Carbon Trading

The Carbon Market – The Essential Guide, Part 1

May 01, 2008
Tim Morris, wise-owl.com analyst

With the global carbon market bearing

an estimated value of $30bn and rising,
investors may be forgiven for
questioning whether the old adage that
‘money doesn’t grow on trees’ still
holds true. To bring you up to speed on
such matters, we have put together this
‘essential guide’.

Fast Facts

The global market for carbon

credits has grown 24 fold since the Kyoto protocol came into effect in 2005.
Europe is the heart of the global carbon market, where futures and options contracts
over carbon credits are traded on dedicated ‘climate exchanges’.
Carbon credit prices are driven by changes in the level of the legal emissions cap, the
weather, fuel prices, and increasing market penetration as emission regulations are
extended to more companies.
Australia hosts the world’s second largest carbon credit market in NSW, but a national
trading system has yet to be established.
Investment in environmentally friendly carbon offset projects, which generate carbon
credits, has also grown strongly.
The market will create opportunities for the renewable energy and forestry sectors,
although use of forestry projects is restricted.
The technical outlook for European carbon credit prices is bullish.

Background

Unlocked following the 19th century industrial revolution, the power of carbon has
fuelled the wave of economic development which has delivered modern society’s greatest
accomplishments, such as electric lighting, the automobile, and flight. However, in the
later half of the last century we learned that these advances were not without cost, as the
first clues began to surface about the toll which modern society’s habits were having on
our planet.

Unlocking the power of carbon based fuel sources releases carbon gases into the air,
trapping heat within the Earth’s atmosphere, creating what we all know as the global
warming effect. For evidence of the effect we need only consider the increasing
concentrations of carbon dioxide within the atmosphere. Before 1850 the Earth’s
atmosphere contained about 280 parts per million (ppm) of carbon dioxide, however the
figure is now 380ppm, and is forecast to reach 550ppm by 2050 according to the
Intergovernmental Panel on Climate Change.

The potential impacts of global warming on sea levels, the weather, and the food chain
are well documented, and the message is clear. Society needs to curb its addiction to
carbon based energy to ameliorate global warming.

For many years global warming remained largely ignored as purely an environmental and
academic issue. Only during the last few decades have world leaders begun to
acknowledge the issue, as its potential economic, social and financial risks became more
translucent.

As world governments unite to counteract the effects of global warming, a combination

of regulatory and market based remedies are being adopted to essentially put a price on
clean air. While this poses a threat to some old industries with unflattering environmental
records, it has spawned an entirely new industry focused on the emerging carbon market,
creating opportunities for investors.

The Kyoto Protocol – Creating a Market for Carbon

A market for carbon evolved as a direct consequence of the Kyoto Protocol, an

international agreement signed in 1997 that became effective from 2005. The treaty
requires developed countries, referred to as ‘Annex I’ nations, to reduce their greenhouse
gas emissions by 5.2% over 1990 levels by 2012. Developing countries that have ratified
the agreement are not required to do so.

Discussions about greenhouse gas emissions often focus on carbon dioxide (CO2), which
is the most common, but not the only gaseous villain in the battle against global warming.
In addition to CO2, the Kyoto Protocol also targets reductions of five other dangerous
gases, which have even greater ‘global warming potential’. However to avoid confusion
and provide an ‘industry standard’, all greenhouse gas emissions are referred to in terms
of CO2 equivalents. With CO2 being the industry’s reference point and four of the six
greenhouse gases targeted by Kyoto containing carbon, it is no surprise to see this
evolving field coined the ‘carbon market’.

Kyoto Compliance

Rather than simply placing a blanket ban on greenhouse gas emissions beyond a certain
threshold, the Kyoto agreement recognises the need for a flexible approach for achieving
emission reductions, offering 3 ways for governments and corporates to achieve
compliance.

1. Direct emission reductions This involves a company or government altering their

existing activities to directly reduce their emissions. A simple example would be
switching off the office lights overnight.

2. Invest in Emission Offset Projects In circumstances when it is not feasible to directly

reduce one’s own emissions enough to meet legal requirements, companies and
governments are able to invest in separate projects that remove carbon from the
atmosphere, to essentially offset their own activities.

3. Financial Compliance
By either paying a penalty for emissions beyond the legal limit, or through buying carbon
credits, which are emerging financial instruments that permit the holder to emit beyond
their legal limit.

