Assault on the "commons" by carbon credits?

Tony Gosling tony at
Wed Feb 9 00:30:16 GMT 2011

The Howling Wilderness of Carbon Credits

Feb 5 2011, 2:30 PM ET - James Fallows - By James Fallows & Chuck Spinney

One of central causes of the financial meltdown 
was the lack of transparency in the complex 
derivatives, like bundled mortgages and credit 
default swaps.  Advocates of global warming would 
have us to believe that they can construct a 
transparent carbon emissions trading scheme that 
will provide market incentives to reduce the emission of greenhouse gases.

At the center of this trading scheme is the idea 
of a carbon credit, which is a generic term for 
any tradable certificate or permit representing 
the right to emit one ton of carbon or carbon 
dioxide equivalent. Think of a carbon credit as 
property in a free market economy -- Ayn Rand, meet Global Warming.

Excessive Carbon emissions (like smoke from a 
steel mill or a coal fired power plant) can, in 
theory, be offset by buying carbon credits.  But 
the calculations involved will make bundled 
mortgage derivatives look like second-grade 
arithmetic, and, as Terry Macalister reported in 
the Guardian on 4 Feb 2011, carbon credits are 
very vulnerable to fraud and theft, so traders 
are wary of them, to say the least [emphasis added]:

Attempts to end the chaos inside Europe's 
emissions trading scheme (ETS) stumbled today 
when the market reopened, only for minimal trading to take place.

Traders were said to be worried that business 
could remain polluted by the theft of carbon 
credits in Austria and elsewhere that forced a 
shutdown of the scheme on 19 January, at the 
estimated cost of £90m in lost business.

The European commission has called on national 
carbon registries to beef up their IT security 
systems, but has upset traders by declining to 
publicly reveal the minimum standards now required.

The ETS is seen as a vital tool in the fight 
against climate change and the fraud is a setback 
to attempts to sell the cap-and-trade scheme to 
the US, Australia and elsewhere. ....[cont.]
I asked my good friend Marshall Auerback, an 
expert on the machinations of Wall Street who has 
degrees in philosophy and law, if he could 
elaborate on this vulnerability.  He responded as follows:

And here's another story, which should make one 
VERY wary.  The person who developed the credit 
default swap, Blythe Masters from JP Morgan, is 
also behind the creation of this carbon capture 
program.  Leave it to Wall Street to find a way 
to extract an economic rent from pollution!

The Emissions Trading Scheme (ETS)  amounts to 
nothing more than a privatisation of the commons 
asset which we call the atmosphere. The ETS would 
create private property relations over public 
space.  In Europe, it's been a colossal failure. 
The EU introduced what was known as the Clean 
Development Mechanism, which was an offset system 
allowing polluters in Europe to invest in 
emissions-reduction infrastructure in poor and 
developing countries and then use the "offsets" 
to avoid undertaking more costly emission reductions in Europe.

There is ample evidence of the projects having 
disastrous effects in poor countries and regions. 
There has been very little technology transfer 
from the rich to poor countries. The projects 
undertaken have often brought civic leaders in 
poor countries into conflict with land-holders 
with the latter enduring significant reductions 
in their capacity to feed themselves. Payola is rife!

This article in the Sunday Times (September 13, 2009) said:

The legitimacy of the $100 billion (£60 billion) 
carbon-trading market has been called into 
question after the world's largest auditor of 
clean-energy projects was suspended by United Nations inspectors.

SGS UK had its accreditation suspended last week 
after it was unable to prove its staff had 
properly vetted projects that were then approved 
for the carbon-trading scheme, or even that they were qualified to do so.

It is clear that emissions have not gone down 
much if at all yet prices of carbon-heavy goods 
and services have gone up. Yes: profits have gone 
up among the big polluters. The big winners have 
been the heavy polluters and the hedge funds (at 
least prior to the crisis) while the losers have 
been consumers, the environment, and poor communities.

Market-based systems are insensitive to equity 
issues. Fortunately, we'll never get this 
introduced here in the U.S., because it 
constitutes an attack on the Appalachian coal 
regions and Obama has already lost West Virginia 
and probably Ohio.  If he were to try this stuff, 
he might well lose Pennsylvania in 2012, and he'll be a one-termer."

Note particularly Marshall's comment about 
leaving it to Wall Street to hijack the "commons 
asset which we call the atmosphere."  The 
economic problem of any commons raises all sorts 
of squishy intellectual problems, because it is 
fundamentally about a question of moral values, 
not property values -- it deals with values we 
profess to uphold and expect others to uphold.

It is ironic indeed that the assault on the 
"commons"  by carbon credits is being spearheaded 
by those advocating policies to reduce global 
warming.  These people profess to be protectors 
of the environment.  Yet the seminal article on 
the moral character of the problems in dealing 
with a commons, i.e., The Tragedy of the Commons, 
was written by the respected environmentalist 
Garrett Harding and appeared in Science in 
1968.  In fact, Hardin's brilliant essay became 
one of the most important sources of intellectual 
pressure that led to the emergence of a 
institutionalized environmental protection 
movement, with the establishment of the 
Environmental Protection Agency in 1970!

Chuck Spinney retired from the Defense Department 
in 2003 after 33 years service (bio) and now 
lives with his wife and dog on a sailboat in the Mediterranean.
+44 (0)7786 952037
"Capitalism is institutionalised bribery."

"The maintenance of secrets acts like a psychic 
poison which alienates the possessor from the community" Carl Jung

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