During the same period, the British Wind Energy Association publicly called for some form of targeted government intervention for the UK to achieve its renewable targets. I approached a number of green energy associations looking to speak to someone who had attempted to obtain finance from RBS for their projects, but I was told that no one would waste their time in such fruitless efforts.

The report that Platform and others commissioned at the end of last year, Towards a Royal Bank of Sustainability, is about attempting to democratise financial institutions. We as taxpayers have paid for it, so we should have some say in how the RBS is run. Financial institutions should exist to finance the needs of society rather than as a means of making large amounts of money for small numbers of people. The political opportunity to assert the public ownership of RBS comes at a time when there is an stark contrast between the social need for low-carbon and the ‘business as usual’ approach of fossil-fuel finance.

The ‘hands off’ approach of the Treasury is looking increasingly untenable. It’s not just left-wing economists and environmentalists that are challenging this position. Jeremy Scott, the global financial services chairman of PricewaterhouseCoopers, has said that ‘Governments need to accept, given the limited likelihood of a quick extraction from the sector, that their main focus needs to be on the positive role they can play given they are “inside the tent”.’

If we put aside for a moment the obsession with short-termist profit maximisation that characterises our economy, there is a clear business case for banks to divert the flow of capital away from new fossil fuels and into clean energy. The government-commissioned Stern Review on climate change clearly laid out that the longer we delay the changes we need to make to our societies and our economies, the higher the annual percentage of GDP we will end up paying to adapt to the consequences of the destabilised climate.

A number of groups are calling for some sort of state-managed green investment bank that would finance the multiple projects necessary for the transition to a low-carbon economy. Some argue that the change in institutional culture might be too great for a bank like RBS to be used to perform this function, and that new financial architecture will be necessary. Regardless of this, the fact remains that any new green infrastructure will need to be accompanied by the withdrawal of banks such as RBS from the fossil-fuel sector. An infinite number of windmills won’t help if they continue to extract and consume coal, oil and gas at the same rate.

The spectacular losses caused by reckless financial practices have been socialised. But the banks continue to insist that the profits remain privatised – and, importantly, the decisions as to how go about creating those profits remains firmly in the hands of the banking executives.

Yet the fact that RBS is majority owned by the public provides an enormous opportunity to demand a much-needed dose of public involvement in financial institutions that up until now have been entirely unaccountable and opaque to the wider public.

The UK taxpayer has paid and will keep paying an enormous price to have kept the banking sector afloat. Possibly the only silver lining to be found in this situation is the political potential to put the sustainability and human rights agenda at the heart of one of the biggest financial structures in the country.

Read Platform\’s report on the RBS

The Royal Bank of Scotland (RBS), formerly a banking behemoth, has been brought to its knees by the crisis, taking a government bailout and agreeing to part-nationalisation. But although the hidden ‘risk’ that got it into trouble has been defined primarily in monetary terms, RBS has been equally adept at concealing the ecological risk inherent in its investment portfolio.

The private banking sector makes considerable profit from lending our money to finance the development of big infrastructural projects around the world – and the UK bank that has been putting the most money into new oil pipelines, coal mines and companies like E On, is RBS.

Until very recently, RBS – which also owns NatWest – even went so far as to promote itself as ‘The Oil and Gas Bank’ with a website of the same name and an international team devoted to making fossil fuel deals happen. While other high-street banks such as HSBC and Barclays have also put up finance for dirty fuels, research has repeatedly shown RBS to be the most heavily involved.

A 2007 Platform report, The Oil and Gas Bank, showed that the emissions embedded within RBS’s oil and gas project finance reached 36.9 million tonnes of carbon – equivalent to one quarter of UK households, and almost as much as the entire emissions output of Scotland itself.

The Cashing in on Coal report (Friends of the Earth/People & Planet, 2008) shows that in the preceding two years, RBS had loaned an estimated $16 billion in 27 different loans to coal-related companies around the world. This included taking part in loans worth $70 billion to E On at a time when it was announcing plans to construct 17 new coal and gas-fired power plants across Europe.

