The Default Line: THE INSIDE STORY OF PEOPLE, BANKS AND ENTIRE NATIONS ON THE EDGE (53 page)

Follow the electricity pylons back inland and you can see why. The importance of coal to India’s future power needs is clearly visible on India’s National Highway 2 on the way out of Kolkata into the heart of eastern India’s coal belt. In the neighbouring state of Jharkhand lie India’s biggest coal mines. And around the city of Dhanbad, known as ‘the Coal Capital of India’, hangs the acrid smoke of burning coal. Incredibly, many coal seams have been on fire since the days of the British Raj. At dusk, innumerable fires can be seen flickering across a scarred and scorched valley. The flames are fed from beneath the surface of the earth, and as the fires burn away the coal under the ground, gaping holes appear on the surface, sometimes swallowing whole houses and families. The villagers took me to one such hole, over 3 metres deep, that appeared just eight days ago. The locals call it ‘Satan’s Womb’. Lax standards in the coal industry over decades have meant that many homes have been built directly above where coal fires burn underground. ‘Our children can’t live well here,’ says a local resident called Nagasur. ‘How can we live here? I am only 34 years old, but look at my face. I look like I’m 50, don’t I?’

It’s hot and sulphurous here – the land is literally on fire and you can see why the locals call it hell. But, despite these appalling conditions, everyone – including young children – is collecting coal (a basket of the so-called black diamonds can fetch 30 rupees, about 40 pence). India’s coal reserves are vast: four to five hundred years’ worth lie beneath its soil. So even the fires that crack open the land with deadly molten chasms won’t slow its use. Coal India was the most valuable company on the Indian stock market in 2011. Many Indians regard the environmental impact of coal as a necessary evil, not just to connect half a billion Indians to the electricity grid for the first time, but also to power the export industries of the future. India shining means India burning.

India’s power surge is not just to connect up its poor, but also to fuel the energy-rich tastes of its 200 million-strong middle class, who are flying more, and buying more.

Evidence for this can be found in the city of Pune, on the other side of India. Bajaj, long known as the iconic manufacturer of auto-rickshaws and cheap scooters, has switched its factories to the production of motorbikes. Richer Indians are demanding more for their rupees. The company also has ambitious plans to export Indian motorbikes into Europe.

Rahul Bajaj is one of the elder statesman of Indian industry: ‘The world watch out. We are not just going to conquer the market by exporting but we are conquering the market by buying other companies,’ he says, referring to Tata’s purchase of Jaguar Cars and Land Rover. Bajaj has already snapped up a third of KTM, a leading Austrian motorbike manufacturer. And he is now manufacturing KTM bikes in India. But there are constraints at home. ‘I would say this: I need infrastructure – I need roads, I need power. How can you go without power? We are short of power.’

Back on the Bengali expressway towards Kolkata, you pass through Durgapur, the steel capital of Bengal. The National Highway 2 is littered with slow-moving Tata lorries dragging massive irregular chunks of steel shaped into two-tonne cylinders, counterweights and pipes. The industrial thirst for energy is barely met by the construction of giant new ‘supercritical’ thermal power stations capable of supplying 1.2 gigawatts. Right now India’s total electricity supply is equivalent to 200 of these power plants, still well short of demand. India says it needs the equivalent of 900 of these by 2030… but at what cost?

India appears oblivious to the current environmental dangers caused by its coal industry – dangers that are literally swallowing up its own citizens. So it may well be too much to expect them to do anything to avert the dangers of climate change, dangers that may not impact the world for another few decades. Anyway, climate change, they insist, is a problem caused by the rich nations.

Already, back in the Sunderbans, they’re seeing changes in the weather. Four islands have been submerged by the sea. Some attribute this to global climate change. I came across one family who had to leave their land after their rice fields and fish ponds were flooded in a cyclone, forcing them to fish for crabs. ‘Yes, the level of the water is rising,’ a boatman told me, ‘and the river is also becoming very silty. There is no future for our children on this island.’

