Obscenity
of carbon trading
If we want to curb climate change, carbon
trading won't do.
In 1992, an infamous leaked memo from
Lawrence Summers, who was at the time Chief Economist of the World
Bank, stated that "the economic logic behind dumping a load
of toxic waste in the lowest wage country is impeccable, and we
should face up to that".
The recently released Stern Review on
climate change, written by a man who occupied the same position
at the World Bank from 2000 to 2003, applies a similar sort of
free market environmentalism to climate change.
Sir Nicholas Stern argues that the cost-effectiveness
of making emissions reductions is the most important factor, advocating
mechanisms such as carbon pricing and carbon trading.
While dumping toxic waste in the global
South might look like a great idea from the perspective of the
market, it ignores the glaringly obvious fact of it being hugely
unfair on those getting dumped upon.
In a similar way, Stern's cost-benefit
analysis reduces important debates about the complex issue of
climate change down to a discussion about numbers and graphs that
ignores unquantifiable variables such as human lives lost, species
extinction and widespread social upheaval.
'Junk economics'
Cost-benefit analysis can be a useful
tool for making choices in relatively simple situations when there
are a limited number of straight-forward options to choose from.
But as Tom Burke, visiting professor
at Imperial College London, has observed: "The reality is
that applying cost-benefit analysis to questions such as [climate
change] is junk economics... It is a vanity of economists to believe
that all choices can be boiled down to calculations of monetary
value." Some commentators have applauded the Stern Review
for speaking in the economics language that politicians and the
business community can understand.
But by framing the issue purely in terms
of pricing, trade and economic growth, we are reducing the scope
of the response to climate change to market-based solutions.
These "solutions" take two
common forms:
- under emissions trading, governments
allocate permits to big industrial polluters so they can trade
"rights to pollute" amongst themselves as the need arises
- another approach involves the generation
of surplus carbon credits from projects that claim to reduce or
avoid emissions in other locations, usually in Southern countries;
these credits may be purchased to top up any shortfall in emissions
reduction
Such schemes allow us to sidestep the
most fundamentally effective response to climate change that we
can take, which is to leave fossil fuels in the ground. This is
by no means an easy proposition for our heavily fossil fuel dependent
society; however, we all know it is precisely what is needed.
What incentive is there to start making
these costly, long-term changes when you can simply purchase cheaper,
short-term carbon credits?
Forcing the market
In the current neo-liberal economic
environment, trading rules inevitably succumb to the pressures
of corporate lobbying and deregulation in order to ensure that
governments do not "interfere" with the smooth running
of the market.
We have already seen this corrosive
influence in the European Union's Emissions Trading Scheme (ETS),
when under corporate pressure, governments massively over-allocated
emissions permits to the heaviest polluting industries in the
initial round. This caused the price of carbon to drop by more
than 60%, creating even more disincentive for industries to lower
their emissions at source.
There are all manner of loopholes and
incentives for industry to exaggerate their emissions in order
to receive more permits and thereby take even less action.
Market analyst Franck Schuttellar estimated
that in the scheme's first year, the UK's most polluting industries
earned collectively £940m ($1,792m) in windfall profits from generous
ETS allocations.
Given all we know about the link between
pollution and climate change, such a massive public concession
to dirty industries borders on the obscene.
We are being asked to believe that the
flexibility and efficiency of the market will ensure that carbon
is reduced as quickly and as effectively as possible, when experience
has shown that lack of firm regulation tends to create environmental
problems rather than solve them.
Community interest
There is a groundswell of opinion that
the "invisible hand" of the market is not the most effective
way of facing the climate challenge.
The Durban Declaration of Climate Justice,
signed by civil society organisations from all over the world,
asserts that making carbon a commodity represents a large-scale
privatisation of the Earth's carbon cycling capacity, with the
atmospheric pie having been carved-up and handed over to the biggest
polluters.
Effective action on climate change involves
demanding, adopting and supporting policies that reduce emissions
at source as opposed to offsetting or trading. Carbon trading
isn't an effective response; emissions have to be reduced across
the board without elaborate get-out clauses for the biggest polluters.
There is an urgent need for stricter
regulation, oversight, and penalties for polluters on community,
local, national and international levels, as well as support for
communities adversely impacted by climate change. But currently
such policies are nigh-on invisible, as they contradict the sacred
cows of economic growth and the free market.
There is, unfortunately, no "win-win
solution" when it comes to tackling climate change and maintaining
an economic growth based on the ever increasing extraction and
consumption of fossil fuels.
Market-based mechanisms such as carbon
trading are an elaborate shell-game of global creative accountancy
that distracts us from the fact that there is no viable "business
as usual" scenario.
Climate policy needs to be made of sterner
stuff.
By: Kevin Smith, researcher with Carbon
Trade Watch, a project of the Transnational Institute ,
email:
kevin@carbontradewatch.org.
