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Brazil was the country that devised, for the Kyoto Protocol,
Clean Development Mechanisms, which would allow it to negotiate carbon credits in the international market. However, it’s losing ground in this area. This is the opinion of the Director of Sustainability at PricewaterhouseCoopers, Marco Antônio Fujihara, who believes that one of the main problems in the country is the lack of cohesive actions both inside the government and between the public and private sector.
“Each government member has a different perspective. The Ministry of Science and Technology says one thing, the Ministry of Environment says another, the Ministry of Industry and Trade says something else, and so it goes. The debate is not based on competitive advantages, and the issue is approached in separate topics,” says Fujihara. In the meantime, India has a committee made up of representatives from both the public and private sector for debating the issue, and the number of CDM projects in that country already totals 320. Fujihara says that Asia and Latin America are the main sellers in this market, but they have chosen opposite paths: while Asia’s market share grew from 21% to 51%, Latin America’s dropped from 40% to 27%. Between January and May 2004, the total transaction volume reached 64 million tons of carbon dioxide. This shows that the quantity negotiated this year should be equivalent to twice as much as the amount traded in 2003.
Other Brazilian problems are the dispersion and lack of continuity of initiatives, bureaucratic and inefficient structures, and the commitment of projects based on an inadequate approval system of sustainability criteria.
In the international context, another country that has been standing out is China, which has 103 projects in the initial stage. In Latin America, the countries that should be mentioned are Peru (12 projects submitted), Argentina (four projects submitted with government approval), and Chile (seven projects submitted). Bolivia has a finished project and a specific agreement with Canada’s government.
According to Fujihara, considering the progress of competition, Brazil should be left with about 6% or 7% of the market share. In 2002, the global market consisted of 4.75 billion tons of carbon, of which Latin America had 400 million, and Brazil, 88 million tons.
“I think we’re losing ground in the international market because we don’t know how to exploit our competitive advantages. We’re good fuel alcohol and biodiesel producers, for instance. However, we don’t make as much money as we could when exporting alcohol, for example. Let’s say Japan decides to buy alcohol to add to gasoline. What would happen then? It would reduce its emissions internally and would thus save more than if it bought carbon credits from Brazil,” Fujihara explains. According to him, it´s for this reason that wealthy countries want to use alcohol and biodiesel in their power matrixes, thus avoiding the purchase of emissions reduction certificates.
Regarding the entry of China in the CDM market, despite its dirty power matrix, which is coal-based, Fujihara says that this is precisely the country’s advantage: “By cleaning it even a little bit, they’ll be able to negotiate. Anything that causes the reduction of emissions is valid. And the criteria they use to decide what their actions will be is: Where is it worth to reduce more? And their actions will be based on this answer.”
Fujihara believes that, by 2005, the price of one ton of carbon, which today varies between 90 cents and US$ 5, will have a significant increase, totaling US$ 20-30. The reason for that is because the penalties established by the European Union will already be in force. However, he warns that extravagant forecasts are being made, such as those that calculate that the value of the world market will be between US$ 5 billion and US$ 50 billion.
With regard to the huge carbon dioxide emissions resulting from forest burns in the Amazon, Fujihara doesn’t believe they will adversely affect Brazilian CDM trade projects. He says:
“This is more of a political problem. We’re actually showing the world that we aren’t able to adequately manage what goes on in our country. It could adversely affect a political or diplomatic negotiation, but from an economic perspective I don’t think there will be any damages because the Kyoto Protocol doesn’t establish carbon dioxide emissions reduction goals for Brazil. However, such goals might be determined in the future if the problem persists. In this case, we would lose all of our advantages.”
However, carbon isn’t the only possible object for negotiation. In Nova Iguaçu, in the state of Rio de Janeiro, there’s a waste plant that received resources from the Netherlands. Fujihara says that the process of decomposition of organic matter, which takes places in all sanitary landfills, generates methane. This gas has a greenhouse effect power 21 times higher than that of carbon dioxide. However, the advantage of methane is that it’s a fuel and can be used for producing energy. “If it was possible to channel this gas in a small turbine in such a way that it was able to produce energy, it would avoid emissions. When this is done, credits are obtained because of methane’s serious greenhouse effect-related impact. It’s also possible to trade nitrogen oxides and fluorides,” says the Director of Sustainability at PricewaterhouseCoopers.
Fujihara insists that, regardless of the figures related to the world emissions market, Brazil needs a more cohesive government action and projects that consider appreciation (for instance, how much would the use of alcohol be worth domestically in terms of reducing emissions to be sold, instead of exporting the fuel?).
According to him, the establishment of rules in the European, Japanese, and Canadian markets might allow the creation of an important negotiation factor in the trading of carbon emissions. However, if governments fail to define a scenario for after 2012, when the deadline for reducing emissions according to the amounts established in the Kyoto Protocol finishes, the opportunities for CDM trading could disappear in 2006-2007.
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