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December 07, 2005


Gar Lipow

Some important points on all this: how do we win anything?

Think about what we need both domestically in each individual nation and internationally between nations:

I) Public works - more light rail to replace automobiles and buses whenever possible, more heavy rail to replace trucks whenever possible, massive investments in more efficient cars, buses and trucks where rail cannot replace them.
II) Regulations – efficiency and renewable standards, probably some sort of green or carbon tax (which is itself a sort of regulation) or tradable permits or emissions caps
III) More economic equality both within and between nations; internationally this means debt forgiveness, transfer payments (whether in the form of buying emission rights or aid or whatever). Domestically this mean more income and wealth equality with each nation, both rich and poor.

This is very much a progressive agenda – left, radical – whatever you want to call it. It is a drastic change in how the world operates; on the physical level it requires rebuilding almost all of the worlds physical infrastructure – agriculture, transportation, buildings, industrial production, electricity generation. On the economic and social level in requires going against the neo-liberal and neo-conservative trends of the past decades, more regulation instead of less, more public spending instead of privatization, a lessening of inequality.

And, critical as global warming is, politically you cannot win such drastic changes simply as a solution to an environmental problem. If you doubt this I’ll push it. But it requires a longer term perspective than most people have the luxury to face. Although global warming is killing poor people now, most poor people face a variety of things that will kill them sooner. Although working and middle class people are already bearing some costs from global warming other trends have greater short term costs for them. And generally global warming in the near terms is already locked into place. Observable results from cutting carbon emissions will occur five to twenty years after the cut.

But there is a political way out of this dilemma. Because the obstacles to solving global warming also are obstacles to solving other problems. Within nations, the vast majority would benefit from greater equality. With a few exceptions labor is being drastically weakened worldwide. Women’s rights are a bit more mixed, but it is fairly obvious that economic inequality puts an extra burden on women who are already economically worse off than men. More equality between rich and poor nations would not only help the poor nations, but would weaken the bargaining power of capital vs. labor in rich one. So there is a chance for the environmental agenda and a general progressive agenda to converge - something like the Apollo Alliance, but with a much larger vision. This won’t happen automatically; the environmental movement has much to offer, including some of the biggest public works programs and income transfer programs in world history; but it also has a lot to ask – including a little less coal worship from the world labor movement.

The key dialog needed is that between environmentalists and progressive movements in general – both in rich and poor nations to develop a common progressive agenda that includes an anti-global warming agenda but does not center around it.

Hardwin Jones

Hi Tom,
I read your post with great interest as someone following the proceedings in Montreal avidly... thanks for the really incisive commentary.

Please if you have time, I wonder if you could clarify your objections to Contraction and Convergence? As you're the only progressive commentator I've read who has come down against it, and I'd love to get some more detail to see if I can learn something from your analysis.

You seem to have three objections: first, the principle- the idea that a "Gordian Knot of climate crisis, climate equity, and political realism could be cut by a simple system [with] per-capita emissions allocations";

and second, the political viability: negotiators wouldn't agree to it (being too self- or nationally-interested);

and thirdly you doubt it could actually work (could be successfully, managed, arbitrated) in practise.

Is that about right?

On the first point, the principle - leaving aside practical considerations for a second - do you say that C and C does not provide an elegant, workable path through that Gordian knot? (or is it the case that it could in theory but wouldn't work in practise?)

On the second point: with sufficient political pressure from the electorate and lobbies, could you envisage a scenario in which governments and their negotiators could be forced to sign up? (or is this a fantasy?)

And on the third, what are the technical/administrative obstacles that would prevent C and C from working in your view?

Because, from my point of view, if for the first point, C and C could work in theory to unravel that Gordian knot, and this makes it a desirable solution, presumably we can (or would not be wasting our time trying to) raise the political capital to overcome the political and technical obstacles to its implementation?

So, to summarise, is it unworkable in theory, or undesirable, or both, or is it actually both theoretically workable and desirable, but not practically workable for political and technical reasons?

If you have any time to share your thoughts on the matter, I would be so grateful.

Many thanks and all the best- Hardwin

Adam Ma'anit

Hi Tom,

I'm getting kind of tired of you bashing us 'climate radicals'. What is it that frightens you so? Have you invested your personal savings in a carbon hedge fund or something? You freely bash us in your blog and your book and we continue to ignore it because you seem uninterested in engaging with any real debate and seem to prefer to resort to rude and dismissive commentary. Frankly, patronising us makes you look bad, not us. Why should we take anything you have to say seriously when we see how completely unreasonable you can be when dealing with 'radicals' or anyone who doesn't see eye to eye with you.

The 'climate justice radicals' include people based in communities who are facing the realities of various trading systems and the pollution ghettos they have created thanks to a blunt instrument like trading. It's all well and good to pronounce from above and dismiss arguments outright, but in order to do that, you'll have to continue to ignore grassroots activists' genuine experiences with these things, and the substantive critique of the market by those pesky 'radicals'. I suppose raising critical questions about the nature of the market and some of the rather deeply flawed logic it depends on is perhaps a bit threatening to you and your ideas, so please carry on confirming that by routinely admonishing us 'radicals'.

