Unfortunately, the verifiers don't always verify: the United Nations has suspended both DNV and SGS for periods of three months in the past few years after verifiers of the verifiers found that they didn't have the technical skills to appropriately assess various projects. Nor is the problem confined to the private sector; the government of Hungary explicitly sold carbon credits to Japan that had already been used to offset domestic emissions—in effect, double counting the same theoretical emission reductions. Partially as a result, the U.S. Government Accountability Office disparaged offsets in a recent report, calling into question not only their efficacy but also their cheapness (their primary selling point).
After all, greenhouse gas emissions continue to rise—concentrations in the atmosphere creep up by roughly 2 parts-per-million per year. And an analysis published in Proceedings of the National Academy of Sciences suggests that any decline in emissions in Europe has simply been outsourced to China. Firms that make HFC-23 have been overstating their emissions, according to non-governmental watchdog group CDM Watch, in order to qualify for even more money for bogus emission reductions. Some experts argue that countries are doing the same thing, allowing destructive practices to go forward now in order to set a high level of emissions that it will be easy to profit from. An analysis by David Victor at Stanford University estimates that as much as two-thirds of the emission reductions registered under the CDM were so-called "fake tons," or not reductions at all.
In this market, brokers do not have to worry about the regulations of the Securities and Exchange Commission, or the commodity and futures oversight boards. Outright fraud has plagued emissions markets, whether it's Anne Sholtz building a Ponzi scheme out of smog allowances in Los Angeles or European cheats charging extra for carbon allowances under the guise of collecting a tax and then disappearing with the proceeds. So far only voluntary commitments and a code of ethics drawn up by the Energy Brokers Association keep players honest—though the new financial reform regulations may change that.
"It's not a bunch of Wall Street traders putting together a con game," Hochschild countered. "This is real companies making real reductions. If there is an appropriate price point, people are going to be incented to produce carbon offsets, which will reduce carbon emissions." Hochschild thinks that "appropriate price" is roughly $20 to $30 per metric ton of carbon dioxide - or roughly twice what carbon dioxide trades for in the European market. "It needs to be high enough to effect change and not affect the economy," Hochschild said. "Is an 8 percent increase in electricity bills worth getting off foreign oil, solving global warming adding jobs and creating a new economy? I would argue that's a no-brainer."
"This is the most efficient way of resolving climate change, not just a tax and not just technology because there's no guarantee emissions go down," Hochschild continued. "It should happen in the next couple of years." Of course, that's what people have been saying since at least 1992.
"There is an interesting story to be told looking back through the 20th century at the drivers of wealth creation," wrote Richard Sandor, founder of the Chicago Climate Exchange, a voluntary trading regime for carbon dioxide, in the October issue of Environmental Finance, the trade magazine of emissions markets. "In the 1990s, it was the commoditization of information. Looking forward, I think the 21st century will be driven by the commoditization of the two most important resources on the planet: Air and water." Nevertheless, Sandor cashed out of at least the air commodity business this spring, selling CCX to IntercontinentalExchange for $600 million.
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7 Comments
Add CommentMaybe we can get a few republicans to tell us what they already think.
Reply | Report Abuse | Link to this...wait for it...
...wait for iiiiiiit...
If algore is hiring the Boy Scouts to plant 21,000 trees to balance his carbon print from his palace in Tenn. and his jets. . . Who's verifying they're actually planting anything?
Reply | Report Abuse | Link to thisMaybe we should just . . . if you earn, give it to Washington. They know better than all of us combined! They do! Just ask 'em.
People who think that the commercialization of the information was a good idea should look at the article in this magazine on ghostwriting in drug industry. If I do not know what you think unless I pay I will not be able to understand you unless I am rich in which case I do not need to know what you say.
Reply | Report Abuse | Link to thisTrading Carbon is a CON JOB. It does nothing to reduce the carbon being produced. It only moves it around the planet. So, why aren't the environmentalist demonstrating against the CON JOB?
Reply | Report Abuse | Link to thisWhat I can't believe is that "scientists" haven't exposed this con for what it is. And I suspect that is because of the vast sums of money at stake.
Reply | Report Abuse | Link to this"Science" is just one more 'opinion' these days, frequently just as opinionated and free of science fact as any lay person opinion. And for likely the usual reasons, as we have seen from the CRU debacle.
Of course carbon trading is wide open to fraud and should be abandoned in favour of greenhouse gas tax. Climate change occurs because energy prices are held artificially by force below realistic levels that would allow atmospheric hygiene.
Reply | Report Abuse | Link to thisThe solution exists and can be seen on Wikipedia under 'Biomass Pyrolysis', biomass including fossil hydrocarbons. All that is required is a proper carbon tax to double CO2 prices.
Can we really say that carbon trading is the wrong way to go? Of course, right now it isn't working because both companies and governments are scamming people. But once regulated, like any other business, it will fall in line and become a legitimate enterprise. Of course, it will probably take years for the government to pass the necessary legislation to make it possible, but it is possible in the foreseeable future.
Reply | Report Abuse | Link to thisAnd from my point of view, cap and trade can reduce carbon emissions. If governments lower the cap every few years, companies would steadily decrease their emissions or be slapped with a heavy fine. Just look at traffic violations; charging $150+ for a ticket seems to encourage people not to speed.
I'm not saying that we should only have a carbon trading system; in fact, I believe we should have both a carbon trading system and a greenhouse gas tax. If companies are forced to pay for their emissions, they will become more responsible about how much they output and reduce it, because money is always a major motivator.
To sum it up, carbon trading isn't as useless as it seems. It can be a major force in reducing emissions when regulated properly. We just need to give it more time.