Nicholas Stern, economic advisor on climate change to the U.K. government, is probably best known for his statement that climate change represents the biggest market failure in history - bigger than two world wars and the Depression put together. His view is echoed by his Australian counterpart Ross Garnaut and in the government's Carbon Pollution Reduction Scheme Green Paper, July 2008, which states that, "Emissions trading schemes are designed to redress this market failure."
Far from reflecting market failure, human-made (anthropogenic) climate change, and most other ecological disasters, are the inevitable result of the success of just such market forces; indeed, they are the unhappy eventuality of a market based system in which all other considerations are subordinated to economic interests. Markets are treasured above all else: families, communities, cultures and natural systems because they facilitate economic development, profits and the rapid turnover of technologies.
Throughout the Green Paper, the government's prior concern with maintaining "long-term economic prosperity" is repeated. Reducing carbon pollution is equated to "a significant reform" for which, "The Australian economy is well placed to respond." The ability of Australia's ecosystems to respond to current levels of climatic disruption, let alone with larger, future perturbations, is given much less consideration.
Stem's comment blaming market failure for climate change, of course, refers to the exclusion by the economic system of costs known as 'externalities'. Such costs include all types of pollution or social disruption which are eventually borne by all. But, why Stem, Garnaut et al consider the markets have failed now, by not including the economic costs of climate change in companies' accounts, when they have not considered it necessary for any other polluting activity, is not explained.
The notion that climate change is the result of market failure is absurd, when, in fact, it is the failure to respect and live within the limits inherent within all natural systems which is the underlying cause of this and a multitude of related problems. To apply a market based mechanism, such as the government's proposed carbon emission reduction scheme, to a crisis in the earth's biosphere will do little if anything to reduce the problem, but does run the risk of making matters worse by allowing people to think that governments are seriously tackling climate instability.
Even within the limited economic parameters of the government's proposed cap and trade system, whereby permits to emit C02 (and other greenhouse gasses) are given and/or sold to the nation's largest emitters, within a specified overall cap and a trade in carbon can then ensue, there are many flaws. From the outset, only the largest of the nation's corporations will be affected by the system, leaving 99% of businesses to continue as usual.
An investigation by the UK's Guardian newspaper found that the Clean Development Mechanism has been contaminated by gross incompetence, rule-breaking and possible fraud. And why would it operate any differently to other sectors in the market? In Australia, it is possible for people with a guilty carbon conscience to off set various activities such as 6-months of driving, flying or keeping a pet cat! Such gestures are futile. A few people with a clear conscience will not save the planet by off loading their C02 emissions to be neutralised somewhere else.
A lengthy article in a 2008 New Scientist magazine on the global C02 market concluded that reductions in carbon emissions could appear on the books while increases (from deforestation, agricultural practices, draining wetlands etc) always stay off them - in other words, carbon capitalism becomes disconnected from the reality of the planets carbon cycle.
Such disconnection with the real world of the biosphere could not be better summed up than by the then premier of NSW Maurice lemma who asked, "What is the use of saving the planet if it wrecks the economy?" Only when politicians are preoccupied with the inverse of lemma's question will we know that they are finally beginning to grasp the problem.
Precipice does not consider that the government's proposed scheme is intended to seriously reduce our impact on the earth's atmosphere. It is intended, however, to allow business to continue pretty much as usual and to ensure that any changes that result are too minimal to cause any economic slow-down.
Furthermore, the introduction to the government's scheme is so slow and the targets so low that many politicians will no longer be in parliament by the time any intended deeper cuts occur. The government's carbon emissions reduction scheme is a cop out. It is based on the dangerously deluded assumption that economic growth is a natural process without which we cannot survive.
The government proposes many reimbursements, incentives and funding to provide a soft-landing for the energy sector, and also to what are termed high-emitting trade exposed corporations, such as coal and alumina exporters. To such businesses the government intends to give at least 30% free permits. In Europe, the first-phase of its carbon trading scheme has been greatly criticised for providing too many free permits to big business, resulting in a very low price for carbon and eroding the scheme. Were these lessons learnt? No, not at all.
In 2008 the second-phase began and, once again, too many permits were simply handed out to 200 large companies (in the U.K. alone) and, in effect, giving those companies a substantial subsidy. The second-phase will last until 2013, so the free permits translate into permission to pollute until then. This over-allocation of permits is a clear result of the bargaining power of business - a process now well underway in Australia.
After the energy sector, transport and agriculture are the next two most carbon polluting sectors within the Australian economy. These two sectors are included in the government's proposed scheme but with so many caveats that they might as well not be. In the case of road transport anticipated price increases in fuel will be offset by a cent for cent reduction in existing fuel taxes and, thereby, disadvantaging rail. As for agriculture it is simply considered too difficult to include in any scheme `at this stage'.
