Carbon Trading, A Shell Game

Carbon trading schemes use neo-liberal logic and coporate self-interest to pervert the aim of reducing carbon emisssions according to Kevin Smith, a researcher with Carbon Trade Watch, a project of the Transnational Institute.

Carbon trading schemes rely on a cost-benefit analysis which reduces the complex issue of climate change down to a discussion about numbers and graphs, ignoring unquantifiable variables such as human lives lost, species extinction and widespread social upheaval.

Cost-benefit analysis can be a useful tool for making choices in relatively simple situations. 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."

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.

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.

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.

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.