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The carbon scam
While bankers and traders sighed with relief at an apparent recovery in their fortunes during April and May, the economic environment for most of the people on most of the planet is deteriorating. Industries are collapsing, unemployment is rising steeply almost everywhere, many thousands of families are being dispossesed of their homes; and hundreds of millions of the world's poorest people are being plunged even deeper into poverty and malnutrition. As for our physical environment, and over the longer term, the future looks even worse. The first evacuation of a Third World community due to rising sea levels has begun; and, as a new research paper published in The Lancet predicts, accelerating climate change is likely to result in more heat waves and the increased incidence of tropical diseases, producing calamitous effects on human health, especially in the Third World countries. The Nursing Times reported:
According to the paper on climate change, published by The Lancet and University College London, worst affected would likely be developing countries such as Bangladesh because they lack sufficient financial resources to deal with events like flooding, crop failure and diseases including dengue fever and malaria.
‘Climate change is the biggest global health threat of the 21st Century,’ authors said.
‘Effects of climate change will affect most populations in the next decades and put the lives of and well-being of billions of people at increased risk,’ they added.
Richard Horton, editor of the Lancet, said: ‘It is an urgent threat, it is a dangerous threat, it is immediate and requires an unprecedented response by government and international organisations.’
Yet there is a piece of good news, which has been taken by some to mean that the Western governments and corporations are already on the right path in their response to the threat of accelerating global warming. Human-generated carbon dioxide emissions, which had risen by 25% in the decade since the adoption of the Kyoto Protocol in 1997, are now falling.
On 15th May 2009, the Confederation of British Industry issued a statement, under the heading 'CBI welcomes fall in carbon emissions in European Union':
The CBI today commented on data published by the European Commission, showing a three per cent fall in carbon emissions in 2008 from firms in the industrial and power sectors, covered by the EU Emissions Trading Scheme (ETS).
Dr Neil Bentley, CBI Director of Business Environment, said:
“This data shows that the Emissions Trading Scheme is an effective way of cutting carbon output.
“Some of the reductions in carbon emissions may have been caused by the fall in industrial output during the recession, but companies have also become more energy efficient and have embraced cleaner, low-carbon technologies. Meanwhile, electricity generators are burning less coal.
“The priority now must be to get a robust international deal in Copenhagen which will make the carbon market even more effective in tackling climate change.”
The European Commission also hailed the good tidings:
The fall [of CO2 emissions] in the industrial and power sectors covered by the emissions trading scheme was claimed by the European Commission as a victory for environmental policies...
The Financial Times quoted Stavros Dimas, EU environment commissioner:
”The reduction was partly due to businesses taking measures to cut their emissions in response to the strong carbon price that prevailed until the economic downturn started.”
investing in pollution
The EU's Emissions Trading Scheme (ETS), in operation since 2005, is a system which aims to reduce the emission of carbon dioxide by turning the right to pollute the atmosphere into a privately-owned commodity, tradeable for profit on the capitalist market. Currently just over 10,000 power-generation and industrial sites, which together produce an estimated 47% of the EU's atmospheric CO2 output, are covered by the scheme.
Each company which is included in the ETS is given an allocation of a certain number of tons of CO2 (in the next phase of the scheme, the allocations will be sold by auction). If the firm then produces less CO2 than its allocation, it can sell the remainder in the form of EU Allowances (EUAs), colloquially known as 'carbon credits'; a company which produces more CO2 than its allocation can cover the difference by buying some of these surplus EUAs on the 'carbon market'.
Under the 1997 Kyoto Protocol, which is due to be re-negotiated at the international climate summit in Copenhagen in December 2009, it is proposed that trading in carbon pollution will soon become a global enterprise. The CO2 emission allocations for each country are based on the pollution levels in 1990, and this is a very useful date for the purposes of the envisaged global carbon trading scheme.
It was following 1990 that, as a result of the overthrow of the socialist economic model in Eastern Europe and the former Soviet Union, those countries suffered from massive and traumatic de-industralisation and impoverishment of the population, which had the side-effect of a major reduction in CO2 emissions. In the nations of the ex-USSR and some other East European countries, industry has not been re-built to anywhere near the level which was achieved under socialism, and therefore their atmospheric carbon dioxide output remains well below its 1990 baseline.
So when the carbon emissions market becomes fully international, any rich country that wishes to exceed its pollution allocation will be able to buy its way out of the problem by purchasing carbon credits from the former socialist states. It is predicted that Japan will be the biggest buyer, and Russia and Ukraine the major sellers, in the global CO2 pollution trade.