Few places are more vulnerable to rising sea levels than the highly populated, low-lying plains of Bengal. Bengal – which encompasses Indian West Bengal and the whole of Bangladesh – is humanity’s Ground Zero for climate change. In the years to come, changing weather patterns are likely kill tens of thousands, and to leave millions more homeless, vulnerable to famine and disease. Already India has tried to build a fence to keep out refugees. Rising sea levels are making themselves felt in other ways. The disappearance of some islands has disrupted the tigers’ habitat, leading to a marked increase in their willingness to enter local villages. At one point two villagers were being killed per week.

Our visit to the Sunderbans coincided with that of India’s environment minister Jairam Ramesh, who had come to release back into the wild a tiger cub that had wandered into a village. Despite the vulnerability of human lives and of the environment that Jairam Ramesh witnessed here, India is proving immune to international pressure on carbon emissions. The country is understandably more concerned with growth than climate change. ‘We have to factor climate change into economic growth,’ Mr Ramesh tells me. ‘Clearly our priority is economic growth. Clearly we have to grow a country like India with its massive challenge of poverty and employment, we have to grow at 8 to 9 per cent a year. Indian emissions are survival emissions. In the West they are lifestyle emissions, so I would tell my environmentalist friends to change their lifestyles before they preach to us as to what our development strategy should be.’

He is echoed by Indian industrialist Rahul Bajaj, who thunders warnings that Indian industry will not be held back by Western concerns about climate change. Plenty of leading Indian businessmen treat climate change as if it was a neo-colonialist conspiracy to keep the BRICS countries down. Mr Ramesh had an especially blunt message for the British negotiator at the failed Copenhagen climate talks, now the leader of the Opposition at Westminster. ‘This constant preaching from Ed Miliband, for example. On India and China he became an evangelical, you know, but I can tell you that Ed Miliband’s carbon footprint is probably twenty times my carbon footprint.’

The global debate about climate change becomes tangible in India. Should all its people be connected to the electricity grid? Should Indians who want to travel from Mumbai to Kolkata have to catch a twenty-six-hour train, or should they be able to fly?

The growing assertiveness of India and of China in recent years has caused the collapse of negotiations on both world trade and on the environment. It is difficult enough to establish a global consensus on trade. Yet trade is an area where, in theory, the challenge is to share out the benefits fairly. For climate change, the global negotiation centres on finding an equitable method to share out down-payments and costs, with uncertain returns, in decades to come, for future generations. It requires an unlikely alignment of interests across a complex matrix of intergenerational and international perspectives. Should young Indians be stopped from flying so as to prevent London and Manhattan being swamped by the waves? Did Western youth in the twentieth century pause to consider the impact of their insatiable consumption of carbon fuels on the islands of the Ganges Delta?

Put simply, if the world really is concerned about climate change, then people in rich countries will have to turn down their thermostats and pull on a couple of jumpers when the weather turns cold. If we in the West readjust our lifestyles, then the carbon in that Iraqi oil field, in that Siberian gas field, in that Indian coalfield, might just remain under the ground – and not end up in the atmosphere.

Europe did come up with a method of trying to restrict carbon output, a method dreamt up by the high priests of high finance. It was called carbon trading. Greed can never have been so good. At one point, because ‘almost everything has a carbon footprint’, the proponents of carbon trading believed that carbon could one day become the most traded commodity on the globe. Half the current trading comes through London, and the City of London is emerging as the world centre for carbon capitalism.

Kingston upon Thames is an unlikely hub for anything, but nestled in the greenery beside the River Thames lies a futuristic office block designed to accommodate a small army of planet-saving, carbon-dioxide-sapping capitalists. Arthur Tait is in charge here, and his ambition is clear: to become the number one trader of carbon in the world. It is 2008, the heyday of trading carbon.

I asked Tait whether ambition such as this – the profit motive itself – can really be the saviour of the planet. ‘Effectively, yes,’ he replies. ‘I think it’ll save it a lot more efficiently than a carbon tax would, or forcing draconian measures on countries that wouldn’t take those measures. So a market-driven force is probably the only way we’re going to save the planet.’

That, in part, is the point of this nascent market. Put a price on emitting carbon and then someone, somewhere, will take the money not to emit it. At the same time there are a whole load of brokers, traders, bankers, fund managers and lawyers trying to match supply with demand – making a packet, while retaining a planet-saving afterglow.

But guess who Mr Tait works for? A company whose other ambition is to be the world’s biggest supplier of hydrocarbon energy: Gazprom.

