The hegemony of the G8 in international forums such as the United Nations Framework Convention of Climate Change means that global climate policy is being chosen for its compatibility with the existing economic system rather than its effectiveness in reducing emissions.
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.
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