Costing the earth: as the deadline for gathering pledges for the Yasuni proposal to leave oil in the ground in return for financial compensation fast approaches, pressure is mounting to tap into the global carbon market. But at what cost, asks Adam Ma'anit?

New Internationalist, July, 2008 by Adam Maanit

Shortly after Ecuadorean President Rafael Correa's declaration of the Yasuni proposal, some of its official backers--such as the Clinton Global Initiative, the Wallace Global Fund, and the World Resources Institute--started making noises about possibly-generating carbon revenue by selling offsets and through controversial 'debt-for-nature' swaps. (1) Former US under-secretary and lead climate negotiator Stuart Eizenstat (currently a director for greenhouse gas trading proponents Chicago Climate Exchange) began singing Yasuni's praises. (2) If the funds don't materialize from other sources, the Correa Government may well find the lure of carbon financing too shiny to ignore. But the record of the carbon market to date has been less than sparkling.

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Carbonworld

In Terry Pratchett's Discworld novels, the principal city of Ankh-Morpork developed an innovative approach for dealing with crime and other antisocial phenomena. The city's budding thieves and assassins were issued licenses and tasked with the dutiful management of theft and murder, replete with annual budgets, forward planning, quotas and quarterly targets. They were permitted to carry on looting and garrotting the citizenry, provided they could produce the necessary paperwork upon request.

Perhaps a leaf was taken from Pratchett's books when the authors of the global carbon market epic the Kyoto Protocol (and its sequels such as the voluntary offset market, the European Union's Emissions Trading Scheme and other spin-offs), penned a comical fantasy about action on climate change. As with Ankh-Morpork, it seems the thieves and assassins in the form of the world's biggest polluters were given license to mug the citizenry of their share of the atmospheric commons. As we lie concussed on the pavement with a killer headache and empty pockets, we have some time to think about what ills have just befallen us and a chance to warn passers-by about the dangers.

In the 10 years since Kyoto was agreed, the global carbon market has exceeded $64 billion in value, and yet little if any actual emissions reductions have been achieved. (3) Despite a global recession, enormous profits have been amassed by some of the world's most polluting industries. Royal Dutch Shell posted a record first-quarter profit of $9 billion as it celebrates winning concessions to drill in the Chukchi Sea off the coast of an ever-warming Northwest Alaska. Meanwhile BP raked in a hefty $7.6 billion as its former workers at Grangemouth Refinery in Scotland went on strike over their pensions against new owner Ineos. Food costs have been spiralling, belts tightening and little to no substantive action has been taken to reduce greenhouse gas emissions anywhere near the recommended rate. In many countries, emissions have actually increased. Amidst all this, our vision still hazy from the sharp blow to the head, we find a cautionary tale for Yasuni and any talk of tapping into the global carbon markets to finance the deal.

Sub-prime carbon

The carbon markets have been a colossal failure. According to Nick Pitts-Tucker of Sumitomo Bank, the Kyoto market is a 'risible disaster. (4) Peter Atherton of Citigroup asserts that the European Union's much feted Emissions Trading System 'has done nothing to curb emissions' and adds that it has led to a 'highly regressive tax falling mostly on poor people'. (5) Even billionaire iiber-capitalist George Soros dismisses the carbon markets as 'ineffective'. 'It is precisely because I am a market practitioner that I know the flaws in the system'. (6)

What's been created is akin to a sub-prime market in carbon, where companies are trading cheap bogus 'credits' generated from dubious projects in the South to justify the West's continued fossil fuel addiction--all in the name of 'clean development'. And like that other sub-prime market, it could steer us into another global recession; only this time the exaggerated pronouncements of the sky crashing down on our heads may well be borne out. With all that we know about how ineffective current market-based approaches have been, you would think that at some point policy-makers would admit that their experiments with carbon markets were all so much pie in the sky and change tack. But not only has the carbon feeding frenzy continued unabated, even more ludicrous policies are being chummed into the policy sea for the sharks to feed on. Policy alternatives like Yasuni risk being consumed by this climate market hysteria.

REDD alert

A new agreement reached at last year's climate talks in Bali takes all this further by recognizing 'avoided deforestation.' Reducing Emissions from Deforestation and Degradation (REDD) allows Northern countries to finance forestry projects such as through the World Bank's growing portfolio of carbon funds (it currently has 10 such funds), and claim carbon credits in return. The Bank, incidentally, continues to fund the fossil fuel industry--to the tune of $1.5 billion in the last two years alone. (7) Its track record on forestry is abysmal. Not long ago it provided support for the Plantar project in Brazil which is associated with human rights abuses, land grabs, water depletion and destruction of indigenous ecosystems and forests to make way for monoculture eucalyptus plantations that locals call 'green deserts'. Indigenous groups are sounding the REDD alert. Simone Lovera of the Global Forest Coalition warned that: 'Indigenous people are victims of climate change and now they are going to become victims of climate change mitigation.' An unambiguous statement by a number of indigenous peoples' representatives voices their opposition: