Citola Blog
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Reasons To Be Cheerful
It’s difficult to take the existentialist approach to climate change and deforestation – but, frankly, there’s little choice.
Let us explain. The existentialist typically celebrates the idea of traveling hopefully, and takes joy in that, rather than arriving. At Citola, we see the goal of generating a better carbon environment through reforestation and avoided deforestation, and the schemes that comprise such REDD concepts, as a vital and important goal.
But, as we’ve explained in earlier posts, the moves towards that objective on an international and national level are disjointed, uneven, and generally a bit dismal. However, we feel there is quite enough cynicism and pessimism surrounding the world, so the way forward must be to travel hopefully and enjoy the journey, just like a good existentialist, complete with a copy of Albert Camus’ The Myth of Sisyphus (Camus imagines Sisyphus smiling as he has to roll the rock back up to the top of the hill for the rest of time).
So it’s with a beam that we notice the Western Climate Initiative. Some western parts of the United State and a few Canadian provinces have clubbed together to organize a cap-and-trade carbon system that, it’s hoped, will drive down emission levels if and when it comes into effect in 2012. California, New Mexico, Quebec, Ontario and British Colombia are major players in the carbon scene, and they’re expressing their determination to get things done. For more detail click here.
But on a federal level, the news is not so great. President Obama’s attempts to push through legislation to curb greenhouse gas emissions looks to be fatally wounded. Cynics (not us, of course) might wonder whether his administration might be looking for a way to blame it all on BP…
But we leave you, for now, on an upbeat note: deforestation rates are falling dramatically in Brazil. As regular visitors know, we’re crying out for reforestation, complete with sensible industrial and financial incentives, to make a positive contribution here. We’ll be smiling ear-to-ear when that day dawns…
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Logging On? Way To Go...
So what’s all the fuss about? According to a recent report from a well respected research group and think tank, Chatham House, illegal logging of rain forests has fallen sharply.
All those good intentions from politicians in the developed world have indeed translated into something concrete, according to the report. Some 17 million hectares have been saved, thanks to political initiatives, in the last decade. The international focus on Brazil has been particularly productive, with illegal logging in decline by somewhere between 50 and 75 per cent over the past ten years.
And Europe is coordinating its efforts to cut emissions, with government ministers in France, Germany and the UK simultaneously publishing articles arguing that the target quota for emissions should be increased to 30 per cent. According to Chris Huhne, UK climate change minister: "The current 20 per cent target is not sufficient to encourage companies to make the necessary investment in green technologies and green jobs. The 'wait and see' policy of sticking to 20 per cent risks putting Europe in the global slow lane of maximizing low carbon economic opportunities."
And a United Nations scheme for emissions reduction through avoided deforestation or degradation (REDD) has seen major progress in Indonesia (home to the world's third biggest forest). Indonesia received $1 billion from Norway in May in exchange for the Indonesian government’s revocation of logging licences to palm oil and timber firms.
But, of course, there’s a but. The REDD fund is supposed to hit $20 billon – yet the actual contributions only amount to $4 billion so far.
Emission reduction amounts to doing less damage. What we need to promote is forestry, REDD schemes, and the promotion of the market in carbon offsets. The news above isn’t good news – it’s just not so bad news. We all have a long way to go. That’s what the fuss is about.
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Hot Air's Cause And Effect
Here’s a conundrum for you. How come climate change debate generates so much hot air?
A benevolent interpretation of recent events is that the United Nations (UN) cannot be faulted for its earnest intent. As the UN, bless its ethically produced cotton socks, hosts a new round of discussions in New York, we find ourselves wondering just where its discussions are going to take us.
The topic in hand is a familiar one: the raising of finance for developing counties to grow in a climate-friendly way. The High Level Advisory Group on financing this type of development with have former British premier Gordon Brown in attendance, along with the new energy minister, Christopher Huhne. The US administration is sending one of its leading financial boffins, Larry Summers, and the benign and patriarchal presence of billionaire hedge fund manager George Soros will also grace the talks.
But what will this gathering of the great and the good get up to? As we’ve reported before, there’s broad agreement that the industrialised countries will have to stump up $30 billion to help the lesser-developed along the path they want them to take. However, we’ve already seen some grants being re-classified as loans, and the general smoke-and-mirrors nonsense that accompanies high-budget accounting.
At the heart of the issue is whether taxing countries using carbon-intensive industrial processes and styles of consumption (or penalising or disincentivising in some other way) would simply inhibit trade. And all this comes at a time when the developed countries, who have to provide the cash, are struggling to stimulate their economies out of the global recession that threatens us all.