Incidentally, the convergence centre was six blocks away, hardly 'far'. It provided an important space for environmental justice activists, indigenous groups, and youth to have a space to explore ideas, share knowledge and network.

And anyone familiar with the Kyoto Process will know that the flexibility mechanisms were heavily lobbied for by key corporate lobby groups and continue to be their main target for 'reform'. Why is it so difficult to believe that they might not have had the most genuine intentions here? Here's a quote from a Montreal side-event this week to confirm this from the President of Natsource (one of the largest players in the market): “The carbon market doesn't care about sustainable development. All it cares about is the carbon price.”

Tom, if you want to disagree with our analysis, please bring it on. But if you want to mis-characterise what we have to say, please give it a rest.


Adam Ma'anit
'climate justice radical'
Carbon Trade Watch

Tom Athanasiou


WRT Contraction & Convergence:

I really wish that C&C would work. It was a touchstone of my early contact with thisissue and I still think that it is pedogogically useful, at least with new arrivals to the climate movement -- who are not, let's face it, in any great danger of contact with rights-based approaches

But the fact of the matter is that it does not work for just the reason that it concieves of equity entirely in per-cap terms, and leaves aside the problem of historical responsibility.

To make a very long story very short, the problem is that there is just not enough space left for this sort of shortcut. This is clear now that C&C has been properly modeled. The fact is that it would simply not provide the developing world with the atmospheric space to develop, which is the core of its promise.

Here, from a forthcoming paper on "Greenhouse Development Rights," the approach that EcoEquity is developing together with a collaborator at the Tellus Institute, are a few further words. The paper itself will be published soon:

“There are lessons here. One is that Contraction and Convergence attempted to be an equitable, one-size-fits-all solution to a problem that, by its nature, is defined by national particularities. It does not work, but absent a better, equally transparent framework for thinking about both adequacy and equity, it remains a pedagogically useful framework. Perhaps it will continue in this role. The claim that it is an operationally viable system, however, will become increasingly difficult to defend, for the simple reason that the large developing countries will never accept it. They will not do so because, as is now clear, it would not grant them the right to (sustainable) development that they both need and deserve. In fact, under any even plausibly adequate low-emission trajectory, their emissions budgets would be strongly and rapidly squeezed, and this would happen well before their legitimate developmental goals are even close to being met.

"The problem here, again, is a fundamental one. Any adequately precautionary transition, will quickly cast the South into a world where it is forced to radically curtail its emissions, and this will always happens long before it has reached a (nationally averaged) level of wealth even vaguely comparable to that which the Northern countries enjoyed when they first started to curb their emissions. There’s simply no way around this, or around that fact that it’s the Northern bankrupting of the greenhouse-gas budget that has put the South into this position.

"None of this means that we should stop talking about the vast disparity between rich-world and developing-world per-capita emissions. Just the contrary: this disparity remains a fundamental, and often shocking, indicator of our predicament. But it does mean that proposals like Contraction and Convergence, based as they are on equal per-capita emissions, are, finally, and despite all their pedagogical virtues, unpromising ways forward. Which is important to know, and not, in the end, any kind of tragedy. Our goal, after all, is climate justice – a fair transition to a sustainable world – not equal per-capita emissions rights. We should not confuse the two.

"Fortunately, abandoning the attempt to define climate equity in terms of emission rights does not require us to abandon right-based approaches in general. What, after all, is the real point of asserting equal per-capita emissions rights? Only to insist that emissions have long been, and will for at least the near future remain, a key input to “development.” And to assure even politically weak developing countries that the climate regime will guarantee them the opportunity to develop, and this despite the pressures of a severely climate-constrained world.

"But if this is the point, why not directly guarantee that opportunity? Why not admit that emissions are only a means, not an end, and that the real problem is to find a path to climate protection that preserves the South’s right to sustainable development?”

Tom Athanasiou


WRT “Climate Radicalism,” and my animus, I think it might be time to say something frankly -- I am not at all the only one in the climate movement that feels the way that I do about the anti-trading critique that you folks stand for, and about the way that you make it. My only unique quality, here, is that I’m willing to say, publically, what many around you already think.

Indeed, someone in Montreal – someone whom you know – told me that you guys are called “Durbanites.” Seriously. I’m not making this up.

Anyway, I don’t wish to be, or even to sound, patronizing. Indeed, I make a point of going out of my way to praise you folks for your concern with the impacts of climate mitigation. Though I will add, here, that these impacts are, to this point, largely threats rather than realities, and far, far outweighed by the impacts that poor communities are going to suffer if we don’t get our arms around the climate crisis.

Also, I really do wish that you guys could admit that there are often huge local (as well as global) benefits to climate mitigation, even when it is driven by market mechanisms. It is certainly the case that there are lots of grassroots folks – folks invisible in your rhetoric – that are quite willing to be on the receiving end of climate mitigation projects.

