> a Summersism:
>>> ... Investments will be chosen strategically based on what yields the highest rate of return for the economy
> C'mon Patrick. What Summers is advocating today has almost nothing to do what he said in 1991... It's a very large stimulus program and oriented to some virtuous and promising long-term investments. They could make the U.S. a healthier and more humane place. We could do a lot worse that this right now.
Which will it be, Doug? The 'highest rate of return for the economy' (LS) or 'the US a healthier and more humane place' (DH)?
I have great trust in you (why, I dunno), but let's ask seriously, what would be a way to discern whether we should fight LS on his 'highest rate of return' or support public works for a healthier/humane US.
If you take a simple starting point, climate change investments, I'm afraid you're going to lose, comrade.
http://www.newint.org/issues/current/
A timely death? Carbon trading is a charade that will do nothing to reduce global warming. Now it seems doomed by the financial meltdown. So will Barack Obama continue championing it, wonders Patrick Bond
In the year leading to the Copenhagen Summit, preventing climate change may now finally get a proper global hearing – but not necessarily with useful outcomes. What could be a last ditch attempt to rely on markets to reduce greenhouse gas emissions looks likely to come from carbon trading enthusiast, US President-elect Barack Obama.
His market-friendly approach to tackling climate change is not surprising. Wall Street financiers donated substantially more campaign cash to Obama than McCain. In January 2008 Obama announced: ‘We would put a cap-and-trade system [a carbon trading mechanism] in place that is as aggressive, if not more aggressive, than anybody else’s out there… So if somebody wants to build a coal-powered plant, they can; it’s just that it will bankrupt them because they’re going to be charged a huge sum for all that greenhouse gas that’s being emitted. That will also generate billions of dollars that we can invest in solar, wind, biodiesel and other alternative energy approaches.’
The idea is that polluters would bid against each other for a share of the emissions allowed under an agreed cap, which in turn they can trade with each other so as to improve economic efficiency.
This may sound like a neat plan. But it won’t work, because ironically, the financial crisis that helped sweep Obama to power has also caused the price of carbon to collapse.
Carbon crash
The crisis crashed so many financial institutions and froze credit markets so quickly that the price of carbon in the emissions-trading markets plummeted by a quarter during the first weeks of October 2008, from around 30 dollars per tonne to less than 22. The price had been 37 dollars per tonne in July – showing just how quickly an incentive scheme meant to provide stability and security to clean energy investors can do the opposite.
A low carbon price is no good for stimulating the kind of investment in alternatives needed: for example, an estimated 50-75 dollars per tonne is required to activate private sector investments in ‘carbon capture and storage’, the as-yet-non-existent technology by which coal-fired power stations could, theoretically, bury liquefied carbon emitted during power generation.
This extreme volatility makes it abundantly clear that market forces cannot be expected to discipline polluters.
Privatizing the air
The financial crisis opens up space for a crucial strategic debate about how to change the world’s economy into something that does not threaten our descendants’ future.
Most climate policies currently under consideration by élites are what the French sociologist Andre Gorz would have called ‘reformist reforms’. Carbon trading, for example, is addressing a market-caused problem – greenhouse gases released during most capitalist transactions – with a capitalist ‘solution’. That solution allows the North to continue emitting through the granting and trading of brand new property rights to pollute. The only real winners are speculators, financiers and energy sector hucksters who have made billions already. As the air itself is privatized and commodified, poor communities across the world suffer and resources and energy are diverted away from real solutions.
But opponents of emissions trading still need to persuade centrist greens and the broader swathes of society that the carbon market is crazy, because conventional wisdom begins with the opposite premise. As Obama himself says: ‘This market mechanism has worked before and will give all American consumers and businesses the incentives to use their ingenuity to develop economically effective solutions to climate change.’
Will it really?
A brief history of failure
Canadian economist John Dales first justified trading in emissions rights by applying market logic to water pollution in a 1968 essay. Then, after the 1980s Reagan/Bush administrations neutered the US Government’s ability to prohibit destructive activities, the Clean Air Act of 1990 was the first to legalize trade in sulphur dioxide to tackle acid rain. This approach was far less successful than parallel European ‘command-and-control’ environmental policies.
Nonetheless, in 1997, the Kyoto Protocol was negotiated to include carbon trading as a core strategy to reduce global emissions. This was because the then US Vice President Al Gore threatened that his Congress would only sign up if corporations gained the ability to continue emitting above set limits by paying to buy someone else’s right to pollute. After co-opting critics in Kyoto, the Clinton-Gore Administration and Congress did not keep their word and, later, George W Bush pulled out of Kyoto. But the idea of carbon trading stuck and in Europe the Emissions Trading Scheme (ETS) was launched in January 2005.
Ever since, tales of scandals and market mishaps have emerged from dismayed financiers and business journalists. The intrinsic problem in setting an artificially-generated market price for carbon was revealed to the world in April 2006 when the ETS crashed thanks to the over-allocation of pollution rights. The EU had miscalculated on how to set up the market and granted electricity generation firms far too many credits. Carbon lost over half its value in a single day, destroying many carbon offset projects earlier considered viable investments.
