Contrary to many reports, this post suggests that Laudato si’ is supportive of the principle of carbon trading, and analyses the reasons behind these misapprehensions which appear to stem from one unfortunately-worded section in the Encyclical.
The Pope’s Encyclical Laudato si’ is a welcome intervention in the climate change debate, highlighting the moral and ethical issues and giving a strong lead to the Catholic faithful and beyond. Apart from climate change deniers, the document was warmly welcomed, and typical of many responses was that of Lord Stern who noted:
“Moral leadership on climate change from the Pope is particularly important because of the failure of many heads of state and government around the world to show political leadership. I hope other religious and community leaders will also speak out about how to tackle the two defining challenges of our generation, namely overcoming poverty and managing the risks of climate change. This would encourage greater political leadership in the run-up to the summit in Paris at the end of this year where countries should reach a new international agreement on tackling climate change
Source of the problem
Along with most climate scientists, he acknowledged that Laudato si’ is “founded in the best science. However, the most problematic part for many was its approach to the practical measures for tackling climate change; whilst stating 
“On many concrete questions, the Church has no reason to offer a definitive opinion; she knows that honest debate must be encouraged among experts, while respecting divergent views. But we need only take a frank look at the facts to see that our common home is falling into serious disrepair”,
it singled out for criticism “the strategy of buying and selling ‘carbon credits’”, , which it said:
“can lead to a new form of speculation which would not help reduce the emission of polluting gases worldwide. This system seems to provide a quick and easy solution under the guise of a certain commitment to the environment, but in no way does it allow for the radical change which present circumstances require. Rather, it may simply become a ploy which permits maintaining the excessive consumption of some countries and sectors.”
This was reported as:
- “Pope Francis encyclical warns on use of carbon credits”- Carbon Pulse
- “Pope attacks emissions trading as a possible ‘ploy’ – Reuters
- “Eight things we learned from the Pope’s climate change encyclical: #3. He doesn’t like carbon trading” – The Guardian
- “IEAT Statement on Papal Encyclical on Climate Change” – International Emissions Trading Association, (IEAT)
- Championing Environment, Francis Takes Aim at Global Capitalism – New York Times
Reasons for concern
The recent report of the International Energy Agency, (IEA), Energy and Climate Change states “putting a meaningful price on CO2 emissions is viewed by many as integral to achieving the 2 °C climate goal … Carbon emissions trading schemes in operation in 2014 covered 3.7 Gt (11 %) of global energy-related CO2 emissions.”
Emissions trading is an important part of the EU’s formal commitment to carbon reduction, and on 23 October 2014, the European Council (2014) endorsed a binding collective target for the 28 Member States of the European Union of “at least 40% domestic reduction in greenhouse gas emissions by 2030 compared to 1990”.
The EU Emissions Trading Scheme (EU ETS), is the world’s largest carbon market; Carbon Pulse reports
“there are 17 Emissions Trading Systems in place across four continents, accounting for around 40% of global GDP, according to ICAP, an intergovernmental body that tracks and supports emissions trading initiatives worldwide. Many other countries are interested in setting up carbon markets as part of their INDCs but some nations, particularly several Latin American nations including Venezuela and Bolivia, are sceptical about measures that commoditise nature or enable industrialised nations to duck their historical responsibility for causing climate change.
The UN’s CDM helped channel over $300 billion in carbon-cutting investments to the developing world by facilitating projects from which industrialised nations could buy carbon credits to meet their own emission reduction goals.”
Thus emissions trading is an important component of the carbon reduction measures that are currently planned and will deliver significant improvements. Any move from the use of such measures would be problematic, although there is clearly scope improvement and in changes on how they are applied.
Interpretation of para. 171
The similarity between the approach of the Pope and that of some Latin American countries is evident and has been noted by Robert N. Stavins, Director of the Environmental Economics Program at Harvard, and also by Ottmar Edenhofer, Chief Economist at the Potsdam Institute for Climate Impact Research and a consultant to the Vatican. In addition to a general suspicion of this market-based instrument, there are instances of CDM projects in Latin America which failed to take account of the concerns of local communities. Edenhofer speculated that the Pope included the issue in response to longstanding concerns about carbon trading schemes from Latin America, but suggested that this should not be seen as an outright rejection of emissions trading: ”[t]he Pope is more or less asking scientists to check if this is an instrument which will provide a solution.”
This interpretation is supported by his colleague, Prof Hans Joachim Schellnhuber, Founding Director of the Potsdam Institute, in his introductory comments to the Encyclical at the Vatican on 18 June Prof Schellnhuber said:
“Putting a price on CO2 emissions – either in the form of emissions cap & trade systems like the one in Europe or the one that China plans to set up, or through national CO2 taxes – is an effective instrument to protect the common good.”
Given the global interest in the launch of the Encyclical, it is unlikely that a statement such as this would be made at its launch if it were incompatible with the interpretation of the text. The wording of paragraph 171 is therefore unfortunate, and “the strategy of buying and selling ‘carbon credits’ appears to be intended as example of the general themes expounded elsewhere in the document, rather than a condemnation of carbon trading per se.
The objective of the encyclical has been described as being “aimed at influencing the debate ahead of UNFCCC talks in Paris in December and [calling] for changes in lifestyles and energy consumption to avert the destruction of the ecosystem before the end of the century, [for which] failure to act would have grave consequences for humanity”. There is a narrow line between influencing the debate and influencing the outcome; Edenhofer has stressed “we should not perceive this encyclical as a kind of substitute for an IPCC document”, saying that it is “complementary” and adding “[i]t is not a document which wants to prescribe the international negotiations.
Professor Schellnhuber’s comments on carbon pricing were recently emphasized at a Vatican Press Conference on 1 July at which Professor Ottmar Edenhofer stated “carbon pricing can help to finance Sustainable Development Goals”.
 Intended nationally determined contributions (INDCs): The actions that countries intend to take under a global climate agreement to be agreed in Paris in December 2015. The nature of these INDCs will largely determine whether the world achieves an ambitious 2015 agreement.
 Clean Development Mechanism (CDM): a mechanism under Article 12 of the Kyoto Protocol designed to help developing countries (non-Annex B) achieve sustainable development by allowing entities from Annex I parties to participate in project or programme-based emission reduction activities hosted in developing countries to obtain CERs [ref ] to use for compliance with Kyoto emission targets. CERs are generated from projects that lead to certifiable emissions reductions that would otherwise not occur.
 Certified Emission Reductions (CERs): Carbon credits generated through the CDM which can be used to meet an Annex B Party’s emission commitment under the Kyoto Protocol, as a unit of trade in GHG emissions trading systems or- if credits are subsequently cancelled – as a method of auditing to deliver foreign aid/investment.
A summary of the Encyclical and links to official documents are provided in the updated version of an earlier post.