Why carbon trading will increase carbon pollution

By Shua Garfield

The rate of growth in global greenhouse gas (GHG) emissions — 3% between 2006 and 2007 — has exceeded the “worst-case scenario” predictions of the UN’s Intergovernmental Panel on Climate Change, the September 26 Los Angeles Times reported. According to Corinne Le Quere, professor of environmental sciences at the University of East Anglia and the British Antarctic Survey, these emissions levels put the world on track for a global average temperature rise of up to 6.1°C over the next century. According to Australian government climate change adviser Ross Garnaut, a rise of this magnitude and speed would result in the extinction of 48-100% of all plant and animal species.

Even if all industrial GHG emissions were to stop now, industrial emissions already in the atmosphere could cause warming that threatens the existence of the Arctic ice cap, the Greenland ice sheet, the Himalayan glaciers, and the Amazon rainforest, according to an article published in the September 23 issue of PNAS, weekly journal of the National Academy of Sciences of the US, by V. Ramanathan and Y. Feng of the Scripps Institute of Oceanography at the University of California.

Despite these dire predictions, some capitalist politicians — citing the current financial crisis and the threat of a prolonged global recession — have called for the rolling back of even the inadequate commitments made by First World governments for action against climate change. At a European Union meeting in Brussels in October, representatives of the German, Italian, Polish and Latvian governments demanded that the EU abandon commitments announced earlier this year to reduce emissions by 20% from 1990 levels and increase the proportion of power generated by renewable energy to 20% by 2020. Citing the threat that these plans would pose to the “competitiveness” of large steel, electricity, petrochemical, and manufacturing companies, these countries’ representatives have threatened to veto measures, including an emissions trading scheme (ETS), aimed at achieving these goals.

In Australia, these views have been echoed by Don Voelte, the chief executive of Woodside — which advertises itself on its website as “Australia’s largest publicly traded oil and gas exploration and production company”. In the October 14 Australian, Voelte was quoted as saying of the federal government’s planned ETS: “You can’t put something like that in at this time until we get this whole fiscal chaos that’s going on in the world straightened out — no government can risk jobs and the economy until we get stabilisation in the world marketplace.” On October 10, federal Liberal Party leader Malcolm Turnbull called on the Rudd Labor government to delay implementation of its ETS —planned to begin in 2010 — by at least one year so as to “strengthen the Australian economy in response to the international financial crisis”.

Federal environment minister Penny Wong has thus far said the government has no plans to delay implementation of the ETS — the final details of which will be announced at the end of this year. However, fearing that the government may yet heed the calls to delay the scheme, Greens’ politicians and some environmental groups have fallen in behind supporting emissions trading as a means of reducing carbon pollution. Addressing an October 11 rally in Canberra organised by GetUp!, Greens leader Senator Bob Brown urged the Rudd government to stick to its proposed timetable for the introduction of the ETS. An October 20 media release by Greens Senator Christine Milne criticises aspects of the ETS proposal, such as the granting of free carbon pollution permits to highly polluting companies, but supports its introduction.

Some environmental groups, including many of those organising or sponsoring the November 15 Walk Against Warming (WAW) protests, have taken a similar approach — criticising the most farcical aspects of the proposed scheme, but supporting the introduction of some sort of ETS. So it will not be surprising if pro-ETS politics get a plug at the WAW. In past years, WAW rallies have attracted tens of thousands of people. While such large mobilisations can be used to build a movement that can challenge environmental destruction and human-induced climate change, this potential is undermined if they are used to support pro-capitalist policies that do not seriously confront the driving forces of global warming. Support for an ETS — even for one that has stronger emission reduction targets than the one proposed by the Rudd government and doesn’t include added subsidies to the coal industry and free handouts of pollution permits to big polluters — is problematic in this regard. Indeed, there is some evidence that these schemes will actually increase GHG pollution.

Emissions trading schemes

In an ETS, governments create a limited number of “carbon pollution permits”. Corporations compete to purchase these permits, which entitle them to emit a specified amount of greenhouse gases, particularly CO2 and methane. The corporations that value pollution permits most highly will pay more for them, providing the government with money that it will supposedly use to combat climate change. Other corporations may find it cheaper to reduce emissions. By progressively reducing the number of permits made available each year, the government can supposedly encourage more and more corporations to find ways of reducing their GHG emissions.

The most prominent example of emissions trading is the European Union ETS, which came into effect in January 2005. At its outset, emissions licenses were granted free of charge to established corporations. Allocations were largely based on estimates prepared by the corporations themselves, resulting in permit allocation levels that, in some industries, exceeded real carbon emissions by up to 50%. This meant that most companies were not forced to make emissions cuts nor purchase pollution permits.

When, in May 2006, the extent of the permit surplus became public knowledge, the price of permission to emit 1 tonne of CO2 collapsed from a peak of 33 euros to 0.20 euros and has since remained too low to encourage corporations to reduce emissions. Indeed, between January 2005 and August 2007, emissions from installations covered by the ETS actually rose by 0.8%. Meanwhile, big electricity generators were allowed to pass onto consumers the “opportunity cost” of withholding their freely-granted permits from the market. The World Wildlife Fund for Nature (WWF) has estimated that by 2012, this scam will have delivered European power generators US$112 billion in additional profits.

