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Is Carbon Trading Contrary To Social Justice?

Sep 10, 2008
You can't trade in something unless you own it. When governments and companies "trade" in carbon, they establish de facto property rights over the atmosphere; a commonly held global commons. At no point have these atmospheric property rights been discussed or negotiated - their ownership is established by stealth with every carbon trade.

Market shares in the new carbon market will be allocated on the basis of who is already the largest polluter and who is fastest to exploit the market. The new "carbocrats" will therefore be the global oil, chemical, and car corporations, and the richest nations; the very groups that created the problem of climate change in the first place. What is more, with the current absence of "supplementarity", the richest nations and corporations will be able to further increase their global share of emissions by outbidding poorer interests for carbon credits.

Many of the projects proposed within the CDM, in particular tree planting and dams, are subject to the same criticisms as other large scale development projects- they assert foreign ownership of local resources, they consolidate the power of undemocratic elites, they oust people from their land, they undermine local self sufficient economies and low carbon cultures.

Carbon absorbed by forests is only removed from the carbon cycle for as long as the tree is standing and alive. Industrial forestry will not sequester carbon. Permanent reforestation is a once only removal of carbon from the cycle and cannot offset sustained overproduction.

Because we cannot know the future, we can have no certainty that any project selling carbon credits has really reduced its emissions further than it would have done without the intervention. Profit competition and technical innovation ensures that industry consistently reduces its energy costs. A carbon market can provide an automatic cash subsidy for any investment in low energy technology. If such incentives exist they should be explicit, targeted and accountable.

Russia's economic collapse since 1990 has reduced its emissions by 30%. Russia is intending to sell this incidental windfall (often call "hot air") as international carbon credits- potentially swamping the market. If countries subsidise their emissions with these Russian credits, the final global emissions will end up being exactly the same as they would have been without a carbon market or a Kyoto protocol.

There are strong incentives for cheating and creating bogus credits that do not represent any real reduction in emissions. The vendor gets the cash without having to change anything and the buyer gets cheap credits. There are similar incentives for misdeclaration, and "leakage"- transferring polluting activities to areas that are not accounted.

The temptation for all parties to cheat requires that every transaction to be scrutinised and every sale to be certified. There is no global institution or accounting system that can manage the complexity of this market.

International legal frameworks are usually very weak. Countries that want to use carbon credits to subsidise their emissions are already arguing for penalties so weak that they will not discourage cheating. Many of the Annex 1 (Russia, Turkey, Ukraine), Romania- these are some of the most corrupt and lawless countries are corrupt or desperate for foreign currency and will happily endorse doctored carbon credits.

The main model for carbon trading is Sulphur Dioxide (SO2) emissions trading under the US 1990 Clean Air Act. This programme faced none of the problems listed above- it was small (a few hundred companies), easy to monitor (one pollutant from one source-power generation), had permanent targets, and, above all, was conducted within one country with strong enforcement mechanisms.

The only international emissions trading has been in CFCs under the Montreal Protocol. Once again, the programme was small (only 17 producer companies), easy to monitor (one pollutant from one industrial process), and within a strong legal framework.

The market assumes that carbon credits from different sources will be fully interchangeable ("fungible" in carbospeak). However, carbon sequestered in sinks is a completely different product from the carbon "saved" by a technical innovation, which is different again from the carbon "saved" by a social or lifestyle change. Add to this the complexity of trading in different greenhouse gases. Each source requires different monitoring rules, different criteria and different agencies. Forcing them to be interchangeable in one market is a recipe for corruption and fraud.

Supporters of carbon trading will argue that these are not problems- they are challenges. "Just because it is hard, does not mean that we should not take action", they say. Let's be clear that carbon trading is not being supported because it will solve climate change. In fact it will undermine even the pathetic emissions reductions already proposed. The real reasons for carbon trading are:

1. Governments want to be assured of a cheap way to buy off their failure to meet their Kyoto targets which will keep public and corporations quiescent.

2. Brokers, accountants, and financial institutions are extremely excited at the thought of the size of their cut in a new $2.3 trillion speculative market.

3. Corporations and other major polluters want pliant governments who don't punish them for their emissions and hand over public money to pay for any emissions they are forced to make.

4. Oil companies support carbon trading as a way to avoid making any cuts in oil production.

5. Academics and financial consultants see rich pickings from becoming "experts" in the new market.
About the Author
James Nash is a climate scientist with Greatest Planet (www.greatestplanet.org). Greatest Planet is a non-profit environmental organization specialising in carbon offset investments.

James Nash is solely responsible for the contents of this article.
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