And then there is your critique of the market. You are certainly right that the market does not care about sustainable development. But the price issue is complex, and while today the system is rigged to keep the price low, this will not be the case for any future regime that is actually designed to prevent a global climate catastophe. And this is going to change the battlefield in some very important ways.

These are complex and debateable issues, and we could both, I think, learn something from discussing them. But then there is another thread, the one that I was picking up on when I quoted your own literature to the effect that “These negotiations are all about making money off the climate crisis, not about bringing about a change in the current system of heavy subsidies for the fossil fuel industry.”

I’m sorry Adam, but this is both wrong and absurd. Moreover, it is not helpful. Hell, the fact is that is is sad. Because you guys really do have your hearts in the right place.

-- toma

Adam Ma'anit


To be frank is one thing, to misrepresent our analysis is an entirely different story.

We all have our nicknames for other groups. Some flattering, some not. Just goes with the territory I guess.

More serious, though, is your assertion that the impacts of climate mitigation are mere threats rather than realities. Do you seriously need me to provide you a list of disturbing projects and examples of carbon laundering of one sort or another in order to convince you that the realities are far more serious than you seem willing to believe? Are you seriously saying that people being evicted off of their lands, the longevity of toxic landfill sites extended at the expense of local communities, housing projects that don't even include roofs!, should all be seen in the context of the 'greater good'? That is some worrying logic with some disturbing precedents in recent history.

The fact is that the central message of the durban group is that the focus of climate policy should be on reductions at source. Plain and simple. It's the simplest system. We know it works. We know we can measure it, campaign for it, lobby for it, etc. We know it will cause the least amount of harm (if any) than any other system. And ultimately, it's what's needed.

That's what campaigners were talking about 10 years ago, but since the market-based jamboree has been going on, it's virtually a non-starter in terms of the official negotiations these days. Companies should not go seeking phantom credits from some market hootenanny when we know that ALL emissions globally need to be reduced now. Allow increases or even stablisation in some areas thanks to the markets, and you're going to have groups of people adversely affected. With the one exception being differentiated responsiblity.

Just because it's CO2 doesn't mean it's any less of a problem for local communities, since we know there are myriad toxic co-pollutants associated with the combustion process.

Re: The market. Well, show me a market that has actually worked to reduce emissions BETTER than effective regulation and I'll sing high praises and hallelujahs to whatever gods or godesses need praising.

Unfortunately, the golden calf that is the US SO2 market simply doesn't pass muster, nor RECLAIM, nor UK ETS, etc.

It's not that Durban people are ideologically opposed to the market, it's that it DOESN'T WORK!

It's a trick. A con. A smokescreen. A way for companies to dodge their responsibilities. Don't listen to me, listen to Ron Southern CEO of ATCO power companies commenting on why he doesn't support emissions trading: “people with duplicitous intentions will find ways on either the supply or the buying side to do things which on the surface may seem proper and appropriate... It’s naive to think everybody involved will act within the intent of the legislation.”

Re: The SEEN document you are fond of quoting. The official talks bear that statement out. I have yet to see any mention of subsidies for the fossil fuel industry in the official negotiations and certainly not in any agreed text. Let alone 'oil' or 'petroleum'. Please point out where in the text these words appear.

Of course people are making money out of this whole climate circus. Are you telling me countries like Russia and Canada aren't trying to make a fast buck? Please.

Ideology may be an issue here, but is it ours or yours? Because you seem to have more faith in the market than even the marketeers themselves.

Anyway, I suspect that we will go back and forth on these points. That I think is fine. Just don't misrepresent our views. Even when you seem to be trying to apologise for being patronising, you still manage to call us 'stupid', 'absurd' and 'wrong'.

When you have to resort to that level, I think there's little room for real debate. Sorry Tom, but you seem to be holier than thou without a halo.



Tom Athanasiou


I am going to do my best not to be offensive here. I trust you will do the same.

First, with regard to my claim that “the imapcts of mitigation measures” are still more theoretical than real, my point was, and is, that the size of the mitigation regime is still VERY SMALL compared to what it will have to be. So if that regime has significant negative effects, they are going to be much larger in the future than they are today. I do not think that you disagree with this.

Further, I do not deny that the few small mitigation efforts that have thus far been made have had some negative impacts. And I am quite prepared to believe that that they have, in some cases, been terrible indeed. But even with the CDM – and I am no great friend of the CDM, as you may not know – some impacts have been positive, and this is true despite the fact that very little of the money that it has moved to date has been linked to projects that have any sustainable development benefits.

With respect to a larger migitation effort though, the one that you and I both want to see, I have no reason to think that the overall effect would be negative. Assuming, of course, that it was based on renewables and efficiency and redistribution, rather than on nukes and large-scale biomass, as I think we would both like to see. I believe this for the simple reason that I think that a path based on decarbonization would yield all sorts of social “co-benefits.”

