The Carbon Scam

By Najma Sadeque – 26 February 2010

In metaphors in all cultures, false claims are often referred to as empty as air. No one could imagine that manufacturing companies and financial speculators could create a trade in pollution but the West has succeeded in doing just that with free-floating carbon dioxide.

Rocked by scandal, the recent Copenhagen summit on global warming ended in disarray, notwithstanding the corporate media’s portrayal of President Obama as saviour. Some scandals were minor or manageable such as the offer by the prostitutes of Denmark of free services to card-carrying delegates.

But the credibility of lead nations was shattered when The Guardian of London published a leaked secret ‘draft final agreement’ prepared by the US, UK, Australia and Denmark that sought to shove the UN leadership out of all future climate negotiations and hand over control to the World Bank. Furthermore, industrialised countries focused more on firming up carbon trade, giving short shrift to remedies and alternative non-polluting technologies. Outraged South countries walked out. Copenhagen’s so-called ‘Accord’ has no legal basis.

The Copenhagen summit was just the latest example of the West trying to create a trade in pollution. In 1991, Lawrence Summers, the then chief economist in the World Bank, in an internal memo, strongly recommended the dumping of toxic waste in Third World countries as the US and other industrialised countries were running out of places to throw it out.

“Just between you and me,” he wrote, “shouldn’t the World Bank be encouraging MORE migration of the dirty industries to the LDCs [Less Developed Countries]?…a given amount of health-impairing pollution should be done in the country with the lowest cost, which will be the country with the lowest wages. I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that… I’ve always thought that under-populated countries in Africa are vastly UNDER-polluted, their air quality is probably vastly inefficiently low compared to Los Angeles or Mexico City.”

In 1992, his memo was leaked to The Economist of London, which commented about it under the caption, “Let Them Eat Pollution.” Although Summers claimed his tone was meant to be sarcastic, it outraged people around the world and was considered revealing of the World Bank’s callous and calculating nature. Brazil’s then secretary of environment late José Lutzenburger, also Brazil’s first internationally-known environmental activist and winner of the Right Livelihood Award (an alternate Nobel Prize) was greatly offended. He wrote to Summers: “Your reasoning is perfectly logical but totally insane…Your thoughts [provide] a concrete example of the unbelievable alienation, reductionist thinking, social ruthlessness and the arrogant ignorance of many conventional ‘economists’ concerning the nature of the world we live in…If the World Bank keeps you as vice-president it will lose all credibility. To me it would confirm what I often said…the best thing that could happen would be for the Bank to disappear.”

The World Bank did not disappear despite its ruinous, non-transparent projects pushed through corrupt and undemocratic governments, but Mr Lutzenburger was forced to resign his post soon after, for standing up to the US and corporate interests.

And Larry Summers? He thrived. In 1999, he was appointed US treasury secretary. Later on in a lecture as president of Harvard University, he stated his ‘essential truth’: “all basic values, including literacy, was linked to market growth.” His ultimate neoliberal equation was: More money-value exchanges = more market growth = more basic values. Today, like a bad penny, Summers has reappeared at Obama’s side as director of the National Economic Council.

The UN finally passed the Kyoto Protocol in 1997 which called for a specific reduction of emissions by 2012. The principle was that the rich, industrialised countries responsible for most of the emissions, should take on the maximum reductions. Most developing nations do not contribute much to global warming yet. These countries, including Pakistan, which produces less than one per cent of greenhouse gases, therefore do not have to act immediately.

By 2009, Kyoto had been signed and ratified by 187 countries, but two countries who are big polluters – the US and Australia – were unwilling to make amends, and pulled out of it. The small print in the Kyoto Protocol has little to do with saving the planet since it incorporated carbon trading.

Carbon trading, as it came to be known, was accommodated after intense corporate lobbying under the Reagan administration. The US delegation that forced its inclusion was led by Al Gore of An Inconvenient Truth fame, who continues to be a major financial beneficiary of carbon trading. Later, Clinton made it a key provision of the Protocol. Someone remarked: “They act like the sale of indulgences by the mediaeval church, absolving the buyers for their immoral actions.”

Front organisations, or rather lobbies like the Environmental Defence Fund and the National Development and Reform Commission that reach deep into Washington, are so heavily funded by corporate interests, all civil society organisations put together cannot match their clout. What they proposed was a perverse and thoroughly dishonest mechanism that legitimises the right to pollute. The scheme was the brainchild of Dr Richard Sandor, founder and chairman of the Chicago Climate Exchange, North America’s sole legally binding greenhouse gas trading system. He is the same person who dreamt up financial futures speculation – essentially irresponsible gambling – that led to the global scams and financial crash last year.

