Carbon dioxide emissions continue unabated even two decades after the adoption of the Kyoto Protocol. Augmented by both pollution of poverty and pollution of affluence, humankind’s carbon footprint is a direct manifestation of its highly anthropocentric relationship with the environment. Global climate change governance, too, is dominated by an ecological modernization discourse which must be renounced for any requisite changes to occur vis-à-vis the increasing carbon levels. While economic considerations are crucial in the construction of any policy, a neoliberal market-based approach does not provide an effective solution to environmental problems. All international treaties are watered down to accommodate for decentralized solutions to environmental issues and we as an international community are stuck looking for answers in the same capitalist system that caused the problem. When a global carbon market is relied on to ensure economic efficiency in de-carbonization schemes, it benefits financiers and industrialists at the cost of local populations, frontline communities and other marginalized groups. The need of the hour, therefore, is a shift towards civic environmentalist discourse. Reigning in indigenous knowledge, creating a strong transnational civil society to foster public accountability, and increasing public awareness are crucial elements to carbon reduction policy without which we cannot achieve ethical change.
Neoliberal market-based solutions like the European Union Environmental Trading Scheme (EU ETS) are preferred to government regulations because they provide an economically efficient alternative by price-incentivizing corporations into reducing carbon emissions. Looking purely from an economic lens, cap and trade works because it sets a quantity-based restriction on pollution (cap) and combines it with a price-based intervention (trade) so firms can determine how much they can afford to reduce emissions based on their costs of abatement. However, determining the prices of permits is a complex endeavor and even economic theory concedes that the costs to society of an inaccurate permit price are exponentially higher than those of a miscalculated cap. While theoretically the trade of permits alleviates the risk of them being mispriced, practical evidence suggests otherwise. Jennifer Weeks explains in her CQ Researcher report on Carbon Tradingthat in the absence of any record on historic greenhouse gas emissions, EU governments had to ask companies how many permits they needed. Obviously, when companies overstated their requirements, they were able to pollute as before and the demand for additional permits became virtually nonexistent. This led to what Annie Leonard refers to in her video The Story of Cap and Trade as “cap and giveaway” (storyofstuffproject, youtube.com) where permits were granted to companies for free. Thus, it is clear that a market of producers cannot determine the price of permits. When there is no price for the permits, the economic paradigm crumbles.
Even when priced by the EU ETS, carbon has been inconsequentially cheap, “hover[ing] below $6” according to an article by Nicholas Kusnetz from Inside Climate News. Weeks also reports that during the first trial phase of the ETS, carbon stock traded at highly volatile prices ranging from “$15” to “$38” (Weeks, 301). The carbon market, like any other, has provided the very uncertainty that policymakers were trying to avoid by letting market forces determine permit prices. Precedent shows that new markets cannot be trusted to be secure and stable; bubbles emerge precisely when we leave markets unregulated. The carbon market, too, is highly susceptible to bubbles just like its precedents – the housing and the dot com bubbles – but the imminence and scale of potential environmental catastrophe calls for a stricter regulation on pollution. However, ETS schemes have been anything but stringent by defining lax conditions for carbon reduction and giving firms more than one way to procure polluting permits.
Carbon offsetting offers a second, perhaps more dangerous, way to earn carbon credits. Under this method, firms can offset their pollution by outsourcing the emission reduction to the Global South because policymakers posit that carbon reduction will have the same effect regardless of where it happens. This is made possible through flexible mechanisms such as the Clean Development Mechanism (CDM) which allows firms to finance conservation projects and sustainable infrastructure development in the Global South. Such carbon offsetting projects widely supported by the World Bank are insufficient and can ironically produce more emissions since any infrastructure project leaves a carbon footprint during its construction, even if it may be used sustainably later. They also exacerbate already existing inequalities between the Global North and Global South by keeping the South dependent on the North for technological advancement and infrastructure development. The International Monetary Fund’s (mis)use of conditionality can force indebted countries to adopt policy changes that might not be conducive to their economies. Moreover, since offsets are acceptable substitutes to reduction, large-scale polluters can get away with not making any emission reductions at all by starting minor projects such as planting more trees or promising to create wind farms. Larry Lohmann, in his paper Carbon Trading, Climate Justice and The Production of Ignorance: Ten Examples, points out why this form of substitutability is problematic, arguing that “none of these things can be verified to be climatically equivalent to each other or to reducing one’s fossil fuel consumption” (Lohmann, 362-363).
Such underwhelming efforts are promoted through the provision of offsetting policies like Reducing Emissions from Deforestation and Forest Degradation (REDD). Under REDD, the loose definition of “forests” has permitted the plantation of thousands of palm trees in Indonesia. This effort has been applauded even though the real motive behind this initiative is to harvest palm oil, a primary ingredient in many household and personal care products. Such one-sided efforts that rarely benefit the Global South pose an even greater threat when the local governments are complicit in such action. Due to better political institutions in the wealthier countries, citizens and activists can obstruct measures like the palm tree plantations in their own neighborhoods. As a work around, the carbon emitters pitch development projects to countries in the Global South where these efforts are both cheaper for the firm itself and profitable for the local government. Sandbrook et al. argues in their paper Carbon, Forests, and the REDD Paradoxthat by assigning a monetary value to forests, policymakers give corrupt governments a rent-seeking opportunity which entices them to deprive local communities of forest ownership, even in cases where their identity might be strongly linked to their environment. Thus, voices of the local communities are silenced or ignored when they resist displacement of their homes or destruction of existing ecosystems. In some cases, their concerns are bought away by providing them with jobs that ironically come at the cost of the local populations’ homeland. Consequently, carbon offsetting becomes a tool used by influential industrialists and financiers to save money under the guise of altruism by exaggerating their contributions.
