Eight reasons why the market can't solve the climate crisis

November 23, 2007

The fourth report from the UN's Intergovernmental Panel on Climate Change, released on November 17, concludes that there is "unequivocal" evidence that human-induced global warming is already under way and, if left unchecked, will lead to rising sea levels, more fierce storms, and more floods and droughts.

The report, prepared by 3000 climate scientists, argues that the window of opportunity for quickly reaching a safer, stable level of greenhouse gas emissions is closing fast.

Contrary to the claims by mainstream politicians and commentators, the market cannot solve this problem.

1. Because it's the market that got us into this mess in the first place — trying to turn the cause into the solution is akin to using petrol to put out a fire. Even Nicholas Stern, the author of the British government-commissioned report, Stern Review Report on the Economics of Climate Change, had to admit that global warming is the result of the "greatest market failure the world has seen".

2. Because market-based mechanisms such as carbon trading have often had the perverse effect of rewarding the biggest polluters by gifting them with tradeable property rights to pollute the atmosphere. One example of this type of topsy-turvy result is from the European Union's Emissions Trading Scheme, whereby in 2005 BP Oil sold 1.4 million tonnes equivalent of emission permits (that it had been given by the British government) for a total of £17.9 millions! Under the NSW Greenhouse Gas Abatement Scheme, Australia's most polluting coal-fired power station, at Hazelwood (which runs on brown coal), has been selling pollution permits to NSW because it has slightly reduced its CO2 emissions.

3. Carbon trading schemes are so riddled with loop-holes that they become prime targets for Enron-style "creative accounting". So for example, a company selling carbon credits generated by a tree plantation established in a poor country, will use the notorious "future value accounting" method to assume that a certain amount of CO2 emissions have been instantly neutralised, while in reality this outcome will only occur over a period of decades as the plantation matures into an effective carbon sink (assuming nothing goes wrong in the interim). Meanwhile, these fake carbon credits can be used by a coal-fired power station in a rich country to continue pollution-as-usual.

4. The carbon trading regime established by the Kyoto Protocol has created the Clean Development Mechanism, which is supposed to encourage rich-country investment in emissions-reducing projects in the Third World, but has become yet another avenue for profit-making by polluting corporations. For example, 53% of all carbon credits are generated by just six refrigerant manufacturing companies in China, India and South Korea. Because a byproduct of the manufacturing process is an extremely harmful greenhouse gas, these companies earn millions of dollars for destroying those gases before they reach the atmosphere and selling on the "greenhouse savings" to other companies mainly in Europe. But these companies often earn more from the carbon market than from their production of refrigerators!

5. The world carbon market is now worth US$25 billion, but global CO2 emissions are still increasing and at an accelerating rate (2.5% per year from 2000-05 compared with less than 1% a year in the 1990s, according to the CSIRO), proving that maximising corporate profit is the only outcome the "market" (which is dominated by the big corporations) rewards, despite all naive attempts to insert an "environmental bottom line".

6. Kevin Smith of the London-based group Carbon Trade Watch has pointed out that "carbon offsets are the modern-day indulgences, sold to an increasingly carbon-conscious public to absolve their climate sins" in the same way that the pre-reformation mediaeval Roman Catholic Church sold redemption from "divine damnation" to "sinners". Like the medieval indulgencies, carbon offsets don't stop the transgressors, the corporate polluters, from "sinning", they simply enrich those selling the "indulgences".

7. Slapping the word "green" on a commodity does not necessarily make it so. This new marketing buzzword could even end up exacerbating the problem — if people feel obliged to buy the latest "energy efficient" car or washing machine, this could spur an increase in consumer purchases, and in the amounts of total CO2 emissions from expanded manufacturing of these commodities. The reduction of CO2 emissions from more energy efficient appliances may be far outweighed by the pollution created by the manufacturing process.

8. We need urgent and massive measures against CO2 emissions — a "war" on warming. We need to rapidly transform humanity's energy infrastructure, massively increase public transport and stop deforestation. We can't wait for market mechanisms to gradually cajole corporations to clean up their act. If a company or industry cannot be transformed to come into line with the objective of maintaining a liveable planet then it must be phased out or closed down. Profit margins simply cannot enter into the equation when we're facing a global catastrophe, endangering the lives of hundreds of millions of people and the living conditions of billions of others.

A final note: To view a hilarious spoof against carbon trading, visit < http://climateandcapitalism.blogspot.com/2007/10/greenwash-A HREF="mailto:guerillas-invade-new-york.html"><guerillas-invade-new-york.html>, where Rising Tide activists, aka "Greenwash Guerrillas", disguised as delegates present a carbon trading conference with a "Deed to the Sky". The spoof is aimed at drawing attention to a new carbon trading bill, the Americas Climate Security Act 2007. that aims to create a national emissions trading scheme in the US.

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