The Kyoto protocol’s Clean Development Mechanism (CDM), operational since January 2006, allows First World countries to earn carbon pollution permits through funding pollution reduction projects in the Third World. Like the EU ETS, the CDM has proven to be a scam that benefits polluting companies, disadvantages the poor, and delivers negligible benefit to the environment.

By September, 2007, 30% of the “certified emissions reductions” (CERs) had come from projects in which refrigerant manufacturers burn HCF-23. Given that one tonne of HCF-23 is estimated to cause as much global warming as 11,700 tonnes of CO2, the installation of HFC-23 incinerators allows these companies to generate huge numbers of pollution permits. In an article published in the February 8, 2007 issue of Nature, Michael Wara, a research fellow at Stanford University’s program on energy and sustainable development, estimates that for every 100 million euros spent installing HFC-23 incinerators, 4.7 billion euros worth of pollution permits are generated. This allows the predominantly European companies that buy these permits to avoid emissions reductions.

Moreover, these refrigerant companies can now earn more from selling these credits than from selling refrigerants, creating an incentive to expand HFC-23 production. In doing so, they increase the output of other pollutants. In his upcoming book The Impact of Climate Change in India, Larry Lohmann cites the example of the Indian company SRF, which has made a $600 million profit from selling pollution permits after spending $2.2 million installing infrastructure that allows it to burn off HFC-23. Lohmann writes: “Meanwhile, residents of the area near the SRF installation have complained about chemical leaks which they claim have affected crops and water. Suresh Yadav, a local landowner, said: ‘Fifty per cent of my crops are damaged by the chemicals. Our eyes are pouring, we can’t breathe, and when the gas comes, the effects last for several days.’”

A March 12, 2007 article in Newsweek notes that “only 2 percent of the United Nations’ trading projects involve renewable energy like hydro dams and wind farms, and communities that preserve forests and follow other ecofriendly practices are ignored”. Similarly, a September 2007 review article in Climatic Change by Karen Holm Olsen of the University of Copenhagen’s research network for environment and development, examining 200 studies of the CDM, concludes that “left to market forces, the CDM does not significantly contribute to sustainable development”.

Indeed, emissions trading may be an obstacle to the development of renewable energy. This is revealed by a leaked document from the UK government’s Department of Trade and Industry, exposed by August 13, 2007, Guardian. The document criticises the government’s target to produce 20% of energy through renewables by 2020. It complains that introducing renewable energy is more expensive than an ETS and warns that “the GHG savings achieved through the renewables target and energy efficiency risk making the EU ETS redundant and prices to collapse”. In other words, direct government spending to increase renewable energy production should be avoided because it threatens the ETS scam that is generating billions in corporate profits.

The Rudd-Wong scheme

The ETS proposed by the Australian government looks set to be just as much of a pro-corporate scam as its EU and Kyoto predecessors. The “green paper”, released on July 16, which outlines the government’s preliminary proposals for the scheme, suggests that at its outset, up to 30% of permits will be given free to “emission-intensive trade-exposed industries” — highly polluting corporations that compete internationally for profits. Corporations that emit more than 2000 tonnes of CO2 equivalent per $1 million revenue will receive 90% of their permits for free. According to the July 17 Sydney Morning Herald, these include BHP’s BlueScope Steel, which announced $596 million in after-tax profits for the 2007-08 fiscal year, and cement manufacturer Adelaide Brighton, which announced a $113.9 million profit for the 2007 calendar year.

Corporations that emit 1500–2000 tonnes of CO2 equivalent per $1 million revenue will receive 60% of their permits free. These include BHP Billiton’s and Rio Tinto’s alumina refineries. BHP Billiton’s profits for the 2007-08 financial year were US$15.4 billion, while Rio Tinto’s profits for calendar year 2007 were US$7.31 billion. Corporations that run coal-fired electricity power plants will also receive government assistance.

In the green paper, the government promises to spend revenues from the sale of emission permits on “clean coal” technologies such as “carbon capture and storage” (CCS). This remains an experimental technology that won’t be available for implementation for at least a decade and it’s unclear whether it will ever achieve permanent storage of industrial-scale GHG emissions. Meanwhile, actually existing clean energy options, including large-scale solar thermal, geothermal, and wind technologies, receive little mention in the green paper.

The emissions reduction targets that Labor’s ETS is supposed to achieve will also probably be grossly inadequate. Garnaut’s recommendations, which are likely to become government policy, are that Australia aim to reduce emissions by 10% below 2000 levels by 2020 and 80% by 2050 as part of an international agreement to keep atmospheric GHG concentrations below 550 parts per million (ppm) CO2-equivalent or 25% by 2020 and 90% by 2050, if agreement to aim for 450 ppm can be obtained. Garnaut considers the second possibility unlikely given what he knows about capitalists and their governments — which is probably a lot, considering that in the past he has served as a senior economic adviser to the Hawke Labor government, as Australia’s ambassador to China and as chairperson of both BankWest and the Primary Industry Bank of Australia.