Under the Kyoto Protocol, the industrialised nations had agreed to country-specific reduction targets within a pre-defined time frame while developing and replacing polluting technologies with new low-carbon ones. The volume was to be equivalent to their 1990 levels of emissions, plus or minus the reduction amount they had committed to. A recent report by the Princeton University states that only 700 million people – about one-ninth of the world’s population – are actually responsible for producing half the emissions of the world.

Creative accounting began by setting the baseline emissions unrealistically high above what the levels really were, allowing the polluters to pollute even more. Governments are given permits which they in turn allocate to the biggest industrial polluters in their own countries, mostly for free. If the polluter doesn’t use up its allowance in the given time (four years), it can sell spare permits to another polluter, or these can be saved and used in the subsequent four-year period. If the polluter still has capacity to pollute some more, it can buy permits from yet another polluter that hasn’t exhausted its allowance. What it boils down to is that polluters can just pay someone else, anywhere else, to lower emissions on their behalf.

A third, and seemingly generous, ploy for earning credits is to invest in pollution-reduction schemes in other countries, mainly developing nations like Pakistan that do not yet have to meet carbon reductions. By simply financing pollution-reducing projects in developing countries, such as solar or wind projects, technology improvements in polluting factories, cleaner improvements to existing energy generation, etc., industrialised countries can avoid reducing their own emissions.

This scheme is probably the biggest scam of all because it allows imagination to run riot. In this, the polluter is allowed to make up its own calculations about an envisaged project to estimate the difference between the emissions of the future project and in the event that it is not executed, all the polluter has to do is to hugely overestimate the emissions, because the bigger they are, the bigger the reductions on the basis of which credits can be earned. Worse, imaginary costs to industry are passed on to consumers. This way they double their profits under the false claim that they have contributed to carbon reduction. There is far too much riding on misplaced trust here.

Already some have made a killing. Lakshmi Mittal, majority owner of the steel company ArcelorMittal and the UK’s richest man bagged a huge excess of permits that by next year could swell to 80 million tonnes worth of carbon emissions – equivalent to Denmark’s entire annual carbon emissions. He is expected to make a billion pounds without any effort.

It has even led to criminal profiteering. Last year, Europol, Europe’s top police body, collaborating with the police in Belgium, Netherlands, France, Denmark, Spain and UK, managed to unearth massive fraud in Europe’s Emission Trading System (ETS). The exercise exposed the weaknesses of carbon trading, and the pointlessness of continuing with it.

The System allows anyone to open a trading account with a national carbon registry, and that is the criminals’ first step. Next, they buy EU emission allowances from any one of the six official carbon exchanges in Europe, but in a country other than where they are registered. They then shift these permits to a third country and subsequently sell to an unregulated broker in a fourth country.

The slick broker then charges VAT (Value Added Tax), without bothering to turn it over to the tax department: some 5 billion euros annually are being pocketed this way by criminals in western Europe. Soon after, before anyone gets wise, the criminal operators vanish into thin air. When the cops arrive, the registered company turns out to be a dummy. Later on, once the coast is clear, they set up another dummy company under a different name, and do it all over again.

By next year, eight years after the ETS will have been established, Europe’s industrial sectors, mainly of metals, cement and glass, will be sporting 400 million surplus permits (measured in units of carbon dioxide only – one tonne of carbon dioxide is equal to one permit), leaving them free to sell them to power companies, which are not given many free permits, and other polluters, encouraging everybody to speed up and increase the intensity of global warming.

The EU was serious about emissions reduction when it first set up the ETS in 2005. Carbon trading was at the core of the EU’s and USA’s strategy, seeing it as incentive to phase into clean technologies. But the profits from pollution turned out to be much greater.

In 2003 there were no Wall Street executives betting on carbon; today there are at least 130 representing big players like Goldman Sachs, Citigroup, JP Morgan and others. The Commodity Futures Trading exchange sees a $2 trillion market building up. Others feel this is an underestimate and speak in terms of a $10 trillion market soon.

At the end of 2008, the US Government Accounting Office stated that carbon trading had failed to accomplish its objective. Last year the Deutsche Bank said carbon markets were simply not working. Even the World Bank, the biggest funder of polluting projects, agreed.

