Monday, May 14, 2007

Carbon (Dis)credit

It is the middle of the merry month of May, and the ongoing lethal game of Global Warming denial continues unabated by the U.S. government. The latest evidence of the U.S. government's fierce recalcitrance towards the realities of Global Warming comes in the form of U.S. attempts to weaken the language of a planned G-8 climate change declaration. In brief, the G-8 declaration includes "a pledge to limit the global temperature rise this century to 3.6 degrees Fahrenheit, as well as an agreement to reduce worldwide greenhouse gas emissions to 50 percent below 1990 levels by 2050", and it is this language that the U.S. seeks to eliminate.

And while this smacks of another embarrassing, if not disgraceful obstruction by the U.S. government of international attempts to deal with the effects of Global Warming, what may be at least as troubling is the gradual acceptance and proliferation of a mode of dealing with Global Warming known as the carbon credit, or emissions trading. Carbon credits are, in short, a tradable permit scheme that attaches a monetary value to greenhouse gas emissions. The ownership of, for example, one carbon credit, confers the right to emit one ton of carbon dioxide. With the advent of the carbon credit, we have a hideous real world example of capitalism at its most perverse, as a fixed dollar value is placed on the cost of polluting the air.

As George Ure of observes, the carbon credit amounts to the following:

"Upon discovering your house is on fire, instead of calling the fire department or grabbing a fire extinguisher, you instead opt to set up a fund trading pool with your neighbors and begin trading futures on your house. Your thinking is that at some point, if an investor in your housing pool is really interested in securing their position, they [not you ] will call the fire department or actually do something."

In our case, the burning house in the above scenario, is, of course, the very air we breath, and the carbon credit trading scheme that is created to address a crucial factor associated with the causes of Global Warming, simply takes on a life of its own as traders discover there is a profit to be made buying and selling not just pork bellies, precious metals, t-bond futures, grains and oil, but what amounts to oxygen futures. Score one for Capitalism, and zero for the environment.


DED said...

For the carbon credit scheme to work, the price of those credits has to continuously increase to a point where it becomes fiscally prudent to invest in cleaner technologies rather than buying more credits. Eventually, a company should go bankrupt as it tries to buy more and more credits.

While it seems like a lousy idea to gamble on the very air we breathe, it may be a compromise that will have to be made. There is such recalcitrant opposition to "doing the right thing", that this gamble on slow progress may be the only way to get any progress at all.

Edwardo said...

Ded, you are almost certainly right, but in any case, the carbon credit scheme stikes me as an epic dodge.