Will Carbon Trading Work?

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Carbon trading is aimed at the wrong target. It doesn’t address global warming.

Solving global warming means figuring out how to keep most remaining fossil fuels in the ground. It means reorganizing industrial societies’ energy, transport and housing systems – starting today – so that they don’t need coal, oil and gas.

Carbon trading isn’t directed at that goal. Instead, it’s organized around keeping the wheels on the fossil fuel industry as long as possible. Carbon trading allocates industries generous short-term numerical emissions budgets and then tries – through trading – to make it cheap and easy for them to continue business as usual within those budgets.

Emissions budgets are numerical because that’s the way a market works. You can’t trade what you can’t measure. Industry needs to know how much pollution it is trading around or it won’t know what it’s getting for its money.

Emissions budgets are generous because if you set tough targets right away your carbon price will go through the roof. Business and consumers will revolt if they haven’t been given any technological and social alternatives that would keep them from having to pay that price. Emissions budgets are also generous because big market players, once they recognize that the earth’s carbon-cycling capacity has become a lucrative asset, will lobby governments in order to pull in as much gravy as they can.

Emissions budgets are short-term because no government has the power to enforce a target to cut emissions drastically by 2050 – or even 2025 – without immediately starting to redirect subsidies from fossil fuels to renewable energy, undertake big programs of public investment in rejiggered energy, transport and consumption systems, and so forth. It won't do these things if it’s committed to the ideology that carbon prices will be the main mechanism for change.