Alas, I must disagree with you that “the focus of climate policy should be on reductions at source. Plain and simple. It's the simplest system. We know it works.” In fact, all we know is that when it happens it works. We do not know that it works in the larger sense. We do not, that is, know that a global mitigation effort focused on domestic reductions and direct opposition to fossil fuel extraction has, or will have, anything like the kind of political traction that will be needed in the next couple of decades. And we have good reasons to doubt that it will.

I suspect that, were we to set aside all the misunderstanding in this conversation, we would find that what we actually have is a strategic disagreement. The Climate Action Network, the Durban group, and EcoEquity – we would all like to see rapid and global decarbonization. What we do not agree about is the best strategy for pusuing that goal.

My objection to your approach focuses on your insistence on treating the people who think that, in the next few decades -- a time in which we can be quite sure that the market and, indeed, market society, is going to remain hegemonic – when we have to bring global emissions to a peak if we are going to avoid catastrophe, we should proceed by villifying market-based approaches.

To be clear, allow me to quote EcoEquity’s recent “Where We Stand.”

“It seems obvious to us that, given the brief time we have to bend the emissions curves, efficiency and common-sense political realism both demand that mitigation be connected to markets. This is not to say that such markets must not be strongly and creatively regulated. Nor is it to deny that markets are easily exploited by the wealthy and the powerful. Nor is it to claim that markets are the only institutions by which significant mitigation efforts can be channeled, that carbon taxes, emissions permit auctions and development funds do not have critical roles to play, and that these might not someday eclipse carbon markets. The point, though, is that many of the criticisms that trading skeptics have focused on markets applies as well to the alternatives, that, whatever the institutional structure of the climate regime, vulnerable communities, in the South and in the North as well, must be empowered to protect their own interests during the transition to a low-carbon economy.

"Getting carbon markets right will not be easy, and it is unlikely that they will ever be well-suited to the drive for sustainable development. But they ought at least to provide the right incentives for mitigation, and thus the complaint that, thus far, they've been designed to keep the price of carbon low is a critical one. Still, we do not worry overmuch about this, for we think that, in anything like a precautionary low-emissions future, attempts to keep the price of carbon artificially low will necessarily fail. Indeed, if the global cap is low enough, and if it is enforced, not even the World Bank will be able to keep emissions permits cheap.”

I hope this helps, and I am sorry if I have seemed hostile or patronizing. The fact is that I am quite upset with the incoherence of the “radical” wing of the climate movement, and for just the reason that I consider myself a radical, and think that we need to do better. A lot better. And, yes, I am entirely willing to admit that some of that incoherence is on my side. Some of it, but not all.


Tom Athanasiou


"Durbanites"! Tut-tut, the climate clowns are running scared tossing around such ad hominem.
Not until the Durban Group arrived did anyone have the courage, wherewithall and the data to speak the obvious: the CAN-nites have no clothes.

Most of TomA's assertions are pure malarkey:

Let's go down a rather short list (from his blog exchange):

"Assuming, of course, that it was based on renewables and efficiency and redistribution, rather than on nukes and large-scale biomass, as I think we would both like to see."

Well, TomA... the key word(s): "Assuming, of course," We should not forget the age old adage about what "to assume" is (an "ass" out "u" and "me"). But I digress. The data all point to word a post-Combustion OPEC, where nukes and unsustainable biomass dominate. This is not the reality of the TomA's California, but that of the Monsantos and ADMs who are positioning themselves to replace big oil. And the nukes are already out of the box. Witness things like Gus Speth and friends commitment to them. The presence at COP/MOP of the Young Nukes Apprentice Group (not the actual name, but check the photo for yourself
(http://www.flickr.com/photos/94752372@N00/70696296/ ).


" What we do not agree about is the best strategy for pusuing that goal."

Indeed. The CAN-nites, as it were, suffer from Katehamptontaliosis (aka: I-4me-U-r2), a rather curious virulent variant of neoliberal bird flu, which metastasizes as follows: Work for progressive NGO to get some degree of street-kred, move to middle-of-the-road-compradorism; manage and massage friendly messages that dont shake things up to much, buddy-up with potentates and politicos of all oily-ilks; reach out and touch Carbon Cartelers and pretend there are markets where they don't exist, in order to ultimately settle in at well positioned climate hedge-fund, to clean up in the market that while TomA cannot even recognize it, Bill Clinton, Al Gore and Sergei Brin (with $500 million alone just in NatSource) are positioning and jockeying for--all the while pretending and denying that real people arent already dead and dying (see W.H.O. reports) from such careerism, showmanship, shadowboxing and hucksterism. (This virus and novel strands of it are variously evidenced in the likes of: Steve Sawyer; Kalee Kreider; Tony Juniper, Gary Cook, Eileen Claussen, Jennifer Morgan and a growing mess of young agitators, inter alia. Clearly a confinement and containment strategy is warranted...some needs to alert the CDC.)

Another one:

"My objection to your approach focuses on your insistence on treating the people who think that, in the next few decades -- a time in which we can be quite sure that the market and, indeed, market society, is going to remain hegemonic – when we have to bring global emissions to a peak if we are going to avoid catastrophe, we should proceed by villifying market-based approaches."

