Will Carbon Trading Work?

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In the carbon markets, both buyers and sellers have an incentive to conceal from the public whether emissions reductions have actually been made. Buyers want to snap up cheap pollution rights; sellers want to make money flogging them. It doesn't matter to either whether the setup actually does any good for the climate or not. And because measurement and enforcement is inadequate or impossible, they can get away with it.

Who's going to be the watchdog for a public increasingly concerned about the climate crisis? It's not clear. For example, UN carbon market regulators and expert bodies are heavily populated by individuals with conflicts of interest: technical experts who have set up their own carbon consultancies to cash in on the market, bankers, heads of government offset purchase programs, and so on.

Raise questions about the arrangement and you often get the response that we have to trust the traders, economists and carbon nerds because no one else understands the dizzying complexities of carbon trading.

We've heard that one before – with ENRON, WorldCom, LTCM and the subprime mortgage market.

Who benefits from carbon trading? Big fossil fuel-using companies. Governments that want to delay climate action. Energy traders. The nuclear industry. Polluting companies that are rich enough to hire the consultants and grease the wheels that enable them to sell certified carbon credits. Hedge funds and commodities traders. Banks and law firms.

Who loses? People fighting polluting fossil fuel developments in their local areas. Communities in countries like India or Brazil who find that their local corporate bad citizens have just gotten an extra cash injection from carbon trading. Communities trying to preserve or develop low-carbon ways of life. Renewable energy developers. Consumers who are charged for carbon permits generators have gotten cheaply or for free. And a global public increasingly at risk from climate change.