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2010-12-09

Offsetting Emissions or Pollution Profiteering? Debating the Surge of Cap-and-Trade Carbon Market

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At the U.N. Climate Change Conference in Cancún, World Bank President Robert Zoellick announced the launch of a new multi-million-dollar fund to help set up markets to trade carbon in China, Mexico, Chile and Indonesia. Carbon trading has been a hot topic here at the climate talks. John Hamilton files a report. [includes rush transcript]

Transcript

This is a rush transcript. Copy may not be in its final form.

AMY GOODMAN: We’re broadcasting from, well, right here in Cancún, Mexico, where the U.N. global warming summit is taking place. On Wednesday, the World Bank president Robert Zoellick announced the launch of a new multi-million-dollar fund to set up markets to trade carbon in China, in Chile and Indonesia. John Hamilton filed this report.

JOHN HAMILTON: The International Emissions Trading Association is holding its own convention on the sidelines of climate talks this week in Cancún. The industry group lobbies on behalf of dozens of member corporations, like Goldman Sachs, ERA Carbon Offsets and Shell Oil. At the posh Westin Hotel and Spa here in Cancún, participants hear the latest news on one of the world’s newest industries: carbon emissions trading under a cap-and-trade system.

IETA CONVENTION PARTICIPANT: Cap and trade is the most efficient way to address environmental problems. So, you reduce emissions the most at the least cost.

JOHN HAMILTON: One of the biggest critics is IETA is also a top organizer for climate justice activities planned for next year’s climate talks in South Africa.

PATRICK BOND: "Capitalism in the age of climate change."

JOHN HAMILTON: Patrick Bond is with the Center for Civil Society based in Durban.

PATRICK BOND: "Cities in CDM." Yeah, it’s Durban. Durban is one of the key guinea pigs for — this is landfill emissions, so they take the methane out, and they turn it into electricity, and they sell it to big companies like Shell. So, Shell will come and buy some carbon credits arranged by the World Bank, and that will allow them to continue business as usual. And, of course, the problem is that when they continue to buy carbon credits, they just continue to emit in the North, but the carbon credits they buy in the South, places like Durban, South Africa, where the next COP17 will be, those projects are often absolutely corrupt or very damaging to local people. And that’s why the REDD debate has become so intense, whether the reduced emissions from deforestation and degradation can be turned also into a privatization of the air. And that’s what, of course, these guys here want to have happen is to have forests become part of the global carbon market.

JOHN HAMILTON: Critics of REDD say the U.N.-backed scheme will lead to the privatization of entire rainforests and could force indigenous peoples off their ancestral lands. But emissions traders contend that the opposite is true, that without a market incentive there’s little hope for preserving what’s left of the planet’s virgin forests. Henry Derwent is president and CEO of IETA.

HENRY DERWENT: So, I mean, I’m really disappointed by people who are simply saying this is not something where there should be any role for the private sector, this is something that is — there should not be any role for the profit motive or trading or buying and selling, because the world works with all those things. You might wish it were otherwise, but if you don’t actually give an economic reason for people to do something other than disfoliate their forests and chop them down in order to put soybeans or cattle or just take the timber and then leave the rest by the most careless and environmentally damaging mechanisms, then it’s going to carry on. You’re not going to stop people by just sort of saying, "We wish you wouldn’t do that." And frankly, the idea of sort of doing the whole thing by simple command and control in the middle of the Amazon, it’s not going to work. Even the Brazilian army is not big enough to do that. You’ve actually got to give the people who live there and who actually say, "I need — I’ve got an economic resource. You’re trying to take it away from me. Give me something else" — you’ve got to answer that question, because otherwise you’re not serious.

PROTESTER: Enter the climate casino! It’s a massive free-for-all!

JOHN HAMILTON: Protests like this 2009 demonstration targeting the Climate Exchange of London hope to sway public opinion against a system that trades in pollution. Michael Dorsey is a professor in the environmental studies program at Dartmouth University.

MICHAEL DORSEY: When we began the largest formal marketplace in Europe, the European Union Emissions Trading Scheme, we saw an over-allocation of allowances to emit. So that essentially saturated the market with credits and caused a plunge in the share price of the credits that were in the system. And it also didn’t incentivize companies to make those investments in technology that they would have otherwise made if the cost of emitting was sufficiently high. So, over the past few years, we haven’t seen the net reduction in emissions that was predicted at the onset. And in addition, there have been different kinds of fraud, tax evasions, criminal conduct in the marketplace, in part because there’s very little regulatory apparatus that pays attention to those individuals and companies that are trading in the marketplace.

JOHN HAMILTON: But Henry Derwent contends that carbon markets have weathered the storm of the Great Recession.

HENRY DERWENT: People talk about volatile carbon markets. Carbon markets have actually been less volatile than baskets of stocks, equities and so forth.

JOHN HAMILTON: But in Europe, the price of carbon is half today of what it was two years ago.

HENRY DERWENT: In Europe and across the world, price differentials for a variety of commodities — I don’t have to talk about oil or coal, I can talk about agricultural commodities, as well — exhibit those sorts of changes. That’s the way the world works nowadays. There are intermediaries, there are market makers, there are people who do hedging and risk coverage, who deal with the results of fluctuations in supply and demand so that it doesn’t get felt by consumers at the bottom of the chain. So there’s nothing particularly unusual there. Of course we’ve been in a difficult financial period. Of course it’s bad investment conditions generally still out there. But I don’t think there’s any reason there to sort of say either "There’s something particularly odd about carbon, so let’s not do that," or to say, "Hey, here’s a great idea: let’s give up on markets altogether and go back to a planned economy." I don’t think so.

JOHN HAMILTON: As developing nations and even some U.S. states turn to cap-and-trade systems, Professor Michael Dorsey worries that rising energy costs will hurt the poor and communities of color, while enriching traders in the carbon commodities market.

MICHAEL DORSEY: One of the key things that we have to do that hasn’t really been done in the creation of the marketplace, particularly in Europe, is provide the resources that are going to protect those that are on the margins of the society that see their energy costs increase. So far, what we’ve had is the increase in energy costs harming those on the margins, while we’ve seen those that profit in the carbon marketplace, particularly derivative traders and financiers, we’ve seen them take windfall profits at the expense of society. In a sense, what they’ve been doing is socializing the harm in the marketplace, particularly the inaugural creation of the marketplace, socializing the harm and then privatizing the profits, that they’ve been essentially profiteering in the unfolding climate catastrophe.

JOHN HAMILTON: For Democracy Now!, I’m John Hamilton in Cancún, Mexico.

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