The Carbon Market

By introducing a legal incentive for companies and governments to spend money on
reducing their emissions, Kyoto has ascribed a monetary value to clean air, causing
environmental issues to enter the realm of corporate financial strategy. Economic logic
suggests that companies and governments will pursue the lowest cost means of achieving
compliance. For the largest polluters, such as power plants and industrial companies,
meaningful direct emission reductions are often unfeasible and very costly. Therefore we
have witnessed strong growth around the later two compliance mechanisms involving
carbon credits, and offset projects, which benefits those whose emissions fall below their
legal limit, and those whose activities actually reduce atmospheric CO2 levels.

Carbon Trading

Carbon credits are essentially licenses that enable the holder to emit one tonne of CO2
equivalent into the atmosphere within a certain period. Carbon credits are generated by
parties that emit below their legal cap, and by those whose activities remove carbon from
the atmosphere. These credits can then be sold to parties who need to offset their own
emissions in order to achieve regulatory compliance. The cost of purchasing a carbon
credit provides a price signal on the value of clean air.

Carbon trading was initially conducted through direct over the counter (OTC)
transactions between governments and companies. The entry of commercial banks into
the market in early 2005, as Kyoto came into effect, sparked the evolution of dedicated
carbon exchanges whose sole purpose was to facilitate trade in carbon credits. The
overall growth in trading volumes for carbon credits since this time has been nothing
short of phenomenal. Trading volumes have increased 24-fold, from around 100 million
tonnes of CO2 equivalent in 2004 to nearly 2.4 billion tonnes in 2007, 2/3rds of which
was traded in the later half of the year. In 2006 the World Bank estimated the size of the
market to be around $30bn.
The most advanced carbon market is hosted by the European Union, which established an
Emissions Trading Scheme (EU ETS) built on the Kyoto mechanisms in 2005. The
scheme covers around half of the regions emissions – regulating 11,000 installations and
6,500 entities across the energy, metal processing, mining, pulp, and paper industries.
The scheme sets an emissions cap for each member entity over a specified time period,
requiring those which have exceeded their emission limits to purchase spare ‘carbon
credits’ or ‘allowances’ from those who beat their reduction target. In the case that no
member of the scheme has any spare credits, polluters can pay a financial penalty for
each tonne of CO2 equivalent emitted beyond their cap.

This financial penalty effectively sets an upper limit on the price of carbon in the
European market, because if the cost of buying credits were to exceed the penalty rate,
members would simply pay the penalty. During phase I of the scheme from 2005-07, the
penalty rate was €40 per tonne of CO2 equivalent. However we have now entered phase
II of the scheme, which sets a penalty rate of €100 per excess tonne from 2008-2012.

Most trading of European carbon credits or ‘allowances’ as they are known, takes place
by way of futures contracts on the European Carbon Exchange (ECX), which has a
market share of around 80%. Contracts are specified according to the year in which the
underlying carbon credit is valid, and are traded for up to 2 years before the underlying
credit expires. For example, the 2008 contract shown below shows the cost of offsetting
emissions made during 2008, and provides the best indication as to the current value of a
European carbon credit, which is currently just below €25.

Key Price Drivers

Factors influencing the price of carbon are much more complicated than traditional
commodity markets, which are typically governed by supply and demand. These market
forces certainly play an important role in carbon pricing, however forecasting future
supply and demand for carbon is very difficult because of the market’s emerging nature
and the intangible nature of emissions and clean air.

As the market for carbon emerged as the product of a new legal framework, the
regulatory environment will remain one of the most important drivers of price. In our
view, the level of regulatory emissions cap will be one of the key long term drivers of
carbon credit prices. By altering the legal limits on emissions, governments and
international regulators have the ultimate influence on demand for carbon credits. By
lowering emission caps, regulators can increase demand and tighten supply by reducing
the number of parties with credits available to trade. On the other hand providing caps
that are too generous can dampen demand and result in an oversupply of credits that can
depress prices. Regulators of the European Trading System learnt this lesson last year
when carbon prices crashed.

The Carbon Crash

In order to set the caps for the first phase of the EU ETS, member entities were asked to
estimate their annual greenhouse gas emissions. These estimates forged the basis of the
caps imposed from 2005-07. However following the release of officially verified
emissions data midway through 2006, it was evident that members had over estimated
their emission profiles, causing the imposed caps to be too generous. The result was an
over supply of carbon credits for the remainder of phase I of the EU ETS, which saw the
prices of the 2006, 2007 and 2008 ECX carbon contracts crash. Prices for 2007 carbon
credits suffered the most damage, falling from €31.50 per tonne in April to below €10 by
May. Prices for the 2007 contract staged an initial recovery, trading around €15 for the
next few months, but as the reality of the oversupply kicked in, their value began to fade
again, becoming almost worthless during 2007.
Other Price Drivers

Penalty Rates/Carbon Tax

The value of carbon credits will also be influenced by the financial penalty imposed on
parties that fail to comply with the cap. Fixed rate penalties for each tonne of emissions
beyond the cap, such as the case in the EU ETS, effectively put a price ceiling on the
price of carbon credits. Throughout 2005-07, when the EU ETS penalty was €40/t,
carbon credit prices never surpassed this level, as expected. However now that the EU
penalty rate has been lifted to €100/t, European carbon credit prices have much more
room to appreciate.

