Published Thursday, August 17, 2000

Teen makes a statement by buying, removing emissions

BY KATHERINE ELLISON

Special to the Mercury News

Already a committed environmentalist at 18, Ryan Buckley has raised money, made speeches and joined protests to show his concern about the planet's fate. But nothing has given him as much satisfaction as buying 50 tons of hot air.

Paying $150, in an order placed over the Internet this spring, the recent Los Altos High School graduate bought the rights to take 50 metric tons of heat-trapping carbon dioxide gas out of the atmosphere. By doing so, he joined what experts predict could become a multibillion-dollar market that may also save forests and combat the leading cause of global warming.

The quickly emerging trade in carbon dioxide is a product of the historic 1997 global conference in Kyoto, Japan, in which the world's industrialized countries agreed to reduce their emissions of so-called greenhouse gases. It also is based on the notion that the strange new commodity will increase in value. It thus combines new-age philanthropy with old-fashioned greed.

Environmentalists are fiercely divided as to whether investments like Buckley's can help avert climate change, but those in favor stress the power of self-interest.

``It reminded me of Wall Street,'' said the lanky honors student, who owns no stocks but has watched affluent friends check their portfolios on the Web. ``I felt that anyone, even individuals like me, could take some control of this market.''

In effect, Buckley bought permissions to pollute. It's a relatively new concept with an important precedent.

For the past several years, at the Chicago Board of Trade, U.S. power firms and speculators have been able to buy and sell the rights to emit one ton of acid-rain-causing sulfur dioxide or nitrogen oxide pollution as if they were pork bellies. The firms use the permits to comply with pollution limits set by the federal Clean Air Act. A power company struggling to meet its mandated target can buy permits from another, perhaps more efficient, company that can afford to cut back far below its limit. Although some of the evidence is in dispute, by many accounts the market has helped reduce pollution at a relatively low cost, while growing to more than $1.7 billion in annual volume.

Brokers familiar with the U.S. sulfur dioxide trade expect a global market in carbon dioxide emission rights to dwarf that figure. Presumably, the value of the rights would grow as the opportunities to cut back emissions are claimed, and become scarcer.

``We think the market could grow as large as $88 billion a year, estimating conservatively,'' said Neil Cohn, a greenhouse gas broker at Natsource, in New York, which sold Buckley his credits.

There's still no legal definition of a carbon emissions credit in the United States, but that hasn't stopped specialized brokers such as Natsource from selling them, mostly to utility companies and a few environmental activists. Buyers thus have no guarantee of any value beyond public relations points.

Buckley said he won't sell his emissions rights, even if their value goes sky-high. He bought them, from Natsource's new Environmental Action Desk, not for himself but on behalf of his school's Environment Club with money raised at a raffle. The intent was to withdraw the rights from circulation, making it that much harder for power firms to avoid cutting emissions at the source.

``This way, the real polluters, the very inefficient companies, will probably just have to go bankrupt,'' Buckley said.

His tiny purchase was unusual in that it did not involve a trade of emissions from one company to another. Instead he will get credit for the actual removal of 50 tons of carbon dioxide emissions by newly planted teak and mahogany trees, which can never be cut down, in a tropical forest in Panama. The absorption is measured by an independent company in Costa Rica.

The use of forests to remove carbon dioxide through photosynthesis -- the process by which all plants take in carbon dioxide and emit oxygen -- is a controversial but intriguing part of the new market. International negotiators have been debating whether to allow investments in planting and preserving trees to count as credits toward the Kyoto targets. Early this month, the Clinton administration publicly supported the tactic. The rules under which investments could be made have not been worked out; more clarity may come at a key meeting of the Kyoto negotiators in November.

Even as financiers begin to race into the trade, some leading conservation groups have begun to raise questions about this novel market approach. Greenpeace, the World Wildlife Fund and the Sierra Club are among several organizations that oppose depending on forests as carbon ``sinks'' to any degree, saying it gives corporations a chance to buy their way out of what they say are urgently needed reductions of fossil fuel emissions at their source. They add that forests are hard to monitor, as well as vulnerable to changing conditions such as disease outbreaks and invasions by settlers.

``There's a danger in that you could get more trees being protected but more pollution,'' said Daniel Becker, a climate-change expert at the Sierra Club.

The system under which pollution rights are traded is known as ``cap and trade,'' with the cap, or limit, motivating the trade. In contrast with the sulfur dioxide market, there's still no cap on carbon dioxide, but many experts believe there will be soon, regardless of whether Kyoto is approved.

Carbon dioxide is emitted when animals and humans breathe and when we burn fossil fuels -- coal, gasoline and oil -- to run vehicles and factories. It's the No. 1 ``greenhouse gas'' that most scientists say is slowly but surely causing the atmosphere to heat up.

Amid mounting evidence of the dangers of global warming, the United States, one of more than 100 countries to sign the Kyoto Protocol, has pledged to cut back its own emissions to 7 percent below 1990 levels by 2008.

Were the Kyoto treaty ratified, big utility companies, which emit vast amounts of carbon dioxide, would face similar caps, enforced by law. That's not likely soon, because of strong political opposition. Some business leaders are concerned about the cost of switching over to new forms of energy. In addition, the majority of the U.S. Senate has voted against the treaty, raising objections that developing countries -- especially China and India -- are not yet bound by any reduction targets.

Yet as concern about climate change grows throughout the world, many firms are starting to take voluntary actions, preparing for what they see as inevitable future regulation.

At the same time, there's growing support for a market in carbon dioxide emissions. Both the United Kingdom and Denmark plan to start trading the pollutants next year. In the United States, meanwhile, financial innovator Richard Sandor, known for inventing interest rate derivatives, recently received a grant from the $1 billion Joyce Foundation in Chicago to design the possible terms of a carbon emissions trade in this country.

At the same time, several U.S., European and Japanese power firms have gone ahead over the past few years and spent more than $75 million on investments in forests for their carbon storage, according to Trexler & Associates, a Portland-based firm that tracks the deals.

In one such investment last year, for instance, in southeastern Brazil, Central & Southwest Utilities of Dallas paid $5.6 million to buy degraded land and restore it to forest, storing an estimated 1 million tons of carbon dioxide.

``It's not altruism -- we're thinking of the carbon credits, and trying to get in early to get the best projects at the cheapest prices,'' said CSW environmental services director Jay Pruett.

The incentive for investments in forests could have special meaning for California woodlands, of which 77,000 acres disappear each year, according to Laurie Wayburn, president of the Pacific Forest Trust in Boonville. Redwoods, in particular, may play a giant role.

``They're world champions in carbon storage,'' Wayburn said. ``They grow fastest, largest and longest.''

Wayburn said she has been brokering a deal in which a major U.S. utility company will make the first investment in California forests specifically for their carbon storage. She hopes to announce the details later this summer.

Wayburn joins many other environmentalists in hoping that the fledgling carbon market will give trees a new lease on life.

``The bottom line is we could finally start to have incentives for private companies to protect forests instead of destroying them,'' said Mike Coda, director of the Climate Change Program for The Nature Conservancy, which has brokered several investments by utility companies.