Environmentalists have been excitedly waiting for George W. Bush’s presidency to end so that we can finally take action on climate change. With Bush gone, we face a major choice about what method we will choose to combat climate change. One of the most popular methods (especially among industry groups) is carbon cap and trade.

Carbon trading schemes have been put into practice by the Kyoto Protocol and in the EU Emissions Trading Scheme (ETS). The way carbon trading works is relatively simple. In theory, the government sets a maximum amount of emissions (a cap), and then gives out tradable credits to corporations based on their reported emissions. The corporations are then allowed to buy credits if they need to emit more, and sell them if they have extra. These programs have been largely ineffective in reducing carbon emissions for many reasons, including the many structural issues inherent in a carbon trading market.

Though carbon markets sound as if they could work, the economic theories run into the brick wall of political reality. The first problem lies in the cap. It is up to governments (or international treaties) to set the cap, and to lower it frequently in order to reduce emissions to sustainable levels. This requires a level of political will that we have never seen in regard to environmental issues. Just imagine the enormous amounts of money industry would spend on lobbying every time a bill was proposed to lower the cap. Additionally, the relevance of the cap level depends on many outside forces. For example, if there is a relatively cool summer, consumers will consume less electricity by using their air conditioning less. This gives energy generating companies many extra credits to trade around, allowing other companies to pollute more. A more striking example to the irrelevance of the cap is illustrated in the collapse of the Soviet Union. The Kyoto Protocol’s cap was based on 1990 emission levels, but, in 1991, the USSR collapsed, lowering its carbon emissions by 30%. Instead of lowering the cap to reflect the loss of carbon emissions, Russian corporations were left with a surplus of credits (hot air) to trade and make money off. These extra credits benefit corporations like Enron. Before its collapse, it was one of the primary groups that pushed the US to sign the Kyoto Protocol.


A pure carbon market is ineffective enough, but the reality is even worse. The EU ETS also includes carbon offsets. These are slightly different from the indulgences that you can buy to offset your personal carbon output, but follow the same principle. Offset projects are supposed to change “business as usual” and reduce emissions compared to what would have happened. For example, a company can build a hydroelectric power plant to generate carbon credits to sell if they claim that without the credits a coal power plant would have been built. The amount of credits the company receives is the difference between the amount of carbon that theoretically would have been emitted by the coal plant and the amount that is emitted by the hydro plant. The problems with offsets are even more extensive than trading.

One common tactic used by corporations is claiming that projects that are planned already would not have been built without the extra financing from the carbon-offset credits. With very little oversight, and very little possible on a global scale, corporations are able to make huge amounts of money off projects that were taking place regardless of carbon-offset schemes. Additionally, the amount of carbon that would have been emitted under “business as usual” is an entirely theoretical amount that is easily manipulated for profit. In fact, during negotiations for the EU ETS it was proposed to have the “business as usual” level be arbitrarily determined because there is no effective way of calculating it.

Another type of offset project is one that is meant to reduce carbon dioxide levels in the atmosphere, which usually take the form of tree plantations. Corporations pay to plant vast plantations of non-native trees (often Eucalyptus) and then profit by receiving carbon credits for the carbon that the trees are calculated to have removed from the atmosphere. Unfortunately, there is no accurate way of calculating how much carbon a single tree has absorbed. There is a more basic problem: once carbon is taken out of the ground it cannot be put back in (carbon sequestration is not real). Even if the carbon is temporarily sequestered in trees, those trees will one day die and decompose (or more likely burn down, do to the massive water use of eucalyptus trees, which devastates local environments.) Using trees as carbon sinks is at best a temporary solution; the only long-term solution is to leave fossil fuels in the ground.

These offset projects occur exclusively in third world countries with terrible effects on local people. The projects, especially the tree plantation kind, often force indigenous and forest dwelling people off their land (the extra emissions they cause when they migrate to cities are not taken into account when calculating the number of credits generated by the project) and often devastate the local ecosystem, drying up streams and killing animals that communities rely on.

Carbon trade and offset schemes are actually worse than doing nothing at all. They force people in the third world to suffer so that the rich countries, which have caused climate change in the first place, can continue polluting and not change their behavior. Carbon trading schemes encourage companies to make the most basic “end of the pipe” solutions that cut greenhouse gas emissions without doing anything to promote the kind of structural change needed to create a sustainable society. Carbon trading is ineffective all the way down to its roots. Reducing carbon emissions in one place should not allow corporations in other places to emit more.

This December, the 15 highest carbon emitting nations will meet in Copenhagen to discuss the successor to the Kyoto Protocol. For the good of our planet and our future, this meeting must come out with real solutions that do not involve ineffective and oppressive carbon trading schemes. There has been enough scheming! It is time to stop giving corporations control over our global carbon sinks and it is time for communities to have control of their own resources.

  • Matthew Reddy

    You’ll find many examples of carbon projects sustaining the vitality of indigenous communities by providing alternative incomes and payments for ecosystem services.

    Clearly the idea that forests decompose and emit carbon shows that the author doesn’t understand overall net sequestration – sure the forest system reaches maturity whereby growth is equal to decay but this is hundreds of tonnes per hectare over the original non-forest land use.

    Simply this would have been a ‘relevant’ piece for an undergraduate in about 1998 but these arguements have been covered many times over now and the consensus opinion is that we require all forms of mitigation, adaptation, sequestration PLUS newly developed low emissions technologies – we cannot afford to be pedantic about which method is A+ or B- ; we need them all.

  • Anonymous

    Two minutes of my life I will never get back. What happened to the global freeze that was supposedly taking place some 30 years ago? The earth’s temp also varies with volcanic activity which has been dormant for some time. Typical tree hugger banging on Bush yet you fail to note that the “carbon sinks” located in North America typically absorb as much carbon as North America releases. Please provide all the facts before you continue to rant.

  • CoalKillz

    Carbon Trading = Colonialism

  • AnonymousformerWesleyanStaff
  • Ned Lamonte

    Well put Jon! Anytime Lieberman supports something you know it’s got to be bad.

  • Laini

    To anonymous, these life-saving “carbon sinks” that you describe can not absorb carbon as quickly as it’s being released into the air. Also, these sinks – oceans, vegetation, and soil – can not hold onto carbon for very long before releasing it back into the atmosphere.

    What’s your problem with tree-hugging?

  • Your pal Danarchy

    Hey Jon, according to that radical rag the NYT only 40% of energy produced by power plants actually reaches consumers. The rest is wasted in transfer. Think about what that means for the viability of mass “green” energy. Just not happening…

  • Robert Korb

    Often the simplest solutions are the best ones. How about simply taxing all carbon emissions? Use a rate that’s lower because the cap no longer applies, but with no loop holes or options for tax avoidance (by creating hydro damns and so forth) there will always be an incentive to reduce the carbon footprint. The money collected should go into an environmental fund devoted to sustainability R&D, or agricultural/reforestation projects designed to remove carbon from the environment.

    Also – “sustainability” should replace the jargon of renewability because the idea of sustainability is more holistic with respect to the environment, where renewability is often defined within a more limited scope; i.e biofuels appear “renewable” at first glance. But they’re not as they rely upon petrochemical fertilizers… On the other hand applying the notion of sustainability seems to force consideration of the longer timeframe – what happens when oil runs out and there’s no petro based fertilizers?

  • Goose Gossage

    Good point Rob. The Coen bros just took on the hoax of clean coal: http://rawstory.com/news/2008/Famed_brothers_Coen_take_on_clean_0226.html

    “Clean coal is supported by the coal industry, the most trusted name in coal”