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Carbon Trading

The Carbon Market The Essential Guide, Part 1May 01, 2008Tim Morris, wise-owl.com analyst

With the global carbon market bearingan estimated value of $30bn and rising,investors may be forgiven forquestioning whether the old adage thatmoney doesnt grow on trees stillholds true. To bring you up to speed onsuch matters, we have put together this

essential guide.

Fast Facts

The global market for carboncredits 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 contractsover carbon credits are traded on dedicated climate exchanges. Carbon credit prices are driven by changes in the level of the legal emissions cap, theweather, fuel prices, and increasing market penetration as emission regulations areextended to more companies. Australia hosts the worlds second largest carbon credit market in NSW, but a nationaltrading system has yet to be established. Investment in environmentally friendly carbon offset projects, which generate carboncredits, 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 hasfuelled the wave of economic development which has delivered modern societys greatestaccomplishments, such as electric lighting, the automobile, and flight. However, in thelater half of the last century we learned that these advances were not without cost, as thefirst clues began to surface about the toll which modern societys habits were having onour planet.

Unlocking the power of carbon based fuel sources releases carbon gases into the air,trapping heat within the Earths atmosphere, creating what we all know as the globalwarming effect. For evidence of the effect we need only consider the increasing


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concentrations of carbon dioxide within the atmosphere. Before 1850 the Earthsatmosphere contained about 280 parts per million (ppm) of carbon dioxide, however thefigure is now 380ppm, and is forecast to reach 550ppm by 2050 according to theIntergovernmental Panel on Climate Change.

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

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

As world governments unite to counteract the effects of global warming, a combinationof regulatory and market based remedies are being adopted to essentially put a price onclean air. While this poses a threat to some old industries with unflattering environmentalrecords, 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, aninternational agreement signed in 1997 that became effective from 2005. The treaty

requires developed countries, referred to as Annex I nations, to reduce their greenhousegas emissions by 5.2% over 1990 levels by 2012. Developing countries that have ratifiedthe agreement are not required to do so.

Discussions about greenhouse gas emissions often focus on carbon dioxide (CO2), whichis 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 dangerousgases, which have even greater global warming potential. However to avoid confusion


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and provide an industry standard, all greenhouse gas emissions are referred to in termsof CO2 equivalents. With CO2 being the industrys reference point and four of the sixgreenhouse gases targeted by Kyoto containing carbon, it is no surprise to see thisevolving field coined the carbon market.

Kyoto Compliance

Rather than simply placing a blanket ban on greenhouse gas emissions beyond a certainthreshold, the Kyoto agreement recognises the need for a flexible approach for achievingemission reductions, offering 3 ways for governments and corporates to achievecompliance.

1. Direct emission reductions This involves a company or government altering theirexisting activities to directly reduce their emissions. A simple example would beswitching off the office lights overnight.

2. Invest in Emission Offset Projects In circumstances when it is not feasible to directlyreduce ones own emissions enough to meet legal requirements, companies andgovernments are able to invest in separate projects that remove carbon from the

atmosphere, to essentially offset their own activities.

3. Financial ComplianceBy either paying a penalty for emissions beyond the legal limit, or through buying carboncredits, which are emerging financial instruments that permit the holder to emit beyondtheir legal limit.

The Carbon Market


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By introducing a legal incentive for companies and governments to spend money onreducing their emissions, Kyoto has ascribed a monetary value to clean air, causingenvironmental issues to enter the realm of corporate financial strategy. Economic logicsuggests 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 wehave witnessed strong growth around the later two compliance mechanisms involvingcarbon credits, and offset projects, which benefits those whose emissions fall below theirlegal 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 CO2equivalent into the atmosphere within a certain period. Carbon credits are generated byparties 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 ownemissions in order to achieve regulatory compliance. The cost of purchasing a carboncredit 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 intothe market in early 2005, as Kyoto came into effect, sparked the evolution of dedicatedcarbon exchanges whose sole purpose was to facilitate trade in carbon credits. Theoverall growth in trading volumes for carbon credits since this time has been nothingshort of phenomenal. Trading volumes have increased 24-fold, from around 100 milliontonnes of CO2 equivalent in 2004 to nearly 2.4 billion tonnes in 2007, 2/3rds of whichwas traded in the later half of the year. In 2006 the World Bank estimated the size of themarket to be around $30bn.