The Weather

It has been suggested that favourable weather conditions for clean energy generators
could influence carbon prices by increasing supply and reducing demand for credits. As
clean energy providers have a positive impact on greenhouse gas emissions by reducing
demand for electricity from ‘dirtier’ power sources, their activities generate carbon
credits. So when excessively windy or sunny weather conditions allow them to generate
more power, supply of carbon credits on the market could increase. At the same time
increased output from clean energy providers could reduce demand from ‘dirtier’ forms
of electricity, which could result in lower emissions and less demand for carbon credits.
Therefore, although it may seem obscure, favourable conditions for clean energy
providers such as sunnier and windier weather could have a negative impact on carbon
credit prices.

Energy Prices

Demand for traditional forms of energy such as coal, oil and gas are expected to have an
impact on demand for emission offset mechanisms such as carbon credits. Using price as
a proxy for demand for these energy sources, we expect a positive relationship between
their price and that for carbon credits. Therefore when coal use is strong, as indicated by
higher prices, emissions would increase, increasing demand for carbon credits.

Market Penetration

The EU’s regional trading system only covers a select few industries – the largest
greenhouse gas emitters. Over the long term we may see the supply and demand
fundamentals change as more industries are included under emission regulations. The
landscape could also change as more countries introduce or join emission cap and trade
systems. The US is the only developed nation which has not ratified the Kyoto protocol;
however there is speculation that this could change following Presidential elections later
in the year, which could increase volatility within existing carbon markets.
Carbon Trading
The Carbon Market – The Essential Guide Part 2
May 05, 2008
Tim Morris, wise-owl.com analyst

Australia's position in the Global Carbon Market

The US has been left on its lonesome

following Australia’s decision to sign
the Kyoto Protocol late last year as the
Rudd government came into power.
Despite being late in recognising Kyoto,
the emergence of a local carbon market
is well under way. A national carbon
trading system is currently being
developed with a target for
commencement in 2010. However
trading is already under way at the state
level, with NSW hosting the world’s
second largest trading scheme in terms
of volumes and value of carbon credits transacted.

Local carbon markets have been evolving for several years because Australia’s reluctance
to ratify Kyoto reflected an unwillingness to be legally bound to emission targets rather
than reluctance to curb emissions. The NSW state government’s ‘cap and trade’ scheme
has been in operation since 2003. Known as the ‘NSW Benchmark Scheme’, it regulates
annual emissions of participants in the electricity market. The ACT government joined
the scheme in 2005.Carbon credits generated under the NSW system are known as New
South Wales Greenhouse Gas Abatement Certificates (NGAC). Spot prices have recently
traded around $6.80 to $7.20 according locally listed provider, CO2 Group (ASX code:
COZ). Being the equivalent to less than €5, local carbon credit prices are much lower
than their European counterparts because of differences in the type of activities permitted
to generate excess credits, and the level of the penalty rate for non compliance.
The local penalty rate is only $12/t of CO2 equivalent, compared to €100/t under the EU
ETS. So as long as this level is maintained, NSW carbon credits should not trade above
$12. The EU ETS is also more restrictive in the types of activities that can generate
credits, which serves to keep supplies tight. Unlike the NSW scheme, the EU ETS does
not allow excess credits to be generated through forestry activities. The rationale behind
this ruling is a source of contention within the industry, especially as the market for offset
projects has ballooned in recent years.

Carbon Credit Creation

‘Offset projects’ are a way of generating carbon credits in addition to directly curbing
emissions below the legal cap. They are recognised by Kyoto because they remove
greenhouse gases from the atmosphere, which is a process known as carbon sequestering.
Carbon can be sequestered from the atmosphere through natural activities such as
planting new trees which absorb it, or by artificial processes which ‘capture’ carbon and
store it underground. Activities that replace others which would have otherwise resulted
in greenhouse gas emissions, such as renewable energy, also generate carbon credits.