We can call this: TomA as Francis Fukuyama. Do I even need to say more? Of course I can...

This is pure foolishness. TomA should really study up, before regurgitating such nonsense. Or just read some basic economics. Indeed let may suggest the one that I give to my students:

M.M. Bell, M.M. and P. Lowe. 2000. “Regulated Freedom: The Market and the State, Agriculture and the Environment,” Journal of Rural Studies, Vol. 16, Issue 3, pp. 285-294 (2000)

As they rightfully say:

"a’freemarket’--thatisamarketinwhichthestatedoesnotintervene--isatheoreticalimpossibilityinastate society"

And critically they add:

"Every age has its characteristic rhetoric, its defining ideas and proverbial expressions, its language of motivation. And one of the most characteristic bits of the rhetoric of our age is, assuredly, the “free market.” It has become scarcely possible to read the front page without encountering this catchphrase and some among its many kindred terms: free trade, downsizing government, deregulation, private enterprise, competitiveness, creative destruction, efficiency. Arrayed alongside are the equally familiar opposition: big government, regulation, central planning, bureaucracy, command-and-control, inefficiency, red tape. The principal opposition, however, is between the market and the state: By common agreement, in the words of one introductory economics textbook (Fischer and Dornbusch, 1983: 14), `markets in which governments do not intervene are called free markets.’ We should be wary of dichotomous thinking, here and elsewhere."

And it is this (crucial and unfortunate) point that TomA's lack of knowledge about the real politik of (non)markets and states, saying nothing of corruption, collusion and cronyism, that typifies the increasing normative state of Gangsta-capitalism (see Michael Woodiwiss new book with similar title: "Gangster Capitalism: The United States and the Global Rise of Organized Crime) that leads the old chap astray. Indeed this is same kind of delusional-quackery that leads Sawyer to conclude "Victory in Montreal" in his pulp-fiction, GreenPeaces press releases. (How did Sawyer say it: "THE INTERNATIONAL COMMUNITY FORCED THE US BACK TO THE TABLE AFTER THEY'D WALKED OUT."

As I said the other day: The US had walked out when it sat down at the table. Even though it made the news, all knew it was not news that the first-at-bat, boss-man (lead negotiator Harlan Watson) was an ExxonMobil-selectee.

What is most disturbing, dubious and damning about TomA, the EcoEquity equivacators and other sufferers of Katehamptontaliosis is that just as these neophytes are coming online with market triumphalism, the real grand Pubahs, the market-makers, Soros, Stiglitz, Krugmann, even to some degree Sachs and Rubin have left the room. The real market experts have definitively said the market cannot and will not deliver such things as labor rights, environmental protection (including climate protection), and a host of other essentials, without considerable state rule--or the thing that is sorely lacking within the overall climate regime--which TomA just denies or is blind to.

And then:

"The point, though, is that many of the criticisms that trading skeptics have focused on markets applies as well to the alternatives,"

Now this is great... but TomA fails to go the next step. He's afraid of joining the radicals. As that might get him shut out of the debate, or at least he acts like he thinks this. As do many carriers of Katehamptontaliosis. (Days before Clinton was to arrive Sawyer and Cook, upon the admonishments of an angry Eileen Claussen, were openly pondering the debacle to their "access" in the talks and the backrooms if Clinton were to come.) What's odd about this comment, is that it typifies the liberal-position, on too much. When faced with two-evils: choose the lesser. Don't dare dump 'em both. Don't talk about the need to create a carbon rescue fund that takes a bite of oily profits; choose the market, instead, since all can be onboard with that, even if its guaranteed not to work. (But then dichotomous thinking does have a peculiar kind of purchase.)


The Bell and Lowe opener was cut-up for some reason. Here it is:

"a free market this is a market in which the state does not intervene is a theoretical impossibility in a state society.”

Larry Lohmann


What's happening? Hope you're well. Missed you in Montreal, but I suppose we we both busy participating in different events. Maybe next time.

I've got several deadlines to meet in the next few days, but thought I'd drop in briefly on the growing debate touched off by your article above.

The statement in your article that most struck my eye, and that I'd like to query you about today, was the reference to "climate justice radicals" who "can’t seem to stop conflating the UN climate process with 'carbon trading.'"

I was puzzled by the implications of this statement and want to make sure I understand what you mean by it.

The statement seems to imply that you think the UN climate process is NOT a process of setting up a carbon market. I don't want to misinterpret you, so let me just try to pin this point down for a minute.

Do you mean that the Kyoto Protocol, for example, is NOT about carbon trading?

I've just consulted my pocket copy of the Protocol (I keep it in my vest pocket to protect myself against stray bullets and evil spells) and I believe I can confirm that Articles 6, 12, 17, inter alia, are all about setting up a carbon trading system.

In addition, as I'm sure you know, the Protocol is widely acknowledged by friend and foe alike -- I can supply references from such Kyoto supporters as Michael Zammit Cutajar (2004), Michael Grubb (1999) and Rob Bradley (December 2005) if you like -- to be based on US pollution trading models.

