Page 1 of
2 The green market
hustlers By M K Dorsey
On the opening panel of the Arctic Science
Summit Week, Jeff Miotke announced,
"Climate-change policy must be based on sound
silence." It was a poignant and telling slip
of the tongue. Miotke, the US State Department's
deputy assistant secretary of the Bureau of Oceans
and International Environmental Scientific
Affairs, joked that his error might have "just
cost me my job".
Then he promptly
corrected himself: "Sound science, not silence."
The audience at the March meeting, a veritable who's
who of
leading polar scientists, burst into laughter.
Miotke's Freudian slip was bittersweet
given the failure of leadership on climate change
from Washington in general and the White House in
particular. The Bush administration’s legacy of
denials has morphed into present-day
foot-dragging. Last November, the shrill
pronouncements of President George W Bush and his
advisers prompted outgoing United Nations
secretary general Kofi Annan to note that climate
skeptics "are out of step, out of arguments, and
out of time".
While scientists agree that
climate change is human-caused, there is no
consensus on the litany of proposals to check this
leading and growing threat to humanity. There is,
however, a widely held assumption that the market
might be able to rescue us from climate
catastrophe. Prominent economists such as Sir
Nicholas Stern and former World Bank chief
economist Larry Summers, a growing list of
high-profile American politicians (including state
governors Arnold Schwarzenegger, Bill Richardson
and Eliot Spitzer, to name a few), and an Oscar
recipient in the person of former US vice
president Al Gore are all advocating market
approaches.
Most prominent among these
market-based strategies is carbon cap-and-trade.
The Kyoto Protocol, in particular, endorsed this
approach as a necessary tool to help avert climate
catastrophe. But neither cap-and-trade nor its
other market-based ilk will bring us back from the
edge. Indeed, the market approaches and the green
business leaders who are promoting them might be
pushing us closer to catastrophe.
Cap-and-trade Carbon trading
works as follows. A group of countries at the
global level or a group of states caps its carbon
emissions at a certain level ("the cap") and then
a government agency issues permits to industries
to emit a stated amount of carbon dioxide over a
stated period of time. Companies can then trade
these credits in a market, or via an exchange,
such as the Chicago Climate Exchange. Hence the
term "cap-and-trade".
The architects of
the Kyoto Protocol were inspired by the trading
system sanctioned by the reauthorized 1990 Clean
Air Act, which came into effect under the current
US president's father, George H W Bush. This
program was relatively successful inside the
United States. It reduced the amount of
sulfur-dioxide emissions that cause acid rain.
That program succeeded because there were few
sources to monitor (about 2,000 smokestacks in the
Midwest) and a national legal system by which to
enforce the mandated limits. By contrast, there
are far too many carbon source points around the
world to monitor, and there is no international
legal system or global environmental organization
to measure, let alone enforce, emissions limits.
On a global scale, carbon trading is
little more than an untested economic experiment
that may not avert climate catastrophe in time.
Moreover, carbon trading aids and abets climate
injustice. In the main, trading is designed to
parcel, privatize, and sell the right to pollute
the atmosphere with carbon dioxide. The very same
petroleum, natural-gas, and electricity concerns
disproportionately responsible for carbon-dioxide
emissions and climate change - which denied the
existence of climate change and are now urging
gradual steps to address it - all stand to make
windfall profits on untested and perhaps
unverifiable cap-and-trade schemes buoyed by
increasingly fraudulent numbers of "offset
projects".
In April, The Financial Times
launched an investigation into carbon trading that
uncovered numerous problems with trading and
offset schemes.
"The rush to go green
suggests easy money for investors in projects that
reduce carbon-dioxide output," the Times reported.
"The reality is otherwise: many carbon projects
turn out to be high risk."
Carbon traders
and analysts told the Times that because of
project failures and over-optimism, "40-50% of the
carbon credits anticipated under the Kyoto
Protocol will never be delivered". Worse, as
Financial Times environment correspondent Fiona
Harvey noted, carbon trading runs "the risk of
fraud, such as sale of credits from
carbon-reduction projects that do not exist. It is
often difficult for buyers and brokers to verify
the existence and effectiveness of projects, as
many are in remote areas."
The Guardian,
meanwhile, reported this month "serious
irregularities at the heart of the process the
world is relying on to control global warming".
The British newspaper found that the Clean
Development Mechanism, designed to "offset
greenhouse gases emitted in the developed world by
selling carbon credits from elsewhere, has been
contaminated by gross incompetence, rule-breaking
and possible fraud by companies in the developing
world, according to UN paperwork, an unpublished
expert report, and alarming feedback from projects
on the ground".
According to researcher
Larry Lohmann, the market solutions to climate
problems "consists of pseudo-scientific
justifications which the UN and other institutions
have agreed on as a result of political
horse-trading".
Lohmann is not a lone
Cassandra in the policy wilderness.
"Carbon-trading markets are like triple witching
hour on speed," said a money-manager panelist at a
meeting in Boston last year co-sponsored by the
law firm Goodwin Procter and the pro-trading World
Resources Institute (WRI). In other words,
carbon-trading schemes are rife with potential for
extreme volatility, gaming and fraud.
In
Europe just a month before the money manager
admonished an audience on trading, the only
official carbon-trading exchange, the
three-year-old European Union Greenhouse Gas
Emissions Trading Scheme (EU ETS), collapsed. The
EU precipitated this collapse with its
fox-over-the-hen-house allocation strategy of
emission permits. The EU gave out valuable
credits, free of charge, based on the
self-reporting of the very same firms that were
responsible for contributing to climate change in
the first place. Naturally, at the outset,
socially responsible firms overstated their
emissions and were allocated a greater number of
credits. After the official accounting of real
emissions in April 2006, EU authorities learned
that firms had "under-polluted". Accordingly there
was a surplus of carbon credits that, once made
public, caused the market to collapse.
Dressing up the market In
mid-November, the largest US environmental
pressure group, the Sierra Club, convened a gaggle
of carbon-trading advocates, including Gore, now
co-partner in the New Generations Investment
concern. There were industry leaders, executives
of non-governmental organizations (NGOs), a
leading climatologist, and Intergovernmental Panel
on Climate Change (IPCC) report co-author and
Democratic Senator Barbara Boxer. The internal
Sierra Club weblog dubbed the event "A Climate
Exchange": a cute double entendre endorsing
the creation of markets in the chief greenhouse
gas. According to the blog, the panel's chief
recommendation stressed "the urgency of setting a
'carbon price’ on greenhouse-gas emissions".
Such groups as Environmental Defense (ED)
and the Sunoco Oil Co-funded Pew Center on Global
Climate Change (PCGCC) are also going to great
lengths to play up the viability of the market in
general and carbon trading in particular, despite
growing evidence to the contrary. This year ED is
set to release a report profiling "just projects
that work" to "get around those that are
questioning trading". Of its many recommendations,
a recent PCGCC report argues that future
multilateral dialogues over climate change should
include only corporations and governments.
Other powerful actors have taken big
positions in the trading game. In 2005, for
example, Google co-founder Sergey Brin bought
through a third party offsets equal to eight
years' worth of emissions from specific sources
related to Google's operations. The offsets
selected were from the Greenhouse Gas Credit
Aggregation Pool assembled by the private
brokerage NatSource. While NatSource would not
confirm this directly, sources close to the deal
put Brin’s purchase at about US$100 million - in a
pool
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