Investment in projects whose sole purpose is to generate carbon credits by offsetting

emissions has ballooned. The Kyoto protocol differentiates between projects undertaken
in developing and developed nations. Projects undertaken in developing nations are
known as ‘Clean Development Mechanism’ (CDM) projects, while those undertaken in
developed nations are known as ‘Joint Implementation’ (JI) projects. Developing nations
have attracted the bulk of investment in carbon offset projects, with the total value of
CDM project investment being over US$5.25bn during 2006, which is 37 times greater
than the $US141m invested in JI projects over the same period.

China has attracted the bulk of carbon offset project investment, hosting 70% of all CDM
projects in 2006, with the next largest player, India, hosting 12%. The fact that
developing nations are being used by industrialised corporate to offset emissions has
stirred much debate. This trend makes sense from a financial point of view because
administering projects in developing nation carries a lower cost. However the critics
argue that this system ignores the actual source of emissions taking place, which is
typically on the other side of the world.

Carbon Credits and Forestry Projects

The emergence of the carbon offset industry has the potential to create an illusion that,
contrary to what our mothers always told us, money does in fact grow on trees. However
after taking a closer look at the fine print governing the EU ETS and Kyoto, we do not
suggest that members start counting on that large Eucalyptus tree in the back yard for
their retirement income.

The Kyoto protocol imposes several restrictions on how forestry projects can be used to
generate carbon credits and offset emissions. Only plantings on areas that did not
previously host a forest are eligible to qualify for credit generation. These areas must not
have hosted a forest on 31st December 1989, and only new plantings made after the year
2000 are eligible. Therefore in layman’s terms, only new trees on previously unplanted
areas can qualify for carbon credit creation.

As there remain issues over how to measure the amount of carbon ‘sequestered’ from the
atmosphere by new plantings, these kinds of projects are excluded altogether from the EU
ETS. This exclusion also helps to mitigate the problem of companies ignoring their own
emissions by pursuing the low cost option of planting a new forest in a developing
country. This strict ruling on forestry activities is an area of contention, as critics argue
that it does not incentivise developing countries to preserve existing forests.

Implications for the Local Forestry Sector

The NSW Benchmark system is more flexible than the EU ETS, as it permits the use of
forestry projects, as long as they comply with the Kyoto rulings. This has the potential to
generate new opportunities for locally listed forestry companies, which in a general sense
have struggled in recent years following changes to tax laws. In light of the growth in
carbon trading it can be easy to envisage the sector receiving a fresh wave of investor
sentiment. Although we see opportunities for these companies to use their forestry
plantations to generate carbon credits and extra revenues, the upside would be limited.

The NSW system’s current restrictions mean that areas where forestry companies cut
down and replant areas of forest would not be able to generate credits. However what the
current rules do suggest is that when forestry companies plant a new area of land for
harvest sometime in the future, that area is able to generate carbon credits, but only once.
When these new areas are ultimately harvested and replanted, more carbon credits would
not be awarded, as the replanting is thought to simply maintain the sequestering role of
the previous trees.
Carbon Market Opportunities

With the growth drivers behind the global carbon market set to remain strong over the
years ahead we anticipate that some interesting opportunities will arise for investors.
However with the market still in its emerging stages in most areas of the world, investors
should adopt the same cautious approach as they would to any other opportunity.
Domestic and international regulatory frameworks will play a vital role, but as the
Europeans learned from last year’s carbon crash, there are likely to be ‘kinks’ that will
need ‘ironing out’.

There are opportunities to directly invest in carbon credits via a number of global climate
exchanges, but given uncertainties over factors driving carbon prices, successfully
operating a carbon futures account could be out of reach for most investors. However for
those who may be interested, we have provided a simple technical outlook on the price of
the ‘2008 ECX CFI futures’ contract, which is essentially the futures price on European
carbon credits valid to offset emissions during 2008.

Based solely on historical price patterns, the outlook has turned bullish after prices
recovered following the 2007 crash. Strong support has been established near €18.50
after prices ‘triple bottomed’ around this level. Prices are currently trading just below
€25, which is a significant resistance level. A break above this level would be bullish.
The emergence of an ascending triangle, a typically bullish pattern, supports the case for
a break above €25.

In terms of other opportunities, the choice of listed companies that participate directly in
the carbon market is currently very limited. However we would not be surprised to see
more IPO’s emerge along this theme during the next few years. Therefore while the
market remains in its emerging stages we see the best opportunities in companies that are
positioned to benefit from the rise of carbon trading, but whose business models are
strong enough to survive, with or without carbon trading. With this in mind, we view the
renewable energy and forestry sectors as ones to watch, but reiterate our stock specific
focus.

