, and now’s certainly the time to get going on it.

Environments — like economies — are interconnected. The whole history of free trade in the Americas is built on the idea that the free flow of goods and services is in everyone’s interest. It would be nice to see that assumption of interconnectedness reflected more in U.S. environmental policy, and the coming U.S. cap-and-trade system would be a great place to start. A Free Carbon Trading Area for the Americas, anyone?

(Image: Man cutting tree and clearing forest in Acre, Brazil. Credit: Haroldo Palo, Jr.)

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Comments: A Free Carbon-Trading Area of the Americas?

  •  Comment from greenskeptic

    Good post and an interesting idea that builds on some of the early carbon sequestration work TNC did at Noel Kempff and elsewhere, and with such companies as AEP. “Free Cap & Trade.”

    Do you know what percentage the Germans are reserving for their International Fund? It would be interesting to run some numbers to see how much could be generated from such a fund.

    Also, curious why limited to South America? Why not Indonesia as well? (Other than the author’s obvious bias…understood.)

  •  Comment from John Pelley

    Good post. We need to implement any program that will work and help our environment.

  •  Comment from Margo

    David, excellent post with good points.

  •  Comment from Mark

    since tnc is using climate change as a major initiative this year, how do we get this excellent idea in our discussions with congress?

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