A report of the UK’s Environmental Audit Committee criticised the government for misleading accounting and advised greenhouse gas cuts be increased by almost 50%. The UK had earlier bought 31.4 million carbon credits through Europe’s ETS in 2006, and 25.7 million in 2007. “Simply purchasing ETS credits did not necessarily mean that the UK was funding real and equivalent emissions reductions elsewhere,” said the Audit Committee.

Yet, soon after the Copenhagen summit ended, lobbies of the EU’s top-polluters were back in action. The European Chemical Industry Council – which represents 29,000 companies – warned that ‘unilateral measures’ would put European companies at a competitive disadvantage with the rest of the world, some even threatening to move their factories abroad where there were less stringent regulations.

Apart from replacing fossil-fuel dependent industries with low-carbon ones, there is a major solution to global warming that has always existed – by simply giving up superfluous but damaging chemical fertilisers and pesticides and unsustainable farm practices, and reverting to traditional farming systems.

Soil contains a lot of carbon – over twice as much as land vegetation. Most of that carbon naturally trapped in the soil, is being removed and released into the air in even more noxious forms following manufacturing processes. When dead plants, animals and organic waste decompose, carbon is released into the atmosphere, but it is balanced by fresh vegetative growth and new life. But with industrial-agricultural methods, carbon is lost at a much faster rate than can be reabsorbed by nature.

Monocultural forests, sugarcane, soybeans and oil palm plantations alone cover some 800 million acres or over 20% of the world’s total cultivated land controlled by corporate interests that abandon plantations worked to death by chemicals, before moving onto newly-levelled forests.

Nature processes boast an in-built democracy that requires sharing by humans who use it. True organic farming, being labour-intensive and based on local conditions, is only possible on a small scale. By localising food production worldwide, not only would about a billion small farmers operating on two to five acres quickly become food-secure and self-reliant, the reduction from global transport, refrigeration, oil-dependent food packaging alone could do away with 10-12% of current global emissions. In Pakistan, where feudalism rules the roost, drastic land reform would also be required.

Just by abandoning industrial agriculture – which is essentially farming without farmers – and returning organic matter to the soil through sustainable organic means would sequester carbon and reduce greenhouse gases by 20-35%. By halting deforestation, land-clearing, industrial monoculture and agro-fuel production, another 15-18% greenhouse gases would be avoided.

Organic agriculture alone is the most efficient, cheapest and socially-beneficial method for reducing greenhouse gases, also for capturing excess emission from non-agricultural sources. Most importantly, it requires no crippling loans and foreign aid, just honest political will.

The US could cut out 64 gallons of fossil fuel per hectare if it grew corn organically. If it converted all its 65 million hectares of farmland to organic, the US alone could remove 260 million tonnes of CO2 a year. On a global level, organic soils could sequester 1.5 billion tonnes of carbon.

Investors, speculators, development banks and agro-based multinational corporations do not want the organic solution as it would pull the rug from under their feet by leaving nothing for them to invest in. A trillion-dollar carbon market is hard to give up. But like industrial agriculture, it was an artificial and superfluous invention.

But while the West wastes time plotting to continue with carbon profits, they are in danger of being bypassed by China.

China hasn’t been sitting pretty as an outsourced global factory simply producing the cheapest versions of consumer goods at unbeatable prices for the world market. It is fully aware of the implications of global warming and climate change and has been investing heavily in low-carbon ‘clean technologies.’ For example, China already boasts 1,000 solar water heater manufacturers that have created 600,000 jobs. This year, it will exceed 5,000 MW of solar cells, a third of the world’s total; in five years time this will double. China extended protection to the domestic wind industry and lifted restrictions to imports only last year after the locals fully dominated the industry. If the Pakistan government is smart enough, it should take advantage of our good relations with China to obtain their technologies and know-how at affordable prices without being taken for a ride by IFI-tied loans.

But on some money-making scores, there’s not much difference in the thinking of feudals or the military government that sanctioned corporate farming. The proposed massive monoculture is exactly the kind that has exacerbated carbon emissions while destroying hundreds of millions of fertile acres in America and elsewhere. After a brief silence following public uproar over the secret leasing of half a million or more acres to foreign investors, the Pakistan government has now announced that the deals made – previously denied – now stand. Whether it is out of scientific ignorance or the usual indifference to the national interest, unless citizens block it, this step will kill our agricultural goose sooner than later.

Published in the Newsline in 26 February, 2010


About denebsumbul

Documentarian, Activist, Journalist, Photographer, Capacity Trainer
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