Full Throttle Reverse - Reverse Engineering

Civilization
Thursday, 26 February 2009
by Vicky Davis

I don’t know how many people took me seriously when I said that the world was being
run by the Cult of Bucky (Buckminster Fuller), but I was very serious despite the fact that
it sounds absurd. Actually, it’s not clear that the ideas of radical environmentalism as a
framework for life on earth originated with Fuller, but if you want to understand to full
measure of the insanity, watch his videos. Just google videos using his name and while
you are listening to the videos, picture the world he had in mind because that’s the world
that’s being created right now for your children.

First of all, you must understand that the federal reserve notes in your wallet only have
the value that is assigned to them and by that I don’t mean $1.00 in the sense we
normally understand it. Money is anything that is valued by the society. In primitive
cultures, certain kinds of shells had value for trading so you can’t even say that gold and
silver are the only items of value. They only have value if they are assigned value by the
society and you can trade them for supplies you need.

In the old world order, those printed pieces of paper you have in your wallet had value
but with the financial market meltdown and the trillions of dollars created as bits in
computers beginning with the dot.compost stock manipulation, corporate accounting
fraud, trillions spent on the war in Iraq and Afghanistan, and the fraudulent subprime
mortgages, the hundreds of billions of bailout money - followed by the hundreds of
billions of “economic stimulus”, billions for private corporations like AIG - and their
hands are out again - and another “economic stimulus” package waiting in the wings that
will be just like the last one, what they have done is to destroy our financial system of
currency. And we will never recover to our old system of currency because the people
who are destroying our system are the same ones who are controlling the “bailout
money” and implementing the new financial system. The new financial system of value
for trading will be based on carbon.

Everybody knows about the World Bank’s plan for trading credits for reductions of CO2
emissions but I think few people really understand that the plan is for carbon credits to be
the underlying basis of value for the world financial system. And why would they
understand it? It’s completely and utterly insane. You have screw your head around
backwards to even think of it. It is a world financial system based on reverse engineering
of civilization - Full Throttle Reverse.

World Bank Carbon Trading Gets Off To An Explosive Start

"To put that figure in perspective, the entire US wheat crop in 2005 was valued at about
7.1 billion dollars," said Karan Capoor, senior financial specialist at the World Bank and
the report's main author.

"The data makes it clear that carbon is now a financial commodity. Carbon is now priced
and business managers take the carbon price into consideration along with other factors
in making business decisions," he said.

Capoor added: "But like other financial commodities, the events of the last two weeks in
the EU ETS shows that markets can be volatile."

The market is the brainchild of the Kyoto Protocol for controlling greenhouse-gas
emissions -- the carbon gases emitted mainly by burning oil, gas and coal that are driving
perilous climate change.

Its backbone is the 25-nation EU's ETS marketplace And it’s such a relief for me to be
able to say it - “Full Throttle Reverse” and to be able to describe what I mean by that. It’s
been a picture in my mind for several years that I couldn’t put into words. It’s a picture of
everything moving in reverse. The deconstruction of our government, our nation, our
financial system, and deconstruction of our economic system that was based on building
for life in an industrialized, modern country.

In the New World Order, there will be value in destroying life and destroying everything
having to do with the

old economy based on fossil fuels. Figuring out the fossil fuels part of it is easy - the hard
part is understanding the destroying life part of it. Every living thing is carbon based.
Carbon is the element that determines whether something is living or not. Regardless of
how the carbon trading system is marketed, human and animal life are included and the
reduction of carbon based life - life that emits CO2, will generate carbon credits which
can be used to purchase items of necessity in the new system. The only thing I can say
about the system is that it is perfectly, brilliantly evil because the system will be firmly in
place before people even begin to understand what it’s about - assuming we are unable to
stop them.

To get an idea of how this system will work, picture a national carbon bank with each
societal unit having an account. A societal unit would be a family, a town, a state, etc.
The CO2 emissions of that unit would be calculated and would be recorded on the
negative side of the ledger. The productivity of the unit would then be calculated and
entered on the plus side of the ledger. If the net is on the plus side, it’s all good. If the net
is negative, then carbon credits must be purchased or obtained from someplace - or the
unit must be dissolved. (Don’t blame me for this insanity - I’m just the messenger).

The relative worth side of the ledger would be a difficult thing to calculate because artists
for example, often have no monetary worth. But they did think of a solution for this
problem. The solution is the “Asset Based Community Development” concept. The
concept and toolkit was developed at Northwestern University. The idea of ABCD is to
inventory the non-tangible assets of the population within a community. The fact that
ANYBODY would spend money on something like this should tell you how serious they
are about the new system of valuation based on resource utilization.

