Saturday, July 17, 2010

Carbon Trading Is A Scam

Carbon trading: another market failure

Lots of people have thought that creating a market to "trade" carbon emissions was always a scam. And there's plenty of evidence that scam is really too weak a word to describe how that market is unfolding. Back in March, The Guardian newspaper in the UK revealed that British industries were given lots of surplus credits - worth something like 66 million tonnes of CO2 - above what they needed. Companies are banking this free money (or free pollution) for future use. That means that they can sell their more expensive credits in the EU marketplace, while purchasing cheaper carbon credits from the developing world thus leveraging a profit in the same way that currency traders move money from more valuable to less valuable currencies.
Back in 2007 the Financial Times also noted that there was a lot of phoney-baloney going on in the world of carbon trading that made the scheme borderline useless and really a magnet for (legal) fraud and funny business.
The growing political salience of environmental politics has sparked a "green gold rush", which has seen a dramatic expansion in the number of businesses offering both companies and individuals the chance to go "carbon neutral", offsetting their own energy use by buying carbon credits that cancel out their contribution to global warming.
The burgeoning regulated market for carbon credits is expected to more than double in size to about $68.2bn by 2010, with the unregulated voluntary sector rising to $4bn in the same period.
The FT investigation found:
* Widespread instances of people and organisations buying worthless credits that do not yield any reductions in carbon emissions.
* Industrial companies profiting from doing very little or from gaining carbon credits on the basis of efficiency gains from which they have already benefited substantially.
* Brokers providing services of questionable or no value.
* A shortage of verification, making it difficult for buyers to assess the true value of carbon credits.
* Companies and individuals being charged over the odds for the private purchase of European Union carbon permits that have plummeted in value because they do not result in emissions cuts.
Francis Sullivan, environment adviser at HSBC, the UK's biggest bank that went carbon-neutral in 2005, said he found "serious credibility concerns" in the offsetting market after evaluating it for several months.
"The police, the fraud squad and trading standards need to be looking into this. Otherwise people will lose faith in it," he said.
Now, comes a kicker - as though you couldn't see this coming from a kilometre away - the EU has suddenly discovered that the carbon trading market is a very attractive outlet for money that the mob needs to launder. Since legitimate businesses have been using it as a scam for years, why wouldn't organized crime get in on the action. Watch in the future as the carbon trading market goes up like the real estate market and then collapses in a heap. Just like with the sub-prime collapse, the powers-that-be will somehow find a way to blame us for the debacle. Meanwhile, nothing will have changed in the level of carbon emissions.
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