The campaign against RBS’s fossil fuel financing is mounting and involves student groups such as People & Planet and NGOs like Friends of the Earth Scotland, as well as more radical networks such as Rising Tide and the Climate Camp. Even the Women’s Institute has signed letters questioning the bank’s involvement in particular projects.

At the heart of the campaign lies the threat of a consumer boycott if RBS doesn’t start to take responsibility for capping and reducing the emissions embedded in its financing. To the bankers, the threat of such action in the context of widespread consumer concern over climate change evokes the spectre of the high-profile boycott of Barclays in the 1970s and 1980s over its involvement in apartheid-era South Africa.

Choosing one particular bank to target poses certain questions, given that so many of them (with the honourable exception of the Co-op) are involved in fossil fuel development. If RBS were to stop financing such companies and projects, then what would stop other financial institutions from providing the necessary money instead?

As extraction costs in the fossil fuel industry rise, companies are increasingly turning towards injections of private capital to make new projects happen, but there is a limited pot of capital available and expectations are not always met. Strategically eliminating large chunks of financing that would otherwise have been available can seriously slow down the rate at which fossil fuels are being extracted and consumed.

In addition, by targeting the ‘worst offender’, any progress made on their part can then be used as leverage to address the performance of other actors in the sector. This tactic of selecting one target in order to ‘shepherd’ the rest has already been met with some success in the US in a campaign by civil society groups to get major banks to stop financing the wave of planned new coal power stations.

RBS looks set to receive up to £20 billion of taxpayers’ money in the recapitalisation of the bank after its spectacular crash in stock market value in early October. With the government in charge, intervention can’t just be limited to the relatively cosmetic business of capping executive bonuses. It should cut to the heart of the climate damage being inflicted by RBS and other banks through their expansion of fossil fuel use around the world. It’s bad enough that Joe Public’s savings have been used to bankroll this expansion: now his taxes could be as well.

The government appears keen to take an ‘arm’s length’ approach to running the bank and to sell it back to the private sector at the first opportunity. But the majority public ownership could provide an example of how the democratisation of such financial institutions could play a vital role in redirecting capital flows away from climate damage and towards the urgent and substantial investment urgently needed in renewable energy, public transport infrastructure and energy efficiency measures.

Freed of the short-term profit interests that dictate the ‘free’ market, banks could play a huge role in allocating capital towards the massive decarbonising overhaul that the global economy needs.

n More information on the campaign can be found on www.oyalbankofscotland.com or the Facebook group ‘Stop the Oil Bank of Scotland’. Kevin Smith is a climate and finance campaigner at eco-justice group Platform

In a move designed to weed out the carbon cowboys, Benn’s proposal is that only offset providers using the Kyoto Protocol’s ‘clean development mechanism’ (CDM) will qualify for the government’s seal of approval. This currently excludes all but a handful of offset companies in the UK. Most of the industry has been delegitimised at a single stroke, including such outfits as Climate Care and the Carbon Neutral Company, who have always taken pains to portray themselves as the good apples in the bad bunch.

That’s the good news. The bad news is that Benn’s measure is only temporary. In response, eight of the largest offset providers in the UK are forming an industry coalition to create their own ‘self-regulating’ standards that would replace the government’s best practice code.

There is even worse news when you look at what the CDM entails. As with voluntary offsets, it is designed to shift the burden of cutting emissions onto poorer countries in the South. A range of research has shown that the same problems of corruption, bogus emissions reductions and harm to communities occur within the CDM as with the voluntary offset market.

To take just one recent example, the Oxford-based carbon broker, Ecosecurities, recently sold CDM credits generated by a wind farm in Maharashtra, India. Fantastic, you might think, this is exactly what the carbon market should be all about, promoting renewable energy in Southern countries. A visit to the project in 2007 revealed a different picture. The gigantic wind farm had been built on traditional grazing grounds and provided no energy to the villagers themselves. Those who resisted met with repression.

The company responsible for the project, Tata Motors, also has an appalling environmental and human rights record in India. When people buy these credits, they are putting money in the pockets of those responsible for violent industrial expansion and land appropriation on the other side of the world.

