We’re all familiar with the ongoing planetary biocrisis. Global temperatures are predicted to rise by 4°C by 2100, with recent research warning of a 6°C rise by 2100, a far cry from the 2°C target deemed safe. The integrity of our energy systems and agriculture are threatened, the world’s oceans slowly acidify, our forests ecosystems are collapsing, and amidst the ecocide the world’s fossil fuel companies continue to increase their fuel reserves, edging dangerously close to safe emissions limits.
One proposed solution to prevent dangerous climate change is the carbon market, “a market created from the trading of carbon emission allowances”. Can the trading of emission permits help pave the way to a low-carbon future? Could the pricing of carbon aid a global transition to renewables? Or is the concept of a carbon market another example of neoliberal hegemony, a capitalist attempt to profit from disaster?
The Origins of Carbon Markets
One of the first markets in emissions trading was the Acid Rain Program in the USA in the 1990s. This was introduced in a market-friendly attempt to reduce the emissions from coal-fired power stations and prevent occurrences of acid rain after previous government legislation had failed to address the problem. The successful 10% reduction of sulphur dioxide emissions between 1995 and 2003 seemed to vindicate the idea of market environmentalism, and encouraged the insistence of market mechanisms in climate negotiations.
The US delegation and the 1,500 lobbyists from the International Emissions Trading Association helped cement the use of market instruments in the 1997 Kyoto Protocol. US Vice President Al Gore advised that the US would only agree to the Protocol if the trading of pollution rights was implemented. Even though the US refused to adopt the Protocol it strengthened the concept of market environmentalism. Since then the design and development of carbon markets has predominantly fallen into the hands of financial market architects, with emissions trading becoming “almost unstoppable”.
Through the prism of capitalist accumulation we can see carbon markets as a case of state enclosure of the commons (the atmosphere) in order to forcefully create a new market, attempting to reduce something complex (climate) into something quantifiable (carbon price). “Creating markets where there have been none before is one of the ways in which, historically, capital has expanded”.
Today, emissions trading is a key part of capitalist logic. Scientists frequently endorse the idea of putting a price on carbon to help tackle global warming. Corporations experiment with internal carbon pricing in attempts to reduce emissions. The World Bank estimates that 12% of annual greenhouse gas emissions are now covered under carbon pricing systems. Carbon markets now form an integral part of an “emerging global policy framework” to tackle climate change.
Despite Nicholas Stern’s assertion that climate change “is the greatest market failure the world has ever seen” carbon markets have quickly propagated across the world. From California to South Africa to Japan, emissions trading is popular globally, with new markets constantly emerging. Emanuele Leonardi references this proliferation as the “carbon trading dogma”, the ideological assumption that only pollution markets can effectively solve climate change.
Carbon markets come in many forms. The largest scheme in existence is the European Union Emissions Trading Scheme (EU ETS), established in 2005, and is a prime example of a cap and trade system. There are also project-based carbon offsets, where instead of cutting local emissions entities can finance “carbon-saving” projects elsewhere. Under the Kyoto Protocol there are also “flexibility mechanisms” such as the Clean Development Mechanism and Joint Implementation.
In 2009 Richard Sandor of the Chicago Climate Exchange, stated “We’re going to see a worldwide market, and carbon will unambiguously will be the largest non-financial commodity in the world”. As predicted, the global carbon market has doubled in size every year since 2005 and is expected to have a market value of US$3.1 trillion in 2020. In 2009 carbon markets traded over US$100 billion a year and were worth €64 billion in 2014. The EU ETS alone had a turnover of €90 billion in 2010.
Carbon markets enjoy widespread support. The City of London has become the focal point for carbon trading, with institutions opening carbon market trading desks or acquiring “carbon companies”. Recent efforts have focused on attempts to link up existing markets, with the EU and California looking to connect their regional markets, and California assisting China with carbon market design. Canadian provinces are preparing to link cap and trade systems, and carbon markets are predicted to expand across North America. Carbon markets are not advancing homogeneously however – efforts to fix the flaws in the EU ETS continue, and Australia is the first country to repeal a carbon price.
The Failure of Atmospheric Commodification
The logic is that a carbon price, controlled by supply and demand, will provide an incentive for market actors to invest in cleaner methods of energy generation in order to save money. “In generating a price for carbon an incentive is created to reduce emissions as efficiently as possible”.
A recent economic study found that, factoring in climatic tipping points, the cost of carbon should be 200% higher than it is today. The EU ETS is plagued by oversupply problems. Countries still have no economic incentive to switch to cleaner energy supplies, and other studies prove that carbon pricing mechanisms are not enough to avert climate change.
Due to the inequalities of purchasing power and wealth transfer, the idea of markets ushering us into a low carbon future seems impossible. The control of our atmospheric commons will remain out of our hands, and the state will step in if resistance emerges. Neoliberalism has always used violence via the state to secure property rights, enforce stability, and quash dissent – carbon markets are no different. An immaterial commodity like carbon requires state intervention for a market to be enforced and regulated.