I can't imagine that you're not aware of all this. So perhaps you mean that market-building is only an "accidental" part of Kyoto, not to be confused with its "essence", which lies elsewhere. In other articles, after all, you've said things like "carbon trading isn't the water, it's only the waves".

But I'm also reluctant to attribute this claim to you, since it doesn't make much sense, either. Are you implying that Articles 6, 12, 17, et al. might somehow be snipped out of Kyoto, leaving the essence of the treaty in place? Even in formal terms this would be a weird belief, given, e.g. Article 26, which precludes remaking the Protocol as we go along.

But let's leave the text of Kyoto behind for a minute -- it's only a text, after all -- and concentrate on the rest of the "UN process", which, if we're to take your statement literally, must be your real subject.

The problem is that when we do this, I find it even more difficult to put a charitable interpretation on your words. But perhaps I'm missing something, and I'd welcome your corrections.

Does your statement mean that you think that the UN climate process as a whole is NOT about carbon trading? As we both know, the last eight years have seen an immense growth in the numbers and size of UN institutions, committees, panels, and so forth that are needed for, and are explicitly devoted to, the complex mechanics of market construction. Panel after IPCC panel, SBSTA after SBSTA, has attempted to find a basis for the accounting systems necessary to create a carbon commodity. Shoals of lawyers, consultants, economists and diplomats have been struggling overtime for years to lay the political, social, legal and other foundations for a global carbon market. Since 1997, at a conservative estimate, 90% of UN climate time, whether that of techical advisers or negotiatiors themselves, has been spent talking about the inchoate carbon market created by Kyoto and its particular challenges and difficulties. If you doubt this, just imagine what would have been the case if Kyoto had NOT been all about setting up a new market -- the reports and negotiations that would NOT have been needed, and the more serious and fruitful subjects to which the UN apparatus could have devoted itself.

This is not even to mention the vast number of private and governmental institutions that have grown up in the wake of the UN process's attempt to create a carbon market: the carbon consultants, validators and verifiers, the merchant banks, the contractors, brokers, buyers, specialist law firm branches, the exchanges, the EU bureaucracies, and so forth. You know better than I do what all this has meant for UN meetings themselves, and their "trade fair" aspect that prevents the roots of the climate change crisis from even being mentioned in venues such as the Palais de Congres in Montreal. This, too, is part of the "UN process", and it revolves mostly around the carbon trade.

Now I suppose it's possible that when you said that the UN climate process should not be conflated or confused with carbon trading, what you meant was that all the bustling carbon trade-oriented institutions that have come into being over the last 10-15 years should be regarded as castles in the air that could just as easily dissolve at some future point in the negotiations, leaving not a wrack behind.

But I find it hard to believe that the Tom Athanasiou of Dead Reckoning would be so naive about the ability of such institutions, once set up, to sustain and reproduce themselves -- to endure and prevail, to become ends in themselves.

That brings me to one last try at interpreting what you might have meant when you said that it was a confusion to identify the UN climate process with carbon trading.

Is it possible that what you meant was that the UN's attempt to set up a carbon market, and all the complications and convolutions that have resulted, is intended as a "means to an end" of achieving targets, and if this "means" turns out not to work (and indeed it is not working), we can always try another means to the same end?

Again, I find it hard to imagine that you would hold such a position, and for reasons similar to those I've already cited.

After all, you are as good a witness as I am to the extent to which this "means" has taken over the process and become the "end". You have seen, surely as clearly as many others, the way this supposed "means" has in fact helped virtually to erase the original "end" to which it was to be directed (rational targets, incentives for structural social and technological change away from fossil dependence, etc.). You're as aware as I am of the evidence that this "means" in fact doesn't even save any money for society or spur even piecemeal innovation, yet all the while lays the foundations for generations of the most bitter social and political strife worldwide over issues of social justice, livelihood, equality and survival.

So I'm left with my puzzlement about what you could have meant by suggesting that it is confused to see the current UN climate process as being all about carbon trading. I don't see how any other interpretation of the UN process is possible, given the evidence of which we are both well aware.

But I'm hoping I'm missing something, and that you can fill in the blank.

Larry Lohmann

Larry Lohmann


A short appendix on us so-called “Durbanites”’ analysis of how the carbon market is working (or not working).

OK, scratch that – I have to confess that this is not OUR analysis; it’s actually quotations from a business conference on carbon finance I attended recently featuring around 250 suits in one of the world’s financial capitals.

But the analysis is that of “insiders” and as such deserves serious attention from anybody who, viewing the scene from an ivory-tower distance, might otherwise be inclined to say that climate mitigation markets will be “efficient” or “realistic”, will “provide the right incentives”, can be “gotten right”, etc. All quotations are verbatim. Names have been removed.

Four main points from the conference:

1. Participants mostly agreed that desperate efforts will have to be made to generate the large numbers of cheap marketable carbon credits from CDM projects and other sources that are needed to allow Northern fossil fuel use to remain relatively unconstrained.