So much of the analysis – and much of the debate in these smart talking shops – is dominated by the views of the developed world. One of the sanest views we’ve seen is the perspective of what the emerging economies need. This is, in essence, a bit of carbon “breathing space” – in simple terms, the right to be a bit dirty, and just get on with it. The argument runs that ecological refinement can come a little later, once mouths have been fed and poverty alleviated.
The circularity of so much of the debate is well illustrated by this paper, which argues, broadly speaking, that economic activity is both the problem and the solution.
Whatever else, we believe that avoided deforestation (REDD) and reforestation is most definitely part of the solution, not the problem. And we will continue promoting forestry as part of the solution.
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ERRT Is A Reason To Be Cheerful
Here at Citola, we’ve often cited our belief that carbon offsets and forestry provide a welcome instance of synergy between business sense and best (or, at least, good) practice in sustainability.
A much-mentioned example of this is a shining example of good corporate citizenship from the Marriott hotel chain. The company’s initiative in the Amazon rain forest a couple of years ago is regularly cited as one to watch (literally, in this case, just click here). And, yes, it’s easy to be cynical about the move. The author of this recent piece of commentary certainly demonstrates that – offering us scepticism not just about the Marriott initiative but the very concept of avoided deforestation (REDD) and reforestation itself.
We’ll leave you to judge this for yourselves. But, as we focus on best forest-management practices and the way forward for sustainable timber harvesting, we notice that the idea of corporate citizenship having a strong conscience in the sustainability area is growing. Witness the new voluntary code just promulgated by the European Retail Round Table (ERRT), which has a strong stated policy goal in this area.
After the delay of the Carbon Pollution Reduction Scheme in Australia, it might have seemed just a bit too optimistic to see an increase in the voluntary carbon market. But initiatives like the ERRT’s mean that there’s positive steps by industry in the absence of government policy.
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Dancing The Cancun
So what are the prospects for Cancun, and the UN climate-change conference in December? Here are the few certainties we can ascertain from the evidence available to us here at Citola.
First and most obvious is that the political grandstanding will still dominate. If we were to stand outside the conference hall selling t-shirts bearing the legend “Cancun: Attitude Capital Of The World”, we might not sell a lot of them – but we might also be in line for a prize for nailing the eco-conference dynamic in a single, snappy PR line.
That said, we see evidence of serious, multi-lateral intentions to produce something more concrete. For example, NIgeria has signed up, just recently, to the much-criticised accord produced in Copenhagen in December. It failed, however, to sign up to any specific provisions for cuts in emissions. If only Nigeria, whose government recently banned the football players representing it in the South African World Cup from representing the country for the next two years, were as serious about ecology as soccer.
Optimistic noises are also coming out of India. Again, given that India is one of the biggest polluters on the planet, one imagines that they can only improve on present performance (just our take – and we do appreciate the Asian argument that they should have the right to develop as the West did before the green debate became a global issue). Here’s a typical report, uncritical and if anything positive, about the prospects for Cancun.
And so to Russia, where the leading Russian-domiciled English-language newspaper, The Moscow Times, opines that the Kyoto Protocol (soon to expire, but never mind that) is not strange or unrealistic (see the end of the piece). But Russia has for so long been far from the ecological debate that the publishers of this article feel the need to explain what it means (and to insist that it is not some sort of Western demon designed to inhibit economic progress) before coming to a broadly positive conclusion.
Last of all come the Canadians, who have been hosting the G8 and G20 meetings of leading economies. It may just be that they’re all nice people who are naturally optimistic, but we do begin to see some sort of consensus emerging that progress is possible.
Let’s hope so.
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Citola Affiliate Program Launch
Citola is pleased to announce the launch of the Citola Affiliate Program.
The Citola Affiliate Program provides a mainstream channel for individuals and organisations to offer their users the ability to calculate and offset their carbon footprint.
"The large majority of people offsetting today are passionately green-focused and offset through traditional channels that are often static websites that provide a limited user experience," explains Angus MacNee, CEO of Citola. "With climate change and global warming becoming more 'top of mind', the Citola widget and affiliate program can reach a much broader audience."
The carbon calculator widget allows users to quickly calculate the carbon footprint of their lifestyle activities and offset the environmental impact through the purchase of verified carbon offsets from Citola Projects.
Citola Affiliates are able to easily customise the size, colour and calculator type of the widget and place it on their website, blog or social network profile (grab and paste HTML snippet). Citola Affiliates are able to support sustainable forestry projects, take positive environmental action and make money through a 7.5 – 10% commission on every sale made through their site.
Further information about the Citola Affiliate Program is available Here.
Registration is available Here.
