by Sara Nelson, University of Minnesota
Carbon prices fell to record lows on 5 January, with declines driven by the Eurozone debt crisis and an over-allocation of credits in Europe’s Emissions Trading Scheme (ETS) (Blas 2011; Szabo 2012a). The price of carbon has fallen 70% since May to make it “one of the world’s worst-performing commodities in 2011” (Szabo 2012a). As even market participants have noted, current low prices and oversupply have undermined the last pretense of environmental aims to which the trade can lay claim: Per Lykander, an analyst at Swiss bank UBS, issued a note to clients stating that “The [carbon] price is already too low to have any significant environmental impact…The carbon scheme isn’t working” (quoted in Blas 2011). Market volatility combined with new forms of enclosure and ‘carbon piracy’ (Vidal 2011) characteristic of emissions offsetting has led Patrick Bond (2011: 20) to argue that “the markets have had their chance, and for all manner of reasons have failed” – on their own terms as well as from a broader perspective of climate justice.
Despite collapsing prices and political opposition, however, trading volumes have continued to increase: the number of offsetting projects entering Kyoto’s Clean Development Mechanism pipeline in 2011 was 63% higher than in 2010 (Carbon Finance 2012); exchange-traded volumes in the ETS rose 24.5% over the year; and trading of offsets in secondary markets (where much speculative trading takes place) grew by 45%. As one carbon broker pointed out, the market turbulence that undermines environmental goals presents lucrative opportunities for traders and speculators: “Any market where there’s volatility, you’re going to have a reasonable amount of activity, and we are seeing this now” (quoted in Kouchakji 2011). In this context, delegates at the recent Durban summit reached an eleventh-hour deal on a second Kyoto commitment period starting in January 2013, and by doing so secured – at least temporarily – both the hegemony and the ineptitude of the emissions trade as the global approach to climate governance. The conference even demonstrated the type of neocolonial dispossession characteristic of carbon markets in particularly salient terms, as a community of 31 families was displaced to accommodate the summit itself (Occupy COP17 2012). As Esther Vivas and Josep maria Antentas (2012) reported at Climate Justice Now!, what the UNFCCC said at Durban was, in a nutshell, ‘We will save the market, not the climate’.
If anything, the outcomes of Durban and the apparent contradiction between carbon’s poor performance and the continued growth of the markets demonstrate the futility of calls for better regulation that would ensure that the emissions trade achieves its environmental goals. These events have rather helped to solidify political opposition to the carbon trade based on its accomplishments, rather than its failures: namely, on the grounds that it has established a massive new financial market in the circulation of environmental debts. The specific features of the carbon commodity – and of offsets in particular – are important here: because offsets are sold through forward contracts and circulate in the form of rights to emit, there is the real possibility that offsets can be productively consumed without ever having been produced in the first place. Forest offsets, for example, may not pay off until 20 or 100 years from the point of trade in offsets, and carry large risks of not fulfilling promised reductions (Thornes and Randalls 2007: 278; also see Gutierrez 2011). As Michelle Chan (2009) has argued, this introduces the threat of ‘subprime carbon’, as offset titles circulate in excess of actual reductions. Maria Gutierrez (2011: 657) similarly notes that “the market for carbon offsets could be seen as an extension of the creation of debt from the economic system to the ecological system”. The bursting of a speculative bubble in carbon would (like the credit crisis) most adversely affect the poorest and most vulnerable populations, socializing losses in the form of exacerbated ecological and economic crisis.
This was the sentiment expressed by many who protested the summit, calling for a repayment of ‘climate debt’ from the global North to the global South rather than the proliferation of commodified ecological debt enabled by the carbon trade (Occupy COP17 2011). With delegates’ general refusal to heed calls for language about equity and indigenous rights in the summit agreements (Global Alliance 2011), the Durban talks built on the precedent of previous summits to function mainly as a vehicle for the uneven distribution of climate risk to the world’s poor and disenfranchised through financial mechanisms. Janet Redman of the Institute for Policy Studies – quoted in a statement from Occupy COP17 – sums this up effectively: “What some see as inaction is in fact a demonstration of the palpable failure of our current economic system to address economic, social or environmental crises…Banks that caused the financial crisis are now making bonanza profits speculating on our planet’s future. The financial sector, driven into a corner, is seeking a way out by developing ever newer commodities to prop up a failing system”.
The current decline in carbon prices – attributed in large part to general economic slowdown precipitated by the Eurozone crisis – demonstrates the destructive potential of the increasing interconnections between markets in economic and ecological debt on a macro level, linking opposition to the carbon trade with movements against debt of all kinds. It is now clearer than ever that a political response to the continued expansion of the carbon trade must confront it not on the basis of what it fails to do, but what it does accomplish: namely, the establishment of a massive new frontier for the financialization of social life, privatizing profits while socializing economic and ecological risk.
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