[Debate] Carbon trade? No thanks! (book signing at Sandton Exclusives today, 3:30pm, join us!)

Patrick Bond pbond at mail.ngo.za
Tue Jan 24 06:16:17 GMT 2012

*Steer clear of this climate 'Ponzi scheme'*

*By Michael Dorsey and Patrick Bond, */Business Day, /24 January 2012



*Africa can do better than invest faith and state resources in yet 
another Ponzi scheme --- the 'privatisation of the air' *

LAST winter, when carbon prices fell 15% in one week, industry analysts 
called it 'carnage'. Then, in the fortnight before last month's Durban 
climate summit, carbon prices fell more than 30%, with front-year 
European Union (EU) Allowance permits dropping below EUR8,50 a ton. And 
they have crashed even further since.

As Deutsche Bank said during the Durban talks: 'We do not expect the 
pricing outlook to improve materially in the foreseeable future.' A UBS 
analyst predicted a price of less than EUR3 a ton in coming months 
because the EU's Emissions Trading Scheme 'isn't working' and carbon 
prices are 'already too low to have any significant environmental impact'.

French bank Société Générale projects that 'European carbon permits may 
fall close to zero should regulators fail to set tight enough limits in 
the market after 2020' --- and without much prospect of that, the bank 
lowered its 2012 forecasts by 28%. A 54% crash for December 2012 carbon 
futures sent the price to a record low, just more than EUR6 a ton. An 
additional oversupply of 879-million tons was anticipated up to 2020, 
partly as a result of a huge inflow of United Nations (UN) offsets: 
about 1,75-billion tons.

Those UN carbon credits include Clean Development Mechanism projects, 
which are notoriously bogus, including SA's pilot in Durban, the Bisasar 
Road 'waste to energy' site.

Every analyst concedes that carbon prices will be far too low to 
catalyse the transformative innovations --- most costing more than EUR50 
a ton (the EU peak was just more than EUR30 a ton five years ago) --- 
necessary in energy, transport, production, agriculture and disposal to 
achieve a solid post-carbon foothold. By all scientific accounts, by 
2020 it is vital to wean the industrialised world economy from 
dependence upon more than half the currently consumed fossil fuels to 
avert catastrophic climate change.

Yet Africa hasn't received this bad news --- the press doesn't report 
the carbon markets with critical vigour.

The lack of awareness of the carbon market's crash is a travesty --- far 
too often the continent has been looted by faraway financiers selling 
snake oil.

This week at the Sandton Sun, a conference aims to 'make Africa a major 
focus for climate finance into the post-Kyoto era', with keynote 
speakers from Morgan Stanley, Standard Bank , Nedbank , Carbon Check, 
CDM Africa Climate Solutions, SouthSouthNorth, similar emissions 
traders, the Johannesburg and Cape Town municipalities and the 
Department of Energy.

Beware you carbon buyers, sellers and speculators, because climate 
gamblers have been led astray since 1997, when the Kyoto Protocol was 
amended to let corporations buy the right to pollute in exchange for 
endorsing the treaty. Washington has refused to honour this ever since, 
even though it represents a broken promise, followed logically by US 
Secretary of State Hillary Clinton's 2009 pledge to raise $100bn a year 
for the Green Climate Fund.

Clutching at straws, that fund's design co-chairman, Trevor Manuel , has 
suggested getting half the revenues from carbon markets. It might have 
been feasible if the emissions trade reached the anticipated $3-trillion 
mark by 2020 but, within a decade, the market has peaked at $140bn in 
annual carbon trades. These are mostly in the EU, where the Emissions 
Trading Scheme was meant to generate a cap on emissions and a steady 
1,74% annual reduction. Unfortunately, the speculative character of 
carbon markets encouraged rampant fraud, value-added tax scams and 
computer hacking, which shut the scheme for two weeks last year.

The EU's carbon trading also included perverse incentives to stockpile 
credits when large corporations as well as Eastern European states 
gambled that the price would increase.

With the market now collapsing, the current perverse incentive is to 
flood supply to at least achieve some return rather than none at all 
when eventually the markets are decommissioned, as happened in 2010 to 
the Chicago Climate Exchange.

Africa can do better than invest faith and state resources in yet 
another Ponzi scheme --- the 'privatisation of the air'. And the north's 
'climate debt' to Africa should be paid not through such gambling but in 
genuine income transfers that reach ordinary people, who are taking the 
brunt of worsening climate chaos.

. Bond and Dorsey are development and environment professors at the 
University of KwaZulu-Natal and Dartmouth College respectively.

*/book signing/**at **Sandton Square Exclusives Books***

*Patrick Bond at shop 111 (upper level), 5^th &Maude,****TUESDAY, 

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