Contact our team if you have any queries about the program, or would like further information at affilates [at] citola.com.
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Woodland Investment: Show Us The Assets!
As promised, we’ve been monitoring at the prospects for the UN Cancun conference, and will report back later in the week. By the way, if you hear a funny noise as you’re reading this – something like cicadas calling softly into the night air – it’s probably the sound of people slithering off the record. Nevertheless, we’re beginning to see a pattern as expectations solidify, and we’ll report back later in the week.
In the meanwhile, we thought we’d take a look at something which is less subject to facile political pronouncements than the orgy of posturing that surrounds the UN climate talks. We’re talking about the personal taxation of woodlands and forestry.
This varies from country to country, of course. For the purposes of this blog, we’ll restrict ourselves to the United Kingdom. Many Citola shareholders are based in the UK, and we thought we’d put forward the investment arguments for forestry as an asset class. Whether or not the UN agrees a new protocol to follow Kyoto (we see the mess this issue has created in Brazil, where reform is a political football), whether or not there’s a carbon-offset bonus to be had (we note how the European Union is dithering on carbon taxation generally), whether or not there are tax incentives for arrested deforestation and reforestation (REDD) projects, one thing is true: forestry is a respected and valued asset class in many countries across the world.
A UK investor going into forestry has a number of financial advantages. First off, woodlands are benignly treated under the terms of Britain’s Inheritance tax (IHT). IHT is designed to curb the creation of dynasties. Wealth can cascade down the generations, but the state wants a share, and takes it using IHT.
We won’t belabour you with boring fiscal detail here, but the fact is that IHT means that someone leaving a two-bedroom flat in a moderately prosperous part of London is also leaving a tax bill. The inheritors might have to sell a flat to pay the bill, since the threshold at which the tax kicks in is £325,000. But forestry is well treated: the tax bill can be deferred through what’s called “rollover relief”. As long as you hold the asset, the tax isn’t payable. So fiscal policy here has a conservationist, green tinge to it.
The Capital Gains Tax (CGT) position is under review right now, as the UK government debates its first Budget under the new Conservative-Liberal Democrat coalition government. The good news is that the new administration is well disposed to forestry investment, and is being kind to entrepreneurs who build businesses. The general thrust of policy seems to be that CGT will be charged at low rates to those who – excuse the vagueness - make things better (entrepreneurs and forestry investors seem to come into this category). The legislation is still being debated, and we are watching carefully.
The Income Tax (IT) treatment of short-term (under ten years) timber croppers is interesting. It’s treated as trade income, but this is beneficial in many ways, as the expenses of culling the timber can be offset against income.
And now you’re wondering how this isn’t political – well, of course, it is. But the benefits are real, and locations such as the UK play pretty fair and don’t change tax laws retrospectively.
It would be wrong to be premature on this one, but we are looking very closely at this area and this country. The UK is very much a space to watch.
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Forestry Land Use - A Chorus of Rusty Cogs
There aren’t many beards in evidence at Citola’s offices, but we hope you’ll know what we mean when we say we’ve been doing a lot of beard-stroking when it comes to the issue of the UN climate change talks. The media dust has more or less settled on the Bonn conference, which ended last week, and what we’re left with isn't a vison but a sound: the persistent squeaking of rusty cogs.
The rusty cog syndrome is well known: It’s the troublemaker in class who gets special attention from the teacher. The troublemaker may have no special talent, other than creating fuss, but to make that problem go away, the troublemaker receives unique treatment. The rusty cog gets the oil.
Sadly, that’s what we’re hearing from Bonn: a chorus of rusty cogs. The United Nations Framework Convention on Climate Change has suffered from too many countries wanting special treatment. There are general expressions of good will, but so many parties withdraw that good will as soon as they see another country opting out, seeking an exemption or other special privilege. The rusty cogs have found a lowest common denominator that inhibits anything that might reasonably be called progress. There was a laudable attempt to move things along from Kyoto (the protocol on emission levels is due to run out within two years, and there is nothing to replace it as yet). But the latest text put forward by the chairman received robust criticism from many quarters.
There’s another round of talks scheduled for August, ahead of the Cancun conference in December. Substantial progress needs to be made behind the scenes, if the Mexican event is not to be as frustrating as last year’s event in Copenhagen.
An interesting side-effect of the slow-down in the global economy has been the spurious claiming of good carbon citizenship from the countries whose economies have been worst affected. Few would argue that the old Eastern Bloc countries in Europe have industrial processes much more sophisticated than the antediluvian. Russia, Bulgaria and Poland were particularly notorious in this respect, with legendarily filthy coal-dependent manufacturing industries. However, lower demand has resulted in lower emission levels from these and other countries - and this has been used as a bargaining chip at the talks. This demonstrates the uselessness of over-depndence on statistics: they measure industrial emissions, but they do not describe them. The processes themselves, of course, need to be reformed.