There’s also the thorny issue of additionality. Carbon offsets are supposed to provide investment for emissions reduction projects that wouldn’t otherwise have happened. If not, they are simply selling ‘hot air’.

But a 2006 investigation in India, conducted by an adviser to the CDM executive board (which regulates the scheme), conservatively estimated that one-third of all projects failed to be ‘additional’. An extensive study of CDM hydro-electricity projects, meanwhile, found that almost all such projects were already under construction when they applied for carbon financing – suggesting that ‘additionality’ in this sector is in very large part a fiction.

There is a basic catch-22 with offsets and regulation. The more you regulate, the more expensive it becomes to enter the market, so the more you push it into the hands of the big corporate bad guys with enough money to make it work for them. The less you regulate, the greater the openings for chancers who claim that they’re generating offsets from any old nonsensical scheme.

Establishing a code of best practice does, at least, acknowledge the serious problems with existing offset schemes. But it also reinforces a false dichotomy of good versus bad offsets that distracts attention from their more fundamental problems. No number of regulatory frameworks or best practice codes can resolve the fact that offsets are snake oil, a nonsensical commodity that reduces the problem of tackling climate change to a short-sighted cost-benefit analysis that foists projects on communities ‘over there’, irrespective of the social costs, and is cheaper than making political and social changes here.

Kevin Smith is a researcher at Carbon Trade Watch (www.carbontradewatch.org), a project of the Transnational Institute, and author of the forthcoming Hot Air and Snake Oil: The Top Ten Carbon Offset Upsets

Carbon trading is central to this approach. It turns the earth’s carbon-cycling capacity into property to be bought or sold in a global market.This use of market forces to address environmental problems takes two forms.

First, governments allocate permits to big industrial polluters who then trade these ‘rights to pollute’. Second, surplus carbon credits are generated from carbon offset projects that claim to reduce or avoid emissions in other locations, usually in Southern countries. These credits may be purchased to top up any shortfall in permits. Under the Kyoto Protocol, such offset projects are carried out in the South through the Clean Development Mechanism (CDM), or in Northern countries through Joint Implementation (JI).

The market is growing enormously.A World Bank report valued it at US$21.5 billion for the first three quarters of 2006, up 94 per cent on its value of $11.1 billion in 2005.

Gleneagles onwards

Despite the hype, the 2005 G8 summit in Scotland produced little in the way of concrete action in dealing with climate change.The final communiqué made limp resolutions to ‘promote’ better practice on climate change, with no mention at all of reducing the rate of extraction and consumption of fossil fuels. Blair was widely praised, however, for bringing the heads of state of Brazil, China, India, Mexico and South Africa to the negotiating table, and it was with these countries that the G8 plus 5 Climate Dialogue was launched.The dialogue brings senior legislators together with international business leaders, civil society representatives and opinion leaders to discuss a post 2012 climate change agreement, with the aim of agreeing a consensus statement at the G8 2008 Japan summit.

The dialogue has a heavy bias towards trading schemes as the best way of dealing with climate change, with one of its four working groups dedicated specifically to developing market mechanisms. Furthermore, the G8 plus 5 summit has mandated the World Bank to facilitate the creation of a framework for climate change management, clean energy and sustainable development.This is in spite of the fact that the World Bank is part of the climate problem rather than the solution: since the UN climate convention was signed at Rio earth summit in 1992, the Bank Information Centre calculates that the World Bank has single-handedly financed over $25 billion in fossil fuel based projects.

In response to the G8 mandate, the World Bank produced a report called Clean Energy and Development: Towards an Investment Framework, an updated version of which was presented at the G8 plus 5 meeting in Mexico in October 2006.

The report promoted carbon trading as the main means of financing the development of clean technology.

The Bank’s promotion of emissions trading through the G8 plus 5 creates a clear conflict of interest in that it is also the largest public broker of carbon purchases, with over $1 billion in its carbon credit portfolio. It generates a great deal of revenue for itself through receiving a percentage commission on all the carbon credits it purchases to administer through its Prototype Carbon Fund. Through its influence in political processes like the G8 plus 5, it has actively lobbied to make the CDM a more attractive proposition for investors and less effective in terms of actually reducing emissions.

