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SAINT AUGUSTINE, May 23 2011 (IPS) - The Kyoto Protocol expires at the end of 2012. Its global focus on CO2 emissions and trading schemes based in London and other financial centres has grown suspect.
The 2007-2008 Wall Street meltdown with the help of the fossil fuel lobbies doomed prospects for a national “cap and trade” bill in the US Congress. Widespread fraud in trading CO2 “offsets” led the UN police agency INTERPOL to warn that the next white collar global crime wave would likely be in trading these carbon derivatives.
Emission-trading schemes were devised to bridge divides between North and South, using “neutral” market mechanisms. These markets for carbon in the Kyoto Protocols included a Clean Development Mechanism (CDM) to compensate developing countries for shifting to low-carbon technologies and development. Traders in Wall Street and London’s big banks hailed these “financial innovations” and set up trading desks and exchanges.
But large polluting industries in Europe’s Emissions Trading Scheme (ETS) quickly gamed the Kyoto Protocol. They lobbied EU governments for so many free CO2 emission permits that they crashed the ETS markets for CO2. Then, instead of shifting from fossil fuels to wind, solar, geothermal and energy efficiency, polluting industries purchased “offsets” under the CDM to fund projects in developing countries.
Verification of these projects proved almost impossible, since so many would have happened any way, for sound business reasons like energy efficiency and more productive, cleaner technologies. Most of the offsets under CDM went to China, allowing it to develop solar, wind, and clean technologies. Now China has developed and captured these export markets; it has stopped selling “offsets” to Europe’s polluting industries, which must now go green and buy their new equipment from China.
Economists pushed policy proposals for “market-based solutions” to climate change in the US Senate during the Reagan and Clinton administrations. Influenced by the ideologies of conservative economists and elite environmentalists, they joined the push to privatise, deregulate, and promote expansion of market-based globalisation. US policy dominated the UN’s first climate summit in Kyoto in 1997, and led to the CO2 emissions-trading approach of the Kyoto Protocol. The focus on CO2 (with lesser attention to other more polluting greenhouse gasses: methane, NOx, VOCs) followed largely because financial traders on Wall Street and in London needed a single commodity -carbon- to construct tradable financial instruments.
Many developing countries were dubious about “cap and trade”, understandably suspicious about turning their climate policies over to faraway trading desks in the major banks and new firms set up to trade carbon. They warned that these new carbon markets were not “free” but created and administered by governments which set and policed the caps on emissions.
Pandering to market-fundamentalist economists by focusing on carbon and its financial trading now seems a strategic mistake. There was a failure to disclose that setting up carbon caps and trading mechanisms actually entailed the creation of costly, complicated new bureaucracies. Monitoring, verifying the offsets, RECs (renewable energy certificates) while lowering the levels (caps) on CO2 emissions was opposed by the polluters. The CO2 permits were to be auctioned, but this quickly turned into massive giveaways to polluters, which then sold them at a profit -as global levels continued to rise.
Thus “cap and trade” turned out to be less efficient then direct taxing and regulation. Trading was opposed by many developing countries, environmentalists, academics, climate scientists as well as some brave economists who argued for taxes. Green tax shifting is still the best solution, as I advocated (Christian Science Monitor 1989, 1990) where taxes on incomes and payrolls are cut and shifted to all forms of pollution (not just CO2), extraction of virgin resources, and waste while remaining revenue neutral. Slowly, this approach is gaining support, even in the US Senate from Senators Maria Cantwell and Susan Collins.
Meanwhile our Ethical Markets Green Transition Scoreboard researching all private investments in green technologies since 2007 reported USD 2 trillion by Q1 2011. While politicians argued, Ethical Markets urged global pension funds and institutional investors to shift at least 10 percent of their portfolios to green companies.
At the same time, the re-think on climate policy produced two ground-breaking reports from IPCC and UNFCCC itself with the World Meteorological Organisation (WMO). They advised broader approaches to global emissions beyond CO2 to focus on soot (black carbon), methane, VOCs and ozone -pointing out that this could decelerate global warming more rapidly than relying on CO2 reductions alone. These policy shifts also focus on green energy. Both can improve health outcomes from such localised pollution sources and make regional government actions feasible -before reaching new global agreements. (END/COPYRIGHT IPS)
(*)Hazel Henderson, author, president of Ethical Markets Media (USA and Brazil), co-developed with the Calvert Group the Calvert-Henderson Quality of Life Indicators ( www.calvert-henderson.com) and co-authored “Qualitative Growth” (2009), Institute for Chartered Accountants of England and Wales (www.icaew.com ).
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