Related to this issue is land use, land-use change and forestry, known by the ugly epithet LULUCF. This area, of course, is of interest at Citola. The matter is being dealt with at a high level by the Intergovernmental Panel on Climate Change (yes that IPCC, complete with controversial data-gathering methods). Working with other divisions of the United Nations, the IPCC has been attacking this area for years.
Key challenges to getting a meaningful agreement in place include getting a consensus from the global community regarding methodologies, finance mechanisms and emission reduction commitments and dealing with the issue of felling timber. The New Zealanders, for example, place carbon liabilities for Kyoto-complaint forestry that is subsequently felled. This influences future plantation processes and can ensure more sustainable forestry management.
Or so we’d like to think. We’ll be back with more on this as and when there are concrete developments.
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Politicians' Promises - And What People Want
The ebb and flow of rumour and counter-rumour continues. The famous budget of $30 billion, agreed in principle after the COP 15 Copenhagen climate conference last December, may be partly made up of “funny money”.
No-one can ever said to be truly impartial or financially disinterested (someone, somewhere, always pays the wages), but London’s International Institute for Environment and Development (IIED) seems to have fewer axes to grind than most. The IIED has just produced a paper that counsels extreme vigilance when examining the pledged cash from richer countries to help poorer countries develop in a way that will, amongst other things, help in the avoided deforestation (REDD) and the reforestation process so dear to our hearts here at Citola.
The paper, in essence, argues that the pledges could be met by tactics such as that of rich countries turning monies previously advanced as grants into loans. The authors of the report argue that there are no real baselines to the COP 15 budget promises, and say that the ongoing United Nations climate talks on Bonn, preparing for the next big conference in Cancun, are in jeopardy of producing no concrete outcome.
Meanwhile, the new head of climate change at the UN, Christiana Figueres, has conceded that the situation is pressing, and that everyone really is going to have to do better following the explosion of exasperated rage which some say was the only true outcome of the COP 15 talks. She has talked to reporters at the Bonn conference, and has admitted that errors have been made – and that the talks towards the end of the Copenhagen conference between emerging nations and richer, better developed ones (essentially when the provisional agreement for the $30 billion budget was hammered out) were lacking in both in certainty and transparency.
Can Ms Figueres do better? Specifically, can she make the big countries stump up the cash and behave better? Let’s hope so. The protesters outside the Bonn talks consistently berate the United States, China and Canada as the bad boys of a fossil-fuel world. And the pressure from within these countries for a greener climate change policy is growing, as papers such as the recent Yale Project on Climate Change demonstrate.
We continue to watch and wait.
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Road To Cancun Paved With Good Intentions
How about these for elusive goals? In no particular order: Truth in advertising, honesty in politics, certainty in climate change negotiations.
We’re at a critical juncture of the climate change conference in Bonn. After the stalled session of self-protection and lobby gridlock that we saw in the COP 15 conference in Copenhagen last December, there are strenuous efforts, as we’ve remarked before, at trying to avert a similar situation in Cancun, Mexico, at the end of this year.
The preparatory talks in Bonn are teeing things up reasonably well, it seems. But it’s not yet sure that we’re going to see the major breakthrough that some commentators are talking about.
Outgoing officials often have a kind of refreshing honesty in their statements. The pronouncements of Yvo de Boer, the retiring head of the secretariat dealing with climate change at the United Nations, falls into that category. He set the Bonn conference this question, for example. The treaty he’s talking about is the Kyoto Protocol, which is due to expire in 2012:: “Are we working towards a new treaty, or a set of decisions, or both?”
Mr de Boer insists that greater clarity as to motives, purpose and willingness to spend towards action on climate change is required amongst the leading, developed nations. If that clarity isn’t achieved, Cancun looks set to be another Copenhagen, albeit with somewhat better weather.
Some things are clear, though. One is that reforestation and avoided deforestation (REDD) is seen as a key weapon to push through the reduction in atmospheric greenhouse gases. Documents tabled in Bonn make that fairly evident.
Another is that the $30 billion in funding dedicated to the purpose of protecting forests amongst developing countries is going to be provided in the form of a grant, not a loan. Some might argue that this signifies a guilty conscience (similarly, some say that allocated carbon permits are a right to pollute rather than an additional environmental benefit). But at Citola, we feel it’s a sign of good intentions. As such, it is to be welcomed.
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