Benjamin K. Sovacool & Toby J. Carroll, Straits Times 28 Feb 08;
EVIDENCE suggests that the market mechanisms currently being touted to address climate change could benefit the few in the short term - and fail all in the long term.
These market mechanisms include carbon trading (where licences to pollute one tonne of carbon are traded among firms) and carbon offsets (where developed countries build carbon-friendly infrastructure in the developing world). There are at least four reasons to be sceptical of their potential.
First, they attempt to reconcile a pro-growth model of development with improvements in the environment. This gives rise to a technocratic approach to the problem that has little chance of succeeding.
The problem with climate change is that reconciling infinite growth with the environment is no technical matter. Nature, unlike the paradigm of perpetual economic growth, appears to be rapidly approaching finite limits. Indeed, climatologists and atmospheric scientists have warned of the likelihood of tipping points, or climate-forcing thresholds, such as the extreme melting of ice or rising sea levels, beyond which changes are impossible to reverse.
Second, addressing climate change through carbon offsets will most likely be detrimental to many in the underdeveloped world.
Alternative transportation fuels such as ethanol and biodiesel, for instance - promoted as a way for developed countries to 'offset' their emissions by investing in the developing world - have increased the global prices of corn, cassava, sugar cane, palm oil and soybeans. This has the largest impact on the poor, who spend 55 to 75 per cent of their income on food.
The recent 'tortilla riots' in Mexico, where the urban poor could not afford higher corn prices, and the 2006 Indonesian protests against high soybean and palm oil prices may be harbingers of more serious conflicts to come.
Third, the promotion of global offsets would penalise developing countries and solidify their dependence on developed nations. It would allow industrial nations to buy limitless amounts of cheap emission reductions in poor countries and bank them indefinitely for the future. This means that when developing nations are obliged to cut their own emissions, they would be left with only the most expensive options.
Fourth, offsets and carbon credits suffer from the assumption that a one-to-one relationship between carbon emissions and offsets exists. The energy-intensive nature of some offsets - such as carbon capture and sequestration - proves no such thing.
Accounting for the energy needed to capture, transport, inject and store carbon dioxide, firms have to sequester two to three tonnes to 'offset' every tonne they emit.
Moreover, efforts to offset carbon by means of afforestation (planting of trees), protecting existing grasslands and injecting carbon dioxide into underground caverns and aquifers run the risk of reaching biological saturation. Some forests can only store a certain amount of carbon no matter how many trees they have.
Also, investing purely in biological offsets such as plants could contribute dangerously to climate change if many of the world's forests turn from sinks (vegetation that absorbs carbon dioxide) to sources (vegetation that releases carbon dioxide). This is a real possibility given that forests and grasslands are at the ever-present mercy of floods, more severe weather, new strains of disease - not to mention vested interests that could later decide to alter land practices.
What we need is a qualitatively different approach - the equivalent of a 'Green New Deal' to address climate change. This would entail building informed constituencies for reform and social movements that can check the sources of climate-changerelated behaviour. It also entails recognising the qualitative differences among carbon mitigation and adaptation techniques. Not all carbon credits and offsets are 'equal', and they should not be treated as such.
The truth is the market is not always the best instrument to pursue public policy goals. The writers are research fellows at the Centre on Asia and Globalisation at the Lee Kuan Yew School of Public Policy.