The G8 plus 5 met again in February 2007 in Washington, at a meeting spearheaded by five US senators who have introduced a congressional bill that would allow US companies to certify emissions reductions, which may be traded on the international market to other nations. Keynote speakers included German chancellor Angela Merkel as well as Nicholas Stern, whose influential Stern Review on climate change has been promoted as providing the economic rationale for the global carbon market, and Paul Wolfowitz, president of the World Bank.

It is not yet clear what targets there are for dealing with climate change at the 2007 G8 summit in Germany, but the majority of governments, industry and international financial institutions are keen to see the groundwork laid for an international emissions trading framework to extend beyond the 2012 Kyoto commitment period that will include the other greenhouse gases and other emissions-producing sectors, such as the airline industry.

Carbon trading won’t work

The G8 and free-market environmentalists have been at the forefront of championing a rosy narrative of ‘win-win’ scenarios in which the quest to maximise corporate profits can go hand in hand with addressing the climate crisis. But this is largely an act of faith, as there is no evidence that climate change can be tackled while maintaining an economic growth pattern based on the ever-increasing extraction and consumption of fossil fuels.

Carbon trading encourages the industries most dependent on coal, oil and gas to delay shifting away from fossil fuels. There is little incentive for expensive plans for long-term structural change if you can get by in the short term by buying cheap permits-pollution rights from operations that can reduce their emissions. Yet for G8 countries seeking to demonstrate their commitment to climate action, these inherent problems of emissions trading are swept aside in favour of a system that sustains the economic dominance of the most powerful industrialised nations.

Kevin Smith is researcher at Carbon Trade Watch, co-author of Hoodwinked in the Hothouse: the G8, Climate Change and Free Market Environmentalism and contributor to G8 Club Governance: www.dhf.uu.se/critical_currents _no1.html

From the World Cup to HSBC and BP’s offset petrol, individuals, organisations and corporations have been keen to prove their climate-friendly credentials by going ‘carbon neutral’. The success of the different schemes reflects the fact that there is an increase in popular awareness about the need to engage with climate change. But are these schemes offering a valid approach to the problem, or are they detracting from the real action that needs to take place?

The first carbon offset project was organised in the US in 1989, when Applied Energy Services had its plans to build a 183 megawatt coal-fired power station approved partly due to its pioneering offset, which involved planting 50 million trees in the impoverished Western Highlands of Guatemala. This initial project was beset by many of the problems that have plagued offset projects ever since. The non-native trees that were planted initially were inappropriate for the local ecosystem and caused land degradation. The local people had their habitual subsistence activities, such as gathering fuel wood, criminalised. Ten years on from the start of the project, evaluators concluded that the offset target was far from being reached.

Some years later, in 1996, the idea to set up a company to market such schemes was cooked up and Future Forests (which later changed its name to the Carbon Neutral Company) was launched. It gained a great deal of publicity initially through high-profile celebrity endorsements from the likes of the Rolling Stones, Leonardo di Caprio and Brad Pitt. Climate Care established itself the following year, and by 2006 there were a further 21 companies marketing voluntary offset projects to individuals, companies and events.

Some environmentalists were dubious about both the ethics and the efficacy of carbon offsets from the beginning, but the dark clouds of doubt and controversy have been gathering throughout 2006. In April, articles appeared in the national press suggesting that some 40 per cent of the mango trees in southern India that Coldplay had sponsored to offset the emissions from the recording of their second album had died. The villagers who were supposed to be the benefactors of the scheme made allegations of unfulfilled promises and project mismanagement, and there was a breakdown in relations between the Carbon Neutral Company and its project partner in India. Yet for months afterwards, fans of the band were still being sold dedicated trees in the plantations that were still being portrayed as a glowing success story.

