No matter which side you come down on in the climate-change debate, it’s the carbon trading desks at the Wall Street banks that win as I wrote yesterday.
There are a number of trading schemes the bank work on, all with questionable results.
Cap-and-trade: This is where a corporation has its carbon output level frozen and if it goes over the limit, it must purchase carbon credits on the exchange to offset the overage.
These credits can usually come from a third-world impoverished country with very little industry. Where this revenue goes for the country is anyone’s guess. But the brokers and sales staff at the bank get their end in commissions.
Although there is a mechanism in the scheme to retire some credits after use to — in theory lower carbon emissions — there is little evidence that this is happening according to a European emission reduction over the first 10 years of cap-and-trade.
In Europe, emissions from companies covered by the EU ETS (Emission Trading System) have decreased from approximately 2,000 million tonnes (Mt) per year in 2005 to approximately 1,800 Mt in 2013, which are the latest numbers.
From my perspective, this seems to be a smallish reduction given that over a decade many of the more inefficient carbon-producing operations should have been phased out with newer equipment. Moving from coal and diesel to natural gas should have provided far more in savings to the companies as well as carbon reductions.
That’s what I call a free-market solution.
There are other mechanisms for in place for corporations to lower their footprint. These involve building electricity producing dams and/or wind farms in third world counties. Planting of forests is another manner of sequestration.
But as you see all of the schemes — and that’s the word used by the EU assuming the English meaning and not the American definition of underhanded planning– involve a transfer of wealth from Western companies to impoverished countries, whose people may or may not benefit from the revenue influx.
It smells and sounds like a scheme to me. American definition.