Several years ago, a radio talk show host named Chris Gerner read a section of Joan
Veon’s book, ‘Global Straight Jacket’ on something she learned about at a United
Nations Women’s Conference in Beijing. The concept is called ‘Family Dependency
Ratio’. You can listen to an audio clip of it HERE but basically it is a calculation of the
value of your family based on your productivity relative to your utilization of the earth’s
resources. The idea is that your family should be neutral or on the plus side. You don’t
want to be negative in a system of values based carbon emissions.

Once you can wrap your head around that, you can then understand the purpose behind
the NAIS animal tracking system. All living creatures must be tagged because in the
carbon bank, each one of those animals has a negative value in the bank that must be
offset by a credit.

After hearing Joan Veon’s description of the Ratio, I did some searching on the World
Bank website for more information. I found a report that has the same kind of perverted
thinking. The title of it is “Environment in Poverty Reduction Strategies and Poverty
Reduction Support Credits’. The logic of this report is that if countries reduce poverty
they will get money for development. That’s reverse logic. How would poor countries
reduce poverty if they don’t get development dollars? You’d have to eliminate poor
people and then you get development dollars. Being very blunt about it, the incentive is
to murder poor people - and you will receive development dollars for doing it.

Another report I found is a draft version of the UN World Population Plan produced in
1994. I’m not sure if they ever voted on it but the principles of it are incorporated into
UN Agenda 21 - Sustainable Development anyway.

Chapter III. Interrelationships Between Population, Sustained Economic Growth and

Sustainable Development Page 9

A. Integrating population and development strategies

Basis For Action

3.1. The everyday activities of all human beings, communities and countries are
interrelated with population change, patterns and levels of use of natural resources, the
state of the environment, and the pace and quality of economic and social development.
There is general agreement that persistent widespread poverty as well as serious social
and gender inequities have significant influences on, and are in turn influenced by,
demographic parameters such as population growth, structure and distribution. There is
also general agreement that unsustainable consumption and production patterns are
contributing to the unsustainable use of natural resources and environmental degradation
as well as to the reinforcement of social inequities and of poverty with the above-
mentioned consequences for demographic parameters. The Rio Declaration on
Environment and Development and Agenda 21, adopted by the international community
at the United Nations Conference on Environment and Development, call for patterns of
development that reflect the new understanding of these and other intersectoral linkages.
Recognizing the longer-term realities and implications of current actions, the
development challenge is to meet the needs of present generations and improve their
quality of life without compromising the ability of future generations to meet their own
needs.

3.3. Sustainable development implies, inter alia, long-term sustainability in production

and consumption relating to all economic activities including industry, energy,
agriculture, forestry, fisheries, transport, tourism and infrastructure in order to optimize
ecologically sound resource use and minimize waste. Macroeconomic and sectoral
policies have, however, rarely given due attention to population considerations. Explicitly
integrating population into economic and development strategies will both speed up the
pace of sustainable development and poverty alleviation and contribute to the
achievement of population objectives and an improved quality of life of the population.

Objectives
3.4. The objectives are to fully integrate population concerns into:

(a) Development strategies, planning, decision-making and resource allocation at all

levels and in all regions, with the goal of meeting the needs, and improving the quality of
life, of present and future generations;

(b) All aspects of development planning in order to promote social justice and to
eradicate poverty through sustained economic growth in the context of sustainable
development.

I would very much like to be wrong about all of this because it’s terrifying to think that
world leaders would even consider participating in something as insane as this system.
But they are as this article on Africa shows. “World Bank’s Carbon Trading Plans Fail
Africa”.

And when you fully understand the system, then you can also understand the plans to
rebuild our infrastructure for “clean energy” and you should be able to understand the
purpose of the nationalized medical records, the shift to a “wellness health care system”
with triage of the chronically ill, the poor, the elderly and the disabled into the “special
care” clinics staffed by 2nd rate providers with decision support computer systems. By
definition, these populations are not sustainable in the carbon based system of relative
value and the U.S. will earn credits for their elimination.

Vicky Davis February 24, 2009

Vicky L. Davis was a Computer Systems Analyst/Programmer who spent 20 years

designing and writing computer systems for large corporations and state and local
governments. For 15 of those years, she worked as a Contractor, which gave her
exposure to a wide variety of different businesses and their internal applications and
operations. She has traveled extensively and has lived in nine states in the course of her
life’s adventure. She maintains a website named www.channelingreality.com where she
posts documentation and analysis of political issues generally not covered in the
mainstream media.

