June 18, 2015 / 3:59 PM / 2 years ago

UPDATE 2-Pope attacks emissions trading as a possible 'ploy'

5 Min Read

* Pope says emissions trading 'quick and easy solution'

* Pope voicing concerns from Latin America

* Comments 'out of step' with many economists, analysts-IETA (Recasts with details on carbon trading, background on Latin America)

By Nina Chestney and Valerie Volcovici

June 18 (Reuters) - Pope Francis attacked one of the major policy initiatives in the fight to combat climate change, warning in his encyclical published on Thursday that the trading carbon credits could merely reward speculators instead of controlling global greenhouse gas emissions.

The pope, the first from the developing world, cautioned that carbon trading systems could be a smokescreen to allow large carbon emitters in wealthy countries to keep doing so, suggesting it might be "a ploy which permits maintaining the excessive consumption of some countries and sectors."

The sharp critique of the market-based approach to curbing emissions comes as support for carbon trading is growing, embraced by institutions like the World Bank and United Nations, as well as the heads of many multinational companies and countries like China..

Emissions trading schemes, such as one in place in the European Union and those being piloted in provinces across China, allow polluters to buy and sell permits to release the carbon dioxide that is blamed for global warming.

Under these systems, companies or countries are given permits to release carbon dioxide up to a certain amount. To exceed that cap, they can buy permits on an open market from others who, by virtue of emitting less, have excess licenses to sell.

The European Commission declined to respond to the pope's comments but the International Emissions Trading Association, a lobby group for the carbon trading industry, issued a statement that described Francis's views on carbon trading as "out of step with most economists and analysts."

Carbon markets "contain safeguards against the excessive speculation warned about in the encyclical," the group said. "It misses the more important point that market mechanisms can help keep the costs down for producers and consumers alike."

The EU operates the biggest emissions trading scheme in the world, while 40 nations and over 20 cities, states and regions around the world now set a price on CO2 emissions.

Ottmar Edenhofer, chief economist at the Potsdam Institute for Climate Impact Research and a consultant to the Vatican, said the pope's comments should not be seen as an outright rejection of emissions trading.

"The pope is more or less asking scientists to check if this is an instrument which will provide a solution," he told Reuters.

Edenhofer speculated that the pope included the issue in response to longstanding concerns about carbon trading schemes from Latin America. The pope, an Argentine, is the first pontiff from the Americas and the Southern Hemisphere.

A bloc of Latin American countries including Venezuela, Bolivia and Ecuador have been hostile to the role of carbon markets in an international climate change agreement, claiming it may let rich countries escape emissions reductions targets while failing to deliver climate justice to the poor.

The U.N.'s Clean Development Mechanism (CDM), for example, allows projects such as re-forestation in developing nations to earn carbon credits for the richer governments and companies that pay for them.

Edenhofer said the Vatican may have addressed carbon trading because "many people in Latin America are quite suspicious about this market-based instrument," especially indigenous people.

"There are incidences of CDM projects in Latin America being designed and implemented in a way that failed to take into account the concerns of local communities which were strongly against the project affecting their ancestral territories," said Guy Edwards, director of the climate and development lab at Brown University.

Others placed the pope's comments in the context of his wider concern for the fate of poorer countries and his insistence on fairness in any international climate agreement. The encyclical makes specific mention of Bolivian bishops who have demanded industrialized countries assume a greater burden in fighting climate change.

"Some people interpret this as a condemnation of carbon markets, but I think pope is saying that this is not a game of catch up for developing countries," said Mindy Lubber, president of investor group Ceres.

"What he seems to be appropriately questioning is whether we need to design solutions that work, not only from a technical perspective, but whether we need to be talking about what's fair and what's just."

But the pope also appeared to warn that a reliance on market-based solutions such as carbon trading would not be enough to see off the threat posed by global warming.

"This system seems to provide a quick and easy solution under the guise of a certain commitment to the environment," he wrote, referring to carbon trading, "but in no way does it allow for the radical change which present circumstances require."

Reporting by Nina Chestney in London and Valerie Volcovici in Washington; Additional reporting by Susanna Twidale in London, Barbara Lewis in Brussels and Marcelo Teixeira in Sao Paulo; Editing by Sonya Hepinstall and Alan Crosby

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