• The European Union carbon market is “betting the house on CDM/JI credits”. Without CDM, there could be “extreme volatility” in prices of EU emissions allowances. “To maintain belief in this market at all, you need CDM” [financial analyst].

• Northern countries as a whole “are gonna need to find 750 – 2,200 CDM projects in the next few years, or something like 1.4 billion tonnes of credits” [banker] Italy, Spain and Canada, to name a few, are gearing up to buy in a big way.

• Yet only a few CDM projects have been registered to date (although 325 are being checked by validators, with a total potential credit volume of 455 million tonnes of CO2).

• Moreover, “hot air” from Russia and the Ukraine [meaningless surplus carbon credits due to post-1990 economic collapse in these two countries] will not yet available to flog to the North for quite a while due to technological and measurement problems slowing Russian participation in Kyoto.

2. But many participants also agreed that the needed commodity and the needed market do not yet exist. It’s proving very hard to set up the institutions to transform CDM credits into private property. Setting up other institutions for transforming CDM credits into proper commodities is also a slow job, such as institutions for transfer and delivery of credits. Risk and how to handle it is an especially big problem. And there just aren’t enough projects, and the separate sub-markets are not linked up yet.

• “The CDM market is not a commodity market. CDM credits are not commodities. It’s a world of discrete projects. No standardization is possible. There’s not much science in predicting prices. Price is linked to project risk, not to the market” [consultant]

• “CDM credits are not real commodities . . . the market is fragmented . . . it has no liquidity . . . it’s short of credit” [banker].

• “There’s no fungibility. The market is fragmented.” Utilities who try to buy lose out. There’s such a price gap between CDM credits and European Union emissions allowances. “It’s too dangerous. CDM credits will always be discounted. There are just not enough guarantees. I’m not going to spend my life in the court of Belo Horizonte to get my credits. . . . We’re placing bets here” [carbon fund manager].

• Whereas European Union emissions allowances, to the satisfaction of business, are “real property” (the government has to compensate you in case of default), CDM credits “don’t have such a solid status yet” [banker]. Yet “title to your CDM credits” is a big issue. “We are already getting calls from our clients about defaults on 2006 trades” [lawyer].

• While other trading systems are coming on line which the EUETS might link up with to make a broader and more liquid market (in Switzerland, Canada, Japan, Australia, Norway and the NE US states), property rights wrangles are a problem with some of these as well. The Bingaman Climate and Economy Insurance Act of 2005 (which would give out carbon rights to sources like coal mines and oil refineries rather than emitters like power plants) has run into controversy in the US Senate over how the allowances would be divided up, bogging down debate [lawyer].

• While early on, prices were set by “early buyers (the World Bank, ERUPT), not by the market”, the market is now moving toward being a sellers’ market.

• You can’t diversify your carbon credits portfolio to get rid of risk just by putting more CDM projects in it, because all CDM projects are crap in terms of risk. You don’t want to commit yourself to buying up too many CDM credits thinking that it will help you meet your EUETS targets [banker; insurer].

• CDM has been underfunded, and the CDM Executive Board and Methodology Panel have been just too slow and too picky. A study on the World Bank website shows that it took between 34-110 weeks to get methodologies approved [banker].

• Not much trading is going on. Given the volumes of credits available, there is 25 times less trading going on than went on in the US SO2 market – which was not very active, either, with most trading occurring within, not between, firms [financial analyst].

• Purchasers of CDM credits are going to have to show proper “due diligence” in their search for the right product if they are to have a leg to stand on when everything goes pear-shaped and they want to squawk that they aren’t getting their money’s worth or have been defaulted on [lawyer]. This is quite a difficult job.

• There won’t be an International Transaction Log for Kyoto carbon credits until at least April 2007, hampering liquidity. Under the Kyoto Protocol’s Marrakesh accords, that means that you can take delivery of credits you have bought only if you are an actual CDM project participant, through your participant account on the CDM registry in Bonn. But many companies don’t want to be project participants. It’s too much bother. They just want the credits so they can go on using fossil fuels [lawyers].

3. The upshot of all these problems is that the corporate sector and its satellites will have to try very hard to pull together to help create this market and its commodity.

• “Everyone is so short people are looking for larger-scale projects” and trying to get experience in plucking low-hanging fruit. Right now, there’s a race to do big projects like HCFC projects that can deliver you a lot of credits in a short time [banker].

• Montreal is going to be maybe the most important meeting since Kyoto because of this supply crunch. How do we drastically scale up approval of CDM projects? The World Bank’s role is to step in to do something about the lack of CDM credits to offer industrialized countries. The Bank will develop new markets, bring liquidity to market, do bigger projects, make program or sectoral CDM possible, and put together investors [banker].

• The Executive Board has to stop reviewing every single project and every single methodology. What if we get 2000 methodologies for the 2000 projects that we need? That would be hopeless! We need a specialized full-time professional unit to rush through approval of CDM projects at breakneck speed. The EB need only do spot checks and should be effectively sidelined [banker].

• To speed things up, we need CDM methodologies to be developed top-down [banker].