Like other units of privately owned business-related property, for example company shares and barrels of oil, the 'carbon price' in the European Union varies wildly, subject to the vagaries of the market; EUAs are bought and sold by hedge funds and other 'investors' in order to make profits from speculation. The "strong carbon price" which EUAs hit before the global economy descended into crisis was about 30 euros; by February 2009, the price of EUAs fell to 8 euros, and by mid May the 'carbon price' had climbed back somewhat, to around 15 euros.
Does the data show, as claimed by the CBI and the EU commission, that the creation of a capitalist market in the right to pollute is an effective way to protect our environment? While the extension of the 'free market' in banking and finance has proved to be a disaster- mitigated only by the nationalisations and bailouts which are being carried out at enormous public expense- could it be that its application to the pollution of the atmosphere is showing itself to be a success?
Crisis- what crisis?
It is notable that CBI Director of Business Environment Dr Neil Bentley felt he had to make a slight concession; his comments included the following throwaway remark:
“Some of the reductions in carbon emissions may have been caused by the fall in industrial output during the recession...”
In polite society, this might be described as an understatement. The scale of the fall in industrial output in the European Union during 2008 was reported by Eurostat as follows:
In December 2008 compared with December 2007, industrial production declined by 12.0% in the euro area and by 11.5% in the EU27.
The Eurostat survey included further detail:
In December 2008 compared with December 2007, production of energy fell by 3.3% in both the euro area and the EU27. Non-durable consumer goods decreased by 3.9% and 4.1% respectively. Capital goods declined by 11.7% in the euro area and by 12.2% in the EU27. Durable consumer goods dropped by 14.5% and 14.1% respectively. Intermediate goods fell by 20.3% in the euro area and by 19.2% in the EU27.
In December 2008 [compared with December 2007], industrial production fell in all Member States for which data are available. The largest decreases were registered in Estonia (-20.7%), Spain (-19.6%), Sweden (-18.4%), Romania and Slovenia (both -17.5%).
Given this massive fall in production (which then continued to plummet in early 2009) the reduction of a mere 3% in CO2 pollution by the those firms which are included in the Emissions Trading Scheme is remarkably slight. It is notable that neither the EU commission nor the CBI produced figures for carbon dioxide emissions per unit of industrial output. No doubt, such figures will sooner or later be calculated by other researchers. When those figures are released, it is quite likely that they will show that in 2008, CO2 pollution by the firms covered by the ETS actually increased per unit of industrial production in the European Union.
Another way of assessing the effectiveness or otherwise of carbon trading would be to compare the CO2 emissions of the European ETS-covered firms with the changes in emission levels in countries which have not, so far, impemented carbon trading systems. Again, the CBI and the EU Commission made no such comparisons. However, some information is available.
In April 2009, a few weeks before the European Union and the Confederation of British Industry discerned that the recent fall in CO2 emissions could be used to promote the effectiveness of the pollution market, USA Today published an article under the headline 'Bad economy helps cut CO2 emissions':
The worldwide economic slowdown is having an unexpected positive impact in the fight against global warming: Emissions of carbon dioxide are falling, records collected by governments show.
From the United States to Europe to China, the global economic crisis has forced offices to close and factories to cut back. That means less use of fossil fuels such as coal to make energy. Fossil-fuel burning, which creates carbon dioxide, is the primary human contributor to global warming.
The USA Today article noted reductions in CO2 emissions in the USA and China; neither which, as yet, have carbon emissions markets:
• Carbon dioxide from U.S. power plants fell roughly 3% from 2007 to 2008, according to preliminary data from the Environmental Protection Agency analyzed by the Environmental Integrity Project. That's the biggest drop since 1995-1996, the first two consecutive years for which data are publicly available [...]
• Electricity production by Chinese power plants has been lower every month since September compared with the same months a year earlier, says Richard Morse, a Stanford University energy researcher. A drop in power generation translates to a drop in carbon-dioxide output. These are the first such drops in Chinese power production since the Chinese economic boom in the 1990s.
USA Today also gave a figure for the recent fall in CO2 emissions from European industrial enterprises. While there are various factors involved, and differing methodologies may affect the statistics, it is notable that carbon pollution from European industrial facilities as a whole dropped by 6%, as against the 3% reported for those industrial and power sectors which are included in the Emissions Trading Scheme:
• Carbon dioxide from industrial facilities in 27 European nations in 2008 plummeted 6%, according to Point Carbon's analysis of data published last week by the European Commission.