Note: (The link to The Cult of Bucky in the first paragraph takes you to The World Game
of Chaos. It not only provides more explanation but is an excellent article. Vern)

Understanding the Global Carbon Cycle

http://www.whrc.org/carbon/index.htm

We (ecologists) have been interested in

carbon for a long time, first, because
carbon is what we (as well as all of the
other plants and animals on earth) are
made of (50% of our dry weight).
Ecologists can learn a lot about
ecosystems and what they do for us by
Richard Houghton, Senior
constructing carbon budgets (or energy
Scientist, Carbon Research
budgets) from measurements of
productivity, food chains, and nutrient cycling.

The second reason that carbon is of interest is because carbon, in the form of carbon
dioxide (CO2), is the major greenhouse gas released to the atmosphere as a result of
human activities. The continued release of greenhouse gases is raising the temperature
of the earth, disrupting the climates we and our agricultural systems depend on, and
raising sea-level. The concentration of CO2 in the atmosphere has already increased by
about 30% since the start of the industrial revolution sometime around the middle of the
19th century and will continue to increase unless societies choose to change their ways.
 Most of the increase in atmospheric CO2 concentrations came from and will
continue to come from the use of fossil fuels (coal, oil, and natural gas) for energy, but
about 25% of the increase over the last 150 years came from changes in land use,
for example, the clearing of forests and the cultivation of soils for food production
[Figure 1].

Figure 1 (select image for larger version - JPG, 109KB)

The global carbon cycle involves the earth's atmosphere, fossil fuels, the oceans, and
the vegetation and soils of the earth's terrestrial ecosystems [Figure 2].
 Figure 2 (select image for larger version - GIF, 65KB)

We at the Center are involved with determining the role terrestrial ecosystems play in
the global carbon cycle. Each year the world's terrestrial ecosystems withdraw carbon
from the atmosphere through photosynthesis and add it again through respiration and
decay. The withdrawals and additions of carbon can be seen in the regular seasonal
oscillation of CO2 concentrations in the atmosphere [Figure 3].
 Figure 3

If the global totals for photosynthesis and respiration are not equal, carbon either
accumulates on land or is released to the atmosphere. Unfortunately, the global rates of
photosynthesis and respiration are neither known nor measured well enough to
determine annual changes in carbon storage. On the other hand, human use of the land,
for example the clearing of forests for croplands, is relatively well documented, both
historically and with satellites, and thus can be used to determine changes in the storage
of carbon.

Research at the Center has focused on the current and historic releases of carbon
that result from changes in land use. The approach we use is based on the fact that much
of the carbon stored in trees and soils is released to the atmosphere when forests are
cleared and cultivated. Some of the release occurs rapidly with burning; some of it
occurs slowly as dead plant material decomposes. When forests regrow on cleared land,
they withdraw carbon from the atmosphere and store it again in trees and soils. The
difference between the total amount of carbon released to the atmosphere and the total
amount withdrawn from the atmosphere determines whether the land is a net source or
sink for atmospheric carbon. Our approach is thus based on two types of data: rates of
land-use change (e.g., annual rates of deforestation) and the changes in carbon that
follow changes in land use.
 Our work shows that between 1850 and 2000 about 155 Pg of carbon were
released to the atmosphere from changes in land use, worldwide (one Pg
[petagram]=one billion metric tonnes=1000 x one billion kg). The amount released each
year generally increased over the period, and by the 1990s the rate of release averaged
about 2 Pg of carbon per year.

When considered with the other terms in the global carbon equation (the
atmosphere, fossil fuels, and the oceans), there is an apparent imbalance in the global
accounting, and considerable effort has gone into explaining and finding this residual
sink, or missing sink, of carbon.

Concern about the consequences of a changing climate has led us to explore how forests
might be used to withdraw carbon from the atmosphere. They have a significant
potential for reducing the rate at which carbon builds up in the atmosphere (see "Using
Forests to Sequester Carbon"), but the major contributor to climatic change, and
hence the human activity most in need of change, is use of fossil fuels for energy.
Advances in the technology of renewable energy sources, including wood-derived fuels,
might reduce our reliance on fossil fuels and thus reduce global emissions of carbon
dioxide significantly.

More data on CO2 are available from DOE's Carbon Dioxide Information
Center in Oak Ridge.