It is expected that once a market in carbon is established by the trade in permits, the price of energy intensive products, such as electricity delivered to homes and businesses, will rise. Given that the demand for such products is regarded as `inelastic' i.e. it is difficult for many people to reduce their demand, such schemes are regressive and, therefore, unfairly impact low-income members of the community. The government proposes to deal with this by reimbursing the proceeds from the sale of carbon permits (that is, the sale of those permits it doesn't just give away).
This all sounds very reasonable and fair, but what is the point if it encourages the same old patterns of consumption? Instead, the moneys raised should be invested in small-scale energy and water-saving appliances such as tanks, solar hot water collectors, greatly improved public transport, safe bike paths, etc. People could then reduce their demand for energy without being disadvantaged.
Not only is the majority of the business sector and agriculture (for now) outside the proposed scheme, but it also does not include - except on a voluntary 'opt-in' basis - forestry, and totally fails to take into account activities such as land use changes which can dramatically alter carbon absorption from soils and wetlands.
Governments around the world which are proposing to adopt carbon trading schemes (or similar) base their proposals on IPCC reports. However, there is a significant time lag between the publication of the reports and the data on which they are based. The failure of such reports to fully consider the impacts of climate feedback (referred to above) is, together with the out-dated data, incorporated into governments responses, such as in the Green Paper.
Thus, the already limited nature of the Australian government's proposal is exacerbated by a failure to acknowledge the rapidly changing and deteriorating situation, whereby, the rate of CO2 production exceeds the IPCC's worst case scenarios and is now growing faster than any time since the industrial Revolution. (From 1970 - 2000 concentration of C02 in the atmosphere rose by about 1.5 ppm each year. Since 2000 this figure has leapt to 2.1 ppm, according to the National Ocean and Atmosphere Administration.)
The government's Green Paper considers that a 2° - 3°C increase in average global temperature is a threshold above which the earth's climate would produce catastrophic consequences. But, climate change is now occurring very rapidly (events predicted by the IPCC to occur at the end of this century are already happening) and the 2° - 3° figure is based on out-dated data.
As mentioned above, the global average temperature increase is 0.78°C and in Australia it is 0.9°C. At these increases - well below the so-called threshold of 2°C - climate extremes are already catastrophic for many species (most famously, polar bears) and for many humans who have lost lives, land or livelihoods.
Following the publication of the Green Paper, Ross Garnaut advised the government to set the carbon emission reduction target at 10% by 2020. But, this was only to be in the unlikely event of an international agreement on carbon trading being reached soon. Assuming no such agreement, his advice was for a target of 5%, a target eventually adopted by the Rudd Government. Such low targets condemn us to an unliveable planet.
The true target of the government's scheme is to maintain and expand Australia's economic wealth. Defenders of the scheme, including some trade unionists, consider that the scheme strikes `a balance between the environment and the economy'. Such people should take up the notion of balance with the myriad of natural processes and life forms which play a part in maintaining the stability of the planet's climatic system - from microorganisms in soil and oceans, to forests and fungi.
The possibility of finding such a balance between nature's complexity and diversity (often not well understood by science) and the economic prosperity of one species is ludicrous. The earth's biosphere, taken as a unitary system, is attempting to maintain its own balance, even as we do all in our power to destroy it.
Carbon trading systems could, in theory, reduce some carbon emissions, and pricing mechanisms could play some role in providing incentives/disincentives within a broader and more serious determination to radically reduce CO2 emissions. However, trading in carbon inevitably results in reductions in one area being bought at the cost of increases' in another. Quite simply, carbon credits are purchased so someone else can pollute.
Even more problematic are those trading systems which deal in so-called carbon off-sets whereby individuals or corporations can purchase the right to emit a certain quantity of CO2 in exchange for a company (usually in the developing world) not emitting an equivalent amount. What human activity, other than the free market, could devise such a scandalous trade? Off set schemes operate at the global level and within Australia. Such schemes are not well regulated and in Australia off-sets are not standardised at all.
At the global level, and under the Kyoto umbrella, the scheme is known as the Clean Development Mechanism. It has spawned a large financial infrastructure of bankers and traders. In 2007, the value of this market was estimated to be $60 billion and attracting big players (or were, until the financial turmoil of mid-2008) such as JP Morgan and Morgan-Stanley, and Barclays Capital.
But CO2 is not being kept out of the atmosphere.
Ally Fricker 2008-2010
This is produced by the group PRECIPICE
(People Representing Ecological Consciousness and Integrity of the Planet Instead of Committing Ecocide)
Phone (O8) 8581 8255.
International Phone (61) 8 8581 8255.
Write:
Ally Fricker
RSD 3
ROBERTSTOWN SA
5381
AUSTRALIA
Ally Fricker
RSD 3
ROBERTSTOWN SA
5381
AUSTRALIA
or Email kbarrett@adam.com.au.