Location is a crucial element of this well-orchestrated deception. CDM undertakings like REDD are still directed towards the frontrunners of the developing world like China and India. According to the CQ Researcher report cited earlier, “about three-quarters” (Weeks, 305) of all CDM projects were directed to such countries. While China and India face a grave dearth of resources to adequately cater to their ever-growing populations, many frontline communities that will first face the impact of climate change reside in small island nations or across the tropics. Indigenous peoples of island nations and local communities of sub-Saharan Africa are largely ignored by the Global North whose focus is on ‘developing’ countries (i.e. India and China) where patrons can still exercise their own economic interests and potentially make gains. Even China’s initiative to create its own carbon market, as Alex Lo explains inNational Development and Carbon Trading: The Symbolism of Chinese Climate Capitalism, is driven largely by profit motives rather than social concern. Carbon markets overall produce ignorance, as Lohmann argues, by blaming indigenous communities for their harmful practices while distracting one’s focus from the most significant cause of climate change: the overuse of fossil fuels by a “global minority” (Lohmann, 363). Hence, a market-based approach to emission reductions fails not only economically and environmentally, but also socially.
For emission reductions to be socially ethical and environmentally impactful, policymakers must look for solutions outside the capitalist system. As long as market forces drive environmental policy, financiers and big firms will find creative ways to circumvent the laws to create profits for themselves. Environmental justice cannot afford to lose out to short-sighted avarice. The urgency of climate change calls for a shift away from the ecological modernization discourse towards civic environmentalism where a transnational civil society’s active participation complements stringent government regulations. International society must make a concerted effort to explore domestic regulations as suggested by the Kyoto Protocol before they were quickly denounced by Western leaders lured by flexible mechanisms.
Domestic measures, defined uniquely for each country, should be designed by local and international NGOs as well as economists and environmentalists to ensure that corporate lobbies do not sway corrupt governments in the direction of passing lax bills. International watchdog organizations should be set up for monitoring each party’s reductions with strict consequences designed for those found in violation of the agreed conditions. Local participation must be strongly encouraged in environmental action to ensure that change happens at every level of society. Indigenous and rural populations must work in conjunction with the government to make policies integrating regional knowledge of the environment. Civic engagement should be promoted through education programs and awareness drives where roles of rural populations are highlighted. An empowered civil society together with a reliable government and multilateral international commitments are the pillars upon which a cleaner and greener future of the world rests.
Weeks, Jennifer. “Carbon Trading.” CQ Global Researcher, 1 Nov. 2008, pp. 295-320, library.cqpress.com/cqresearcher/cqrglobal2008110000.
storyofstuffproject. “The Story of Cap & Trade.” YouTube, YouTube, 1 Dec. 2009, www.youtube.com/watch?v=pA6FSy6EKrM.
Kusnetz, Nicholas. “Top Economists: $40+ Carbon Price Needed to Meet Paris Climate Goal.” InsideClimate News, 14 June 2017, insideclimatenews.org/news/31052017/carbon-price-paris-climate-agreement-economists-stern-stiglitz.
Sandbrook, Chris, et al. “Carbon, forests and the REDD paradox.” Oryx 44.3 (2010): 330-334.
Spash, Clive L. “The brave new world of carbon trading.” New Political Economy 15.2 (2010): 169-195.
Sorrell, Steven, and Jos Sijm. “Carbon trading in the policy mix.” Oxford review of economic policy19.3 (2003): 420-437.
Lohmann, Larry. “Carbon trading, climate justice and the production of ignorance: ten examples.” Development 51.3 (2008): 359-365.
Lo, Alex Y. “National development and carbon trading: the symbolism of Chinese climate capitalism.” Eurasian Geography and Economics56.2 (2015): 111-126.
Paterson, Matthew. “Who and what are carbon markets for? Politics and the development of climate policy.” Climate Policy 12.1 (2012): 82-97.
Newell, Richard G., William A. Pizer, and Daniel Raimi. “Carbon markets 15 years after Kyoto: Lessons learned, new challenges.” Journal of Economic Perspectives 27.1 (2013): 123-46.
Caney, Simon. “Markets, morality and climate change: What, if anything, is wrong with emissions trading?.” New Political Economy 15.2 (2010): 197-224.
Gibson, Shannon M. Politics of Global Environment. Spring 2018, University of Southern California, Los Angeles, CA. Lectures.
Bayrak, Ergin. Intermediate Microeconomic Theory. Fall 2017, University of Southern California, Los Angeles, CA. Lectures.
Ipsa Agnani is a Senior at the University of Southern California studying International Relations and Economics. She is an international student from India and wants to go back and work there after graduation. As an active public speaker, Ipsa has always been interested in social activism. While her main passion lies in gender-based issues, she is keen on learning about environmentalism and development. Ipsa believes that education is the route to social change and wants to foster a conscientious community where dialogue and community action complement strong law enforcement to fight back against social evils. At USC, Ipsa volunteers as a public speaking teacher at the Shaukat Initiative, chairs the Undergraduate Advisory Group for the Centre for Excellence in Teaching, is a managing editor at the Global Women’s Narratives Project and served as a Resident Assistant for two years.
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