Green investment debacle
But even when the dire human cost of the economic slump is taken out of consideration, there is an important caveat. The USA Today article quoted a specialist:
A recession-driven drop in emissions "is good for the environment," says Emilie Mazzacurati of Point Carbon, an energy research company.
But Ms Mazzacurati added:
"In the long term, that's not how we want to reduce emissions."
[...] Some experts fear lower emissions may make companies and governments less likely to spend money to cut carbon output. "There's a risk that it will push back needed investment into … cleaner production," Mazzacurati says.
A Guardian article on the debacle of 'green energy' and 'green industry' in Britain indicates that Emilie Mazzacurati's fear is well founded:
Green power companies are heading for "crisis" and Britain should no longer rely on them to meet its energy security and climate change obligations, some industry experts are warning.
The difficulties - triggered by the credit crunch, recession and a collapse in the carbon price - have led to new demands this weekend to ministers from companies warning that their renewables schemes are at risk without more financial aid.
Over the past week alone, the previously fast-growing renewable energy sector has seen Shell decide to stop building wind and solar schemes worldwide, the wave company Pelamis hit by technical and financial troubles, and EDF Energy warn that UK renewables targets would not be realised and should be scaled back to achievable levels [...]
"I think it's heading towards a crisis," said Andrew Mill, who sits on the government's Renewables Advisory Board. "The government has done a lot in terms of policies and targets, but the reality is that it was always going to take a lot of money to make it happen. And that money is not coming through quickly enough."
The situation could be worse because green industry figures often suggest that everything is fine, argues Mill. "A lot of the [renewable companies] can't afford to talk about it as they need to be seen as a good investment. If they don't give out a good story then they can't raise money."
The problems stretch across the industry, he said, from small marine energy companies to large-scale investments in offshore wind farms that are expected to form the cornerstone of ambitious plans to generate 15% of Britain's energy from renewable sources by 2020. "The big utilities are struggling to raise project finance for inshore wind farms, and they were supposed to be the easy projects."
And therefore, any gains for the environment which have accrued during the current economic crisis will be lost as soon as the economy picks up, and production and consumption surges again. Working in its mysterious and destructive ways, the global capitalist market giveth, and the market taketh away. Yet it is we, as human beings, who decide to accord such power to this chaotic force.
Can the West be greened?
Given that the market mechanism of 'carbon trading' shows no signs of having any beneficial impact on the CO2 pollution which is endangering life on Earth, it is worth considering some non-market mechanisms which could be applied by the developed countries. These are not difficult to envisage; and the fact that the necessary actions would need to be organised and funded by the state is only a problem because the power of 'free market' capitalism- which has been in ascendancy during the two decades since human-generated climate change has been officially recognised as a very serious problem- makes it so.
To list a few straightforward and modest proposals: a major programme to install and upgrade home insulation, provided at no cost to households; a huge investment in public transport, not only greatly extending the system but making it much more convenient and free or very cheap to use; a programme to re-equip or replace all industrial, energy-producing and service sector economic enterprises on the basis of green technology; a massive expansion of research and development towards cleaner technology; the provision of all Western-developed green technologies at zero cost to the Third World countries, disregarding any issues of 'intellectual property rights'.
The implementation of such programmes would generate millions of jobs; and they would also be extremely expensive. But, as is proved by the trillions of pounds, dollars and euros which are currently being spent on rescuing the financial system, not to mention the trillions routinely expended on nuclear weapons and other military purposes; when the ruling group in society decides that an objective must be achieved, then the resources to do so will be obtained.
However, the resources required to make a drastic reduction in CO2 emissions would have to come from somewhere. The most environmentally-efficient way to bear the costs would be to significantly reduce the post-tax spending power of the people who have above average incomes.
This, even on its own, would have a beneficial effect on pollution. Within the rich countries- which between them, despite the rise of China and India, produce the majority of carbon emissions- it is the financially better off who consume the most energy, buy the most industrially produced goods, and purchase the most services which are dependent on the output of the energy-producing and industrial sectors. Making the richer somewhat poorer would drastically improve the prospects for humanity as a whole.
Will such proposals be considered by the leaders of the developed capitalist countries at the climate change summit in Copenhagen in December this year? Of course not. Instead they will discuss how to extend the market in CO2 pollution into a truly global profit-making opportunity for corporations and hedge funds.
The human race is the master of our planet, but until it becomes the master of itself, our planet is in danger; and the poor majority of our species will suffer the worst.