In October, the UK Advertising Standards Authority (ASA) ordered the Scottish and Southern Energy Group (SSE) to stop making claims about ‘neutralising’ its customers’ emissions in its leaflets. In the contentious advert, the SSE claimed to ‘plant trees to balance out the CO2 that your gas heating and household waste produces’. Although the SSE was able to provide figures on what emissions the average household produced, the lack of scientific knowledge about the carbon cycle meant that it was unable to provide sufficient evidence that the number of trees it planted would match or exceed the level of emissions, and it was thus in breach of the ASA guidelines. It has yet to be seen what impact this ruling will have on the countless other spurious ‘neutralising’ claims made by similar offset schemes.

These incidents, and many others, have highlighted some of the technical problems with offset schemes, and have brought the environmental or social shortcomings of specific projects into focus. Less has been written about how offset schemes are fundamentally ineffective in addressing climate change through their emphasis on personal consumption, lifestyle and individual action.

Social change is a necessary precursor to dealing with climate change. There is an urgent need to restructure society away from the fossil fuels-based, carcentred, throwaway economy ‘business as usual’ scenario to one in which we pragmatically reduce our emissions levels in the context of a renewable energy-based, participatory, diversified transport, reuse/recycle economy. No matter how many low-energy light bulbs you install, or how much recycling you do, there is still the need for more systemic changes to take place in society. No amount of individualistic action is going to bring about this change in itself.

Such changes will not happen without community organising and collective political action. Yet there are no offset schemes that encourage individuals to engage in collective action to bring about wider structural change. Offset schemes place the onus for climate action on individuals acting in isolation from others. This inhibits their political effectiveness.

The act of commodification at the heart of offset schemes assigns a financial value to the impetus that someone may feel to take climate action, and neatly transforms this potential to bring about change into another market transaction. There is then no urgent need for people to question the underlying assumptions about the nature of the social and economic structures that brought about climate change in the first place. One just has to click and pay the assigned price to get ‘experts’ to take action on your behalf. Not only is it ineffective and based on half-baked guessing games and dubious science, it is also very disempowering for the participants.

The single most effective – and incontrovertible – way of dealing with climate change is drastically to limit the quantity of fossil fuels being extracted. Providing support for communities who are resisting the efforts of the industries to extract and burn ever-increasing quantities, therefore, is one of the most important strategies in dealing with climate change. Yet it is the least encouraged because, unlike carbon offsets, it involves posing a critical challenge to the established systems of corporate power and societal organisation.

One of the most inspiring recent examples of effective climate action has been the victory of the Ogoni women in stopping Shell from flaring gas from its oil fields in Nigeria. Not only was this the source of numerous pollution and health problems for the Ogoni people; it was also the single largest source of CO2 emissions in sub-Saharan Africa. This hard-won victory, a huge success in terms of both social justice and climate change, depended on community empowerment, confrontational politics and international solidarity.

One of the most distressing effects of the culture of offsets is the fact that it negates all three of these factors. Instead of community empowerment, climate change is presented as a matter of individualistic morality and lifestyle choices that discourages collective political action. We are being led to believe that responsible consumer choice is all that is necessary on our part, rather than engaging in a different kind of political responsibility and activity – one that confronts the fact that there are profound changes that need to be made in our society in order to effectively deal with climate change. The notion of international solidarity is transformed into a one-sided affair involving a neo-colonial relationship of economic advantage and conditional aid.

Promoting a more systemic approach to climate change would not seek to reduce the problem to marketing gimmicks, technological quick fixes or neo-colonial exploitation. Any individual, organisation or government embracing this holistic attitude would commit to doing everything they could to reduce their climate impact, but would not ‘offset’ responsibility for their remaining emissions. Rather they would commit to demanding, adopting and supporting climate policies that reduce emissions at source.

This means supporting stricter regulation, powers of oversight and penalties for polluters at all levels. It means supporting communities adversely impacted by climate change and so-called ‘climate-friendly’ projects. Finally, it means endorsing the notion that real solutions to climate change require social change; and, for those who count themselves as a part of that movement, spending time and energy towards achieving such change.Kevin Smith is a researcher with Carbon Trade Watch, a project of the Transnational Institute. He is co-author of The Carbon Neutral Myth: offset indulgences for your climate sins, forthcoming in January 2007