In the background, Tait’s team of traders are barking into their trading phones, hustling deals, watching variables as diverse as temperature charts in Europe, the escalating price of crude oil and the negotiating position of the awkward Czechs over the allocation of the right to emit carbon in Europe. There are no pinstripes or strangely coloured blazers. The traders are casually dressed but utterly focused on the latest information coming through their Reuters terminals.

‘From a standing start a few months ago,’ says Tait, ‘the people here will aim next year either to sell into the market or trade eight million tonnes of carbon reductions, but within the next three years grow that up to 80 to 85 million tonnes.’

Tait’s team has just signed a deal to buy up 1.3 million tonnes of CO2 emissions savings made through upgrades to a polluting manufacturer in South Korea. The reductions have been certified to the United Nations standard. But that’s just the start of the wheeler-dealing. Tait takes me over to another floor of the building. ‘On Susan’s desk, what we’ll do instantaneously is sell on the bulk of those savings into the Japanese market,’ he says, as from her desk in Kingston upon Thames Susan flogs a million tonnes of finest-quality, un-emitted Korean carbon to Korea’s near-neighbours in Japan. ‘Japan is very short of carbon,’ Tait remarks. Of the 300,000 tonnes remaining, 70,000 is handed over to the trading desk to do smaller deals in the carbon market, while 230,000 tonnes worth of carbon permits are sold to Gazprom’s commercial gas customers in the UK – in this instance, a major supermarket. It’s a remarkable ‘dual-fuel’ deal. Gazprom provides the supermarket with hydrocarbon-rich gas, and it also supplies the permits to offset the consequent emission of CO2 from burning the fuel. Carbon-neutral gas is, apparently, a popular new product.

‘Zero-carbon oil’ is probably being developed, somewhere in the world, right now (the brand name could be ‘Conscious Crude’). For detractors, carbon-neutral gas is a startling symbol of carbon trading’s false dawn. The detractors included one rather unlikely man: a Latvian politician called Andris Piebalgs. Between 2004 and 2009 this straight-from-the-hip Baltic bruiser served as the European Commissioner for Energy, and so shares responsibility for Europe’s pioneering emissions-trading scheme. It’s known, in the jargon, as a ‘cap-and-trade’ scheme.

The scheme works as follows. Countries, together with certain industries and companies, have their emissions of carbon dioxide capped at a specific negotiated level. The right to emit that carbon is then handed out by the government in the form of a permit. Polluters emitting carbon require a credit for every tonne put out into the air. Emit less than your allocated permit allows and you can sell the surplus credits on the market – so polluters are paid to emit less carbon. Emit more than your allocation and you need to buy new credits, a financial punishment for over-polluters. The price is then set by the interaction of supply and demand for the credits. If all traders are emitting too much carbon, the price of permits will skyrocket. The higher the price of carbon credits, the greater the incentive for polluting industries to rein in their emissions. That is the theory that drives the carbon traders of Kingston upon Thames. Gazprom’s vision is to marry its unrivalled supply of hydrocarbon gas from Siberia to Russia’s highly inefficient industrial base, ripe for carbon-saving technology. Russia could be the OPEC of the carbon market.

‘We’ll instigate projects in Russia,’ says Arthur Tait. ‘Those projects will reduce emissions. We’ll get certificates for those and trade those here too.’ Gazprom would thus become a one-stop shop for ‘low-carbon’ gas. It is complicated, but it isn’t rocket science. The real difficulty, however, is in setting up the system in the first place – which brings us back to Mr Piebalgs. The trailblazing European Trading Scheme (ETS) tripped over itself in Phase 1. The price of carbon crashed from an effective €30 per tonne to a pointless price of €0.63 (about 50p). But when I cheekily asked him if the ETS had been a failure, I did not expect him to say ‘Yes’. But he did. ‘Yes, I would describe it as a failure,’ he told me. ‘And we also know the reasons.’ Commissioner Piebalgs went on to say that the price of carbon needed to be at least €20 to €30 per tonne. ‘If you want to create a market you shouldn’t make too many compromises – and the mistakes were obvious. If you give allowances for free, on a not very clear basis, you can expect that you will have too many allowances – and that’s what happened.’