• The UK will join the German government in pushing over the medium term to get the EU trading system to accept sinks credits (now banned from the EUETS), which should add to the credit volume available [bureaucrat].

• The Japanese government is giving Japanese companies handouts of 50% of “initial investment costs” for CDM projects, as well as 50% of validation and legal documentation costs, together with And subsidies for transaction costs like feasibility studies and Project Design Documents, but not for sinks [securities executive].

• Unilateral CDM initiated by Southern countries without Northern proponents is going to boom [UN bureaucrat].

4. However, this headlong push for credits can only sharpen the contradiction [long noted by the Durban group] between market imperatives and the need for a radical shift toward a non-fossil-fuelled society.

• The CDM is “not working” [certifier]. It “is not encouraging companies to devote funds to renewable energy sources . . . to the extent . . .hoped” [Wall Street Journal]. “It is widely recognized that . . . [the end-of-pipe developments that so far constitute the bulk of CDM projects] have no direct development benefits” [UNEP official]. While “there were high hopes that the CDM would usher in climate-friendly FDI . . . this remains largely to be seen” [banker].

• Renewable and efficiency projects account for only about 34% of the credits, which are mostly generated by a handful offend of pipe projects (as of 15 August) [certifier].

• There is a lot of relabelling of business as usual as “additional”. Up to 50 per cent of projects are not really “additional” [certifier].

• The current 15 per cent of renewable/efficiency market investment due to (2%) or leveraged by (13%) CDM can only shrink. If this failure continues, then the carbon biz will put itself in jeopardy [certifier].

• Yet the trend is for the market to be biased even more against projects that could help with the transition to a non-fossil future. Prices in the CDM market will be largely influenced by producers of big amounts of credits – coal mine methane, N2O reduction, big projects in China, etc. After all, HFC23 credits [which are end-of-pipe add-ons to existing industrial plants and do not help in the shift toward a nonfossil economy] are 400 times cheaper than credits from solar energy. N2O [ditto] credits are 80 times cheaper than solar [consultant].

• The best size for a project from a banking point of view is 1-3 million tonnes CO2. Bankers are not interested in small community-based projects. “Few in the market can deal with communities” [banker].

• Nor are current fairly high prices for EU allowances showing any signs of driving a transition to a non-fossil economy. In practice EUETS prices basically have been merely following the increase in the price of natural gas, or, more precisely, the forward price 6 months hence, in particular winter gas prices (although there are anomalies after late July 2005), or more fundamentally still, the cost of shifting from coal to natural gas. At most, high allowance prices may provide a moderate disincentive to shift from gas to coal in response to high gas prices [financial analyst].

• Despite the contradiction between market imperatives and a transition toward a non-fossil economy, the question of whether the carbon market actually has anything to do with climate change has now been completely repressed within the specialist community. At this meeting it was so far outside the universe of discourse that it was not even taboo to raise the subject. It simply wasn’t touched, except informally in the corridors by a few of the younger B-school representatives present.


• The meeting provided yet more plentiful evidence from business itself for the lack of connection between this market and climate objectives.

• Business’s obsession with “strengthening CDM” in order to maximize the flow of credits in a viable market regardless of their fraudulence is an important “talking point” to raise with well-intentioned NGOs who also advocate “strengthening CDM” (because they think it “strengthens Kyoto”). Given the contradictions involved, whose interests are being served by “strengthening CDM” rather than just killing it off or letting it die a natural death?

• Business is understandably obsessed by the enormous and multiple risks connected with trying to create and use a carbon market. It sees the whole market project as shaky, because it’s beginning to understand in some detail the institutions that would be necessary to make it work. It’s ironic that CAN, e.g., with its “theoretical” and “classroom” view of the market, is actively trying to cover up these difficulties.

• A new example of risk from this meeting: one law firm stressed how hard it will be for any firm buying carbon credits to exercise what is called, in the business world, “due diligence” (in this case, being responsible for checking the condition and legal status of the carbon assets you’re buying). If you want to have any chance of getting compensated for what you’ve paid for in case of default or shoddy goods, you have to be able to show that you took proper precautions when you were shelling out the money for them. One thing you are responsible for checking beforehand is whether the CDM project complies with the laws of the host state. For instance, suppose false claims are made to the UK’s CDM authority, or “Designated National Authority”, about the legality of a CDM project backed by a UK firm in another country. This is now a criminal offense and you can be put in jail and fined for this. You can’t just make any claim you like to your government about the legality of a CDM project that you are pursuing in a Southern country, since a false declaration can lead to review of a project. If enough pressure were put on the UK’s DNA in such a case, it could be forced to require any information submitted to it to be “independently verified” by a third party consultant or a lawyer.

• Another example of the risk that businesses buying carbon credits are very worried about: local resistance. At this meeting, a banker went out of his way to lament the problems his bank ran into with Plantar. “We ran into a big storm . . . we had a lot of permanence rocks thrown at us. . . . It was like stepping into a stream full of piranhas.”


In order to move this discussion back to the top of the blog, I've created a new posting called "Cutting through the smoke on trading". Please go there to continue the thread.


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