However, even the most stringent cuts in GHG emissions envisaged by Garnaut pose risks of climate catastrophe. According to NASA’s Goddard Institute of Space Studies director James Hansen, one of the most highly regarded climate scientists in the world, stabilisation of atmospheric GHG concentrations in the 450-550 ppm range threatens to trigger runaway climate change that could cause sea levels to eventually rise by up to 60 metres and global average surface temperatures to rise by up to 6oC. Hansen recommends that to ensure a safe climate, GHG levels need to be brought below 350 ppm and preferably closer to 300 ppm. CO2 levels are already at 384 ppm and growing by 2-3 ppm per year.

Garnaut claims in his September 5 Targets and Trajectories report that even with existing technologies it is already technically possible to stabilise GHG concentrations below 400 ppm. But if it’s technically possible to make major inroads into fighting global warming now, why are capitalist governments throwing money at corporate polluters and hoping that market forces — which, as the financial crisis shows, can’t even solve the market’s own problems — will solve the environment’s?

Emissions trading schemes are the capitalist rulers’ method of choice precisely because — as shown by the examples of the EU ETS and the CDM — they are easily manipulated to ensure the continued profitability of the worst corporate polluters. Even a “cleaner”, stricter ETS would rely on inefficient, anarchic market forces to make changes that are urgently needed. Such an “ideal” ETS would still be subject to the decisions of a capitalist government whose main priority is maintaining the economic and political power of its nation’s capitalists, and would therefore “soften” the scheme if these profits and power were threatened. No amount of lobbying by environmental groups to make such schemes “better” can change that.

Which way forward for the environment movement?

But if ETSs are unworthy of environmentalists’ support, what is? Firstly, environmentalists are right to campaign around immediate demands that the capitalists stop deforestation, expansion of coal mining and coal-fired power generation, etc. Single-issue campaigns around these demands have the potential to mobilise large numbers of ordinary people, raising their confidence to engage in collective extra-parliamentary struggle.

It is also important to explain what is actually necessary to end unsustainable carbon pollution in a socially just manner. This would include a national (and international) plan to phase out the fossil fuel industries, requiring their nationalisation and the transitioning of their resources and workforces towards a massive government-directed program of implementing renewable energy, energy efficiency, public transport, reforestation and sustainable, low-input agriculture.

Tackling the climate crisis would also require First World countries to transfer renewable energy infrastructure, manufacturing capacity, and research and development programs to the Third World. In recent years it has become fashionable among First World leaders to blame the Third World — particularly China, India and Indonesia — for rising GHG emissions. While it is true that in recent years China has had the fastest growing GHG emissions — 7.5% between 2006 and 2007 — and surpassed the USA’s emissions levels in 2006, blaming China and other Third World countries for the climate crisis ignores several important facts.

Firstly, on a per capita basis, China’s emissions, and those of the Third World in general, remain around 40% of those of the First World. When the GHGs accumulated in the atmosphere since the Industrial Revolution are taken into account, the Third World’s share is miniscule. Secondly, 25% of China’s emissions are produced by export-oriented industries that largely exist to serve the irrational consumption patterns of the First World. Thirdly, the Third World has as much a right to industrial development as the First World, but is hindered by the First World’s monopolisation of advanced technology — a legacy of centuries of colonial and imperialist plunder of the former by the latter.

For the Third World to develop sustainably, the First World must give up its technological monopoly, direct its technical and industrial resources away from war and profiteering, and towards sustainability in both the rich and poor countries. This would not be a hand-out, but long-overdue reparations for the invasions, occupations, slavery, genocide, and economic plunder that have kept the Third World underdeveloped.

To implement such massive restructuring programs, some environmentalists have called for a green “New Deal” — referring to policies of 1930s US president Franklin Delano Roosevelt in which public funds were spent on some large projects in which millions of unemployed workers were press-ganged into constructing public works infrastructure. The October 25 issue of Green Left Weekly echoed this call, though with reservations – noting that the main aim of the New Deal was to prop up capitalism during the Great Depression and suggesting that any green “New Deal” should involve public ownership and workers’ control.

But while it is correct to demand that capitalist governments resource environmental public works, socialists have an additional duty — to explain that capitalist governments will resist calls to make such reforms, and even if forced to do so by strong mass movements, will still try to find ways to make them corporate-friendly and roll them back as soon as they think they can get away with it. Capitalist governments are also likely to put as much of the cost for these programs as they can on working people, which risks undermining mass support for environmentalism.

The only way to guarantee that society’s resources will be put to a rational use in a way that can’t be undermined by capitalists is to get rid of capitalism altogether. This will require ordinary working people to be organised into a mass movement that can replace the capitalist state machine with a working people’s government, a government that, because it is independent of the capitalists’ control, takes the economy out of the capitalists’ hands. This would unlock far more resources to combat climate change than are held in any capitalist government’s budget surplus or what they spend on corporate subsidies. It is precisely because its working people did exactly this in 1959-60 that Cuba has been able to increase its forest coverage by over 50% since then, reduce electricity used for lighting by 30% in recent years, transition most of its agriculture to organic production methods during the 1990s, and become the only country designated by the WWF to be sustainably developing.