Carbon markets have also been wracked with crime. A reliance on corporate self-regulation has encouraged “climate fraud”. INTERPOL in 2013 released the “Guide to Carbon Trading Crime”, detailing carbon market-associated money laundering, insider trading, and cybercrime, and explaining how the capacity to falsify information or receive bribes has been found in regulatory institutions of all kinds.
Carbon markets have even failed to reduce emissions. The trading processes do not reduce greenhouse gas emissions and offsetting can increase emissions. An economic structure has emerged that relies on maintaining emissions to make money. There have been regional emissions reductions but only as a result of short-term fuel switching. Global emissions can be seen increasing through the online measurements of the Mauna Loa Observatory.
These failures would suggest that regardless of design carbon markets cannot reduce emissions. As Mike Childs describes:
“The global carbon budget to avoid dangerous climate change is too small to allow trading. If a temperature target of 1.5 degrees is chosen with a reasonable to high chance of avoiding it, then the global carbon budget will be tiny. Carbon trading relies on countries having ‘spare’ carbon emissions … Under a tiny carbon budget it is almost certain that no country will have any spare emissions to sell.”
Carbon trading also ignores fossil fuel consumers that cannot be subsumed under markets – the US military for example, potentially the world’s largest consumer of petroleum, would hardly accept a carbon price as it released almost 60 million metric tons of CO2 in 2011.
The hoped-for renewable transition is also an abject failure. Larry Lohmann provides evidence that in the EU ETS renewable energy “gains no demonstrable benefits.” Indeed, the ETS has been criticised for being in direct competition with renewable energy, and has had “a very limited impact” on boosting renewable technologies. Max Koch comes to a similar conclusion, with carbon prices never being high enough to trigger technological change. Carbon markets are thus able to trigger short-term changes for immediate profit but are incapable of long-term planning.
A Mistaken Enemy: Capitalism, not Carbon
There is a need to address the heart of the capitalist system, the “grow or die” imperative that has created carbon markets. Through “Accumulation by Decarbonization” capitalism has created a smokescreen of environmental protection and progressivism whilst furthering inequitable wealth redistribution. There is “no equitable technological solution to climate change” and a green capitalism would still be “characterized…by the unequal distribution of economic, social and environmental risks”. The anti-ecological character of capitalism should be accepted. Existing wealth inequalities are only exacerbated within emissions trading, and carbon markets offer “wealth creating opportunities” to polluters.
Carbon markets also preserve the divisions of North and South. As Howard Zinn said, “globalization is in fact imperialism”. Areas of the earth that can absorb excess carbon are becoming commodified as part of carbon offset schemes, enclosing the commons further. The South is effectively becoming a carbon dump for the industrialised nations, seizing land from indigenous communities to be “managed” per climate agreements. It is no surprise that developing countries see the “ecological concern of industrialized countries [as] merely the latest chapter in a long history of imperialism”.
It is clear then that carbon markets are another weapon in capitalism’s toolkit of domination and assimilation. They present the image that climate change does not contradict capitalism and helps stifle resistance, absorbing and commodifying environmental concerns. Following Naomi Klein’s concept of disaster capitalism “the energy and desire to act on climate change” has been redirected into a “marketing opportunity”. Capitalism has proven how quickly it can shift after sensing “a business opportunity” in disaster.
“Ultimately carbon markets are designed to continue capitalist development and expansion.” Environmental protection is secondary to the profit motive. Carbon trading is a form of “proxy commodification”, turning environmental degradation into a tradable commodity. Even if the global economy were to be “decarbonised” it would still be capitalist in nature, merely “increasingly authoritarian”. Capitalism will maintain the status quo at all costs, and carbon markets allow business as usual as we purchase “green credentials” and personal offsets.
As Murray Bookchin said, capitalism “will not decay”. It is constantly expanding, and attempts to “green” capitalism are destined to fail. “One might more easily persuade a green plant to desist from photosynthesis than to ask the bourgeois economy to desist from capital accumulation”. Even the World Bank, despite its rhetoric of sustainability, “continues to subsidise and support fossil fuel extraction on a scale 17 times larger than it supports clean energy initiatives”.
We have seen that market mechanisms cannot prevent climate change. Faith in their power is dangerous. A new approach is required.
Are Markets Necessary?
Capitalism is a dead end. It can not solve the biocrisis it created, but there are glimmers of hope. The global economy now produces renewable energy at an “industrial scale” and our global energy infrastructure can be replaced with renewables in the coming decades. These developments leapfrog any need for carbon markets and it is only political will that is required to realise them, something we must spearhead. “The historical record shows very clearly that…changes in energy industries require the mobilization of mass social movements. We cannot wait for visionary politicians to forge the way.”
But a solution cannot be a simple product of technics. Our society and its view of the environment has to change. “Renewable energy is a necessity for a sustainable and equitable society, but not a guarantee of one”. We must remember that “every society extends its own perception of itself into nature”. A renewably powered capitalist economy would still view the natural world as a resource to be managed and plundered. The future is anti-capitalist.
As the bourgeoisie ruin our world in the name of profit we have to steel ourselves for the struggles ahead and ask ourselves – who’s afraid of ruins?
This essay is a shortened version. The original essay and accompanying references can be found at Fighting the Biocrisis.