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  Yahoo News 10 Nov 06
Despite their problems, carbon markets are here to stay, say experts
by Karen Calabria

BBC 9 Nov 06
'Obscenity' of carbon trading
Viewpoint by Kevin Smith

If we want to curb climate change, carbon trading won't do, argues Kevin Smith in the Green Room this week.

From the Stern Review to Europe's Emissions Trading Scheme, he argues, the aim of reducing emissions has been perverted by neo-liberal dogma and corporate self-interest.

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.

Kevin Smith is a researcher with Carbon Trade Watch, a project of the Transnational Institute which studies the impacts of carbon trading on society and the environment

The Green Room is a series of opinion articles on environmental topics running weekly on the BBC News website A series of thought-provoking environmental opinion pieces

Yahoo News 10 Nov 06
Despite their problems, carbon markets are here to stay, say experts
by Karen Calabria

NAIROBI (AFP) - The carbon market, the jewel in the crown of the Kyoto Protocol, is a flawed gem but one likely to endure, regardless of the form that international efforts take to tackle climate change, experts here say.

Carbon trading is the centrepiece of the UN's pact on curbing the greenhouse gases that are dangerously changing the world's climate system, and an arduously-negotiated, controversial piece of treaty architecture it has proven to be.

The market takes two forms.

One is a market in emissions by rich countries, which are alloted caps for their pollution. If they clean up their act, they can sell any surplus to partners who are above their goal, thus providing a financial incentive all round.

So far, the only major Kyoto emissions trading scheme has been launched by the European Union, gathering large EU corporate energy-users.

But, after a good start in 2005, the market suffered two horrific crashes this year after it was discovered that EU countries were in fact disgorging less pollution than initially thought.

That's a piece of good news for the environment, but bad news for trade.

The emissions market became flooded with sellers, depressing the price of a tonne of carbon dioxide (CO2), the principal greenhouse gas.

Ruta Bubniene, of the green group Climate Action Network Europe, said faith remained in the market, despite its turbulence. "This has so far been the most feasible measure of reducing emissions because it's acceptable to businesses which wouldn't otherwise agree" to a total, immediate phase-out of CO2-belching equipment, Bubniene said.

"The problem with emissions trading is that it's not the solution but merely a tool to bring about real action in an affordable and transparent way," International Emissions Trading Association ( IETA) director Edwin Aalders explained.

Kyoto's other market machines are called the Clean Development Mechanism (CDM) and Joint Implementation (JI).

Under it, rich countries that back clean-technology projects in developing countries (under the CDM) or in Eastern Europe (under JI) get carbon credits.

These credits can be bought and sold or set against the rich countries' own quota -- a tactic that some deride as "paying to pollute."

"Right now, European Union members are allowed to achieve 50 percent of the reductions required by the Kyoto Protocol externally," Bubniene said.

Rich countries need to limit the amount of reductions that they can outsource abroad and focus more on domestic reductions as a way to meet Kyoto's goals of the Kyoto Protocol, she said.

Kyoto, which took effect in February 2005, commits industrialized countries who ratified the treaty to bring their greenhouse gas emissions to an average of five percent below their 1990 level by 2012.

Other environmentalists echoed Bubniene's sentiments.

"This can be thought of as a 'pay to pollute' solution because it does not force a large-scale investment in energy efficient technology, (as it allows) polluters to buy what they need," Greenpeace's Steve Sawyer said.

"The system is currently very flawed but we're working on ways to clean it up by the time (the present) Kyoto (commitment period) expires in 2012," he added.

Negotiations for cuts beyond 2012 are expected to begin in earnest next year.

The United States, the world's top polluter, and Australia, leading in pollution per capita, signed up to Kyoto but have refused to ratify it.

President George W. Bush says its targets are too costly for the American economy.

Even so, carbon markets are cautiously making headway in these two holdout countries, although at a regional level, and a growing number of businesses are lobbying their governments for change, angry at being locked out of the profits that can be made from the CDM and JI.

In May, the World Bank said that the global market for CO2 grew tenfold in the space of a year to reach 10 billion dollars in 2005.

But it cautioned that the market was still deeply volatile.

Environmental economists remain hopeful that the carbon trading will iron out its problems and continue to grow as an effective way to mitigate climate change.

"Two years ago in London or any other major financial capital, if you mentioned emissions trading or climate change, people would have sat staring, with their mouths hanging open," IETA's Aalders said. "But now people are putting money into this as a way to reduce emissions and investing in renewable energy," he added.
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