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The most advanced carbon market is hosted by the European Union, which established anEmissions Trading Scheme (EU ETS) built on the Kyoto mechanisms in 2005. Thescheme covers around half of the regions emissions regulating 11,000 installations and6,500 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 carboncredits or allowances from those who beat their reduction target. In the case that nomember of the scheme has any spare credits, polluters can pay a financial penalty foreach tonne of CO2 equivalent emitted beyond their cap.

This financial penalty effectively sets an upper limit on the price of carbon in theEuropean 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, thepenalty rate was 40 per tonne of CO2 equivalent. However we have now entered phaseII 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 placeby way of futures contracts on the European Carbon Exchange (ECX), which has amarket share of around 80%. Contracts are specified according to the year in which theunderlying carbon credit is valid, and are traded for up to 2 years before the underlyingcredit expires. For example, the 2008 contract shown below shows the cost of offsettingemissions made during 2008, and provides the best indication as to the current value of aEuropean carbon credit, which is currently just below 25.

Key Price Drivers

Factors influencing the price of carbon are much more complicated than traditional


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commodity markets, which are typically governed by supply and demand. These marketforces certainly play an important role in carbon pricing, however forecasting futuresupply and demand for carbon is very difficult because of the markets emerging natureand the intangible nature of emissions and clean air.

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

The Carbon Crash

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


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Other Price Drivers

Penalty Rates/Carbon Tax

The value of carbon credits will also be influenced by the financial penalty imposed onparties that fail to comply with the cap. Fixed rate penalties for each tonne of emissionsbeyond the cap, such as the case in the EU ETS, effectively put a price ceiling on theprice 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 EUpenalty rate has been lifted to 100/t, European carbon credit prices have much moreroom to appreciate.

The Weather

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

Energy Prices

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

Market Penetration

The EUs regional trading system only covers a select few industries the largestgreenhouse gas emitters. Over the long term we may see the supply and demandfundamentals change as more industries are included under emission regulations. Thelandscape could also change as more countries introduce or join emission cap and tradesystems. 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 laterin the year, which could increase volatility within existing carbon markets.


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Carbon Trading

The Carbon Market The Essential Guide Part 2May 05, 2008Tim Morris, wise-owl.com analyst

Australia's position in the Global Carbon Market

The US has been left on its lonesomefollowing Australias decision to signthe Kyoto Protocol late last year as theRudd government came into power.Despite being late in recognising Kyoto,the emergence of a local carbon marketis well under way. A national carbontrading system is currently beingdeveloped with a target for

commencement in 2010. Howevertrading is already under way at the statelevel, with NSW hosting the worldssecond largest trading scheme in termsof volumes and value of carbon credits transacted.

Local carbon markets have been evolving for several years because Australias reluctanceto ratify Kyoto reflected an unwillingness to be legally bound to emission targets ratherthan reluctance to curb emissions. The NSW state governments cap and trade schemehas been in operation since 2003. Known as the NSW Benchmark Scheme, it regulatesannual 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 NewSouth Wales Greenhouse Gas Abatement Certificates (NGAC). Spot prices have recentlytraded 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 lowerthan their European counterparts because of differences in the type of activities permittedto generate excess credits, and the level of the penalty rate for non compliance.


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The local penalty rate is only $12/t of CO2 equivalent, compared to 100/t under the EUETS. 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 generatecredits, which serves to keep supplies tight. Unlike the NSW scheme, the EU ETS doesnot allow excess credits to be generated through forestry activities. The rationale behindthis ruling is a source of contention within the industry, especially as the market for offsetprojects has ballooned in recent years.

Carbon Credit Creation

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

Investment in projects whose sole purpose is to generate carbon credits by offsettingemissions has ballooned. The Kyoto protocol differentiates between projects undertakenin developing and developed nations. Projects undertaken in developing nations are

known as Clean Development Mechanism (CDM) projects, while those undertaken indeveloped nations are known as Joint Implementation (JI) projects. Developing nationshave attracted the bulk of investment in carbon offset projects, with the total value ofCDM project investment being over US$5.25bn during 2006, which is 37 times greaterthan the $US141m invested in JI projects over the same period.

China has attracted the bulk of carbon offset project investment, hosting 70% of all CDMprojects in 2006, with the next largest player, India, hosting 12%. The fact that


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developing nations are being used by industrialised corporate to offset emissions hasstirred much debate. This trend makes sense from a financial point of view becauseadministering projects in developing nation carries a lower cost. However the criticsargue that this system ignores the actual source of emissions taking place, which istypically 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. Howeverafter taking a closer look at the fine print governing the EU ETS and Kyoto, we do notsuggest that members start counting on that large Eucalyptus tree in the back yard fortheir retirement income.

