Kyoto Protocol loopholes threaten viability of biomass industry

Speaking at British Biogen’s annual conference, Michael Gubb, Visiting Professor at Imperial College London and Associate Fellow at the Royal Institute of International Affairs, said the value of carbon could be undermined by the sheer scale of trading in surplus Russian and Ukraine emissions credits. If the price of carbon were to fall, there would be less of an incentive for industry to switch to renewable energy sources such as biomass.

Gubb cited various studies as he summarised the theoretical potential contribution of biomass energy to meeting the Kyoto Protocol targets. The Torres 2 study, for instance, shows that renewable energy might contribute 250 TWhrs in Europe by 2010. 40% of this could come from biomass and waste sources, Gubb said.

“Notwithstanding all the huge uncertainties,” said Gubb, “biomass’ contribution is potentially very large and is really a crucial component of European ambitions regarding Kyoto. It is probably the only one you could not do without at all because it is such a large chunk.”

Gubb added that such projections imply the need for subsidies. “Biomass is not going to achieve anything like its contribution without pretty active government support coming through in competitive markets,” Gubb said.

Professor Gubb welcomed last week’s announcement that renewables will be exempt from the UK’s Climate Change Levy, but pointed out that as long the CCL was set at 0.15p/kWhr, the exemption would be likely to benefit the hydro and wind power industries more than other renewables. Gubb said he believed international trading in carbon credits could establish a price for carbon of up to $50/ton. Under these circumstances, Gubb said, the CCL could rise to as high as 0.5p/kWhr, at which point an exemption from the CCL would increase the competitiveness of renewables sources such as biomass.

“There is a risk,” said Gubb, “that natural incentives and the international implicit price of carbon beginning to emerge may be undermined by the scale of what the NGOs call loopholes: trading in Russian and Ukrainian surplus allowances (see related story); if loose rules around sinks allow a lot of credit to be claimed for carbon absorption that would have occurred anyway; or if there is loose application of the Clean Development Mechanism under which investments in emissions saving projects in developing countries may generate credits that contribute towards the obligations of the industrialised countries.”

Ironically, the biomass industry could benefit from the wider introduction of carbon sinks allowances.

While the classification of biomass as carbon neutral would mean the industry would not be penalised for failing to meet emissions targets, farmers could benefit if they are paid up front for absorbing carbon by growing biomass crops under future carbon sinks regulations. “That may be an opportunity to break the ‘horse and cart’ problem – i.e. You can’t get paid for growing biomass until you know who’s paying you to burn it,” said Gubb.

In conclusion, Gubb urged the renewables industry to play a more vigorous role in lobbying for ratification of the Kyoto Protocol. “The renewables industry at present does not have much coherent force in these negotiations. It really pales besides the strength of lobbying from some of the fossil fuel industries, particularly emanating from the US. The renewables energy industry really needs to stand together more powerfully in this international process.”