By 2007, the European Commissioner for Energy had admitted the ETS was: ‘A failure’. Peter Atherton of Citigroup conceded: ‘ETS has done nothing to curb emissions…[and] is a highly regressive tax falling mostly on poor people.’
Had it achieved its aims? ‘Prices up, emissions up, profits up… so, not really.’
Who wins, who loses? ‘All generation-based utilities – winners. Coal and nuclear-based generators – biggest winners. Hedge funds and energy traders – even bigger winners. Losers…ahem…consumers!’
Even the Wall Street Journal confirmed in March 2007 that emissions trading ‘would make money for some very large corporations, but don’t believe for a minute that this charade would do much about global warming.’
The Kyoto Protocol also promotes carbon trading in the Majority World via the Clean Development Mechanism (CDM). This aims to finance emissions reductions project by project: for example, by turning landfill methane into electricity, or by planting trees. But, according to a Newsweek investigation in March 2007, ‘it isn’t working... [and represents] a grossly inefficient way of cutting emissions in the developing world.’
Notorious projects like the Bisasar Road toxic landfill in Durban and Plantar timber monoculture in Brazil were promised vast funds, with dreadful consequences for local communities and ecosystems. Newsweek called the trade ‘a shell game’ which has already transferred ‘$3 billion to some of the worst carbon polluters in the developing world’.
In October 2008, with the market crashing, Carl Mortished wrote in The Times of London: ‘The ETS is making a mockery of Europe’s stumbling attempts to lead the world in a market-based carbon strategy. It is causing irritation and frustration to the armies of advisers and investors who seek to cajole utilities into big investments in carbon reduction.’
With friends like these...
All this mainstream criticism should spell the end for what is clearly a bad idea, incapable of fulfilling its goals. But many still doggedly endorse the carbon market, including major green groups in the influential Climate Action Network (CAN), which has lobbied most visibly on the Kyoto Protocol. Why? Some would say pragmatism: it’s the only game in town. Consider this comment from Sierra Club Canada director Elizabeth May: ‘I would have preferred a carbon tax, but that is not the agreement we have. The reality is that Kyoto is the only legally binding agreement to reduce greenhouse gases. When you’re drowning and someone throws you a lifeboat, you can’t wait for another one to come along.’
But according to Michael Dorsey, professor of political ecology at the US’s Dartmouth College, there is another reason for CAN’s support: some of its leaders have personal involvement in the industry. He lists many prominent greens closely connected to carbon trading firms. Take, for example, CAN board member Jennifer Morgan of the Worldwide Fund for Nature who took leave for two years to direct work on Climate and Energy Security at carbon trading firm E3G. Or Kate Hampton, formerly of Friends of the Earth, who joined Climate Change Capital as head of policy while simultaneously advising the EU on energy and the environment, working for the California Environmental Protection Agency, and acting as president of International Carbon Investors and Services.
Dorsey concludes: ‘After more than a decade of failed politicking, many NGO types...are only partially jumping off the sinking ship – so as to work for industries driving the problem. Unfortunately, many continue to influence NGO policy from their current positions, while failing to admit to or even understand obvious conflicts of interest.’
Serious strategies
Carbon trading is not a seaworthy lifeboat and as temperatures (and sea levels) rise we are discovering the numerous leaks. Luckily, countering the more sluggish, corporate-sponsored elements of the environmental movement are grassroots organizations coming together to oppose market strategies wholesale and advocate direct and equitable measures that reverse addiction to fossil fuels.
Critics of carbon trading – affected communities from Indonesia, Thailand, India, South Africa, Brazil and Ecuador, together with academics, researchers and radical environmentalists – first issued the ‘Durban Declaration’ in October 2004. This sounded the alarm about the ethical and economic shortcomings in carbon trading; their deep critique was later turned into a seminal book by Larry Lohmann. [1]
A tragic setback came in July 2007 with the death of Durban Declaration host Sajida Khan. She had battled against a Clean Development Mechanism proposal for methane extraction that had kept open the Bisasar Road toxic dump next to her home – a facility that caused the cancer that ultimately killed her. But in December 2007, the movement joined forces with broader global justice activism at the Bali climate talks and formed the Climate Justice Now! network.
Climate Justice Now! is committed to exposing the false solutions to the climate crisis promoted by governments, financial institutions and multinational corporations – ‘solutions’ such as trade liberalization, privatization, forest carbon markets, agro-fuels and carbon offsetting. Instead, its members are campaigning to leave fossil fuels in the ground and invest in clean, efficient, community-led renewable energy. These are the only serious strategies in place: to halt climate change at the supply side. They will go much further than market gimmicks towards saving the planet.
Patrick Bond directs the Centre for Civil Society at the University of KwaZulu-Natal in Durban, South Africa, and is co-editor of the new book, Climate Change, Carbon Trading and Civil Society, available from UKZN Press and Rozenberg Publishers (Amsterdam).
1. Larry Lohmann, Carbon Trading - a critical conversation on climate change, privatisation and power, Dag Hammarskjold Foundation and the Corner House, 2006.