The Kyoto protocol imposes several restrictions on how forestry projects can be used togenerate 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 nothave hosted a forest on 31st December 1989, and only new plantings made after the year2000 are eligible. Therefore in laymans terms, only new trees on previously unplantedareas can qualify for carbon credit creation.

As there remain issues over how to measure the amount of carbon sequestered from theatmosphere by new plantings, these kinds of projects are excluded altogether from the EUETS. This exclusion also helps to mitigate the problem of companies ignoring their ownemissions by pursuing the low cost option of planting a new forest in a developingcountry. This strict ruling on forestry activities is an area of contention, as critics arguethat 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 offorestry projects, as long as they comply with the Kyoto rulings. This has the potential togenerate new opportunities for locally listed forestry companies, which in a general sensehave struggled in recent years following changes to tax laws. In light of the growth incarbon trading it can be easy to envisage the sector receiving a fresh wave of investorsentiment. Although we see opportunities for these companies to use their forestryplantations to generate carbon credits and extra revenues, the upside would be limited.

The NSW systems current restrictions mean that areas where forestry companies cutdown and replant areas of forest would not be able to generate credits. However what thecurrent rules do suggest is that when forestry companies plant a new area of land forharvest 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 wouldnot be awarded, as the replanting is thought to simply maintain the sequestering role ofthe previous trees.


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Carbon Market Opportunities

With the growth drivers behind the global carbon market set to remain strong over theyears 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 theEuropeans learned from last years carbon crash, there are likely to be kinks that willneed ironing out.

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

Based solely on historical price patterns, the outlook has turned bullish after pricesrecovered following the 2007 crash. Strong support has been established near 18.50after prices triple bottomed around this level. Prices are currently trading just below25, 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 fora break above 25.

In terms of other opportunities, the choice of listed companies that participate directly inthe carbon market is currently very limited. However we would not be surprised to seemore IPOs emerge along this theme during the next few years. Therefore while themarket remains in its emerging stages we see the best opportunities in companies that are


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positioned to benefit from the rise of carbon trading, but whose business models arestrong enough to survive, with or without carbon trading. With this in mind, we view therenewable energy and forestry sectors as ones to watch, but reiterate our stock specificfocus.

Full Throttle Reverse - Reverse Engineering

Civilization

Thursday, 26 February 2009by Vicky Davis

I dont 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, its 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 thats the world

thats 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 dont 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 cant 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


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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 Banks plan for trading credits for reductions of CO2emissions but I think few people really understand that the plan is for carbon credits to bethe underlying basis of value for the world financial system. And why would theyunderstand it? Its completely and utterly insane. You have screw your head aroundbackwards to even think of it. It is a world financial system based on reverse engineeringof 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 pricedand 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-gasemissions -- 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 its 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. Its


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been a picture in my mind for several years that I couldnt put into words. Its 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 everythinghaving 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 its 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, its all good. If the net

is negative, then carbon credits must be purchased or obtained from someplace - or the

unit must be dissolved. (Dont blame me for this insanity - Im just the messenger).

The relative worth side of the ledger would be a difficult thing to calculate because artistsfor 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


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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

Veons book, Global Straight Jacket on something she learned about at a United

Nations Womens 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 earths

resources. The idea is that your family should be neutral or on the plus side. You dont

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 Veons description of the Ratio, I did some searching on the WorldBank website for more information. I found a report that has the same kind of pervertedthinking. The title of it is Environment in Poverty Reduction Strategies and PovertyReduction Support Credits. The logic of this report is that if countries reduce povertythey will get money for development. Thats reverse logic. How would poor countriesreduce poverty if they dont get development dollars? Youd have to eliminate poorpeople and then you get development dollars. Being very blunt about it, the incentive isto 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. Im 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


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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


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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 its 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 Banks 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


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lifes adventure. She maintains a website namedwww.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 Gameof 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

Richard Houghton, Senior

Scientist, Carbon Research

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

constructing carbon budgets (or energy

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.


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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].


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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].


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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.


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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.


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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 2.20.8 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.


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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 intendedeffects 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.


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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.


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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 ):


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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

gu

r

e

1

]

.

I

n

t

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.

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

window)

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.


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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.

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