Carbon and Changes in Land Use

Our work shows that for the years 1850 to 2000 about 155 PgC were released to
the atmosphere as a result of changes in land use, 85% from forests either
logged or converted to other uses, the rest largely from cultivation of prairie
soils (One Pg [petagram]=one billion metric tonnes=1000 x one billion kg). The
total loss of carbon from terrestrial ecosystems was 165 PgC, but about 15 PgC
accumulated in wood products (e.g., buildings, furniture, paper, etc.). The net
increment in these wood products is the difference between harvests (about 235
PgC) and oxidation of products (about 220 PgC) over this 150-year period.
 Conversion of natural ecosystems to croplands and pastures was responsible for
net releases to the atmosphere of 107 and 21 PgC, respectively. The net effect of
logging and regrowth was to release about 23 PgC. The annual rate at which
carbon was released to the atmosphere generally increased over the period 1850
to 2000 as rates of deforestation increased [Figure 1].

Figure 1 (select image for larger version - JPG, 110KB)

For the decade of the 1990s the net release of carbon from changes in land use
averaged 2.2±0.8 PgC/yr. In the 1990s the net flux of 2.2 PgC from changes in
land use was the difference between a release of 5.2 PgC from oxidation of dead
vegetation, soil organic matter, and wood products and an uptake by regrowing
ecosystems of about 3.0 PgC/yr). For the decade of the 1990s, the global carbon
cycle can be summarized as follows (units are PgC):

For additional information on the "Missing carbon sink", see Missing Carbon.
Using Forests to Sequester Carbon

It is possible to remove carbon from the atmosphere and sequester it in forests

and forest products, even though the trend to date has been the reverse.
Management practices that could reduce or reverse the current emissions of
carbon from land include (1) a halt to deforestation, (2) an expansion in the area
of forests, (3) an increase in the stocks of carbon in existing forests, (4) more
efficient harvest and greater use of wood in long-lasting products, and (5) the
substitution of wood fuels for fossil fuels (see Table 1 at bottom of page). It is
important to recognize, however, that the rate of global warming needs
management as well. Unless the warming is gradual enough to avoid widespread
mortality of forests, the additional releases of carbon caused by the warming
itself, through increased respiration, decay, and fires, may cancel the intended
effects of forest management. Regions in Africa with a potential to sequester
carbon are shown in Fig. 1.

The estimates are based on a comparison of today's ecosystems

(determined from satellite) with the ecosystems thought to have existed prior to
human existence. Human influences have generally reduced the area and stature
of forests, and Figure 1 shows where human modifications are thought to have
been light, medium, and heavy.
 Figure 1

These areas represent the regions with the greatest potential to re-
accumulate carbon through such practices as allowing natural forest growth,
planting forests, or establishing agroforestry, the practice of combining trees
with agriculture. The accumulation of carbon in forests can only continue while
the forests are growing, however. Fully grown forests neither accumulate nor
release carbon. Thus the strategy with the greatest potential for keeping carbon
out of the atmosphere indefinitely is to replace fossil fuels with wood-derived
fuels that are sustainably produced.
The Missing Carbon Sink

For the decade of the 1990s, the global carbon cycle can be summarized as
follows (units are PgC. - One Pg [petagram]=one billion metric tonnes=1000 x
one billion kg ):
 Attention on the global carbon cycle over more than 30 years has focused
on the apparent imbalance in the carbon budget in the above equation - the so-
called "missing sink," missing because the accumulation of carbon has not been
observed. The average annual emissions of 8.5 PgC during the 1990s (6.3± 0.4
Pg from combustion of fossil fuels and 2.2± 0.8 Pg from changes in land use)
are greater than the sum of the annual accumulation of carbon in the atmosphere
(3.2 ± 0.2) and the annual uptake by the oceans (2.4 ± 0.7 PgC/yr). An
additional sink of 2.9 PgC/yr is required for balancing the budget. The terms in
the global carbon equation can be shown graphically over the period 1850-2000
[
F
i
g
u
r
e

1
]
.

I
n

Figure 1 - select image for larger version (opens in separate

t
window)
h
e last few years several independent analyses based on geochemical data (data
from the atmosphere and oceans) and a series of carbon budgets based on data
from forest inventories have shown that carbon is accumulating in northern mid-
latitude terrestrial ecosystems, although estimates of the magnitude and location
of the accumulation vary among the analyses.

In the tropics (where forest inventories are rare), the total net flux of carbon
from changes in land use (2.2 PgC/yr) is consistent with recent estimates of flux
based on atmospheric data.
 Globally, terrestrial ecosystems are calculated to have been a net sink of
0.7 (±0.8) PgC/yr to the atmosphere during the 1990s. For the period 1850 to
2000, a geochemical summary of the global carbon cycle is as follows (the
terrestrial term having been determined indirectly by difference) (units are PgC):

The terrestrial net release may be the result of different processes, however:

The last term may, again, be referred to as the missing carbon sink because it
has not been observed.